(As filed October 13, 1999)
File No. 70-9513
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
on
FORM U-1/A
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
ALLIANT ENERGY CORPORATION
222 West Washington Avenue
Madison, Wisconsin 53703
IES UTILITIES INC.
Alliant Tower
Cedar Rapids, Iowa 52401
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(Names of companies filing this statement
and addresses of principal executive offices)
ALLIANT ENERGY CORPORATION
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(Name of top registered holding company parent)
Erroll B. Davis, Jr.
President and
Chief Executive Officer
Alliant Energy Corporation
222 West Washington Avenue
Madison, Wisconsin 53703-0192
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(Name and address of agent for service)
The Commission is requested to send copies
of all notices, orders and
communications in connection with this
Application or Declaration to:
Barbara J. Swan, General Counsel William T. Baker, Jr., Esq.
Alliant Energy Corporation Thelen Reid & Priest LLP
222 West Washington Avenue 40 West 57th Street
Madison, Wisconsin 53703-0192 New York, New York 10019
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Amendment No. 2 amends and restates Item 1 of the Application or
Declaration in this proceeding as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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A. Introduction. Alliant Energy Corporation (formerly Interstate Energy
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Corporation) ("Alliant Energy") is a registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act").(1) Its public
utility subsidiaries are Wisconsin Power & Light Company ("WP&L"), South Beloit
Water, Gas and Electric Company, Interstate Power Company, and IES Utilities,
Inc. ("IES") (collectively, the "Operating Companies"). Together, the Operating
Companies provide public utility service to approximately 908,000 electric and
388,000 retail gas customers in parts of Wisconsin, Iowa, Minnesota and
Illinois. Alliant Energy's direct non-utility subsidiaries include Alliant
Energy Corporate Services, Inc., a service company, and Alliant Energy
Resources, Inc., which serves as the holding company for substantially all of
Alliant Energy's investments in non-utility subsidiaries.
Alliant Energy indirectly owns undivided interests in two nuclear
power facilities, the Kewaunee Nuclear Power Plant ("KNPP"), located in the Town
of Carlton, Wisconsin, and the Duane Arnold Energy Center ("DAEC"), located in
Palo, Iowa. KNPP, a 532 megawatt pressurized water reactor, is operated by
Wisconsin Public Service Corporation ("WPSC"), a subsidiary of WPS Resources
Corporation ("WPS Resources"), and is jointly owned by WPSC (41.2%), WP&L
(41.0%) and Madison Gas & Electric Company (17.8%). DAEC is a 535 megawatt
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1 See WPL Holdings, Inc., et al., 66 SEC Docket 2256 (April 14, 1998).
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boiling water reactor. It is operated by IES, which has a 70% ownership interest
in the facility. The remaining 30% is owned by two generation and transmission
cooperatives.
Alliant Energy requests approval herein to acquire all of the voting
securities of a new company (herein referred to as "Alliant Nuclear") to be
organized under Wisconsin law. Through Alliant Nuclear, Alliant Energy proposes
to acquire and hold a 25% membership interest in Nuclear Management Company, LLC
("NMC"), a Wisconsin limited liability company. Alliant Nuclear's capitalization
will consist of 100 shares of common stock, without par value. Alliant Energy
proposes to purchase the common stock of Alliant Nuclear for the amount
(estimated not to exceed $1.1 million) that will be required by Alliant Energy
to fund the acquisition of its 25% interest in NMC. Additional investments by
Alliant Energy in Alliant Nuclear in the form of cash contributions, loans,
and/or non-interest bearing advances may be made from time to time in order to
finance Alliant Nuclear's authorized operations pursuant to Rule 52 or Rule
45(b), as applicable, as and when capital calls are made of all members by NMC.
It is not expected that Alliant Nuclear itself will conduct any operations or
have any significant assets, other than its investment in NMC.
NMC has been formed for the purpose of consolidating into one
organization the talents and efforts of specialized employees of IES and certain
other unaffiliated nuclear power plant owners in order to make available to such
plant owners a larger and more diverse pool of skilled workers and other
specialized resources than would otherwise be available to them if they were to
continue to manage their plants independently of each other. Initially, NMC will
render services to the NMC Plant Owners, as defined below, and, subsequently, to
Nonaffiliated Companies, as defined below.
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Currently, the members of NMC are WEC Nuclear Corp. ("WECN"), a
subsidiary of Wisconsin Energy Corporation ("WEC"), WPS Nuclear Corporation
("WPSN"), a subsidiary of WPS Resources and an affiliate of WPSC, and Northern
States Power Company ("NSP"). Subject to obtaining the approval of the
Commission in this proceeding, Alliant Nuclear proposes to become a 25% member
of NMC. Further, as more fully described below, IES and NMC propose to enter
into certain agreements pursuant to which IES would make available to NMC
specialized personnel and, in turn, would purchase from NMC specified categories
of services.
The current members of NMC or their utility affiliates and IES
(hereinafter referred to, collectively, as the "NMC Plant Owners") collectively
own interests in and operate seven nuclear generating units at five locations.
NSP owns and operates the Prairie Island Units 1 and 2, located near Red Wing,
Minnesota, which are pressurized water reactors having a combined net generating
capacity of 1,003 megawatts, and the Monticello generating station, located near
Monticello, Minnesota, a boiling water reactor with a net generating capacity of
536 megawatts. Wisconsin Electric Power Company, a subsidiary of WEC, owns and
operates two units at the Point Beach nuclear generating station located near
Two Rivers, Wisconsin. The Point Beach units are also pressurized water reactors
and have a combined net generating capacity of 970 megawatts. These five units,
together with the single unit DAEC and KNPP, are hereinafter referred to
collectively as the "NMC Plants."
NMC will be managed by a Board of Directors comprised of
representatives of each of its members, and will be capitalized with
contributions from each of its members, as provided for in the NMC Limited
Liability Company Operating Agreement (the "Operating Agreement") filed herewith
on a confidential basis as Exhibit A-2. It is intended that the capital
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contributions of the members will be equal. Under the terms of the Operating
Agreement, the profits and losses of NMC will be allocated to the members in
accordance with their percentage interests, and additional capital contributed
pursuant to a capital call would be on the same basis. The Operating Agreement
requires a supermajority vote of the members to make a capital call greater than
$250,000 annually per member. The rate of return on NMC's equity capital
deployed to serve the NMC Plants will not exceed the average of the most recent
rates of return allowed by the public service commissions that regulate the NMC
members, i.e., the Iowa Utilities Board, the Minnesota Public Service Commission
and the Public Service Commission of Wisconsin. The Operating Agreement
contemplates the admission of other utilities as members.
IES's commitments to purchase services from and provide personnel and
other resources to NMC are set forth in a Services Agreement (the "Services
Agreement") and Employee Lease Agreement (the "Lease Agreement") (collectively,
the "Agreements"). Forms of the Services Agreement and Lease Agreement are filed
herewith as Exhibits B-1 and B-2, respectively. The Services Agreement and Lease
Agreement between NMC and IES will be substantially identical to those between
NMC and each of the other NMC Plant Owners.
B. Description of the Agreements.
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1. The Services Agreement.
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The Services Agreement lists various categories of support services
which the NMC Plant Owners believe will improve operations of the NMC Plants if
provided on an integrated basis by NMC (the "Services"). The Services will be in
the areas of fuel management; procurement and warehousing; licensing; outage
support; quality assurance; records management; safety assessment and oversight;
security; training and special projects.
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Because the decision to integrate the provision of any nuclear plant
support service must be undertaken with great care, the Services Agreement
allows for a period of time for Service Development Teams ("SDTs") to further
evaluate each category of the Services to determine whether providing them on an
integrated basis through NMC will be compatible with the needs and
responsibilities of each NMC Plant Owner with respect to its own nuclear units.
For example, if a particular service is currently provided to an NMC Plant Owner
pursuant to a long-term contract with a third-party vendor and there is
difficulty in assigning that contract to NMC, it may not be possible for NMC to
achieve the scope needed to create safety or reliability standardization, or
economic efficiencies. Once SDTs have recommended that a Service or group of
Services (the "Basic Services") can be provided by NMC on an integrated basis,
then an implementation plan for transitioning such Basic Services to NMC will be
developed. The transition plan will require development of a service specific
budget. NMC Plant Owners will be obligated to make good faith efforts to take
the Basic Services from NMC. NMC may also offer other categories of the Services
("Optional Services") to the NMC Plant Owners which the NMC Plant Owners may
choose, but shall not be obligated, to take.
Even when the SDTs agree that a Basic Service can effectively be
delivered by NMC, IES will not be obligated to take the Basic Service if it
believes that to do so would jeopardize the safety, integrity or reliability of
DAEC or compliance with government regulations. The provisions of the Services
Agreement are intended to promote as much integration of support services among
the NMC Plants as possible while assuring that no one utility is disadvantaged
by being required to take a specific service. Thus, the Services Agreement
balances the interests of furthering the development of NMC with the interests
of each of the NMC Plant Owners. The Services Agreement also assures that this
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balancing of each utility's interests is achieved not only when NMC commences to
provide any of the Services, but on an ongoing basis.
The primary advantage of using NMC is that the Services will be
performed by utility employees experienced in the operation and maintenance of a
nuclear power facility on a continuing basis. Such employees will be dedicated
to NMC pursuant to the Services Agreement. As indicated, the Services Agreement
provides that the NMC Plant Owners will retain the discretion to withhold
employees from NMC if necessary to avoid jeopardizing safety and reliability in
the operation of any NMC Plant. Thus, the Services Agreement will provide IES
with adequate safeguards to assure that the primary objectives of safety and
reliability of its nuclear operating facilities are preserved and that NMC will
work only to improve upon these primary objectives.
NMC will combine and coordinate the talents and resources of four
regulated utilities in the area of nuclear power plant operations. This will
enable IES and the other NMC Plant Owners to standardize processes and service
functions that meet or exceed industry standards and to achieve cost
efficiencies through economies of scale. NMC will also allow the NMC Plant
Owners to reduce their dependence upon third-party vendors and contractors by
creating a larger and more flexible pool of specialized employees who will be
available to all NMC Plant Owners. In contrast, bidding to the market for
services available from consultants provides no opportunity for the pooling of
resources or sharing of costs and gains in safety, reliability and efficiency.
In the near term, it is anticipated that IES employees involved in the
operation and management of DAEC will continue to devote most of their time to
those duties. As NMC develops over time, however, service delivery will likely
become more integrated among the NMC Plant Owners and IES employees will devote
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more of their time to the performance of the Services for other NMC Plant
Owners.
NMC will maintain its books and records and system of accounts in
substantial conformity with the Uniform System of Accounts for Mutual Service
and Subsidiary Service Companies, as in effect from time to time. IES will have
full access to NMC's books and records. To the extent that costs incurred by NMC
can be identified to a particular NMC Plant or Plants, such costs will be
directly assigned to the owner or owners of the respective NMC Plant or Plants
as appropriate. It is anticipated that NMC will directly assign substantially
all of its costs in this manner. Costs which cannot be directly assigned to a
particular NMC Plant (e.g., NMC's general overheads and administrative expenses)
will be allocated through a loading on direct labor dollars charged to each of
the NMC Plant Owners for Services performed. This loading will be based on
estimates of direct labor dollars made at the beginning of each year and will be
adjusted (trued-up) annually based on actual indirect charges for common costs
incurred and actual labor dollars charged for Services in that year. Certain
other common costs which provide benefits to all NMC Plant Owners (e.g., cost of
a computer system) will be allocated equitably among the NMC Plant Owners. NMC
will file annual reports on Form U-13-60 to comply with periodic reporting
requirements of Rule 94 under the Act.
All of the Services furnished by NMC to the NMC Plant Owners will be
performed at cost, fairly and equitably allocated. NMC will submit monthly
statements to each NMC Plant Owner for the Services rendered during the previous
month. This monthly payment and billing procedure is expected to minimize the
need for substantial working capital by NMC.(2) In the case of Services rendered
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2 To the extent working capital is required, it is anticipated that NMC would
- - borrow funds from lenders pursuant to Rule 52.
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by NMC in respect to DAEC and KNPP, which are jointly owned with other
utilities, such costs will be reallocated among the plant owners in proportion
to their respective ownership shares in the manner provided in the participation
or operating agreement among the owners of those plants.
Subject to the availability of resources and its commitment to provide
the Basic Services to the NMC Plant Owners, NMC may also from time to time offer
similar services to nonaffiliated companies ("Nonaffiliated Companies"). Any
services which may be rendered by NMC to Nonaffiliated Companies will be billed
at negotiated rates designed to produce a profit to NMC.
As indicated, each of the NMC Plant Owners will be committed under the
Services Agreement to make available to NMC such personnel and other resources
as are reasonably necessary to enable NMC to provide the Basic Services
described above. Personnel resources may be provided under employee leases (see
description below), direct employee charges to NMC, and/or the transfer of
employees to NMC. Other resources made available to NMC may include the use of
office space, vehicles, furniture, equipment, informational systems and computer
time. The NMC Plant Owner providing services or other resources to NMC will be
reimbursed for the cost thereof in accordance with Rules 90 and 91.
The Services Agreement provides (in Section 3.1(d) thereof) that NMC
shall provide the Services at the lower of its cost (defined, consistent with
Rules 90 and 91, to mean the fully allocated cost of NMC, inclusive of a
reasonable return on amounts invested in NMC) or the "market price" for such
Services. Section 4.6(d) of the Services Agreement provides that an NMC Plant
Owner shall be reimbursed by NMC for personnel and other resources made
available by such NMC Plant Owner at the lower of its cost or the "market price"
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for such personnel and resources. Under Section 2.3(d)(i) of the Services
Agreement, however, the parties have agreed as among themselves that NMC's cost
shall be deemed to reflect the "market price" of services provided by NMC to the
NMC Plant Owners. The Wisconsin and Minnesota public service commissions have
approved the Services Agreement on this basis. Moreover, consistent with
existing requirements of the Iowa Utilities Board, all services (including
leased personnel) provided by IES to NMC will be performed at cost, in
accordance with Rules 90 and 91.
2. Employee Lease Agreement.
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The Lease Agreement sets forth the terms and conditions under which
each of the NMC Plant Owners will make its employees available to NMC. The Lease
Agreement confirms that each NMC Plant Owner shall retain direction and control
over its employees and that such employees shall continue to be employed by the
respective NMC Plant Owner, not NMC. The Lease Agreement enumerates all
employee-related expenses which would be included in the determination of a
fully loaded, fully allocated cost and incorporates various terms from the
Services Agreement so as to coordinate the Lease Agreement with the Services
Agreement. For example, the Agreements have the same term, termination,
liability and dispute resolution provisions.
C. The Provision of Services by NMC is in the Public Interest.
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In this era of change in the nuclear power industry highlighted by
increasing competition, the nuclear industry faces two significant challenges
that are addressed by the creation of NMC. The first involves retaining staffing
resources with the skills and expertise to operate facilities in a safe,
reliable and efficient manner. The second is to achieve a consistent, strong
performance record to assure compliance with all Nuclear Regulatory Commission
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("NRC") requirements. In this regard, some utilities have found it difficult to
meet current nuclear plant safety and reliability requirements and still achieve
cost and plant performance results necessary to remain economically viable.
NMC will provide the NMC Plant Owners with an opportunity to achieve
economies and efficiencies without adversely affecting plant safety and
reliability. The opportunity provided to nuclear engineers and managers by NMC
to work to promote the safe, reliable and efficient operation of a fleet of
nuclear plants rather than one or two plants should help to retain and recruit
experienced and well-qualified personnel. This resource sharing should also lead
to the development of best practices and standardization which will enhance the
safety and reliability of each of the facilities serviced. Maintaining high
levels of safety and reliability is an important factor in maintaining cost
effective nuclear operations. Developing strong, consistent compliance with NRC
regulations may be better achieved over the long run through a single entity
that focuses on operations of several units rather than only one or two.
Through NMC, the safety and reliability of the NMC Plants will be
maintained. At the same time, through NMC, the NMC Plant Owners will have an
opportunity to make more efficient use of their employees and other resources
related to nuclear plant management and operations, which could lower costs.
Utility employees responsible for providing services at up to five different
plant sites will coordinate their efforts to establish best practices and
process improvements that can be implemented at all of the plants serviced by
NMC. Sharing of personnel may also provide efficiency gains, particularly where
utility employees are able to dedicate a portion of their time to plants where
the services have been performed by outside consultants, as the utility owners
can utilize leased utility employees at a lower cost.
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IES believes that its employees will benefit from the experiences of
other utilities operating similar nuclear facilities. In this regard, each of
the NMC Plant Owners brings significant experience and historically strong
performance to this venture. In addition to DAEC, which is operated by IES, the
other NMC Plant Owners operate six nuclear units. Both the Point Beach and
Prairie Island dual unit plants have a relatively small total generating
capacity in comparison to other dual unit plants in the industry. The others are
single unit plants. Creation of a common overhead structure for various
management services is anticipated to improve operations at all of the
facilities. Further, some of the units share common design features. The Point
Beach units, Prairie Island units, and the KNPP unit are similarly designed
pressurized water reactor plants. Likewise, the Monticello unit and DAEC are
similarly designed boiling water reactors. These similarities will afford the
NMC Plant Owners opportunities to achieve efficiencies through standardization
and the transfer of relevant experience.
IES believes that obtaining the Services from NMC will allow it to
evaluate and possibly implement best practices existing at the other utilities.
Whether or not IES adopts such practices, it will continue to benefit from the
efficiencies achieved through working with the experienced staff of other
regional nuclear operators. Neither the Services Agreement nor Lease Agreement
will compromise or conflict with IES's duty and commitment to have its nuclear
facilities operated in a safe and efficient manner. Finally, the Agreements do
not transfer IES's ultimate control or responsibility for operation of DAEC.
NMC will provide a favorable corporate arrangement for joint service
delivery in a structured, recurring and efficient manner. If successful, IES
believes this arrangement may provide the opportunity to pursue other corporate
structures that may be consistent with industry restructuring, such as a
movement to a generating company business (either through sale or lease of
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assets or output). However, IES has no current plans to transfer ownership of
the DAEC to NMC.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this statement
filed herein to be signed on their behalf by the undersigned thereunto duly
authorized.
ALLIANT ENERGY CORPORATION
By: /s/ Erroll B. Davis, Jr.
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Name: Erroll B. Davis, Jr.
Title: Chief Executive Officer
IES UTILITIES, INC.
By: /s/ Eliot J. Protsch
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Name: Eliot J Protsch.
Title: President
Date: October 13, 1999
