<PAGE> 1
File Number 70-8577
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
TO
FORM U-1
APPLICATION-DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
(a registered holding company and
the parent of the other party)
CNG ENERGY SERVICES CORPORATION
One Park Ridge Center
Pittsburgh, Pennsylvania 15244-0746
Names and addresses of agents for service:
S. E. Williams, Senior Vice President
and General Counsel
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
J. M. Hostetler, Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
<PAGE> 2
File Number 70-8577
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
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.
Consolidated Natural Gas Company ("Consolidated") is a Delaware
corporation and a public utility holding company registered as such under the
Public Utility Holding Company Act of 1935 ("Act"). It is engaged solely in
the business of owning and holding all of the outstanding securities, with the
exception of certain minor long-term debt, of sixteen subsidiaries. These
subsidiary companies are primarily engaged in natural gas exploration,
production, purchasing, gathering, transmission, storage, distribution, by-
product operation, energy services and other activities related to the natural
gas business.
CNG Energy Services Corporation ("Energy Services") -- formerly CNG
Gas Services Corporation -- is a wholly-owned, non-utility subsidiary of
Consolidated engaged in the energy marketing business. Energy Services now
proposes to form a new subsidiary, CNG Special Products and Services, Inc.
("CSPS"), to engage in the business of providing energy-related services
("Customer Services") to customers of the local distribution companies ("LDCs")
<PAGE> 3
in the Consolidated System (1) and to others, primarily customers of non-
affiliated utilities.
PROPOSED ACTIVITIES
The Customer Services will generally be offered by CSPS as a
convenience to utility customers, and will be related to energy services being
provided to such customers, or will generate revenues which will act as a cost-
offset with respect to the utilization of existing Consolidated LDC personnel
or facilities. None of the Customer Services will require a large amount of
additional capital investment, nor will the number of Consolidated LDC
personnel involved be of such a magnitude that utility services would in any
way be impaired. The rendering of any significant support by a Consolidated
LDC to CSPS to enable it to provide Customer Services would require approval of
the state public utility commission having jurisdiction over the subject LDC.
What follows is a list of Customer Services that would directly or
indirectly benefit customers:
(1) Service Line Maintenance Program
(2) Appliance Guard (extended service warranty)
(3) Payment Power (bill payment protection)
(4) Routine Furnace Services
(5) One-Package Appliance Inspection and Replacement
(6) Community Bill Payment Center
(7) Energy Audits and Services
________________________________________________
(1) The LDCs in the Consolidated system are The East Ohio Gas Company, West
Ohio Gas Company, The Peoples Natural Gas Company, Hope Gas, Inc., and
Virginia Natural Gas, Inc.
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(8) Propane Service
(9) Gas Fired Electric Generators
(10) Pipeline Maintenance, Construction, and Managerial Support
Services for Others
The above list is not intended as an exhaustive itemization of Customer
Services. Other services of the same genre -- which would be a convenience
to or have some benefit for customers -- would also fit within the definition
of Customer Services, and would not require additional Commission authorization
unless additional funding for CSPS was necessary.
Energy Services intends for CSPS to conduct its Customer Services
business both within and outside of the four states of Virginia, West Virginia,
Pennsylvania and Ohio where the Consolidated LDCs are located (collectively the
"LDC States"). However, during the twelve month period beginning on the first
day of January in the year following the date CSPS commences Customer Services
activities pursuant to an order issued in this proceeding, and for each
subsequent calendar year thereafter, the revenues from customers in the LDC
States will exceed the total revenues from customers in all other states.
Some customer and Consolidated System benefits from the activities of
CSPS would be to : (1) retain or increase system LDC gas load; (2) promote
aspects of the LDC gas business that are less weather sensitive; (3) utilize
existing Consolidated System faculties, and experience, to manage, support and
staff the new service entity; (4) lessen overall energy costs of customers;
(5) reduce one-time cash outlays for repairs by LDC customers; and, (6)
improve the financial strength and continued viability of Consolidated's
existing customer base by reducing energy costs. It is expected that the
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business of CSPS will be profitable which will inure to the benefit of
Consolidated's investors.
The following is a more detailed description of the Customer Services
listed above:
(1) Service Line Maintenance Program
CSPS would pay for repair of service lines -- owned by and on
customer's property -- in exchange for a nominal monthly fee. This is similar
to service offered by telephone companies to repair telephone lines inside the
house -- without any additional charge above the nominal monthly fee.
Generally, in Ohio, Pennsylvania and West Virginia -- states
served by Consolidated LDCs -- the customers own and are responsible for the
portion of the natural gas service line which is on their property. For a
fixed monthly fee, CSPS would provide payment of service line repairs or
replacements, which typically cost an average of $600.00. The actual repair or
replacement would be performed by an independent contractor selected by CSPS
from a pre-approved list.
CSPS's service line program will (1) protect customers from the
high "out-of-pocket" cost and (2) facilitate the repair or replacement of the
service line. The service will benefit Consolidated LDCs by increasing
customer satisfaction and building good will.
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(2) Appliance Guard
CSPS would provide customers with an extended service warranty
that would cover the cost of repairing appliances owned by the customer. It
would include (but not be limited to) gas grills, furnaces and air conditioning
units, and commercial and residential ranges. The customer is protected from
high repair costs; the LDC benefits from increased customer satisfaction and
good will.
(3) Payment Power
CSPS, through contractual arrangement with American Banker's
Insurance Group, would provide bill payment protection for customers up to $400
a month for six months -- should the customer become unemployed, disabled, or
die. Customers receive payment protection and LDCs benefit from reduced
delinquencies, decreased collection activity, and increased customer
satisfaction.
(4) Routine Furnace Services
CSPS would act as an intermediary for customers to arrange
routine inspections or repairs of furnaces. CSPS would choose the contractor
from a list of qualified contractors. This referral service would be provided
at no additional cost to customers; the contractor -- having entered into a
reduced fee arrangement with CSPS -- pays for the program. CSPS then bills the
customer the contractor's standard or usual fee for inspection/repair
services. The referral service should be a convenience to customers and build
good will for LDCs.
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(5) One-Package Appliance Inspection and Replacement
This would be a "premium service" offered by CSPS to "add value"
for the customer. It goes beyond the Routine Furnace Services plan mentioned
above, by offering annual inspection, maintenance service, or even replacement
of any appliance, including hot water heaters. Also, CSPS may offer customers
the option to rent, rent-to-own, or purchase appliances like hot water heaters
and furnaces.
(6) Community Bill Payment Center
CSPS would provide a centralized bill payment center where
customers can -- with "one-stop" -- pay their gas, electric, water,
telephone, cable and other utility or municipal bills. The potential for such
centers will depend on the local community (overall interest and feasibility).
Local utilities and municipalities maybe able to reduce costs by merging
existing bill payment locations into the community bill payment center.
(7) Energy Audits and Services
CSPS would arrange energy audits for institutional and
commercial customers, and then offer the customer a turn-key service package,
including bank or other third party financing, to implement energy-saving
recommendations resulting from the audit. CSPS, as a general contractor, would
not perform the actual audit or implementation work, but would subcontract such
to third parties with the appropriate expertise.
<PAGE> 8
(8) Propane Service
CSPS would arrange for this service in areas where, at the
present time, it is not economical for LDCs to extend natural gas service via
underground pipeline. A qualified contractor would be selected from a pre-
approved list for installation of the propane tank and necessary hook ups.
(9) Gas Fired Electric Generators
CSPS would arrange for the installation of temporary or
permanent gas-fired turbines, for the on-site generation and consumption of
electrical energy. For example, some industrial customers use large amounts of
electricity in the manufacturing process. The capacity of the local electrical
grid may necessitate a decrease in industrial production -- or require the
industrial to pay a higher rate for electricity -- during certain hours of
peak demand. With the installation of gas-fired turbines, to generate
electricity during the hours of peak demand, the industrial would maintain its
production or cut its energy costs to be more competitive in world markets.
(10) Pipeline Maintenance, Construction and
Managerial Support Services For Others
For pipeline maintenance, CSPS would manage all Department of
Transportation ("DOT") required maintenance on pipelines owned by other
utilities. This would involve conducting and documenting leak surveys, leak
repairs, corrosion monitoring, class location studies, valve inspection, etc.
<PAGE> 9
For pipeline construction, CSPS would arrange for and manage the
construction of pipelines to be owned by other utilities. For example, an
electric utility may decide to make an existing generating station capable of
burning natural gas for the generation of electricity. Several miles of large
diameter, underground pipeline may be necessary. The utility may want to own
the pipeline, but lacks the expertise to arrange for its construction. CSPS
would utilize existing expertise within the Consolidated system to arrange for
and manage the pipeline construction project.
For managerial support services, which are intended for small,
non-affiliated utilities, CSPS would offer (1) consultant services to solve
financial or operational difficulties, (2) managerial services for one or more
day-to-day operations, and (3) training services for the employees of small
utilities to meet new standards in the industry or comply with government
regulations. The services would be tailored to meet the particular needs.
For example, one operational support service might be meter reading services
arranged by CSPS.
SERVICE ARRANGEMENTS BETWEEN CSPS AND CONSOLIDATED LDCS
Consolidated's LDCs will assist CSPS in customer billing, accounting
and other energy-related services. It is anticipated that these services for
CSPS can be done by the current staff at the LDCs. All services between the
LDCs and CSPS, or CSPS and any other Consolidated system company, required to
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conduct the new Customer Services will be billed at cost, in accordance with
Section 13(b) of the Act and Commission Rules 87, 90 and 91.
SOURCE OF FUNDS
Energy Services requests authorization to create and capitalize CSPS,
as a wholly-owned subsidiary. CSPS will be incorporated in Delaware and will
have authorized capital stock of $10,000,000, consisting of 1,000 shares of
common stock, $10,000 par value each. Energy Services through CSPS would seek
to (1) efficiently centralize the administration of the new services and (2)
better insulate the Consolidated System -- including its LDCs -- from the risks
associated with investing in the new business. Even though Energy Services is
requesting authorization in this Application to finance CSPS up to $10,000,000
over an approximate five year period, it is currently estimated that a maximum
of $5,000,000 of financing will be required for the first two years of CSPS
activities.
Energy Services proposes to raise funds for the purpose described
above by (i) selling shares of its common stock, $1.00 par value, to
Consolidated, (ii) open account advances as described below, or (iii) long-
term loans from Consolidated, in any combination thereof.
The open account advances and long-term loans will have the same
effective terms and interest rates as related borrowings of Consolidated in the
forms listed below:
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(1) Open Account Advances may be made to Energy Services to provide
working capital and to finance the activities authorized by the SEC. Open
account advances will be made under letter agreement with Energy Services and
will be repaid on or before a date not more than one year from the date of the
first advance with interest at the same effective rate of interest as
Consolidated's weighted average effective rate for commercial paper and/or
revolving credit borrowings. If no such borrowings are outstanding, the
interest rate shall be predicated on the Federal Fund's effective rate of
interest as quoted daily by the Federal Reserve Bank of New York.
(2) Consolidated may make long-term loans to Energy Services for the
financing of its activities described above. Loans to Energy Services shall be
evidenced by long-term non-negotiable notes of Energy Services (documented by
book entry only) maturing over a period of time (not in excess of 30 years) to
be determined by the officers of Consolidated, with the interest predicated on
and substantially equal to Consolidated's cost of funds for comparable
borrowings by the parent. In the event Consolidated has not had recent
comparable borrowings, the rate will be tied to the Salomon Brothers indicative
rate for comparable debt issuances published in Salomon Brothers Inc. Bond
Market Roundup or similar publication on the date nearest to the time of
takedown. All loans may be prepaid at any time without premium or penalty.
Consolidated will obtain the funds required for Energy Services
through internal cash generation, issuance of long-term debt securities,
borrowings under credit agreements or through other authorizations approved by
the SEC subsequent to the effective date of this Application-Declaration.
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Energy Services, in turn, would fund CSPS with "mirror-image"
financing, reflecting the same source and combination of funds as utilized
between Consolidated and Energy Services.
SUMMARY OF AUTHORIZATION REQUESTED
Consolidated requests authorization to fund Energy Services, from
time to time through December 31, 2000. All funding by Consolidated to its
immediate subsidiary (Energy Services) would be through (i) the sale of Energy
Services' common stock to Consolidated, (ii) open account advances from
Consolidated, and (iii) long-term loans from Consolidated. Any provision of
funds by Consolidated to Energy Services can be in any combination of these
three forms of financing; and any financing, between Energy Services and its
subsidiary -- CSPS -- will be in the same combination of forms as between
Consolidated and Energy Services (i.e., mirror image).
Thus, Consolidated and Energy Services respectfully request the
following authorizations:
(1) For Energy Services to obtain up to $10,000,000 from
Consolidated (in the manner described above) to invest in CSPS;
(2) For CSPS to obtain up to $10,000,000 from Energy Services (in
mirror-image financing described above) to engage in the new Customer Services
described above.
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CERTIFICATES OF NOTIFICATION
CSPS will file semi-annual certificates of notification, within 60
days after the end of each calendar semi-annual period, which will include the
following information:
1. The type, amount and use of financing, during the period and
cumulatively.
2. Balance sheet of CSPS as of the last day of the period.
3. Income statement of CSPS for the period and cumulatively for the
year to date.
4. Copies of state commission orders approving affiliate service
arrangements between CSPS and Consolidated System LDCs.
RULE 53 SATISFIED
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 electric 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.
<PAGE> 14
Currently Consolidated owns indirectly a 1% general partnership and a
34% limited partnership interest in Lakewood Cogeneration, L.P. ("Lakewood"),
an EWG. The 1% general partnership interest in Lakewood is owned by CNG Power
Services Corporation, an EWG and a wholly-owned subsidiary of Consolidated.
Consolidated does not own any interests in a FUCO. Consolidated believes that
Rule 53(a), (b) and (c) are satisfied in its case as follows.
Fifty percent of Consolidated's retained earnings as of December 31,
1994 was $734,740,000; Consolidated's aggregate investment (as defined in Rule
53(a)(1)(i)) in Lakewood on such date and in both its EWGs as of the date of
filing of this Application-Declaration is estimated to be approximately
$18,000,000, thereby satisfying Rule 53(a)(1). Consolidated and its
subsidiaries maintain books and records to identify the investments in and
earnings from its EWGs in which they directly or indirectly hold an interest,
thereby satisfying Rule 53(a)(2). Employees of Consolidated's domestic public-
utility companies do not render services, directly or indirectly, to the EWGs
in the Consolidated System, thereby satisfying Rule 53(a)(3). No application
for EWG financing has been filed with the Commission since adoption of Rule 53;
Rule 53(a)(4) is correspondingly inapplicable at this time.
None of the conditions described in Rule 53(b) exist with respect to
Consolidated, thereby satisfying Rule 53(b) and making Rule 53(c) inapplicable.
Item 2. Fees, Commissions, and Expenses
_____________________________
(a) State (i) 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 (ii) if the proposed transaction involves the sale of securities
<PAGE> 15
at competitive bidding, the fees and expenses to be paid to counsel selected by
applicant or declarant to act for the successful bidder.
It is estimated that the fees, commissions and expenses ascertainable
at this time to be incurred by Consolidated and Energy Services in connection
with the proposed transactions will not exceed $7,000, including the $2,000
filing fee, $4,000 payable to Consolidated Natural Gas Service Company, Inc.
("Service Company") for services on a cost basis (including regularly employed
counsel) for the preparation of this Application-Declaration and other
documents, and $1,000 for miscellaneous other expenses.
(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.
The charges of Service Company, a subsidiary service company, for
services on a cost basis (including regularly employed counsel) in connection
with the preparation of this Application-Declaration and other related
documents and papers required to consummate the proposed transactions are as
stated above.
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(a) and 7 and Rule 43 are deemed applicable to the issuance
of securities by Energy Services and CSPS.
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Sections 9(a) and 10 are deemed applicable to the acquisitions (i)
by Consolidated of the capital stock, open account advance debits and notes of
Energy Services and, (ii) by Energy Services of the capital stock, open account
advance debits and notes of CSPS, and (iii) the entry of CSPS into the Customer
Services described above.
Section 12(b) and Rule 45 are considered applicable to loans made by
Consolidated to Energy Services and Energy Services to CSPS.
Section 13(b) and Rules 87, 90 and 91 are deemed applicable to the
services being provided by the LDCs, or any other company within the
Consolidated system, to CSPS.
If the Commission considers the proposed future transactions to
require any authorization, approval or exemption, under any section of the Act
or Rule or Regulation other than those cited herein, such authorization,
approval or exemption is hereby requested.
(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 Securities and Exchange
Commission) over the proposed transactions.
<PAGE> 17
The financing authorization sought herein is not subject to the
jurisdiction of any State or Federal commission (other than the Commission).
The Consolidated LDCs may be required to make affiliate-transaction filings
with their respective state commissions regarding the service agreements
between them and CSPS.
(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.
Inapplicable.
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.
Consolidated and Energy Services request that the Commission issue
its order with respect to the transaction proposed by the end of May 1995.
(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 - Office of Public Utility Regulation 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.
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the
proposed transactions. The office of the Division of Investment Management -
Office of Public Utility Regulation 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.
<PAGE> 18
Item 6. Exhibits and Financial Statements
___________________________
The following exhibits and financial statement are made a part of
this statement:
(a) Exhibits
Please see the initial U-1, filed February 24, 1995, for Energy
Services' Certificate of Incorporation and Bylaws, and the Opinion of Counsel.
O Revised Proposed Notice pursuant to Rule 22(f)
(b) Financial Statements
_________________
Financial statements of the applicant-declarants are deemed
unnecessary with respect to the proposed authorizations sought herein due to
the simple nature of the proposed transaction and the amount to be invested
relative to the size of the applicant-declarants. However, any financial
information will be furnished which the Commission shall request.
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 item is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons or
that response.
The proposed transactions do not involve major federal action
having a significant effect on the human environment. See Item 1(a).
<PAGE> 19
(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 is preparing an environmental
impact statement with respect to the proposed transaction.
<PAGE> 20
SIGNATURES
___________
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned Companies have duly caused this statement to be
signed on their behalf by the undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By L. D. Johnson
Vice Chairman of the Board
and Chief Financial Officer
CNG ENERGY SERVICES CORPORATION
By J. M. Hostetler
Its Attorney
Dated: April 3, 1995
<PAGE> 1 EXHIBIT O
Proposed Notice Pursuant to Rule 22f)
(Release No. 35- )
FILINGS UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("ACT")
April__, 1995
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
April ____, 1995 to the Secretary, Securities and Exchange Commission,
Washington, DC 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 as amended, may be granted and/or permitted to
become effective.
____________________________________
<PAGE> 2
Consolidated Natural Gas Company, et al. (70-8577)
________________________________________
Consolidated Natural Gas Company ("Consolidated"), CNG Tower, Pittsburgh,
Pennsylvania 15222-3199, a registered holding company, and its wholly-owned
non-utility subsidiary, CNG Energy Services Corporation ("Energy Services"),
One Park Ridge Center, Pittsburgh, Pennsylvania 15244-0746, have filed an
Application-Declaration, and Amendment No. 1 to such, under Sections 6, 7,
9(a), 10, 12(b), and 13(b) of the Act and Rules 43 and 45 thereunder.
Energy Services is engaged in the energy marketing business. Energy
Services now proposes to form a new subsidiary, CNG Special Products and
Services, Inc. ("CSPS"), to engage in the business of providing energy-related
services ("Customer Services") to customers of the local distribution companies
("LDCs") in the Consolidated System and to others, primarily customers of non-
affiliated utilities.
The Customer Services will generally be offered by CSPS as a convenience
to utility customers, and will be related to energy services being provided to
such customers, or will generate revenues which will act as a cost-offset with
respect to the utilization of existing Consolidated LDC personnel or
facilities. None of the Customer Services will require a large amount of
additional capital investment, nor will the number of Consolidated LDC or other
system company personnel involved be of such a magnitude that utility services
would in any way be impaired. The rendering of any significant support by a
Consolidated LDC to CSPS to enable it to provide Customer Services would
<PAGE> 3
require approval of the state public utility commission having jurisdiction
over the subject LDC.
What follows is a list of Customer Services that would directly or
indirectly benefit customers:
(1) Service Line Maintenance Program
(2) Appliance Guard (extended service warranty)
(3) Payment Power (bill payment protection)
(4) Routine Furnace Services
(5) One-Package Appliance Inspection and Replacement
(6) Community Bill Payment Center
(7) Energy Audits and Services
(8) Propane Service
(9) Gas Fired Electric Generators
(10) Pipeline Maintenance, Construction, and Managerial Support
Services for Others
The above list is not intended as an exhaustive itemization of Customer
Services. Other energy-related services of the same genre -- which would be
a convenience to or have some benefit for customers -- would also fit within
the definition of Customer Services, and would not require additional
Commission authorization unless additional funding for CSPS was necessary.
Energy Services proposes to raise funds for CSPS by (i) selling shares of
its common stock, $1.00 par value, to Consolidated, (ii) open account advances
as described below, or (iii) long-term loans from Consolidated, in any
combination thereof.
<PAGE> 4
The open account advances and long-term loans will have the same effective
terms and interest rates as related borrowings of Consolidated in the forms
listed below:
(1) Open Account Advances may be made to Energy Services to provide
working capital and to finance the activities authorized by the SEC. Open
account advances will be made under letter agreement with Energy Services and
will be repaid on or before a date not more than one year from the date of the
first advance with interest at the same effective rate of interest as
Consolidated's weighted average effective rate for commercial paper and/or
revolving credit borrowings. If no such borrowings are outstanding, the
interest rate shall be predicated on the Federal Fund's effective rate of
interest as quoted daily by the Federal Reserve Bank of New York.
(2) Consolidated may make long-term loans to Energy Services for the
financing of its activities described above. Loans to Energy Services shall be
evidenced by long-term non-negotiable notes of Energy Services (documented by
book entry only) maturing over a period of time (not in excess of 30 years) to
be determined by the officers of Consolidated, with the interest predicated on
and substantially equal to Consolidated's cost of funds for comparable
borrowings by the parent. In the event Consolidated has not had recent
comparable borrowings, the rate will be tied to the Salomon Brothers indicative
rate for comparable debt issuances published in Salomon Brothers Inc. Bond
Market Roundup or similar publication on the date nearest to the time of
takedown. All loans may be prepaid at any time without premium or penalty.
<PAGE> 5
Consolidated will obtain the funds required for Energy Services through
internal cash generation, issuance of long-term debt securities, borrowings
under credit agreements or through other authorizations approved by the SEC
subsequent to the effective date of this Application-Declaration.
Energy Services, in turn, would fund CSPS with "mirror-image" financing --
reflecting the same source and combination of funds as utilized between
Consolidated and Energy Services.
________________________________________
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
