File No. 70-9703
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1/A
AMENDMENT NO. 2 TO
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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VECTREN CORPORATION
VECTREN UTILITY HOLDINGS INC.
20 N.W. Fourth Street
Post Office Box 209
Evansville, Indiana 47702-0209
(Names of company or companies filing this statement
and addresses of principal executive offices)
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Not applicable
(Name of top registered holding company parent of
each applicant or declarant)
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Ronald E. Christian
Senior Vice President, General Counsel and Secretary
Vectren Corporation
Post Office Box 209
Evansville, Indiana 47702-0209
(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 to:
Joanne C. Rutkowski
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1875 Connecticut Avenue, N.W.
Washington, D.C. 20009
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TABLE OF CONTENTS
Item 1. Description of Proposed Transactions
A. Introduction
B. Description of the Companies
1. Vectren Corporation
2. The Dayton Power & Light Company
C. The Proposed Transactions
1. The Intermediate Holdco
2. Acquisition of the DP&L Assets
D. Utility Regulation
Item 2. Fees, Commissions and Expenses
Item 3. Statutory Analysis
A. Applicable Statutory Provisions
B. Legal Analysis
1. Section 10(b)(1)
2. Section 10(b)(2)
3. Section 10(b)(3)
4. Section 10(c)(1)
5. Section 10(c)(2)
6. Section 10(f)
7. Section 3(a)(1)
Item 4. Regulatory Approvals
A. Antitrust
B. FERC
C. State Regulation
Item 5. Procedure
Item 6. Exhibits and Financial Statements
A. Exhibits
B. Financial Statements
Item 7. Information as to Environmental Effects
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
This Pre-Effective Amendment No. 2 amends in its entirety the Form U-1 that
was filed with the Securities and Exchange Commission on June 16, 2000, and
amended on June 20, 2000.
A. Introduction.
Vectren Corporation ("Vectren") is seeking approval under the Public
Utility Holding Company Act of 1935 (the "1935 Act" or "Act") in connection
with: (i) the formation of an intermediate holding company over its
public-utility subsidiaries and (ii) the indirect acquisition, through the
Intermediate Holdco, of a public utility company that will hold certain of the
natural gas distribution assets of The Dayton Power & Light Company ("DP&L")
(collectively, the "Transactions"). Vectren is a recently created Indiana public
utility holding company that claims exemption from registration pursuant to Rule
2 under Section 3(a)(1) of the Act. Following completion of the Transactions,
Vectren and the intermediate holding company will qualify as exempt intrastate
holding companies and so ask the Commission to issue an order granting them
exemptions under Section 3(a)(1) of the Act.
B. Description of the Companies
1. Vectren
Vectren was formed on March 31, 2000 from the combination of Indiana
Energy, Inc. and SIGCORP, Inc. Vectren Corporation, Holding Co. Act Release No.
27150 (March 8, 2000) (the "March Order"). Through its public-utility subsidiary
companies, Southern Indiana Gas and Electric Company ("SIGECO"), Community
Natural Gas Company, Inc. ("Community") and Indiana Gas Company, Inc. ("Indiana
Gas"), Vectren provides electric and/or gas utility service to customers in
Southern and Central Indiana
Indiana Gas provides gas distribution service to approximately 510,000
customers in Indiana. In 1999, Indiana Gas had operating revenues of
approximately $431.4 million and net income of approximately $29.7 million.
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The properties of Indiana Gas used for the production, storage and
distribution of gas are located solely within the state of Indiana, except for
pipeline facilities extending from points in northern Kentucky to points in
southern Indiana, by means of which gas is transported to Indiana for sale or
transportation by Indiana Gas to ultimate customers in Indiana. Indiana Gas
purchases approximately 50% of its total system gas supply requirements from the
Gulf Coast production basin, and approximately 48% from production in the
Mid-Continent basin. The interstate pipelines that transport pipeline supplies
to the Indiana Gas service territory include ANR Pipeline Company ("ANR"), CMS
Panhandle Eastern Pipeline Company, Texas Eastern Transmission Company, Texas
Gas Transmission Corporation and Midwestern Gas Transmission Company (via ANR).
SIGECO provides electric distribution service at retail to approximately
126,000 customers and retail gas distribution to approximately 107,000 customers
in Indiana. In 1999, SIGECO had operating revenues of approximately $375.8
million and net income of approximately $46.7 million. SIGECO's gas utility
operations are located in a single contiguous area in southwestern Indiana.
SIGECO purchases nearly 100% of its system supply gas requirements from the Gulf
Coast production basin, particularly in the on-shore and offshore Texas and
Louisiana producing regions. SIGECO has contracted for firm transmission
capacity on five interstate gas pipelines: Texas Gas Transmission Corporation,
Midwestern Gas Transmission Company, Tennessee Gas Pipeline Company, ANR Gas
Pipeline Company and Texas Eastern Transmission Corporation.
Vectren also owns approximately 33% of the outstanding common stock of
Community, a small Indiana gas distribution company. Community has several
service territories in southwestern Indiana that are adjacent to or near the gas
service territory of SIGECO. Community has 6,638 natural gas customers and
approximately 470 miles of distribution mains.
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In the March Order, the Commission found "substantial" evidence that
Indiana Gas, SIGECO and Community share a common source of supply, within the
meaning of Section 2(a)(29)(B), in that the utilities "derive their gas supply
predominantly from the Gulf Coast production basin." The Commission further
found that the SIGECO electric operations constitute an integrated electric
utility system within the meaning of Section 2(a)(29)(A) and, further, that
there is "de facto integration" of the Vectren electric and gas systems.
Vectren owns a number of additional non-utility subsidiaries that are
described in Appendix A.
2. DP&L
DP&L is a wholly owned subsidiary of DPL, Inc., a public utility holding
company that claims exemption from registration pursuant to Rule 2 under Section
3(a)(1). DP&L provides electric and gas service to customers in west central
Ohio. For the twelve months ended June 30, 2000, DP&L had approximately $219.4
million of gross operating revenues from its gas utility operations and
approximately $425 million in gas assets as of June 30, 2000. Of interest here,
DP&L provides retail gas distribution to approximately 300,000 customers. Under
DP&L's operation, the gas assets were supported by long-term firm pipeline
transportation agreements with ANR Gas Pipeline Company, Texas Gas Transmission
Corporation, CMS Panhandle Eastern Pipe Line Company, Columbia Gas Transmission
Corporation and Columbia Gulf Transmission Corporation. Along with firm
transportation services, DP&L has approximately 14 billion cubic feet of firm
storage service with various pipelines.
In addition, DP&L is interconnected with CNG Transmission Corporation.
Interconnections with interstate pipelines provide DP&L the opportunity to
purchase competitively priced natural gas supplies and pipeline services. DP&L
purchases its natural gas supplies using a portfolio approach that minimizes
price risks and ensures sufficient firm supplies at peak demand times. The
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portfolio consists of long-term, short-term and spot supply agreements. In 1999,
firm agreements provided approximately 60% of total supply, with the remaining
supplies purchased on a spot/short-term basis. DP&L purchases the vast majority
of its total system gas supply requirements at the Lebanon Hub, through the Gulf
Coast production basin, the Mid-Continent basin and the Appalachian basin.
DP&L interstate pipeline contracts that are used in connection with the
operation of the gas assets will be transferred to Vectren as part of the asset
acquisition. The existing DP&L commodity purchase contracts will not be
transferred to Vectren. Instead, Vectren will access commodity through the use
of transferred transportation contracts from the same sources that historically
have been available to DP&L.
C. The Proposed Transactions
1. Intermediate Holdco
Vectren has established a new Indiana subsidiary, Vectren Utility Holdings,
Inc. ("VUHI") that will serve as the intermediate holding company for Vectren's
utility interests. Vectren will contribute the common stock of its
public-utility subsidiary companies to VUHI, which will qualify for exemption
under Section 3(a)(1) of the Act. By order dated August 16, 2000, the FERC
approved the formation of the Intermediate Holdco. Southern Indiana Gas &
Electric Co., FERC Docket No. EC00-113-000 (a copy of the order is attached as
Exhibit D-2.2).
2. Acquisition of the DP&L Assets
Vectren and one of its subsidiaries, Vectren Energy Delivery of Ohio, Inc.
(formerly Number-3CHK, Inc.) (referred to here as "OhioCo") have entered into an
agreement to purchase certain of the natural gas distribution assets of DP&L
(the "DP&L Assets") for a purchase price of approximately $425 million. Vectren
proposes to acquire the DP&L Assets as a tenancy in common through two separate
subsidiaries: Indiana Gas will acquire an approximately 47% ownership interest
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in the DP&L Assets and OhioCo will acquire the remaining approximately 53%
ownership interest in the DP&L Assets. OhioCo will be the operator of DP&L
Assets. Because Ohio law requires domestic incorporation of any entity providing
utility services in Ohio, to ensure that it complies with Ohio law, Indiana Gas
has incorporated under Ohio, as well as Indiana, law.
D. Utility Regulation
Indiana Gas, SIGECO and Community are subject to broad regulation as to
rates and other matters, including affiliate transactions, by the Indiana
Utility Regulatory Commission ("Indiana Commission"). After the acquisition of
the DP&L Assets, the gas distribution system jointly owned by OhioCo and Indiana
Gas (the "Ohio System") will be subject to broad regulation as to rates and
other matters by The Public Utilities Commission of Ohio ("Ohio Commission").
By order dated July 11, 2000, the Ohio Commission authorized OhioCo and
Indiana Gas to acquire the DP&L Assets. Vectren Energy of Ohio, Inc., Case No.
00-524-GA-ATR (the "Ohio Order") (a copy of the Ohio Order is attached hereto as
Exhibit D-1.3). In approving the acquisition, the Ohio Commission expressly
noted that the transaction structure was intended to help Vectren maintain its
exempt status. Of interest here, the Ohio Order notes:
On June 8, 2000, joint petitioners filed a supplement to the joint
petition. Since the filing of the joint petition, Vectren and IGC
consulted with the SEC staff. Pursuant to that consultation, Vectren
and IGC intend to proceed with the acquisition of the DP&L gas assets
pursuant to the following structure: 1) [OhioCo] will acquire an
approximate 53 percent ownership interest in the gas assets, and IGC
will acquire an approximate 47 percent ownership interest in the DP&L
gas assets; 2) Vectren will be the operator of the DP&L gas assets and
IGC has now incorporated under Ohio law; 3) the DP&L gas assets to be
jointly owned by [OhioCo] and IGC will be operationally combined so
that effectively they will be operated in Ohio by Vectren as a single
entity; and 4) the combined enterprise will maintain a single tariff
applicable to Ohio customers and provide gas service to customers in
the name of Vectren. To effectuate the operational combination, joint
petitioners request that the Commission provide accounting authority
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sufficient in all respects for Vectren to maintain such books, system
of accounts, depreciation reserve or fund, and any other records as
[OhioCo] and IGC may reasonably require to lawfully own, operate, and
maintain the DP&L gas assets in accordance with Title 49, Revised
Code, as well as all other applicable laws and regulations.
In approving the acquisition, the Ohio Commission found that:
The proposed transaction is reasonable, will not adversely affect the
public utility company's customers, is in the public interest, and
should be approved. * * * We find that our jurisdiction and authority
over the rates, services, and operations of the owner of the DP&L gas
assets will not change due to the proposed transaction. Moreover, we
find that it will not impair our ability to protect ratepayers. The
Commission is satisfied that the potential transfer of ownership
interest in DP&L's gas assets will not impair the quality of service
presently provided to customers of the public utility, and that
Vectren has the ability to operationally manage the gas assets. We
note that Vectren has made a commitment to hire a significant number
of present DP&L employees who operate the gas distribution system and
such can ensure the provision of just and reasonable service. We also
find that IGC has sufficiently demonstrated the requisite experience
and capabilities to operate and manage gas assets in Indiana, where it
operates a gas utility serving some 500,000 customers and is
considered by the Indiana Regulatory Commission to have solid
management, finances and operations.
By letter dated September 7, 2000 (the "Indiana Letter"), the Indiana Commission
similarly advised the SEC that:
the [Indiana] Commission believes that it has the jurisdiction to
monitor the activities of Indiana Gas to ensure that
cross-subsidization between Indiana Gas and [OhioCo] or any other
affiliate does not occur.
The foregoing opinion is given with the understanding that
Vectren's Indiana and Ohio utility businesses will be separately
operated and that Indiana Gas and [OhioCo] will not be merged into a
single company. * * *
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Finally, the [Indiana] Commission advised that Indiana Gas has
operated in Indiana as a gas utility continuously since 1945 and under
our regulatory purview.
A copy of the Indiana Letter is attached as Exhibit D-1.4.
SIGECO's electric operations are subject to the jurisdiction of the FERC
under the Federal Power Act with respect to wholesale electric rates and other
matters. ProLiance Energy, LLC is also subject to the jurisdiction of the FERC
under the Federal Power Act, as a marketer of electric power. The gas
distribution operations of Indiana Gas, SIGECO and OhioCo are covered by the
Hinshaw Amendment and thus exempt from regulation by the FERC under sections
1(b) and 1(c) of the Natural Gas Act. Moreover, that portion of Indiana Gas'
system that extends into Kentucky solely for the purpose of interconnecting with
the pipeline of Texas Gas Transmission Corporation is subject to a certificate
issued by the FERC under Section 7f of the Natural Gas Act.
Following the acquisition, the Ohio System will be covered by the Hinshaw
Amendment to the Natural Gas Act and thus exempt from FERC regulation pursuant
to Section 1(c) of that act. The Ohio System will be subject to comprehensive
rate regulation by the Ohio Commission. In addition, the costs of purchased gas
charged to customers through adjustment clauses in the Ohio System's rate
schedules will be subject to periodic audits by, and proceedings before, the
Ohio Commission.
The transportation of natural gas to eligible end-use customers through the
Ohio System will be provided on an open-access, non-discriminatory basis,
overseen by the Ohio Commission which establishes guidelines for pricing, terms
and conditions for such service.
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As a public utility under Ohio law, the Ohio System will also be subject to
regulation by the Ohio Commission as to: (1) record keeping and accounting,
including depreciation rates; (2) abandonment of utility facilities; (3) service
quality and safety; (4) issuances of stocks, bonds, notes and other securities;
and (5) mergers and certain acquisitions and leases with other public utilities.
The Ohio Commission requires Ohio public utilities to file various reports and
other information with the Ohio Commission on a periodic basis, including an
annual report containing information regarding their utility operations and
results.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses to be paid or incurred, directly or
indirectly, in connection with the transactions contemplated herein, are
estimated to be approximately $4.3 million.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
A. Applicable Provisions
The acquisition by VUHI of the securities of the Vectren public-utility
subsidiary companies, including OhioCo, and the indirect acquisition by Vectren
of OhioCo are subject to Sections 9 and 10 of the Act.
B. Legal Analysis
Section 9(a)(2) makes it unlawful, without approval of the Commission under
Section 10, "for any person to acquire directly or indirectly any security of
any public utility company if such person is an affiliate ... of such company
and of any other public utility or holding company, or will by virtue of such
acquisition become such an affiliate." As a result of the proposed Transactions,
Vectren and VUHI will be affiliates of Indiana Gas, SIGECO, Community and
OhioCo. The statutory standards to be considered by the Commission in evaluating
the proposed Transactions are set forth in Section 10 of the Act. As set forth
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more fully below, the Transactions comply with all of the applicable provisions
of Section 10 and, so, should be approved.
1. Section 10(b)(1).
Section 10(b)(1) precludes approval of an acquisition that "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
interests of investors or consumers."
a. Interlocking Relationships.
By its nature, any acquisition results in new links between theretofore
unrelated companies. Cf. Northeast Utilities, Holding Co. Act Release No. 25221
(Dec. 21, 1990), as modified, Holding Co. Act Release No. 25273 (March 15,
1991), aff'd sub nom. City of Holyoke v. SEC, 972 F.2d 358 (D.C. Cir. 1992)
(stating that interlocking relationships are necessary to integrate two merging
entities). While it is contemplated that there will be some overlap between the
Vectren Board of Directors, on the one hand, and the boards of VUHI and OhioCo,
on the other, interlocking boards are typical of wholly-owned subsidiaries and
necessary to integrate VUHI and OhioCo into the Vectren system. The interlocks,
therefore, will be in the public interest and the interests of investors and
consumers, and thus not prohibited by Section 10(b)(1).
b. Concentration of Control.
Section 10(b)(1) is intended to avoid "an excess of concentration and
bigness" while preserving the "opportunities for economies of scale, the
elimination of duplicate facilities and activities, the sharing of production
capacity and reserves and generally more efficient operations" afforded by the
coordination of local utilities into an integrated system. American Electric
Power Co., 46 S.E.C. 1299, 1309 (1978). In applying Section 10(b)(1) to utility
acquisitions, the Commission must determine whether the acquisition will create
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"the type of structures and combinations at which the Act was specifically
directed." Vermont Yankee Nuclear Corp., 43 S.E.C. 693, 700 (1968).
In the March Order, the Commission found that the Vectren system did not
involve "the concentration of control of public utility companies, of a kind or
to an extent detrimental to the public interest or the interests of investors or
consumers." The proposed Transactions will not affect the scope or provision of
services in Indiana. While the acquisition of the DP&L Assets will result in
subsidiaries of Vectren (Indiana Gas and OhioCo) owning a gas utility system in
Ohio, it must be noted that Vectren will serve approximately 308,000 customers,
only approximately 9% of the total natural gas customers in Ohio. In the
combined region of Indiana and Ohio, Vectren's utility companies will serve only
approximately 19% of natural gas customers. In comparison to those of other
utilities, Vectren's presence will not threaten competition.
The competitive effects of the proposed Transactions will also be
considered by other regulators. See, e.g., Northeast Utilities, Holding Co. Act
Release No. 25221 (Dec. 21, 1990) (finding that "antitrust ramifications of an
acquisition must be considered in light of the fact that public utilities are
regulated monopolies and that federal and state administrative agencies regulate
the rates charged consumers"). The creation of the Intermediate Holding Company
has been approved by the FERC under Section 203 of the Federal Power Act.
Notification and Report Forms were filed with the Antitrust Division of the
Department of Justice and the Federal Trade Commission pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. ss.1311 et seq.
(1996), describing the competitive impact of the acquisition of the DP&L Assets.
Thereafter, the Antitrust Division issued second requests to Vectren and DP&L.
After Vectren and DP&L responded to the requests, the Antitrust Division closed
its investigation.
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For these reasons, the proposed Transactions will not "tend toward
interlocking relations or the concentration of control" of public utility
companies, of a kind or to the extent detrimental to the public interest or the
interests of investors or customers within the meaning of Section 10(b)(1).
2. Section 10(b)(2)
Section 10(b)(2) requires the Commission to determine whether the
consideration Vectren will give DP&L for the gas assets is reasonable and
whether it bears a fair relation to investment in and earning capacity of the
utility assets being acquired. The determination of the acquiror of the DP&L
Assets was made as a result of an auction process, conducted by an investment
banking firm. There were multiple participants in that process and the resulting
price and terms and conditions for the acquisition are the product of
arms'-length negotiations between the buyer and seller.
In light of this evidence, Vectren believes that the consideration for the
acquisition bears a fair relationship to the sums invested in and the earning
capacity of the DP&L Assets.
Further, Vectren believes that the estimated fees and expenses in this
matter bear a fair relation to the value of the DP&L Assets and the strategic
benefits to be achieved by the Transaction, and further that the fees and
expenses are fair and reasonable. See Northeast Utilities, Holding Co. Act
Release No. 25548 (June 3, 1992), modified on other grounds, Holding Co. Act
Release No. 25550 (June 4, 1992) (noting that fees and expenses must bear a fair
relation to the value of the company to be acquired and the benefits to be
achieved in connection with the acquisition). The total estimated fees and
expenses of $4.2 million represent less that 1% of the value of the
consideration Vectren will pay for the DP&L Assets, and are consistent with
percentages previously approved by the Commission. See, e.g., Entergy Corp.,
Holding Co. Act Release No. 25952 (Dec. 17, 1993) (fees and expenses represented
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approximately 1.7% of the value of the consideration paid to the shareholders of
Gulf States Utilities); Northeast Utilities, Holding Co. Act Release No. 25548
(June 3, 1992) (approximately 2% of the value of the assets to be acquired).
3. Section 10(b)(3).
Section 10(b)(3) requires the Commission to determine whether a proposed
acquisition will unduly complicate the acquirer's capital structure or will be
detrimental to the public interest or the interest of investors or consumers or
the proper functioning of the resulting system.
The proposed Transactions will not unduly complicate the capital structure
of Vectren or its subsidiaries. The proposed Transactions do not involve the
creation of any minority interests nor will the existing senior debt and senior
equity securities of Vectren be affected by the merger. As demonstrated below,
post-transactions, Vectren and each of its utility subsidiaries will continue to
fall within the seventy-to-thirty percent debt-to-common equity ratio generally
prescribed by the Commission. See, e.g., National Grid Group plc, Holding Co.
Act Release No. 27154 (March 15, 2000). Vectren provides projected debt ratios
in Exhibit J-2.
Section 10(b)(3) also directs the Commission to consider whether an
acquisition will be detrimental to the public interest or the interest of
investors or consumers, or the proper functioning of the resulting holding
company system. In this matter, the creation of the Intermediate Holdco will
serve to further integrate the operations of the Vectren utilities, within the
meaning of the Act, and to provide an additional degree of structural separation
and protection for those companies. Nor will the acquisition of the DP&L Assets
be detrimental to the protected interests or to the proper functioning of the
resulting holding company system. As a practical matter, OhioCo will operate the
Ohio System on its own behalf and on behalf of Indiana Gas. The DP&L Assets will
be operationally combined so that the Ohio customers will perceive that they are
served by a single entity that will do business under the name of the OhioCo.
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Moreover, for Ohio regulatory purposes, the Ohio System will be treated as a
single entity that is being operated by OhioCo. Vectren's predecessor, Indiana
Energy, Inc., successfully employed a similar model for the past ten years with
Richmond Gas Corporation and Terre Haute Gas Corporation, which were separate
subsidiaries of Indiana Gas, but which were operationally combined for service
and regulatory purposes. Perhaps more importantly, this structure has been
expressly approved by the Ohio Commission, the agency that is most directly
responsible for the protection of Ohio utility consumers.
4. Section 10(c)(1)
Under this section, the Commission cannot approve "an acquisition of
securities, 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." Section 8, which governs the combination of electric and gas operations,
does not apply to the instant Transactions. Section 11, which again is directed
to registered rather than exempt holding companies, stands for the principle
that a registered holding company should be generally limited to a single
integrated public-utility system.
As noted above, the Commission in the March Order found that Vectren
comprised an integrated electric utility system and an integrated gas utility
system and, further, that there was "de facto" integration of the gas and
electric systems. The creation of the intermediate holding company will not
affect the integration of the underlying utility systems. The question, then,
for the Commission is whether the DP&L Assets, together with Vectren's existing
gas operations, will constitute a single, integrated gas-utility system within
the meaning of the Act.
Section 2(a)(29)(A) defines an integrated public utility system with
respect to gas utility companies as:
a system consisting of one or more gas utility companies which are so
located and related that substantial economies may be effectuated by
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being operated as a single coordinated system confined in its
operations to a single area or region, in one or more states, not so
large as to impair (considering the state of the art and area or
region affected) the advantages of localized management, efficient
operation, and the effectiveness of regulation: provided, that gas
utility companies deriving natural gas from a common source of supply
may be deemed to be included in a single area or region.
The DP&L Assets are located in a single area that is adjacent to, and contiguous
with, the service territory of the existing Vectren gas operations. Further, the
DP&L Assets and the Vectren gas operations derive their gas from common sources
of supply, as established above in the discussion regarding common basins and
common interstate pipeline systems that deliver commodity to the respective
utilities. See NIPSCO Industries, Inc., Holding Co. Act Release No. 26975 (Feb.
10, 1999) ("NIPSCO") (finding integration between Indiana and Massachusetts
utility companies based upon coordinated gas supply departments, obtaining gas
from common basins and using trading hubs).
The DP&L Assets will be included in Vectren's on-going process of
consolidating and integrating the operating departments, as well as the
administrative functions, of its utility subsidiaries. The first phase of the
consolidation of the service dispatching function has been announced. Vectren is
planning full integration of operating departments such as corporate
engineering, gas control, gas system design, sales and marketing into a single
organizational framework. Corporate and administrative functions will also be
integrated and centralized. These functions include planning and forecasting,
budgeting, tax, investor relations, treasury, human resources, corporate
communications and accounting. Ultimately, other customer services such as
billing, call center and collections are expected to be centralized as well.
5. Section 10(c)(2)
The standards of Section 10(c)(2) are satisfied because the Transactions
will tend toward the economical and efficient development of an integrated
public utility system, thereby serving the public interest, as required by that
section of the Act.
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The Commission has previously found that the creation of a holding company
results in financial and organizational benefits for the utility system. WPL
Holdings, Inc., Holding Co. Act Release No. 25377 (Sept. 18, 1991); see also
Chevron Corp., Holding Co. Act Release No. 27122 (Dec. 27, 1999); Roanoke Gas
Co., Holding Co. Act Release No. 26996 (April 1, 1999); BEC Energy, Holding Co.
Act Release No. 26874 (May 15, 1998); Western Resources, Inc., Holding Co. Act
Release No. 26783 (Nov. 24, 1997).
With respect to the acquisition of the DPL Assets, the Transaction will
result in benefits to investors, consumers and the public interest. The
transaction represents an opportunity for growth. The DP&L Assets are a logical
fit in that they are geographically close to Vectren's existing utility
operations, and, thus, there will be enhanced economies of scale from the
provision of common support to the Vectren public-utility subsidiary companies.
In addition, the overlap of interstate pipeline suppliers and common supply
basins will create opportunities for synergies in the gas cost area. Because
this matter involves an asset transaction and not the sale of the DP&L business
as such, relatively few corporate personnel are being transferred to the buyer,
since they will continue to be needed to serve DP&L's continuing electric
utility operations. Opportunities for savings will thus arise as Vectren's
existing personnel expand their duties and responsibilities by working on behalf
of the Ohio System. Further, there will be savings and efficiencies associated
with the acquisition itself, both in financial and operational terms, as the
DP&L Assets are fully integrated into the Vectren system. Among other things,
Vectren's larger scale, both in financial and operational terms, will enhance
the utilities' ability to utilize new developments in technology and information
systems.
Although some of the anticipated benefits are strategic and will be fully
realizable only in the longer term, they are properly considered in determining
whether the standards of Section 10(c)(2) are met. National Grid Group plc,
supra; see American Electric Power Co., 46 S.E.C. 1299, 1320-1321 (1978). The
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Commission has recognized that potential benefits are entitled to be considered,
regardless of whether they can be precisely estimated: "[S]pecific dollar
forecasts of future savings are not necessarily required; a demonstrated
potential for economies will suffice even where these are not precisely
quantifiable." Centerior Energy Corp., Holding Co. Act Release No. 24073 (April
29, 1986) (citation omitted). See also Energy East Corporation, Holding Co. Act
Release No. 26976 (Feb. 12, 1999) (authorizing acquisition based on strategic
benefits and potential, but unquantifiable, savings).
6. 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 to such acquisition have been complied with, except where the
Commission finds that compliance with such State laws would be
detrimental to carrying out the provisions of section 11.
The Ohio Commission is the sole state regulator with jurisdiction over the
proposed acquisition of the DP&L Assets. As explained in Item 4, below, Vectren
has received the necessary approval under Ohio law. No state approval is
required for the formation of VUHI.
7. Section 3(a)(1)
Following the proposed Acquisition, both VECTREN and VUHI will be holding
companies within the meaning of Section 2(a)(7) of the Act. As such they will be
required to register with the Commission , and comply with the various
requirements for registered holding companies, unless they are able to qualify
for exemption. Section 3(a)(1) provides a presumptive exemption from
registration under the 1935 Act if:
such holding company, and every subsidiary company thereof which is a
public-utility company from which such holding company derives,
directly or indirectly, any material part of its income, are
predominantly intrastate in character and carry on their business
substantially in a single state in which such holding company and
every such subsidiary company are organized.
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In other words, the objective requirements of Section 3(a)(1) are that the
holding company and each of its (a) "material" public utility subsidiaries be,
(b) "predominantly" intrastate in character and carry on its business
"substantially" in a single state in which the holding company and the material
subsidiaries are organized. If an applicant satisfies the objective requirements
of the statute, Section 3(a) directs the Commission to grant an exemption,
"unless and except insofar as [the Commission] finds the exemption detrimental
to the public interest or the interest of investors or consumers." For the
reasons set forth herein, Vectren and VUHI, and each of their material utility
subsidiaries, will be predominantly intrastate in character and carry on their
business substantially in Indiana.
Although the statute speaks of "income," the Commission has traditionally
considered a wide range of numerical factors and, in practice, given the
greatest deference to revenues in determining materiality. In NIPSCO, the
Commission also determined that it was appropriate to consider "operating
margin" or "net operating revenues," which are defined as gross revenues minus
costs of purchased gas for retail gas distribution and the cost of fuel for
electric generation, when considering combination gas and electric systems.
Here, as in NIPSCO, the netting out of fuel costs is necessary to avoid
overstating the size, and therefore materiality, of the acquired company. The
Commission has explained: "This is because pass-through costs represent a much
larger part of revenues in the gas business than in the electric business." AES
Corporation, Holding Co. Act Release No. 27063 (Aug. 20, 1999).
a. Materiality of Utility Subsidiaries
In NIPSCO, the Commission found that an out-of-state utility subsidiary
which contributed the following percentages of the consolidated holding company
figures would not be material for purposes of Section 3(a)(1):
Measure NIPSCO Range of Values
Gross Operating Revenues 16.0-16.2%
Operating Margin 10.8-11.2%
Utility Operating Income 7.1-8.7%
In the instant matter, VECTREN, VUHI and the utility subsidiaries other than
OhioCo will continue to be incorporated in Indiana. For purposes of analysis
under Section 3(a)(1), the only out-of-state utility will be OhioCo., which
would have contributed the following revenues, margin and income on a pro-forma
basis for 1999:1
-----------
1/ Although Indiana Gas will be an Ohio, as well as an Indiana, utility, it is
treated as an Indiana utility for purposes of the analysis under Section
3(a)(1). This approach is consistent with that approved by the Commission in KU
Energy Corp., Holding Co. Act Release No. 25409 (Nov. 13, 1991). In that matter,
Kentucky Utilities Company, a Kentucky public-utility company and exempt holding
company, merged with its Virginia subsidiary public-utility company. Kentucky
Utilities then incorporated in Virginia, as well as in Kentucky, in order to
satisfy the requirements of Virginia law. For purposes of analysis under Section
3(a)(1), Kentucky Utilities was treated as a Kentucky utility. See discussion
infra.
----------
Measure OhioCo Values
Gross Operating Revenues 11.3%
Operating Margin 8.8%
Utility Operating Income 10.9%
The OhioCo contributions fall within the range of acceptable values under NIPSCO
for both gross operating revenues and operating margin. While utility operating
income is higher than that considered in NIPSCO, it is within the 10% to 12%
range generally considered the bright-line limit on contributions by immaterial
subsidiaries and so, neither VECTREN nor VUHI will have any "material"
out-of-state public-utility subsidiary companies.
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b. Predominantly and Substantially Intrastate
In NIPSCO, the Commission found the "predominantly and substantially"
standard satisfied where the out-of-state utility operations represented no more
than the following percentage of total utility operations:
Measure NIPSCO Range of Values
Gross Operating Revenues 19.2-19.8%
Operating Margin 13.0-13.7%
Utility Operating Income 8.7-11.1%
Under the language of the statute, the "predominantly and substantially" test
must be applied both, on a consolidated basis, to the holding company and, on a
corporate basis, to each material utility subsidiary. In the instant matter, the
out-of-state utility operations of VECTREN and VUHI, on a pro forma basis for
1999, would have had revenues, margins and income slightly higher than that
approved in NIPSCO but well within the range established by Rule 2 filings and
the Commission's interpretation of similar language in Section 3(a)(2) of the
Act:/2
----------
2/ See, e.g., 1999 Form U-3A-2 filed by Southwestern Energy Company (24% of
utility revenues and retail gas sales, on an Mcf basis, from out-of-state), 1997
Form U-3A-2 filed by LG&E Energy Corporation (20.43% out-of-state electric
utility sales, on a Kwh basis), and 1997 Form U-3A-2 filed by MidAmerican Energy
Holdings Company (31.98% out-of-state electric utility sales, on a Kwh basis,
and 17.36% out-of-state utility customers). In addition, the Commission, in
Houston Industries Inc., Holding Co. Act Release No. 26744 (July 24, 1997),
found that a holding company which receives approximately one-third of its
utility operating revenues from a subsidiary company is still "predominantly" a
public-utility company within the meaning of Section 3(a)(2) of the Act.
----------
Measure VECTREN/VUHI
Gross Operating Revenues 21.3%
Operating Margin 16.6%
Utility Operating Income 20.6%
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On a corporate basis, Indiana Gas will be the only subsidiary with out-of-state
utility operations. The contributions of revenues, margins and income by the
Ohio operations of Indiana Gas, on a pro forma basis for 1999, would have been
slightly higher than that approved in NIPSCO but well within the range
established by Rule 2 filings and the Commission's interpretation of similar
language in Section 3(a)(2) of the Act:
Measure Indiana Gas Values
Gross Operating Revenues 19.3%
Operating Margin 17.0%
Utility Operating Income 22.5%
c. "Unless and Except" Clause Considerations
As noted above, notwithstanding an applicant's compliance with the
objective requirements of Section 3(a)(1), the Commission can deny or condition
an exemption, "insofar as [the Commission] finds the exemption detrimental to
the public interest or the interest of investors or consumers." In assessing
this standard, the Commission has traditionally focused on the presence of state
regulation on the theory that federal intervention is unnecessary when state
control is adequate. See, e.g., KU Energy Corp., Holding Co. Act Release No.
25409 (Nov. 13, 1991); CIPSCO Inc., Holding Co. Act Release No. 25212 (Sept. 18,
1990). The proposed Acquisition will have not have an adverse effect on
VECTREN's existing electric and gas operations, or on the way that rates are
regulated by the Indiana and Ohio Commissions, or the ability of those
commission to effectively regulate the operations of the Vectren utility
subsidiaries.
Chapter 6 of the 1995 Report on The Regulation of Public-Utility Holding
Companies (the "1995 Report") discusses the background and administration of the
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Act's exemptive provisions and explains that: "Congress subjected holding
companies to the requirements of the Act because meaningful state regulation of
their abuses was often obstructed by their control of subsidiaries in several
states and by the constitutional doctrines limiting state economic regulation."
Id. at 109, note 4. The legislative history makes clear that exemptions from
registration are available where the holding company is susceptible to effective
state regulation or is otherwise not the type of company at which the Act was
directed. See Sen. Rep. No. 621, 74th Cong., 1st Sess. (1935).
Both of those factors are present in this matter. As noted above, the Ohio
Commission has made extensive findings about its ability to protect consumers in
the context of this particular transaction, and the Indiana Commission has
issued a letter similarly addressing these concerns, particularly with respect
to the question of cross-subsidization. In matters involving exempt holding
companies, the SEC has traditionally given great deference to the views of the
affected state regulators. In NIPSCO, for example, the Commission noted that:
Each of Bay State's and Northern's regulators made the finding aware
of the fact that, if we approved the application, Bay State and
Northern would be owned by an out-of-state holding company exempt from
registration under the Act. The Commission has given weight to a
state's judgment concerning its ability to exercise effective
regulatory control (emphasis added).
NIPSCO./3
----------
3/ The NIPSCO order cited Wisconsin Energy Corp., Holding Co. Act Release No.
24267 (Dec. 18, 1996) ("the judgment of a state's legislature and public service
commission as to what will benefit their constituents is entitled to
considerable deference when not in conflict with the policies of the Act");
Northern States Power Co., 36 S.E.C. 1, 8 (1954) ("The considered conclusion of
the local authorities, deriving their power from specific State legislation,
should be given great weight in determining whether the public interest would in
fact be adversely affected . . . ."), cited with approval in Houston Industries,
Inc., Holding Co. Act Release No. 26744 (July 24, 1997).
----------
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Of interest here, the Ohio Commission specifically cited the experience of
the Indiana Commission and the absence of regulatory abuses as a basis for its
finding that the proposed structure "is reasonable, will not adversely affect
the public utility company's customers, is in the public interest, and should be
approved":
We also find that [Indiana Gas] has sufficiently demonstrated the
requisite experience and capabilities to operate and manage gas assets
in Indiana, where it operates a gas utility serving some 500,000
customers and is considered by the Indiana Utility Regulatory
Commission to have solid management, finances, and operations.
In the Indiana Letter, that Commission similarly advised the SEC that:
the [Indiana] Commission believes that it has the jurisdiction to
monitor the activities of Indiana Gas to ensure that
cross-subsidization between Indiana Gas and [OhioCo] or any other
affiliate does not occur.
The foregoing opinion is given with the understanding that
Vectren's Indiana and Ohio utility businesses will be separately
operated and that Indiana Gas and [OhioCo] will not be merged into a
single company. * * *
Finally, the [Indiana] Commission advised that Indiana Gas has
operated in Indiana as a gas utility continuously since 1945 and under
our regulatory purview.
Further, exemption of Vectren will not give rise to any of the evils that the
Act was intended to address. Vectren is a publicly held company subject to
continuous reporting requirements under the other federal securities laws. A
transaction that links two adjacent companies in a narrowly defined geographic
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<PAGE>
area does not create a problem of "scatteration" for purposes of the Act. As
explained more fully in the discussion under Section 10(c)(2), supra, the
proposed Transactions will tend toward the economic and efficient development of
an integrated public-utility system.
Concerning the structure of the proposed transaction, a helpful comparison
can be drawn to the Commission's decision in KU Energy Corporation, Holding Co.
Act Release No. 25409 (Nov. 13, 1991). In that matter, KU Energy Corporation
merged its Virginia subsidiary, Old Dominion Power Company, into its Kentucky
subsidiary company, Kentucky Utilities Company, and then incorporated that
company (Kentucky Utilities) in Virginia, as well as in Kentucky, in connection
with its request for an order of exemption under Section 3(a)(1). Although the
order is silent as to the reason for the restructuring and dual incorporation,
there is a discussion of the KU Energy case in the 1995 Report:
In some instances, [an overly strict reliance on size as a proxy for
effective state regulation] has created practical difficulties
unrelated to the abuses that the Act was intended to address. In 1988,
for example, Kentucky Utilities Company sought SEC approval for a
restructuring that would establish a holding company over its utility
operations. Under SEC precedent, it was unclear whether an
out-of-state utility subsidiary that contributed approximately 7
percent of Kentucky Utilities' consolidated utility revenues could be
disregarded as an immaterial subsidiary for purposes of section
3(a)(1). Before an exemption was granted, nearly three years later,
the company was required to merge its operations into a single utility
company that was then incorporated in two states.
1995 Report at 111-112. In a footnote, the report explained the mechanics of the
transaction:
Kentucky Utilities Company, a Kentucky public-utility company and
exempt holding company, merged with its Virginia subsidiary
23
<PAGE>
public-utility company, thereby mooting the materiality issue under
section 3(a)(1). The company then incorporated in Virginia, as well as
in Kentucky, in order to satisfy the [domestic incorporation]
requirements of Virginia law.
Id. at 112, note 23.
In the 1995 Report, the Division recommended that the Commission apply more
liberal standards for exemption, where the affected states agree. The Commission
implemented this recommendation in 1997, when it granted an order of exemption
under Section 3(a)(2) in connection with the merger of Houston Industries Inc.
and NorAm Energy Corp. Houston Industries, Inc., Holding Co. Act Release No.
26744 (July 24, 1997). To secure an exemption post-merger, Houston which was a
Section 3(a)(1)-exempt holding company, merged the holding company into the
utility, thereby collapsing the holding company structure. The surviving entity,
renamed Houston Industries Incorporated, then acquired NorAm. At the end of the
day, the parent Texas utility had as its subsidiary, NorAm, a gas company with
operations in six states.
It must be emphasized that, in moving from a Section 3(a)(1) to a Section
3(a)(2) structure, Houston surrendered all of the structural and financial
benefits -- including separation of regulated and nonregulated operations,
efficiencies in financings and transparency for regulatory purposes -- that are
the hallmarks of the traditional holding company structure. The sole purpose for
this structure was to enable Houston Industries Incorporated to qualify for
exemption under Section 3(a)(2) of the Act. The Commission did not challenge the
applicant's choice of corporate structures but, instead, tested the chosen
structure against the standards of the Act. In particular, the Commission noted
that:
There appears to be little possibility in this case that the holding
company structure will be used to evade state and local regulation, or
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<PAGE>
that regulation under the Act is needed to supplement state regulation
in order to prevent detriment to the interests protected by the Act.
Various state and local regulatory bodies that have continuing
jurisdiction over the utility operations of Houston and NorAm have
formally authorized the proposed business combination. All were aware
that Houston was seeking an exemption from most provisions of the Act.
In each case where a specific finding to the effect that the
transaction is consistent with, or not opposed to, the public interest
was required, such a finding was made. The Commission traditionally
has given great weight to the views of the states in this regard.
Footnote omitted. In this matter as well, there is nothing to suggest that the
holding company structure will be used to evade state and local regulation, or
that regulation under the Act is needed to supplement state regulation in order
to prevent detriment to the interests protected by the Act. In particular, both
Ohio and Indiana have continuing jurisdiction over the utility operations of
Indiana Gas and OhioCo. Both were aware that Vectren was seeking an exemption
from most provisions of the Act. Both have stated their comfort with the
proposed arrangement. Consistent with Houston Industries, NIPSCO and the cases
cited therein, the Applicants urge the Commission to give "great weight to the
views of the states in this regard."
Finally, a question has arisen whether the Commission should look behind
the form and analyze the Vectren transaction as if the DP&L Gas Assets were held
by a single subsidiary, ignoring the actual structure in which Indiana Gas and
OhioCo will hold undivided interests in the assets in a tenancy in common. While
there is not a case directly on point, the Commission's treatment of Bay State
Gas Company and its wholly-owned subsidiary, Northern Utilities, Inc., in the
NIPSCO decision indicates that the SEC will respect the corporate forms absent
some evidence of abuse. At issue in that matter was whether NIPSCO would qualify
for exemption under Section 3(a)(1). Bay State and Northern were both
out-of-state subsidiaries. But for the fact that Northern was wholly-owned by
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Bay State, the procedure would have been clear: the Commission would analyze the
subsidiaries separately, to determine if either was "material" and then,
consider the combined effect of all out-of-state operations to see if the
combined system would be "predominantly and substantially" intrastate.
Because Northern was wholly-owned by Bay State, however, the Commission
could have "looked through" Bay State and count Bay State and Northern as a
single subsidiary for purposes of "materiality" under Section 3(a)(1),
consistent with the concept of "direct or indirect" that pervades the statute.
The fact that the Commission did not take this additional step indicates that
the SEC will not look behind the form of a proposed transaction absent some
evidence of financial or regulatory abuse.
As discussed previously, there are appropriate safeguards in this matter to
ensure that the proposed structure will not be detrimental to the public
interest or the interest of investors or consumers, the "protected interests"
under the Act. Indiana Gas, SIGECO and Community are subject to broad regulation
as to rates and other matters, including affiliate transactions, by the Indiana
Commission. After the acquisition of the DP&L Assets, the gas distribution
system jointly owned by OhioCo and Indiana Gas (the "Ohio System") will be
subject to broad regulation as to rates and other matters by the Ohio
Commission.
In approving the acquisition, the Ohio Commission expressly noted that the
transaction structure was intended to help Vectren maintain its exempt status.
The Indiana Commission has similarly indicated its comfort with the proposed
arrangement. Further, there are a number of safeguards in place to ensure
against cross-subsidization or other detriment to the protected interests. Under
the proposed structure, utility and nonutility financings will be done through
separate subsidiaries of the parent holding company. Financings for the
nonutility activities are done by Vectren Capital Corp., a first-tier nonutility
subsidiary of Vectren, while financings for the utilities will be done by VUHI,
the new intermediate utility holding company. Although the nonutility financings
are backed by a parent support agreement, there is no recourse to utility assets
or stock in the event of a nonutility default.
The ability to finance utility operations at the VUHI level should further
shield the utility operations from any risks that may be associated with the
nonutility activities. The Ohio and Indiana Commissions have jurisdiction over
all issuances of equity and debt with a maturity of one year or more. To the
extent that Indiana Gas is now dually incorporated, it will require the approval
of both Ohio and Indiana for equity and long-term debt financings. Thus, the
proposed structure will result in more regulation, not less.
Finally, as noted by the Indiana Commission, Indiana Code 8-1-2-49 requires
that Indiana Gas must file any contract between it and Vectren and/or OhioCo.
That section, in pertinent part, provides that "[i]f it be found that any such
contract is not in the public interest, the [Indiana] Commission after
investigation and hearing is authorized to disapprove such contract." While Ohio
does not have a statute that specifically governs affiliate transactions, it can
address these types of issues through codes of conduct and traditional
ratemaking proceedings. Further discussion of the regulation of the Vectren
system is contained in the discussion of Utility Regulation, supra.
The structural protections, the degree and quality of other regulation and
the absence of any holding company abuses all tend to establish that the
proposed structure will not be detrimental to the "protected interests." Nor
would the grant of an exemption in this matter preclude the ability of the
Commission to deny the exemption in a subsequent matter if it appeared that the
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<PAGE>
exemption would prove detrimental to the protected interests. There are a number
of ways in which this matter could be distinguished from subsequent
nonconforming filings.
o First, there is no evidence of past problems. Indeed, the Ohio Commission
expressly focused on the company's positive experience with the Indiana
Commission, in determining to approve the acquisition of the DP&L gas assets.
o Second, each of the affected state regulators has specifically addressed
the particular structure and concluded that it would not impair the regulator's
ability to protect consumers.
o Third, there is no scatteration of utility properties. As explained more
fully in the discussion under Section 10(c)(2), supra, the gas utility services
territories of Indiana Gas and DP&L actually adjoin.
o Fourth, in the event that a holding company would try to use this type of
structure to evade regulation under the Act, there is a natural limit.
Notwithstanding the number of subsidiaries that may be used to avoid
"materiality", the total amount of out-of-state operations must be counted for
purposes of determining whether the system as a whole is "predominantly and
substantially" intrastate.
o Fifth, the Commission always has the authority under the "unless and
except" clause to condition or deny an exemption that it finds to be detrimental
to the protected interests. This point is well-illustrated by the Commission's
decisions denying orders of exemption in Cities Service Co., 8 S.E.C. 318
(1940), and Electric Bond and Share Co., 33 S.E.C. 21 (1952), even though those
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companies met the objective requirements for exemption. As the Commission
explained in a recent matter
In those cases, there was both an attempt to evade section 3(a)(3) . .
. and a history, and future likelihood, of abuses the Act was intended
to prevent. In each of these cases, the Commission determined that the
applicant was essentially the type of company at which the purposes of
the Act were directed and noted that the exemption would have been
denied under the unless and except clause, even if the applicant had
satisfied all the objective criteria for exemption.
AES Corporation, Holding Co. Act Release No. 27063, note 44 (Aug. 20, 1999)
(emphasis added).
Accordingly, the Commission should find that sufficient safeguards exist
under state law to ensure that no potential adverse consequences will result
from the proposed Transactions, and that Vectren and VUHI are entitled to orders
of exemption under Section 3(a)(1) of the Act.
ITEM 4. REGULATORY APPROVAL.
Set forth below is a summary of the regulatory approvals that will be
obtained in connection with the acquisition.
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(1) Antitrust
The acquisition is subject to the requirements of the Hart-Scott-Rodino Act
and the rules and regulations thereunder, which provide that certain acquisition
transactions may not be consummated until certain information has been furnished
to the Antitrust Division of the Department of Justice and the Federal Trade
Commission, and until certain waiting periods have been terminated or have
expired. Vectren and DP&L filed their notifications on March 16, 2000.
Thereafter, as noted above, the Antitrust Division issued second requests to
Vectren and DP&L. After Vectren and DP&L responded to the requests, the
Antitrust Division closed its investigation.
If the acquisition is not completed within twelve months after the
expiration or termination of the waiting period, Vectren and DP&L would be
required to submit new notices to the Antitrust Division and the FTC and a new
waiting period would have to expire or be terminated before the acquisition
could be completed.
(2) Federal Energy Regulatory Commission
As noted earlier, the FERC has approved the intermediate holding company
transaction.
(3) State Regulatory Approval
The Ohio Commission has authorized the acquisition of the DP&L Assets. See
Exhibits D-1.3, the Ohio Order.
ITEM 5. PROCEDURE.
The Commission is respectfully requested to issue and publish not later
than August 25, 2000 the requisite notice under Rule 23 with respect to the
filing of this Application, such notice to specify a date not later than
September 19, 2000 by which comments may be entered and a date not later than
September 19, 2000 as the date after which an order of the Commission granting
and permitting this Application to become effective may be entered by the
Commission.
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Vectren believes that a recommended decision by a hearing or other
responsible officer of the Commission is not needed for approval of the proposed
acquisition. The Division of Investment Management may assist in the preparation
of the Commission's decision. There should be no waiting period between the
issuance of the Commission's order and the date on which it is to become
effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
Exhibits
A-1 Vectren Corporation's Articles of Incorporation and By-Laws,
incorporated by reference to SEC Form S-4, File No. 333-90763, November
12, 1999.
A-2 Constituent documents of VUHI.
B-1 Agreements governing the Acquisition, incorporated by reference to SEC
Form 8-K, File No. 001-15467, December 28, 1999.
D-1.1 Joint Petition to the Ohio Commission, dated March 20, 2000.
D-1.2 Supplement to Joint Petition to the Ohio Commission, dated June 8,
2000.
D-1.3 Order of the Ohio Commission.
D-1.4 Letter from Indiana Commission
D-2.1 FERC application.
D-2.2 FERC Order.
E-1 Map of proposed combined service territory (filed in paper format
on Form SE).
F-1 Opinion of counsel - Vectren Corporation
F-2 Past tense opinion of Vectren Corporation's counsel (to be
filed by amendment).
H-1 Vectren's 1999 Annual Report, incorporated by reference to SEC
Form 10-K, File No. 001-15467, March 30, 2000.
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H-2 1999 Form U-3A-2 for Indiana Energy, Inc., incorporated by reference
to SEC File No. 69-00312, March 1, 2000.
H-3 1999 Form U-3A-2 for SIGCORP, Inc., incorporated by reference to SEC
File No. 69- 00397, February 29, 2000.
H-4 DP&L's 1999 Annual Report, incorporated by reference to SEC Form 10-K,
File No. 001-02385, March 31, 2000.
I-1 Proposed Form of Notice.
J-1 Section 3(a)(1) financial projections (CONFIDENTIAL TREATMENT, filed
under Form SE).
J-2 Section 10(b)(3) financial projections (CONFIDENTIAL TREATMENT, filed
under Form SE).
Financial Statements
FS-1 Vectren Corporation's Unaudited Pro Forma Condensed Consolidated
Balance Sheet and Statement of Income for the 12 months ending December
31, 1999, the 12 months ended June 30, 2000 and projected data for
2000, 2001 and 2002 (CONFIDENTIAL TREATMENT, filed under Form SE).
FS-2 Vectren Corporation's Consolidated Balance Sheet and Statement of Income
for the quarter ended March 31, 2000, incorporated by reference to SEC Form
10-Q, File No. 001-15467, May 15, 2000.
FS-3 DP&L's Consolidated Balance Sheet and Statement of Income for the quarter
ended March 31, 2000, incorporated by reference to SEC Form 10-Q, File No.
001-02385, May 15, 2000.
FS-4 Vectren Corporation's Consolidated Balance Sheet and Statement of Income
for the year ended December 31, 1999, incorporated by reference to SEC Form
10-K, File No. 001- 15467, March 30, 2000.
FS-5 DP&L's Consolidated Balance Sheet and Statement of Income for the year
ended December 31, 1999, incorporated by reference to SEC Form 10-K, File
No. 001-02385, March 31, 2000.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
The acquisition neither involves a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. Consummation of the acquisition will not result in changes in
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the operations of DP&L that would have any impact on the environment. No federal
agency is preparing an environmental impact statement with respect to this
matter.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned companies have duly caused this Application to be signed
on its behalf by the undersigned thereunto duly authorized. The signature of the
applicants, through the undersigned, is restricted to the information contained
in this application which is pertinent to the instant application.
Date: September 29, 2000 /signed/
--------
Ronald E. Christian
Senior Vice President, General Counsel
and Secretary
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Appendix A
List of Vectren Corporation's Non-Utility Subsidiaries
1. Vectren Utility Holdings, Inc. is a holding company that provides
environmental and other services to Vectren's utility companies.
2. Vectren Generation Services, Inc. is an intermediate holding company
under Vectren for Southern Indiana Minerals, Inc. and Vectren Fuels, Inc.
3. Southern Indiana Minerals, Inc. processes and markets coal combustion
by-products.
4. Vectren Fuels, Inc. owns and operates coal mining properties, including
a one-hundred percent (100%) ownership interest in Cypress Creek Mine, Inc.,
Prosperity Mine, LLC and Cypress Creek Mine, LLC and a ninety-nine percent (99%)
ownership interest in SFI Coal Sales, LLC.
5. Vectren Foundation, Inc. is a non-profit corporation under Vectren,
which makes contributions to organizations and communities in which Vectren
provides utility services.
6. Vectren Resources, LLC primarily provides information technology
resources to Vectren and its subsidiaries.
7. Vectren Capital Corp., and its direct subsidiary, IEI Capital Corp., are
financing vehicles for Vectren's non-regulated subsidiaries.
8. Vectren Enterprises, Inc. is a intermediate holding company for five
non-regulated businesses: Vectren Communications, Inc., Vectren Energy Services,
Inc., Vectren Financial Group, Inc., Vectren Utility Services, Inc. and Vectren
Ventures, Inc.
9. Vectren Communications, Inc. is a holding company for SIGCORP
Communications Services, Inc., which conducts communications-related strategic
initiatives.
10. SIGECO Advanced Communications, Inc. holds Vectren's investment in
SIGECOM, Inc. and Utilicom Networks, LLC. Utilicom Networks, LLC is a joint
venture between Advanced Communications, Inc. and Utilicom Networks, Inc., which
markets and provides enhanced communications services over a high-capacity
fiber-optic network in SIGECO's service territory.
11. Vectren Energy Services, Inc. is an intermediate holding company for
Vectren Energy Solutions, Inc., which holds a one-hundred percent (100%)
interest in SIGCORP Energy Services, Inc., Energy Systems Group, Inc., Vectren
Environmental Services, Inc., Indiana Energy Services, Inc. (dormant) and
SIGCORP Power Marketing, Inc. (dormant), and a fifty percent (50%) ownership
interest in ProLiance Energy, LLC.
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12. SIGCORP Energy Services, Inc. has a ninety-nine percent (99%) ownership
interest in SIGCORP Energy Services, LLC, which provides natural gas, pipeline
management and other natural gas related services, through its ownership
interest in SIGCORP Gas Marketing, LLC, Ohio Valley Hub, LLC and Signature
Energy Management, LLC.
13. Energy Systems Group, Inc. has a two-thirds ownership interest in
Energy Systems Group, LLC, an energy-related performance contracting firm
serving industrial and commercial customers.
14. Vectren Environmental Services, Inc. holds a fifty-one percent (51%)
ownership interest in Air Quality Services, LLC, a joint venture created to
provide air quality monitoring and testing services to industry and utilities.
15. ProLiance Energy, LLC provides gas and power to more than 1,000
commercial, industrial, municipal, residential and utility customers.
16. Vectren Financial Group, Inc. is an intermediate holding company for
the following entities: Southern Indiana Properties, Inc., Vectren Synfuels,
Inc. and Energy Realty, Inc.
17. Southern Indiana Properties, Inc. makes investments in real estate,
which include: SIP-GT I, Inc., Southwest Lease Capital, Inc., Southern Indiana
Joint Ventures, Inc., MCN Equities, Inc. and Joint Ventures Affiliated, Inc.
18. Vectren Synfuels, Inc. owns a limited partnership in Pace Carbon
Synfuels Investors, L.P., which produces and sells coal-based synthetic fuel
that qualifies for federal tax credits.
19. Energy Realty, Inc. invests in real estate and affordable housing,
including a ninety-eight percent (98%) ownership interest in BCI Holding Co.,
LLC.
20. Vectren Utility Services, Inc. holds investments in non-regulated
subsidiaries which provide various services to Vectren, and include Reliant
Services, LLC, CIGMA, LLC, IEI Financial Services, LLC and Utility Debt
Collectors, Inc. (dormant).
21. Reliant Services, LLC is an underground locating, construction and
meter reading company.
22. CIGMA, LLC is a regional supplier of materials and integrated supply
solutions to the energy market and related industries.
23. IEI Financial Services, LLC performs third-party collections,
energy-related equipment leasing and related services.
24. Vectren Ventures, Inc. invests in energy-related companies and projects
and holds the remainder one percent (1%) interests in Vectren Resources, LLC,
SIGCORP Energy Services, LLC and IEI Financial Services, LLC.
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