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File No. 70-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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COLUMBIA ENERGY GROUP
13880 Dulles Corner Lane
Herndon, VA 20171-4600
COLUMBIA ELECTRIC CORPORATION
13880 Dulles Corner Lane
Herndon, VA 20171-4600
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(Names of company or companies filing this statement
and addresses of principal executive offices)
COLUMBIA ENERGY GROUP
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(Name of top registered holding company parent of
each applicant or declarant)
J. W. Trost, Vice President
COLUMBIA ENERGY GROUP SERVICE CORPORATION
13880 Dulles Corner Lane
Herndon, VA 20171-4600
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(Name and address of agent for service)
Names and Addresses of Subsidiary Company Agents for Service:
D. P. Detar, Treasurer
Columbia Electric Corporation
13880 Dulles Corner Lane
Herndon, VA 20171-4600
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Columbia Energy Group ("Columbia"), a registered holding company
under the Public Utility Holding Company Act of 1935 (the "Act"), and its
wholly-owned subsidiary company, Columbia Electric Corporation ("Columbia
Electric"), hereby submit for filing this Application-Declaration on Form U-1.
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
(a) Furnish a reasonably detailed and precise description of the
proposed transaction, including a statement of the reasons why it is desired to
consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its relation
to the proposed transaction.
Columbia, through its wholly-owned subsidiary Columbia Electric,
seeks authority to invest up to $200 million to acquire and fund a fifty percent
(50%) interest in an independent power project that is currently under
construction in Gregory, Texas ("Project Gregory"). It is contemplated that the
project, when completed, will be certified as a qualifying facility ("QF") under
the Public Utility Regulatory Policies Act of 1978 ("PURPA"). In connection with
the proposed investment, Columbia will not seek recovery through increased
rates to customers of its utility subsidiaries to be compensated for any losses
or inadequate returns it may sustain from Project Gregory.
Background
Since 1986, Columbia, through its wholly-owned subsidiary Columbia
Electric (formerly known as TriStar Ventures Corporation), has been involved in
the development, ownership and operation of domestic independent power projects.
See, e.g., The Columbia Gas System, Inc., Holding Co. Act Release No. 24199
(Sept. 26, 1986) (authorizing activities related to qualifying cogeneration
facilities and small production facilities under the Public Utility Regulatory
Policies Act of 1978). Columbia Electric has interests in three cogeneration
projects that produce both electricity and useful thermal energy. These projects
are fueled principally by natural gas and have a total capacity of nearly 250
megawatts.
In addition to its other development activities, Columbia has
entered into joint development agreements with Westcoast Energy (U.S.) Inc. to
develop, own and operate three gas-fired merchant power plants to be located in
the Northeast and Mid-Atlantic regions of the United States and, possibly,
Canada. In total, the three plants are anticipated to provide approximately 1000
megawatts of electricity using approximately 160 Mmcf per day of natural gas.
The total cost of these projects is estimated to be between $600 million and
$700 million. Columbia Electric also has options to acquire a number of sites in
Pennsylvania, each capable of supporting at least a 250 MW plant.
Project Gregory
In June, 1998, Columbia Electric and LG&E Power Inc. ("LG&E")
entered into an agreement to participate in the development, construction,
start-up, operation,
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maintenance, financing and ownership of a gas-fired cogeneration project near
Gregory, Texas ("Project Gregory"). The project, a 550 megawatt (MW) equivalent
electricity and steam production facility capable of producing 1,500,000 pounds
per hour of steam, will serve steam needs and power needs of the Reynolds Metals
Company's Sherwin Alumina Plant. The facility, which is expected to begin
commercial operation in the summer of 2000, will also provide electricity to the
Texas energy market.
The assets of Project Gregory will be held by Gregory Power
Partners, L.P., a special purpose limited partnership that will be jointly owned
by subsidiaries of Columbia Electric and LG&E. Of interest here, Columbia
Electric Gregory General Corporation will hold a 1% interest as a general
partner of Gregory Power Partners, L.P. while Columbia Electric Gregory Limited
Corporation will hold a 49% interest as a limited partner, on behalf of Columbia
Electric. Similarly, LG&E Power Gregory IV Inc. will hold a 1% interest as a
general partner and LG&E Power Gregory I Inc. will hold a 49% interest as a
limited partner, on behalf of LG&E.
A second special purpose entity, Gregory Partners, LLC, will provide
administrative and advisory services with respect to Project Gregory. Columbia
Electric Gregory Remmington Corporation will hold a 1% interest as
member-manager, and Columbia Electric Gregory Member Corporation will hold a 49%
interest as a member of Gregory Partners, LLC, on behalf of Columbia Electric.
LG&E Power Gregory II Inc. will hold a 1% interest as member-manager, and LG&E
Power Gregory III Inc. will hold a 49% interest as a member of Gregory Partners,
LLC, on behalf of LG&E.
Project Gregory will be financed with a combination of equity and
debt under a credit agreement with ING (U.S.) Capital Corporation and a
syndicate of international financial institutions. The total cost of the
project is estimated to be approximately $240 million. It is contemplated that
additional guarantees will be required in connection with the contracts for the
sale of steam and power generated by the facility.
Columbia's initial investments in Project Gregory have been made in
reliance on Rule 58 which exempts the acquisition of securities of
energy-related companies, subject to certain conditions. Specifically, Rule
58(b)(1)(viii) defines an energy-related company to include any company that
derives substantially all of its revenues from the "development, ownership or
operation of 'qualifying facilities,' as defined under the Public Utility
Regulatory Policies Act of 1978, as amended ('PURPA'), and any integrated
thermal, steam host, or other necessary facility constructed, developed or
acquired primarily to enable the qualifying facility to satisfy the useful
thermal output requirements under PURPA."
There is no question as to the propriety of the underlying activity.
See, e.g., Energy Initiatives, Inc., Holding Co. Act Release No. 25876 (Sept. 7,
1993) (authorizing the acquisition of an ownership interest in a nonaffiliate
engaged in the business of developing, owning and operating cogeneration and
independent power generation projects); The Columbia Gas System, Inc., Holding
Co. Act Release Nos. 25802 (April 23, 1993) and 24199 (Sept. 26, 1986)
(authorizing Columbia to invest in and to operate
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electric cogeneration facilities); CNG Energy Company, Holding Co. Act Release
No. 24253 (Dec. 3, 1986) (authorizing investments of up to $100 million in
qualifying cogeneration facilities); see also Rule 58 Release ( the exemption
for investment in companies such as QFs "is intended to encompass activities
with which the Commission is familiar as a result of its administrative
experience and that appear to be so closely related to the ordinary course of
business as not to require case-by-case analysis pursuant to sections 9(a)(1)
and 10"). It is in reliance on these orders that Columbia now seeks an order
under Sections 9(a)(1) and 10 of the Act.(1)
Rule 54 provides that the Commission, 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 EWG or FUCO, or other transactions by
such registered holding company or its subsidiary other than with respect to
EWGs or FUCOs, shall not consider the effect of the capitalization or earnings
of any subsidiary which is an EWG or FUCO upon the registered holding company
system if the provisions of Rule 53(a), (b) and (c) are satisfied. With respect
to the requested authority, each of the conditions is satisfied.
(b) Describe briefly, and where practicable state the approximate
amount of, any material interest in the proposed transaction, direct or
indirect, of any associate or affiliate of the applicant or declarant company or
any affiliate of any such associate company.
See Item 1.a.
(c) If the proposed transaction involves the acquisition of securities
not issued by a registered holding company or subsidiary thereof, describe
briefly the business and property, present or proposed, of the issuer of such
securities.
See Item 1.a.
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(1) Columbia chooses to seek an order, rather than to rely on Rule 58, in order
to preserve its investment ability under that rule. The problem arises because
- -- unlike Rule 53 which defines "aggregate investment" generally in terms of
monies invested by, or for which there is recourse to, the registered holding
company --Rule 58 defines the term to include investments for which there is
recourse to any company in the registered system. See Rule 58(a)(3) (aggregate
investment in energy-related companies is defined as "all amounts invested or
committed to be invested in energy-related companies, for which there is
recourse, directly or indirectly, to the registered holding company or any
subsidiary company thereof"). Thus, even investments for which there is recourse
only to the project assets (so-called "nonrecourse" project financing) would be
counted for purposes of Rule 58, with the anomalous result that the "aggregate
investment" under that rule is significantly greater than the amount for which
Columbia Energy Group and its other subsidiaries are truly at risk.
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(d) If the proposed transaction involves the acquisition or
disposition of assets, describe briefly such assets, setting forth original
cost, vendor's book cost (including the basis of determination) and applicable
valuation and qualifying reserves.
See Item 1.a.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
(a) State (1) the fees, commissions and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof, and
(2) if the proposed transaction involves the sale of securities at competitive
bidding, the fees and expenses to be paid to counsel selected by applicant or
declarant to act for the successful bidder.
<TABLE>
<S> <C>
Legal fees in connection with
the preparation of the Application-Declaration . . . . . . . $ 7,500.00
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</TABLE>
(b) If any person to whom fees or commissions have been or are to be
paid in connection with the proposed transaction is an associate company or an
affiliate of the applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
Legal services in connection with the subject
application-declaration have been rendered by the Columbia Energy Group Service
Corporation at cost.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
(a) State the section of the Act and the rules thereunder believed
to be applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of exemption.
Sections 6, 7, 9 and 10 of the Act, and Rules 52 and 54 thereunder
are applicable to the proposed transaction.
(b) If an applicant is not a registered holding company or a
subsidiary thereof, state the name of each public utility company of which it is
an affiliate, or of which it will become an affiliate as a result of the
proposed transaction, and the reasons why it is or will become such an
affiliate.
Not applicable.
ITEM 4. REGULATORY APPROVAL
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the U. S. Securities and
Exchange Commission) over the proposed transaction.
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The proposed transactions are not subject to the jurisdiction of any
State commission other than this Commission. The applicants are preparing an
application for certification of Project Gregory as a qualifying facility under
the Federal Power Act.
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with the
proposed transaction.
Not applicable.
ITEM 5. PROCEDURE
(a) State the date when Commission action is requested. If the date
is less than 40 days from the date of the original filing, set forth the reasons
for acceleration.
It is requested that the Commission issue its Notice by October 9,
1998, and its order on or before November 16, 1998.
(b) State (i) whether there should be a recommended decision by a
hearing officer, (ii) whether there should be a recommended decision by any
other responsible officer of the Commission, (iii) whether the Division of
Investment Management may assist in the preparation of the Commission's
decision, and (iv) whether there should be a 30-day waiting period between the
issuance of the Commission's order and the date on which it is to become
effective.
Columbia hereby (i) waives a recommended decision by a hearing
officer, (ii) waives a recommended decision by any other responsible officer or
the Commission, (iii) consents that the Division of Investment Management may
assist in the preparation of the Commission's decision, and (iv) waives a 30-day
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
(a) Exhibits
F Opinion of Counsel (to be filed by Amendment)
G Proposed Notice
There have been no material changes, not in the ordinary course of
business, since the date of the financial statements filed herewith.
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ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102(2)(C) of the
National Environmental Policy Act [42 U.S.C. 4232(2)(C)]. If the response to
this term is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons for
that response.
The proposed transactions subject to the jurisdiction of this
Commission have no environmental impact in and of themselves.
(b) State whether any other federal agency has prepared or is
preparing an environmental impact statement ("EIS") with respect to the proposed
transaction. If any other federal agency has prepared or is preparing an EIS,
state which agency or agencies and indicate the status of that EIS preparation.
No federal agency has prepared or, to Columbia's knowledge, is
preparing an EIS with respect to the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned companies have duly caused this
Application-Declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
COLUMBIA ENERGY GROUP
DATE: September 24, 1998 by: /s/ M. W. O'Donnell
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M. W. O'Donnell, Senior Vice President
& Chief Financial Officer
COLUMBIA ELECTRIC CORPORATION
DATE: September 24, 1998 by: /s/ J. W. Trost
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J. W. Trost, Vice President
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EXHIBIT G
SECURITIES AND EXCHANGE COMMISSION
(Release No. )
____________, 1998
Columbia Energy Group ("Columbia"), a holding company registered
with the U. S. Securities and Exchange Commission ("Commission") under the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act" or Act"),
and its wholly-owned subsidiary, Columbia Electric Corporation ("Columbia
Electric"), 13880 Dulles Corner Lane, Herndon, VA 20171-4600, a Delaware
Corporation, have filed an application seeking authority to invest up to $200
million in a qualifying facility that is currently under construction in
Gregory, Texas.
The filing and amendments thereto are available for public
inspection through the commission's Office of Public Reference. Interested
persons wishing to comment or request a hearing should submit their views in
writing by , to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the
applicants-declarants at the address specified above. Proof of service (by
affidavit or, in case of an attorney-at-law, by certificate) should be filed
with the request. Any request for a 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 this matter. After said date, the joint application-declaration,
as filed or as it may be amended, may be permitted to become effective.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
Jonathan G. Katz
Secretary
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