File No. 70-7287
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 16 TO
FORM U-1
APPLICATION-DECLARATION
WITH RESPECT TO ACQUISITION AND FINANCING
OF A WHOLLY-OWNED SUBSIDIARY
AND AUTHORIZATION OF SHORT-TERM BANK BORROWING
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 (ACT)
EASTERN UTILITIES ASSOCIATES (EUA)
P.O. Box 2333, Boston, Massachusetts 02107
EUA COGENEX CORPORATION (COGENEX)
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name of companies filing this statement
and address of principal executive office)
EASTERN UTILITIES ASSOCIATES
(Name of top registered holding company parent of
applicant or declarant)
CLIFFORD J. HEBERT, JR., TREASURER
EASTERN UTILITIES ASSOCIATES
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name and address of agent for service)
The Commission is requested to mail signed copies
of all orders, notices and communications to:
ARTHUR I. ANDERSON, ESQ.
McDermott, Will & Emery
75 State Street
Boston, MA 02109
The application-declaration on Form U-1 dated September 24,
1986, as amended by Amendment No. 1 dated November 14, 1986, by
Amendment No. 2 dated December 12, 1986, by Post-Effective
Amendment No. 1 dated February 29, 1988, by Post-Effective
Amendment No. 2 dated March 9, 1988, by Post-Effective
Amendment No. 3 dated April 12, 1988, by Post-Effective
Amendment No. 4 dated April 22, 1988, by Post-Effective
Amendment No. 5 dated April 22, 1988, by Post-Effective
Amendment No. 6 dated July 18, 1988, by Post-Effective
Amendment No. 7 dated August 12, 1988, by Post-Effective
Amendment No. 8 dated September 19, 1988, by Post-Effective
Amendment No. 9 dated October 31, 1989, by Post-Effective
Amendment No. 10 dated November 14, 1989, by Post-Effective
Amendment No. 11 dated December 21, 1989, by Post-Effective
Amendment No. 12 dated April 15, 1992, by Post-Effective
Amendment No. 13 dated July 10, 1992, by Post-Effective Amendment
No. 14 dated August 3, 1992 and by Post-Effective Amendment No.
15 dated August 21, 1992, is amended as stated below.
Item 1. Description of Proposed Transactions.
By an order in this proceeding dated December 19, 1986
(Release No. 35-24273) (the "1986 Order"), the Commission
authorized EUA to acquire all of the issued and outstanding
capital stock of Citizens Heat and Power Corporation, a
Massachusetts corporation which provided energy management
services to institutional customers and which became EUA's
wholly-owned subsidiary, Cogenex. The 1986 Order further
authorized Cogenex to expand its operations outside of New
England provided that, among other things, the revenues of
Cogenex attributable to customers located outside of New England
remain less than the revenues attributable to customers located
within that area (the "50% Restriction"). By an Order dated
September 17, 1992 (Release No. 35-25636) (the "1992 Order"), the Commission
authorized Cogenex to include revenues attributable to
customers located in New York as revenues attributable to New
England for purposes of the 50% Restriction. The 1992 Order also authorized
Cogenex to exclude revenues derived from qualifying
cogeneration facilities under the Public Utility Regulatory
Policies Act of 1978 from its calculation of the 50% Restriction.
The Commission's most recent adjustment to the 50% Restriction
was on September 30, 1994 (HCAR No. 35-26135) when it authorized
Cogenex to exclude revenues from consulting services from the 50% Restriction
calculation.
Cogenex management believes that for the reasons set
forth in Exhibit I hereto, the 50% Restriction is not mandated by
the Act or prior Commission precedent and should be removed.
Accordingly, Cogenex hereby requests that the Commission
authorize Cogenex to conduct its business activities without
regard to the 50% Restriction.
Item 2. Fees, Commissions and Expenses.
The estimated fees, commissions and expenses to be paid or
incurred directly or indirectly in connection with the proposed transactions
will be supplied by amendment.
Item 3. Applicable Statutory Provisions.
Transactions Section 11(b)(1)
Item 4. Regulatory Approval.
No state commission and no Federal commission, other than
the Securities and Exchange Commission, has jurisdiction over the
proposed transactions.
Item 5. Procedure.
In order to be in a position to carry out the proposed transactions
at the most advantageous time, EUA and Cogenex
request that the Commission issue its order hereon on the
earliest practicable date.
It is not considered necessary that there be a
recommended decision by a hearing officer or by any other
responsible officer of the Commission. The Office of Public
Utility Regulation may assist in the preparation of the decision
of the Commission and it is believed that a 30-day waiting period
between the issuance of the order of the Commission and the date
on which the order is to become effective would not be
appropriate.
Item 6. Exhibits and Financial Statements (* filed herewith).
Exhibits.
*Exhibit H Proposed Form of Notice.
*Exhibit I Legal Memorandum to Securities and
Exchange Commission.
Financial Statements.
None.
Item 7. Information as to Environmental Effects.
The transactions described in Item 1 do not involve major
federal action significantly affecting the quality of the human environment.
No Federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed
transactions.
SIGNATURE
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.
EASTERN UTILITIES ASSOCIATES
By:___________________________
Clifford J. Hebert, Jr.
Treasurer
EUA COGENEX CORPORATION
By:___________________________
Clifford J. Hebert, Jr.
Treasurer
Dated: December 12, 1994
Exhibit H
(PROPOSED FORM OF NOTICE)
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- , 70-7287)
Eastern Utilities Associates ("EUA"), a registered holding company, and
its wholly-owned subsidiary, EUA Cogenex Corporation ("Cogenex") have filed
Post-Effective Amendment No. 16 to an application-declaration with this
Commission pursuant to Section 11(b)(1) of the Public Utility Holding Company
Act of 1935 (the "Act").
By an order dated December 19, 1986 (Release No. 35-24273) (the "1986
Order"), the Commission authorized EUA to acquire all of the issued and
outstanding capital stock of Citizens Heat and Power Corporation, a
Massachusetts corporation which provided energy management services to
institutional customers and which became EUA's wholly-owned subsidiary,
Cogenex. The 1986 Order further authorized Cogenex to expand its operations
outside of New England provided that, among other things, the revenues of
Cogenex attributable to customers located outside of New England remain less
than the revenues attributable to customers located within that area (the "50%
Restriction"). By an Order dated September 17, 1992 (Release No. 35-25636)
(the "1992 Order"), the Commission authorized Cogenex to include revenues
attributable to customers located in New York as revenues attributable to New
England for purposes of the 50% Restriction. The 1992 Order also authorized
Cogenex to exclude revenues derived from qualifying cogeneration facilities
under the Public Utility Regulatory Policies Act of 1978 from its calculation
of the 50% Restriction. The Commission's most recent was on September 30, 1994
(HCAR No. 35-26135) when it authorized Cogenex to exclude revenues from
consulting services from the 50% Restriction calculation.
Cogenex management believes that (i) the 50% Restriction has become an
impediment to Cogenex's maximizing its potential opportunities and (ii) for the
reasons set forth in Exhibit I hereto, the 50% Restriction is not mandated by
the Act or prior Commission precedent. Accordingly, Cogenex hereby requests
that the Commission authorize Cogenex to conduct its business activities
without regard to the 50% Restriction.
NOTICE IS FURTHER GIVEN that any interested person may, not later than
_________, 1994, request in writing that a hearing be held on such matter,
stating the nature of his interest, the reasons for such request, and the
issues of fact or law raised by said application/declaration which he desires
to controvert; or he may request that he be notified if the Commission should
order a hearing thereon. Any such request should be addressed: Secretary,
Securities and Exchange Commission, 450 5th Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. A copy of such request should be served personally or
by mail upon the applicant/declarant at the above-stated address and proof of
service (by affidavit or, in case of an attorney at law, by certificate) should
be filed with the request. At any time after said date the
application/declaration, as filed or as it may be amended, may be granted and
permitted to become effective as provided in Rule 23 of the General Rules and
Regulations promulgated under the Act, or the Commission may grant exemption
from such rules as provided in Rules 20(a) and 100 thereof or take such other
action as it may deem appropriate. Persons who request a hearing or advice as
to whether a hearing is ordered will receive any notices and orders issued in
this matter, including the date of the hearing (if ordered) and any
postponements thereof.
For the Commission, by the Division of Corporate Regulation, pursuant to
delegated authority.
Secretary
EXHIBIT I
LEGAL MEMORANDUM
TO
SECURITIES AND EXCHANGE COMMISSION
Proposed Elimination of the Geographic Restriction on the
Provision of EUA Cogenex Corporation's Services
History of EUA Cogenex Corporation.
EUA Cogenex Corporation ("Cogenex"), originally named
Citizens Heat and Power Corporation, was organized in 1983 to
provide energy management services to institutional customers,
such as hospitals, municipal buildings and schools. Citizens
Heat and Power Corporation was acquired by Eastern Utilities
Associates ("EUA"), a registered holding company under the Public
Utility Holding Company Act of 1935 (the "Act"), in 1986 and
renamed Cogenex. EUA acquired Cogenex because EUA's management
believed that energy conservation would reduce the need for
capital expenditures to construct additional generating capacity
during a time when New England was experiencing rapid economic
growth with a growing demand for electricity, and serious
capacity shortages were projected. EUA's system companies (the
"System") had already provided a number of conservation programs
to their customers in an effort to minimize the increase in the
cost of electricity. The acquisition of Cogenex greatly enhanced
EUA's ability to provide conservation services to potential
customers.
Cogenex operates as an independent company, providing energy
management services to mostly non-affiliated consumers of energy.
Any transactions with the System are conducted at arms length.
However, as a successful business, Cogenex contributes to the
overall financial strength and stability of the System to the
benefit of the System's investors, a party whose interests the
Securities and Exchange Commission (the "Commission") is required
to protect under the Act.
In 1986, as a case of first impression, the Commission
authorized EUA to acquire Cogenex, provided that Cogenex's
services marketed outside of New England permitted it to better
utilize its personnel and equipment, and provided that revenues
attributable to customers located outside of New England were
less than 50% of Cogenex's total revenues.
**1. Eastern Utilities Associates Order Authorizing
Acquisition of Capital Stock of Energy Management
Company, Financing Thereof, and Related Transactions,
Release No. 35-24273 (December 19, 1986)**
At that time, the 50% revenue restriction (the "50% Restriction") was not an
impediment because of the energy situation in New England. New
England offered fertile ground for Cogenex's relatively new ideas
of how to "create" more energy. In 1992, conditions in New
England and nationally had changed so Cogenex requested and
received authorization to (i) include revenues attributable to
customers located in New York with those of New England for
purposes of the 50% Restriction and (ii) exclude revenues derived
from qualifying cogeneration facilities ("QFs") under the Public
Utility Regulatory Policies Act of 1978 and the regulations
promulgated thereunder ("PURPA") from calculations to determine
compliance with the 50% Restriction.
**2. Eastern Utilities Associates, et al. Supplemental
Order Authorizing Expanded Operational Region for
Energy Management Services Company, Release No. 35-
25636 (September 17, 1992)**
In 1994, the Commission granted Cogenex's further request to exclude
revenues from consulting services from the 50% Restriction calculation.
**3. EUA Cogenex Corporation Order Authorizing Formation of
Non-Utility Subsidiaries, Issuance and Purchase of
Stock, Open Account Advances, Loans, Guarantees and
Inter-Affiliate Services, Release No. 35-26135
(September 30, 1994)**
Cogenex management believes, however, that even with such
modifications, the 50% Restriction has become an impediment to
Cogenex's maximizing its potential business opportunities given
the current situation in New England and nationwide to the
detriment of the interests of the System's investors.
Cogenex's Services.
The following is a description of the three principal market
activities (the "Activities") of Cogenex:
Energy Management/Shared Savings.
Cogenex continues to develop its original business
activities in the areas of building automation, lighting
modifications, boiler replacement and other heat recovery through
shared savings contracts in which the customer agrees upon a
prescribed base year and a set of savings calculations and
receives a guaranteed allocation of savings. Cogenex evaluates
the customer's site and advises the customer as to what steps
should be taken to reduce energy consumption. Cogenex acts as a
contractor by engaging the necessary professionals to install the
new equipment and/or modify the existing equipment. Cogenex
usually funds the initial cost of making its recommended changes
and is repaid through the shared savings contract. The contract
is for a fixed term, but typically contains an option of
prepayment. Cogenex maintains an ownership interest in the new
equipment while the contract is in force. Cogenex also may, from
time to time, acquire existing shared savings contracts or the
benefits of these agreements from other energy savings and/or
demand side management ("DSM") contractors.
Utility Demand Side Management.
Cogenex's activities also include acting as an energy
services contractor for several electric utilities to assist them
in meeting their conservation and demand reduction goals ("DSM
Services"). Cogenex works with commercial and industrial
customers of the utility to implement demand reduction targets
and may enter into shared savings contracts of the type
previously described with those customers under II. 1. above.
Self-Generation.
Cogenex also participates in various installed self-
generation projects and is authorized to engage in development
activities with respect to the development of additional self-
generation projects. In a self-generation project, a
cogeneration facility: (i) is sized to a minimum base load
thermal requirement for the customer; and (ii) produces
electricity which displaces a portion of the customer's retail
electric consumption -- a so-called "in the fence" application.
New self-generation projects are required to be certified as QFs.
Rationale for Elimination of the 50% Restriction.
Cogenex proposes that the 50% Restriction be removed for the
following reasons:
The circumstances have changed since the establishment
of the 50% Restriction.
**4. See Request for Comments on Modernization of the
Regulation of Public Utility Holding Companies, Release
No. 35-26153 (November 2, 1994)**
It has become clear that DSM services are very much in the
public interest nationwide and worldwide. Many state commissions
have adopted regulations to foster DSM services via utility
programs. Public utility commissions in a number of states
require the filing of integrated resource plans which include a
description of DSM plans and activities in order to foster DSM.
Often, as a matter of course, utilities within a certain
geographic area share resources. New England and New York
utilities, for example, share with utilities in New Jersey and
Canada. Currently, utilities are forced to borrow from one
another during peak demand times if their own supply of energy is
overtaxed. Such peak-time energy is, of course, very expensive,
which expense is passed on to ratepayers. Conservation within
New England decreases the need to borrow from outside the area,
and conservation outside of New England reduces the need of
outsiders to borrow from New England utilities. At the same
time, less borrowing allows for a greater energy reserve to be
available for New England utilities both within their own systems
and without should the need arise.
The market for power is rapidly changing. Interaction among
utilities nationwide will only increase in the future, through
power marketers and otherwise, with the expected increase in open
competition among them, the introduction of wholesale wheeling
and the move towards retail wheeling. The sale of energy is
becoming a national business for all utilities.
A number of utilities are relying on DSM to provide for
their needs well into the next century. DSM is attractive to
utilities because it can be more cost effective than building new
power facilities. New facilities, including certain non-utility
generating units, can take years to come on line, especially if
they face local opposition to their construction. It only takes
three to nine months to implement a Cogenex energy management
plan, and the changes are mostly internal; there is little basis
for community opposition.
Lately, there has been some pressure on utilities by
nonparticipating ratepayers to curtail their DSM programs so that
such nonparticipating ratepayers will not have to subsidize the
participating ratepayers. However, Cogenex believes that any
trend in that direction will only increase its opportunities to
provide energy management services directly to consumers because
Cogenex's programs do not have to rely on subsidies from
utilities.
The 50% Restriction is not mandated by the Act or prior
Commission precedent.
Cogenex operates its business under the auspices of
Section 11(b)(1) of the Act. That section permits the retention
of businesses by an integrated public utility system that are
"reasonably incidental, or economically necessary or appropriate
to the operations of such integrated public utility system."
Additionally, Section 11(b)(1) requires the non-utility business
to be "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 . . . ." This language has
been construed by the Commission as requiring a functional
relationship between the operations of the utility system and the
non-utility business, and, if the relationship is found, it
should be in the public interest.
**5. In the Matter of CSW Credit, Inc. and Central and South
West Corporation, Release No. 35-25995 (March 2, 1994). **
Cogenex was by necessity found by the Commission to be
functionally related to the System when EUA was permitted to
purchase it. The 50% Restriction, however, is no longer
necessary to ensure that Cogenex is functionally related to the
System.
When EUA acquired Cogenex, DSM was a
relatively new field of business. Experience over the years has
taught Cogenex management that all of its business can be
controlled from New England with no detrimental impact on its New
England business.
Cogenex's DSM business is highly integrated
and is computer controlled from its Lowell, Massachusetts office.
DSM clients from California to the Virgin Islands are monitored
24 hours per day, 365 days a year via computer. Equipment
problems are identified and repaired by computer control; if the
repair requires parts, service personnel are often dispatched
before the client is even aware of a problem. Because it is
important for Cogenex's financial results that all installed
equipment operate all the time, their computer monitoring is
state-of-the-art and has significant economies of scale. Cogenex
can monitor projects located anywhere in the world as it is
monitoring its current projects in various parts of the United
States, without any detraction from its DSM services in New
England or elsewhere. The experience that Cogenex will get from
extended activity around the country will improve the energy
management skills of Cogenex employees and improve the efficiency
of the Cogenex activities to the benefit of Cogenex's New England
customers.
Cogenex, as a member of the System, can
draw expertise from the System, and the System adds credibility
to Cogenex when it solicits bids. The System also provides
Cogenex with contacts for potential business and additional
resources which enhance Cogenex's competitiveness.
Eliminating the 50% Restriction is necessary and appropriate
in the public interest. Energy conservation is clearly in the
public interest because it eliminates the negative effect the
development of new facilities may have on the environment and
simultaneously reduces dependency on foreign resources.
Cogenex's expertise in energy management is far too valuable to
the public interest to provincially and artificially restrict it
to one geographic area. Technology developed in the last fifty
years has connected people and their energy needs across the
country and the world in a way which was not envisioned when the
Act was written. However, the Act's concern with the public
interest remains. Public interest by its nature is in constant
flux and must be interpreted within the current national
environment. Public interest in 1995 is not the same as it was
in 1935 or even as it was in 1986. Congress in enacting the
Energy Policy Act of 1992 is encouraging energy conservation
nationwide and mandating it for federal buildings, much of which
are outside of New England. There could be no clearer message
that energy conservation is in the public interest.
Section 11(b)(1) was interpreted by the Commission
in the Jersey Central Power and Light Company ("Jersey Central")
release to allow for some amount of discretion in determining
functional relationship for activities outside of a system's
region.
**6. Jersey Central Power & Light Company Order Authorizing
Licensing of Computer Programs, Release No. 35-24348
(March 18, 1987)**
In Jersey Central, the Commission stated that Section
11(b)(1) permitted the business of a retainable company other
than those activities that are functionally related to the
holding company system if (i) the business evolved in connection
with the utility business, (ii) the investment of the utility
company in the business is not significant compared to the
system's total financial resources and (iii) the investment has
the potential to benefit investors and consumers of the system.
The facts of Jersey Central are that the company, an
electric utility subsidiary of a registered holding company, had
developed computer programs that helped to identify theft of
service. The company asked for and received authorization to
license the programs to other utilities. The licenses were non-
exclusive and non-transferrable, and were sold for cash. The
company was also to provide the licensees with training and
additional advice via telephone.
Cogenex's increased Activities outside of New England would
comply with the three requirements of Jersey Central. EUA
acquired Cogenex as a logical expansion of the energy management
services it was providing to its customers; EUA's investment in
Cogenex's increased Activities outside of New England would not
be significant in the near future to the System's total financial
resources; and a successful Cogenex will benefit the System's
investors by strengthening the System financially. Additionally,
Cogenex's increasing importance to the System's financial
condition and the System's corresponding increase in financial
involvement in Cogenex should not be viewed as a negative because
energy conservation has become an integral part of modern utility
services.
The Commission recently reiterated its position in Jersey
Central in a decision concerning Central and South West
Corporation's ("Central and South West") attempt to expand its
factoring business.
**7. See Note 7**
Central and South West was denied authorization to increase its services
to nonaffiliates primarily on the basis that the factoring business,
while likely to besuccessful, was not a complex product or skill that the
public could not readily obtain from other sources. Cogenex's energy
services differ from Central and South West's factoring business
in that they are highly specialized services intimately related
to the utility field. Cogenex has become a leader in the energy
conservation field
**8. A Saving Strategy, Jerry Ackerman, The Boston Globe, P.
A85, December 4, 1994**
and differs from its closest competitors in
that it is has many sources of materials and labor to provide the
best package of services to its customers.
In cases similar to Jersey Central, the Commission granted
authority to CNG Energy Company ("CNG"),
**9. CNG Energy Company Order Authorizing Proposal to enter
into Marketing Contract With Non-Associated
Manufacturer of Computer-Aided, Radio-Dispatch Systems,
Release No. 35-23963 (December 26, 1985); CNG Energy
Company Order Authorizing a Proposal to enter into
Marketing Contract with Non-Affiliated Manufacturer of
Gas meters, Release No. 35-23734 (June 14, 1985)**
a non-utility subsidiary of a holding company, to acquire exclusive marketing
rights in the United States and Canada for an electronic device
for reading customer meters from outside a dwelling and for a
computer-aided, radio-dispatch system. In both cases, CNG had an
affiliate that had assisted in the development and testing of the
device, and that wanted to insure stable production and prices
for the devices which it intended to sell to its own customers.
In one release, the Commission also made mention of the fact that
the affiliate was interested in ensuring the highest rate of
return on its investment through the sale of the devices to third
parties.
Geographic restrictions were not imposed by the Commission
on a nonutility affiliate of Cogenex, EUA Energy Investment
Corporation ("EEIC"), in a release in early 1994 which authorized
EEIC to participate in a joint venture to provide various
informational services related to gas pipelines.
**10. EUA Energy Investment Corporation Order Authorizing
Creation of New Subsidiary; Acquisition of General
Partnership Interest; Capital Contribution; Loans and
Advances, Release No. 35-25976 (January 25, 1994)**
The joint venture is developing an automated computer system that collects,
compiles and distributes information to third parties about gas
pipeline capacity and capacity rights. The computer system will
be a resource of many companies outside of the System and the New
England region, yet the Commission did not feel compelled to put
any geographic limit on the activities of such partnership.
The decisions reached by the Commission in all of the cases
described above indicate that a non-utility subsidiary of a
holding company may engage in a profitable, energy-related
business without being artificially confined to the area serviced
by the holding company's system. The same result occurs in
releases where the Commission has allowed holding companies to
form subsidiaries for the purpose of selling consulting services
to non-affiliates. American Electric Power Company, Inc. and The
Southern Company
**11. American Electric Power Company, Inc. Order Authorizing
Creation of Consulting Subsidiary to Render Services to
Non-Affiliates; Reservation of Jurisdiction, Release
No. 35-22468 (April 21, 1982); The Southern Company
Order Authorizing Creation of Consulting Subsidiary to
Render Services to Non-Affiliates, Release No. 35-22132
(July 17, 1981)**
each formed a subsidiary in order to sell utility related management,
technical and training expertise to non-affiliates on the open market.
Their customers were anticipated to be utilities, governments and
businesses. Their authority to conduct these consulting businesses were not
limited by geographic considerations.
Cogenex's fact situation is analogous to the consulting
cases noted above. Cogenex's primary business strategy is to
yield a higher rate of return than the System's regulated utility
operations by enabling consumers to use energy more efficiently.
Cogenex evaluates a customer's energy use and then makes
recommendations, just as consultants do. Cogenex provides its
customers with technical expertise on how to run the equipment,
just as consultants do. The contracting work of Cogenex,
including installation of cogeneration equipment, is integral to
the business strategy of promoting energy savings for its
customers, be they individual sites or utility programs.
Consultants frequently provide equipment to their customers
as part of a broad provision of services. It is less costly and
more efficient for one party to diagnose the situation and then
provide the equipment needed, as opposed to the customer going to
the marketplace and trying to buy what is needed piecemeal. For
example, the companies in the consulting cases noted above also
intended to provide computer programs and manuals as part of
their consulting services.
Like CNG, Cogenex wants to be able to control the quality of
the equipment installed whenever possible. Cogenex's profits
depend on the equipment operating properly, therefore it is
necessary to oversee its installation and operation. One-stop
shopping encourages consumers to use Cogenex because it is always
easier to deal with one party and it is usually cheaper as well.
Not lifting the geographic restriction will have a
detrimental effect on New England by making Cogenex less
competitive and thereby reducing its value and contribution to
the System and NEPOOL.
Restricting the competitiveness of Cogenex will
limit the opportunity for Cogenex to earn a premium return for
the System's investors. Cogenex's return on equity has exceeded
the return earned by other System companies. An economically
healthy Cogenex enhances the reputation of the System in the
business community. Allowing Cogenex to maximize its potential
will increase the overall financial strength of the System.
Restricting Cogenex competitiveness will harm New
England and the national interest by ultimately increasing the
cost of energy and negatively impacting the environment. This is
manifested by the need to build costly new powerplants, secure
additional and presumably more costly fossil fuel supplies, and
increase the cost of compliance with the Clean Air Act ("CAA").
The CAA treats emission reduction as a national problem. DSM
reduces the need for emissions and, therefore, affects the cost
of energy significantly, because the cost of CAA compliance is
reduced. Increased DSM on a national level has regional impacts
in New England by reducing acid deposition and relieving pressure
on CAA emission caps. This ultimately redounds to benefit the
ratepayers of all New England utilities.
Cogenex has proven, since 1986, to be an important part of
the System. It is clearly functionally related to the utility
business of the System. It has benefitted many utilities and
individual customers in New England and New York. The artificial
geographic restriction should not apply to non-utility
subsidiaries that have clearly demonstrated they can serve a
nationwide/worldwide audience that simultaneously enhances the
integrated system, while providing significant public interest
benefits to its home region and beyond.
In making this request to the Commission, Cogenex is
encouraged by the fact that Congress has already moved away from
the notion of geographic restrictions with its enactment of
PURPA, the Gas Related Activities Act of 1990, and the Energy
Policy Act. What the activities permitted by such acts and
Cogenex's energy conservation services have in common is a
recognition that today's world is focused on an interconnected
need to find new economically and environmentally sound sources
of energy.
If the Commission grants Cogenex's request to lift the 50%
Restriction, Cogenex, unlike exempt wholesale generators ("EWGs")
and foreign utility companies ("FUCOs"), will continue to be
subject to full regulation by the Commission as a subsidiary of a
registered public utility holding company. As the Commission
moves forward with the process which began with the roundtable in
July of 1994 and is continuing with its November roundtable
release, it may wish to consider adopting regulations which
regulate energy service companies like Cogenex more like EWGs and
FUCOs and less like the public utility subsidiaries.
Pending the completion of that process, it is appropriate to
remove the 50% Restriction for the reasons set forth above.
