BEFORE
THE PUBLIC UTILITIES COMMISSION OF OHIO
In the Matter of the Joint Petition of )
Vectren Energy of Ohio, Inc., Indiana Gas )
Company, Inc., and The Dayton Power )
and Light Company, to Transfer the ) Case No. 00-524-GA-ATR
Natural Gas Assets of the Dayton Power )
and Light Company to Vectren Energy of )
Ohio, Inc. and/or Indiana Gas Company, )
Inc. Pursuant to Section 4905.48(B) and )
(C), Revised Code. )
)
In the Matter Application of The Dayton )
Power & Light Company for Approval of )
a Revised Bill Format Pursuant to Rule ) Case No. 00-605-EL-UNC
4901:1-18-10 and Rule 4901:1-10-22, )
Ohio Administrative Code. )
FINDING AND ORDER
The Commission finds:
(1) On March 20, 2000, Vectren Energy of Ohio, Inc. (hereinafter
Vectren), Indiana Gas Company, Inc. (hereinafter IGC), and
The Dayton Power and Light Company (hereinafter DP&L) filed
a joint petition to transfer the natural gas assets of DP&L
to Vectren and/or IGC.
(2) In the March 20, 2000 joint petition, the joint petitioners
state that Vectren is the proposed purchaser of the natural
gas as-sets of DP&L pursuant to Section 4905.63, Revised
Code. Joint petitioners state that Vectren is subject to the
jurisdiction of the Commission and desires to complete the
purchase under Section 4905.48, Revised Code. At the time of
the filing, IGC was evaluating whether it, rather than
Vectren, might become the acquirer of DP&L's gas assets;
under this scenario, IGC would remain incorporated under
Indiana law and would also become incorporated under Ohio
law. The ultimate acquirer of the DP&L gas assets will be
determined based on the entity more likely to receive an
intrastate exemption under the Public Utilities Holding
Company Act (hereinafter PUHCA). Joint petitioners state
that the preferred structure is for Vectren to acquire the
gas assets. Joint petitioners further state that, in the
event that the Securities and Exchange Commission
(hereinafter SEC) rejects Vectren's request for a PUHCA
exemption, Vectren will proceed with the acquisition even if
that results in regulation as a holding company under PUHCA.
Joint petitioners state that Indiana Energy, Inc. is the
guarantor of either Vectren or IGC's obligations, and will
not be involved in the ownership or operation of the DP&L
gas assets. Indiana Energy, Inc. is in the process of
merging with SIG-CORP. At the time of the filing of the
joint petition, joint petitioners expected the merger to be
consummated by the end of March 2000.
Joint petitioners pledge that following approval of the
joint petition, Vectren will hire a significant number of
DP&L employees who currently operate the gas assets.
The agreement provides for a purchase price of $425,000,000
(plus or minus certain adjustments) for the DP&L gas assets.
In the joint petition, joint petitioners state that to fund
the purchase price one of the following two scenarios will
take place. If Vectren is the acquirer, then Indiana Energy,
Inc. or Vectren, or owner of their subsidiaries, will make
an equity contribution to Vectren of approximately one half
of the $425,000,000, which will enable Vectren to secure
long-term debt to repay that loan. If the acquirer is IGC,
then the same arrangements will be made except that IGC will
participate rather than Vectren. Joint petitioners state
that an appropriate application will be made to the
Commission under Section 4905.40, Revised Code, under either
scenario.
(3) 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 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) Vectren 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;/1/ 3)
the DP&L gas assets to be jointly owned by Vectren 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 sufficient in all
respects for Vectren to maintain such books, system of
accounts, depreciation reserve or fund, and any other
records as Vectren 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.
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/1/ As a result of IGC's recent incorporation in Ohio, it is dually
incorporated under Indiana and Ohio law.
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In the supplement, Vectren and IGC confirm that the
accounting treatment to be employed by the operationally
combined enterprises will: 1) record the purchase and sale
of the DP&L gas assets as a consolidated enterprise in
accordance with the Uniform System of Accounts for natural
gas companies, including the inclusion of the acquisition
adjustment in account 114; and 2) Vectren (individually and
jointly on behalf of IGC) will record any amortization of
the acquisition adjustment as a consolidated enterprise in
account 425, miscellaneous amortization, unless and until
the Commission orders otherwise.
Finally, the joint petitioners state that the DP&L gas
assets being purchased by Vectren and IGC include the net
book cost at closing of all GCR balances and PIPP balances.
Joint petitioners commit to either crediting or surcharging
customers for such amounts as provided by the tariff, upon
adoption of the tariff.
(4) DP&L is a natural gas company as defined by Section
4905.03(A)(6), Revised Code, and a public utility, as
defined by Section 4905.02, Revised Code, and, as such, is
subject to the jurisdiction of this Commission. Vectren is
an Ohio corporation and a wholly owned subsidiary of Indiana
Energy, Inc. IGC is an Indiana corporation and a wholly
owned subsidiary of Indiana Energy, Inc. The Commission has
jurisdiction over the instant transaction by virtue of
Sections 4905.05, 4905.06, 4905.63, and 4905.48, Revised
Code, to ensure that the owner possesses the financial and
technical capabilities necessary to continue to provide
adequate service and that the potential transfer of
ownership will not harm the public interest.
(5) In the joint petition, the joint petitioners request that
the Commission: 1) find that a hearing is not warranted or
required; 2) state that we strongly prefer and endorses the
"preferred structure;" 3) state that we prefer the first
alternate structure to the regulation of Vectren as a
registered holding company under PUHCA; 4) approve the
purchase and sale of the DP&L gas assets from DP&L to
Vectren or IGC pursuant to Section 4905.48(B) and (C),
Revised Code, explicitly indicating that the acquisition
will not affect the Commission's jurisdiction and authority
over the rates, services, and operations of the owner of the
DP&L gas assets, nor would it impair the Commission's
ability to protect ratepayers; 5) approves the adoption of
DP&L's natural gas tariff (P.U.C.O. No. 3) by Vectren or
IGC; and 6) grant joint petitioners such other and further
relief which they may be reasonably be entitled to, and
which is necessary or advisable in the premises.
In the joint petitioner's supplement to the joint petition,
joint petitioners request that the Commission: 1) approve
the sale of the DP&L gas assets, including GCR and PIPP
balances; 2) approve the operational combination of the DP&L
gas assets; 3) permit Vectren and IGC to continue the
accounting treatment previously approved for the DP&L gas
assets, including the depreciation accounts; and 4) permit
Vectren and IGC to file consolidated annual reports to be
treated as a combined unit of other filings.
(6) Staff filed two reports in Case No. 00-524-GA-ATR. On May
31, 2000, staff filed its first analysis of the transaction.
In that filing, staff asserts that Commission approval of
the transaction is necessary because it envisions Vectren or
IGC issuing long-term debt and Section 4905.40, Revised
Code, requires Commission authorization of issuances of
long-term debt by utilities under its jurisdiction. In the
second filed analysis, staff states that approval of the
petition would result in the public being furnished no less
adequate service than they are currently receiving and,
therefore, the staff has no reason to oppose the proposed
transfer. In addition to the commitments contained in the
supplement to the joint petition, staff favorably notes
Vectren's commitment to develop a stakeholder group to work
on implementing a customer choice program within a
reasonable period of time.
(7) The Commission has reviewed the application and supporting
exhibit and finds 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 are not convinced that a hearing is
necessary in this matter. 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 Utility
Regulatory Commission to have solid management, finances,
and operations. Moreover, we find that the transaction will
not result in a change of rates for the current DP&L gas
customers. We are in agreement with booking the acquisition
adjustment in Account 425 as that is a below the line
account. We also clarify that pursuant to Ohio law the
amount is not available for recovery in jurisdictional
rates. Accordingly, the application for approval of the
potential change in ownership interest should be granted.
(8) We find the operational combination of DP&L gas assets to be
reasonable. Moreover, we approve the adoption of DP&L's
natural gas tariff, P.U.C.O. No. 3. In addition, the
Commission finds Vectren's commitment to implement a
customer choice program within a reasonable time following
the approval of the asset transfer to be a benefit of this
transaction, particularly, since we have been seeking such a
program since 1998.
(9) On March 21, 2000, DP&L filed an application for approval of
a revised bill format in Case No. 00-605-EL-UNC. The purpose
of the new bill format is to inform customers that, although
DP&L will still provide the billing to its current
customers, Vectren will be their supplier of natural gas
service and DP&L will be the supplier of electric service.
On April 21, 2000, the
Commission suspended the approval of DP&L's revised bill
format pending the outcome of Case No. 00-524-GA-ATR.
(10) Having reviewed the revised bill format, the Commission
finds that the revised bill format is reasonable in that it
in-forms customers that Vectren will be their gas supplier
and the present billing services provided by DP&L will be
continued. The Commission does, however, wish to point out
that in approving this revised bill format, we are not
ruling on any other portion of DP&L's bill nor are we
commenting on whether DP&L's bill format complies with the
Commission's new electric restructuring rules.
(11) On April 3, 2000, Local 175 of the Utility Workers Union of
America, AFL-CIO (hereinafter Local 175) filed a motion to
in-tervene, to defer action, and objections. On April 19,
2000, the Ohio Partners for Affordable Energy (hereinafter
OPAE) filed a motion to intervene. On May 4, 2000, Vectren
and IGC filed a memorandum contra OPAE's motion to
intervene. On May 11, 2000, OPAE filed a memorandum contra.
On May 19, 2000, DP&L filed a memorandum contra of OPAE. On
May 30, 2000, DP&L filed a memorandum in opposition to Local
175's motion to intervene.2 Neither Local 175 nor OPAE
requested a hearing. Since the Commission has determined
that a hearing is not necessary on this matter, we find that
Local 175 and OPAE's motions to intervene are moot.
It is, therefore,
ORDERED, that the joint petition of Vectren, IGC, and DP&L to transfer the
natural gas assets of DP&L to Vectren and IGC is hereby granted. It is, further,
ORDERED, That the joint petitioners notify the Commission in writing as of
the date any such ownership interest in the natural gas assets of DP&L is
changed. It is, further,
ORDERED, That Case No. 00-524-GA-ATR be closed of record. It is, further,
ORDERED, That the revised bill format proposed in Case No. 00-605-EL-UNC
shall be adopted and that case be closed of record. It is, further,
ORDERED, That a copy of this Finding and Order be served upon all parties
in both records.
THE PUBLIC UTILITIES COMMISSION OF OHIO
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Alan R. Schriber, Chairman
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Ronda Hartman Fergus Craig A. Glazer
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Judith A. Jones Donald L. Mason
MBL;geb
Entered in the Journal Signed by Commissioners
July 11, 2000 Schriber
Fergus
Gary E. Vigorito Glazer
Secretary Jones
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/2/ This pleading was timely filed pursuant to an extension of time granted by
the attorney examiner.
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