File No. 70-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
------------------------------
CENTRAL POWER AND LIGHT COMPANY
539 North Carancahua Street
Corpus Christi, Texas 78401-2802
PUBLIC SERVICE COMPANY OF OKLAHOMA
212 East Sixth Street
Tulsa, Oklahoma 74119-1212
SOUTHWESTERN ELECTRIC POWER COMPANY
428 Travis Street
Shreveport, Louisiana 71156-0001
WEST TEXAS UTILITIES COMPANY
301 Cypress Street
Abilene, Texas 79601-5820
CENTRAL AND SOUTH WEST SERVICES, INC.
Williams Tower 2
2 West 2nd Street
Tulsa, Oklahoma 74103
(Names of companies filing this statement and addresses
of principal executive offices)
---------------------------
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
-----------------------------
Wendy G. Hargus, Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005-1413
(Names and addresses of agents for service)
<PAGE>
Central Power and Light Company, Public Service Company of
Oklahoma, Southwestern Electric Power Company and West Texas Utilities Company
(the "Operating Companies"), wholly owned public utility subsidiaries of Central
and South West Corporation ("CSW"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act"), and Central
and South West Services, Inc., a wholly owned subsidiary of CSW that is
authorized to provide services to associate companies pursuant to Section 13(b)
of the Act and rules of the Securities and Exchange Commission (the
"Commission") promulgated thereunder (the "Service Company"), hereby submit for
filing this Application on Form U-1. By this Application, the Operating
Companies and the Service Company seek authority to market the mortgage services
of PHH Mortgage Services Corporation ("PHH Mortgage") and the relocation
services of PHH Real Estate Services Corporation ("PHH Real Estate"), or
possibly in the future other providers of mortgage and relocation services that
can offer comparable services and benefits ("Other Providers"), to its customers
and to conduct the related activities described herein.
Item 1. Description of Proposed Transactions.
The Operating Companies, directly or through the Service
Company, propose to market to their customers a mortgage incentive program
called the Better Choices Home Mortgage Program (as the same may be renamed from
time to time, the "Better Choices Program").
The Better Choices Program is designed to promote efficiency
in the use of energy and environmental conservation by customers of the
Operating Companies. Under the Better Choices Program, customers will be offered
the opportunity to obtain mortgages with enhanced benefits to customers on homes
that qualify either for a Good Cents Home Certification or a Good Cents
Environmental Home Certification. The Good Cents Home Certification requires
that the home to be purchased meet certain energy efficiency standards (such as
those relating to the quality of the insulation installed, the energy efficiency
of the heating, ventilating and air conditioning equipment and other appliances
installed and the presence of energy management systems). The Good Cents
Environmental Home Certification requires that the home to be purchased meet not
only energy efficiency requirements but also have at least a minimum number of
environmental conservation features from a list of features (such as low-flow
shower heads, recycling bins, composting facilities and use of non-polluting
materials).
The Good Cents Environmental Home Certification Standards have
been submitted to the Edison Electric Institute for certification that they meet
the standards of the E-Seal Program of the Edison Electric Institute, an
industry-wide program to promote energy efficiency and environmental
conservation. The Operating Companies will certify to PHH Mortgage (or Other
Providers) that the homes meet the standards for either a Good Cents Home
Certification or a Good Cents Environmental Home Certification and will list the
features of the homes that qualify them for such certification. Based on such
certification, customers will be offered various benefits that may permit them
to qualify for mortgages that are 15% to 20% larger than conventional mortgages
available to them. The increased sizes of the mortgages are made possible by a
combination of features, such as granting mortgages for 100% of the cost of
qualifying energy efficiency and environmental conservation features and
calculating income available to service mortgages on the basis of reduced
utility bills. In addition, customers will be offered other inducements that
will vary over time, such as reduced points, closing costs and interest rates.
The services offered by PHH Mortgage are integrated with the
relocation services offered by PHH Real Estate, which maintains a network of
residential realtors capable of assisting customers in selling their existing
homes, buying new homes and, together with PHH Mortgage, qualifying for new
mortgages under the Better Choices Program if they move within the service
territories of the Operating Companies. In addition to receiving the benefits of
the relocation services, customers would, where lawful, be paid portions of the
referral fees received by PHH Real Estate from the realtors upon closing. The
Operating Companies would not render any services to customers in respect of the
relocation services of PHH Real Estate and would not certify the homes of
relocating customers as qualifying for preferential mortgages if the customers
move out of the service territories of the Operating Companies. Nonetheless, the
Operating Companies believe that these ancillary services contribute to the
primary objectives of the Better Choices Program for the Operating Companies:
(i) the promotion of energy efficiency and environmental conservation on the
part of customers; and (ii) the promotion of general customer good will in an
era of anticipated competition in retail electric service by making available
financial services products that offer significant benefits to customers. As
noted above, in the future the Operating Companies might market similar services
offered by Other Providers.
The Operating Companies (directly or through the Service
Company) would market the Better Choices Program through direct mail programs,
articles, promotional literature, advertisements, customer kits, and mail
inserts. The mail inserts portion of the marketing activity would utilize the
excess bill space in the billing envelopes sent by the Operating Companies to
their utility customers such that the total envelope weight with the added piece
would not result in any additional postage. The Operating Companies would be
compensated for their marketing services by payment to them, where lawful, of a
portion of the referral fee received by PHH Real Estate (or Other Provider) from
the realtor upon closing. The Operating Companies would also be compensated for
their marketing services by the payment to them, where lawful, of fees based on
mortgages closed by PHH Mortgage. The Operating Companies propose to offer the
Better Choices Program for the customer relations reasons stated above, rather
than primarily to make profits, and estimate that such compensation might only
cover their costs. Currently, it is estimated that the aggregate costs of the
Better Choices Program in 1998 and 1999 would be $50,000 and $100,000,
respectively, and that aggregate revenues in those years would be $40,000 and
$100,000, respectively.
Rule 54 promulgated under the Act states that in determining
whether to approve the issue or sale of a security by a registered holding
company for purposes other than the acquisition of an exempt wholesale generator
("EWG") or a foreign utility company ("FUCO"), or other transactions by such
registered holding company or its subsidiaries other than with respect to EWGs
or FUCOs, the Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an EWG or a FUCO upon the registered holding
company system if Rule 53(a), (b) and (c) are satisfied. As set forth below, all
applicable conditions set forth in Rule 53(a) are, and, assuming the
consummation of the transactions proposed herein, will be, satisfied and none of
the conditions set forth in Rule 53(b) exist or will exist as a result of the
transactions proposed herein.
Rule 54 under the Act is satisfied because Rules 53(a), (b)
and (c) are satisfied. As of March 31, 1997, CSW has invested approximately
$894.2 million in EWGs and FUCOs or approximately 46% of CSW's average
"consolidated retained earnings" of $1,939 million at the end of its four fiscal
quarters ended March 31, 1997, thus satisfying Rule 53(a)(1). CSW maintains in
conformity with United States generally accepted accounting principles and makes
available the books and records required by Rule 53(a)(2). No more than 2% of
the employees of CSW's operating subsidiaries will, at any one time, directly or
indirectly, render services to an EWG or FUCO in which CSW directly or
indirectly owns an interest, satisfying Rule 53(a)(3). And lastly, CSW will
submit a copy of Item 9 and Exhibits G and H of CSW's Form U5S to each of the
public service commissions having jurisdiction over the retail rates of CSW's
operating utility subsidiaries, satisfying Rule 53(a)(4). None of the conditions
described in Rule 53(b) exist with respect to CSW or any of its subsidiaries,
thereby satisfying said Rule and making Rule 53(c) inapplicable.
Item 2. Fees, Commissions and Expenses.
The estimate of the approximate amount of fees and expenses
payable in connection with the proposed transactions is as follows:
Holding Company Act filing fee $ 2,000*
Counsel fees
Milbank, Tweed, Hadley & McCloy 7,500
Miscellaneous and incidental
expenses including travel,
telephone and postage 500
-------
TOTAL $10,000
- -------------------------
* Actual amount.
Item 3. Applicable Statutory Provisions.
Sections 9(a), 10 and 11(b) of the Act are or may be
applicable to the proposed transactions. To the extent any other sections of the
Act may be applicable to the proposed transactions, the Operating Companies and
the Service Company hereby request appropriate orders thereunder. Section 9(a)
of the Act makes unlawful the acquisition by a subsidiary of a registered
holding company of "any . . . interest in any business" without the prior
approval of the Commission under Section 10 of the Act. Under Section 10(c)(1),
the Commission may not approve the acquisition of any interest in any business
if the proposed acquisition is "detrimental to the carrying out of the
provisions of Section 11" of the Act. Under Section 11(b)(1), the Commission
must limit the operations of a public utility holding company and its
subsidiaries to a single integrated public utility system, and to such other
businesses as are reasonably incidental, or economically necessary or
appropriate, to the operations of such integrated public utility system. The
Commission may permit as reasonably incidental, or economically necessary or
appropriate, to the operations of an integrated public utility system the
retention of an interest in any business (other than the business of a public
utility company as such) which the Commission shall find necessary or
appropriate in the public interest or for the protection of investors or
consumers and not detrimental to the proper functioning of such system.
The Operating Companies believe that the marketing of the
Better Choices Program will provide substantial enhancement of efficiency of
energy use by residential customers and will promote customer good will, and
therefore satisfies the requirements of Sections 9(a)(1) and 10 in that it is
incidental, and economically necessary or appropriate to the Operating Companies
core business of generating, transmitting and distributing electric energy. The
Better Choices program is also appropriate in the public interest, in that it
will promote environmental conservation by residential customers, and is not
detrimental to the proper functioning of the Operating Companies and the Service
Company.
The Better Choices Program satisfies the two-pronged
"functional relationship" test established by the United States Court of Appeals
for the District of Columbia Circuit in Michigan Consolidated Gas Co. v. SEC,
444 F.2d 913 (D.C. Cir. 1971), which traditionally has been used by the
Commission in applying Section 11(b)(1) of the Act. Under the "functional
relationship" test, an integrated public-utility system may retain an interest
in another business if (i) the additional business is "reasonably incidental or
economically necessary or appropriate" to the integrated system and (ii) the
retention of the additional business is in the public interest. Michigan
Consolidated at 916. The nature of the Better Choices Program and the objectives
of the Operating Companies in desiring to offer it to customers make it closely
related to the core business of the Operating Companies; therefore the marketing
of these programs to customers easily passes the "functional relationship" test.
Item 4. Regulatory Approval.
No state regulatory authority and no federal regulatory
authority, other than the Commission under the Act, have jurisdiction over the
proposed transactions.
Item 5. Procedure.
It is requested that the Commission issue and publish not
later than July 18, 1997 the requisite notice under Rule 23 with respect to the
filing of this Application, such notice to specify a date not later than August
8, 1997 as the date after which an order granting and permitting this
Application to become effective may be entered by the Commission and the
Commission enter not later than August 9, 1997 an appropriate order granting and
permitting this Application to become effective.
No recommended decision by a hearing officer or other
responsible officer of the Commission is necessary or required in this matter.
The Division of Investment Management of the Commission may assist in the
preparation of the Commission's decision in this matter. There should be no
thirty-day waiting period between the issuance and the effective date of any
order issued by the Commission in this matter, and it is respectfully requested
that any such order be made effective immediately upon the entry thereof.
Item 6. Exhibits and Financial Statements.
Exhibit 1 - Preliminary opinion of Milbank, Tweed, Hadley & McCloy,
counsel to the Operating Companies and the Service
Company.
Exhibit 2 - Final or "Past Tense" opinion of Milbank, Tweed, Hadley &
McCloy, counsel to the Operating Companies and the
Service Company (to be filed with Certificate of
Notification).
Exhibit 3 - Financial Statements as of March 31, 1997 (to be filed by
Amendment).
Exhibit 4 - Proposed notice of proceeding.
Item 7. Environmental Effects.
The proposed transactions do not involve major Federal action
having a significant effect on the human environment. No Federal agency has
prepared or is preparing an environmental impact statement with respect to the
proposed program.
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned company has duly caused this
document to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: July 14, 1997.
CENTRAL POWER AND LIGHT COMPANY
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
PUBLIC SERVICE COMPANY OF OKLAHOMA
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
SOUTHWESTERN ELECTRIC POWER COMPANY
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
WEST TEXAS UTILITIES COMPANY
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
CENTRAL AND SOUTH WEST SERVICES, INC.
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
<PAGE>
Exhibit Index
Exhibit Transmission
Number Exhibit Method
- ------ ------- -------------
1 Preliminary opinion of
Milbank, Tweed, Hadley &
McCloy, counsel to the
Operating Companies and
the Service Company. Electronic
2 Final or "Past Tense"
opinion of Milbank, Tweed,
Hadley & McCloy, counsel
to the Operating Companies
and the Service Company
(to be filed with the
Certificate of Notification). __
3 Financial Statements as
of March 31, 1997 (to
be filed by amendment). __
4 Proposed notice of
proceeding. Electronic
EXHIBIT 1
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005
July 14, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form U-1 Application-Declaration
(File No. 70-_________)
Dear Sirs:
We refer to the Application on Form U-1 (the "Application")
under the Public Utility Holding Company Act of 1935, as amended (the "Act"),
filed by Central Power and Light Company, Public Service Company of Oklahoma,
Southwestern Electric Power Company and West Texas Utilities Company (the
"Operating Companies"), which are wholly owned public utility subsidiaries of
Central and South West Corporation ("CSW"), a registered holding company, and
Central and South West Services, Inc., a wholly owned subsidiary of CSW that is
authorized to provide services to associate companies pursuant to Section 13(b)
of the Act and the rules of the Securities and Exchange Commission (the
"Commission") promulgated thereunder (the "Service Company"). The Application
relates to the proposed marketing by the Operating Companies to their customers
of mortgage services of PHH Mortgage Services Corporation and relocation
services of PHH Real Estate Services Corporation (or possibly in the future
other providers), having certain energy efficiency and environmental
conservation features, as described in the Application (the "Transactions"). We
have acted as special counsel for the Operating Companies and the Service
Company in connection with the Transactions and, as such counsel, we are
familiar with the corporate proceedings taken and to be taken by the Operating
Companies and the Service Company in connection with the Transactions.
We have examined originals, or copies certified to our
satisfaction, of such corporate records of the Operating Companies and the
Service Company, certificates of public officials, certificates of officers and
representatives of the Operating Companies and the Service Company and other
documents as we have deemed it necessary to require as a basis for the opinions
hereinafter expressed. In such examination we have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us as
originals and the conformity with the originals of all documents submitted to us
as copies. As to various questions of fact material to such opinions we have,
when relevant facts were not independently established, relied upon certificates
by officers of the Operating Companies and the Service Company and other
appropriate persons and statements contained in the Application.
Based upon the foregoing, and having regard to legal
considerations which we deem relevant, we are of the opinion that, in the event
that the proposed Transactions are consummated in accordance with the
Application, as it may be amended, and subject to the assumptions and conditions
set forth below:
1. All state laws applicable to the proposed Transactions will have been
complied with.
2. The consummation of the proposed Transactions will
not violate the legal rights of the holders of any
securities issued by the Operating Companies or the
Service Company or any associate company thereof.
The opinions expressed above in respect of the Transactions
described in the Application are subject to the following assumptions or
conditions:
a. The Transactions shall have been duly authorized and
approved to the extent required by state law by the
Boards of Directors of the Operating Companies and
the Service Company.
b. The Commission shall have duly entered an appropriate
order or orders granting and permitting the
Application to become effective with respect to the
Transactions described therein.
c. The Transactions shall have been accomplished in
accordance with required approvals, authorizations,
consents, certificates and orders of any state
commission or regulatory authority with respect to
the consummation of the Transactions and all such
required approvals, authorizations, consents,
certificates and orders shall have been obtained and
remain in effect.
d. No act or event other than as described herein shall
have occurred subsequent to the date hereof which
would change the opinions expressed above.
In rendering the opinions hereinabove expressed, we will rely
upon opinions of other counsel to the Operating Companies and the Service
Company who are qualified to practice in jurisdictions pertaining to the
Transactions in which we are not admitted to practice. We do not express any
opinion as to matters governed by any laws other than the Federal laws of the
United States of America, the laws of the State of New York and, to the extent
hereinabove stated, the laws of other jurisdictions pertaining to the
Transactions in reliance upon said opinions of counsel to the Operating
Companies and the Service Company.
We hereby consent to the use of this opinion as an exhibit to
the Application.
Very truly yours,
/s/ MILBANK, TWEED, HADLEY & MCCLOY
Milbank, Tweed, Hadley & McCloy
EXHIBIT 4
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
____________, 1997
Notice is hereby given that the following filing(s) has/have
been made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the proposed
transaction(s) summarized below. The application(s) and/or declaration(s) and
any amendments thereto is/are available for public inspection through the
Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on
the application(s) and/or declaration(s) should submit their views in writing by
__________, 1997 to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) specified below. Proof of service (by affidavit
or, in case of an attorney at law, by certificate) should be filed with the
request. Any request for hearing shall identify specifically the issues of fact
or law that are disputed. A person who so requests will be notified of any
hearing, if ordered, and will receive a copy of any notice or order issued in
the matter. After said date, the application(s) and/or declaration(s), as filed
or amended, may be granted and/or permitted to become effective.
Central Power and Light Company, Public Service Company of Oklahoma,
Southwestern Electric Power Company, West Texas Utilities Company and Central
and South West Services, Inc.
(70- )
Central Power and Light Company, Public Service Company of
Oklahoma, Southwestern Electric Power Company and West Texas Utilities Company
(the "Operating Companies"), wholly owned public utility subsidiaries of Central
and South West Corporation ("CSW"), a registered holding company, and Central
and South West Services, Inc., a wholly owned subsidiary of CSW that is
authorized to provide services to associate companies in the CSW system, have
filed an application on Form U-1 seeking authority to market to their customers
a mortgage incentive program called the Better Choices Home Mortgage Program
(the "Program"). The Program has been developed in cooperation with PHH Mortgage
Services Corporation and PHH Real Estate Services Corporation ("PHH") to permit
PHH to offer to customers larger mortgages on more beneficial terms on homes
that meet specified energy efficiency and environmental conservation standards.
Certain of those standards have been designed to qualify for certification under
the industry-wide E-Seal Program of the Edison Electric Institute. Ancillary to
these mortgage services, customers would be offered relocation services through
a PHH network of realtors. The Operating Companies would market the Program to
their customers and would certify the compliance of homes with the energy
efficiency and environmental conservation standards. The Operating Companies
would, where lawful, receive as compensation for their services portions of the
referral fees paid by realtors to PHH for relocation services for customers and
fees based on mortgages closed by PHH. Possibly in the future, the Operating
Companies would market under the Program the mortgage and relocation services of
providers other than PHH.
