(As filed July 12, 2000)
File No. 70 -[ ]
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
ALLIANT ENERGY CORPORATION
222 West Washington Avenue
Madison, Wisconsin 53703
REGENCO LLC
6609-R West Washington Street
West Allis, Wisconsin 53214
(Names of companies filing this statement and addresses of
principal executive offices)
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ALLIANT ENERGY CORPORATION
(Name of top registered holding company parent)
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Edward M. Gleason
Vice President - Treasurer and
Corporate Secretary
Alliant Energy Corporation
222 West Washington Avenue
Madison, Wisconsin 53703-0192
(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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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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1.1 Background. Alliant Energy Corporation ("Alliant Energy") is a
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registered holding company under the Public Utility Holding Company Act of 1935
(the "Act").1 Its direct and indirect public utility subsidiaries are: Wisconsin
Power & Light Company ("WP&L"), South Beloit Water, Gas and Electric Company,
IES Utilities Inc. ("IES") and Interstate Power Corporation ("IPC")
(collectively the "Operating Companies"). Together, the Operating Companies
provide service to approximately 919,000 electric and 393,000 gas utility
customers in portions of Wisconsin, Iowa, Minnesota and Illinois. The Operating
Companies own and operate all or portions of 31 electric generating plants in
Wisconsin, Iowa and Minnesota having a combined generating capacity of more than
5,200 MW.
Alliant Energy's non-utility subsidiaries include Alliant Energy Resources,
Inc. ("AER"), which serves as the holding company for many of Alliant Energy's
non-utility subsidiaries. AER owns all of the issued and outstanding common
stock of Alliant Energy Investments, Inc. (formerly IES Investments, Inc.),
which, in turn, owns all of the outstanding common stock of Heartland Energy
Services, Inc. ("HESI"), which currently has no business operations.2 On
November 16, 1999, HESI acquired 301.508 (representing 30.15%) of the Class A
Units of ReGENco LLC ("ReGENco"), a Wisconsin limited liability company, for an
initial investment of $1,083,333.33, and entered into a subscription agreement
to acquire 666.667 (representing 66.66%) of the Class B Units of ReGENco for an
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1 See WPL Holdings, et al., Holding Co. Act Release No. 26856 (April 14,
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1998) (the "Merger Order").
2 HESI was previously engaged in marketing electricity and natural gas
throughout the United States but transferred those operations to other
affiliates of WPL Holdings, Inc. (now called Alliant Energy) prior to the
date of the Merger Order. See Merger Order, Appendix A, n.4.
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additional investment of $1,666,666.67.3 The other investors in ReGENco include
WITECH Corporation, a non-utility subsidiary of Wisconsin Energy Corporation, an
exempt holding company, and several private investors.
1.2 Description of ReGENco and its Business. ReGENco was formed to
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fill the need in the Midwest for turbine-generator services that was created by
the recent decision of Siemens-Westinghouse Power Corp. to close its facility in
West Allis, Wisconsin, near Milwaukee. ReGENco provides turbine and generator
repair/upgrade services and related project management and engineering services
to utilities and other customers with an emphasis on the Midwest market. In
addition, through strategic alliances with other companies, ReGENco intends to
offer a full line of integrated project management, product and service
engineering and servicing for the turbine and generator market on a national
scale. It is the goal of the founding members of ReGENco to promote competition
in the Midwest for turbine and generator repair/upgrade services.
Specifically, ReGENco provides all of the following turbine repair/upgrade
services: blade inspection and analysis; blade repair and replacement; diaphragm
repair; rotor and casing repair; valve repair; combustor and transition piece
repair (gas turbine only); field inspection and overhaul; non-destructive
examination (e.g., ultrasonic) and condition assessment; and field alignment and
balance. Generator repair/upgrade services offered by ReGENco include: rotor and
stator repairs and rewinds; replacement/repair of retaining rings; high-speed
rotor balance; non-destructive examination and evaluation; and inspection and
testing.
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3 ReGENco is an "energy-related company" within the meaning of Rule 58(b)(1),
and specifically category (vii) thereof. Alliant Energy's initial
investment in the Class A Units of ReGENco was reported on Form U-9C-3 for
the period ended December 31, 1999. See File No. 074-00037.
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ReGENco is currently leasing a portion of the former Siemens-Westinghouse
Power Corp. facility in West Allis, Wisconsin, from an entity controlled by one
of the private investors in ReGENco. This facility is located in close proximity
to many of the Operating Companies' power plants. The proximity of a repair
facility to a generating station can be an important consideration in terms of
reducing the average length of a plant outage for turbine or generator
repair/upgrade services, and can also reduce the risk of loss or damage to
equipment associated with long-distance shipment. If the Operating Companies did
not have access to the ReGENco facility, they would in many cases be forced to
ship generator and turbine components to similar repair facilities located
outside the Midwest market.
1.3 Management of ReGENco. Under its operating agreement, the
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management of ReGENco is vested exclusively in an Advisory Board, which is
appointed by the holders of the Class A Units. The Advisory Board is made up of
seven individuals, of whom two are selected by HESI. The vote of a majority of
the members of the Advisory Board (i.e., four advisors) is required for consent
or approval of any action taken by the Advisory Board. Among its other powers,
the Advisory Board appoints the officers of the company who are, subject to
certain restrictions, responsible for the day-to-day conduct of the business of
ReGENco. The Chairman of the Advisory Board is a vice president of WP&L. The
President and Chief Executive Officer of the company was previously part of the
Siemens-Westinghouse Power Corp. management team.
1.4 Specific Authorization Requested. In this proceeding, ReGENco, a
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"subsidiary company," within the meaning of Section 2(a)(8) of the Act, of
Alliant Energy, is requesting approval pursuant to Section 13(b) of the Act to
provide turbine and generator repair/upgrade services to the Operating Companies
at market-based prices, as determined through competitive bid procedures
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mandated by each of the four state public service commissions in the Operating
Companies' service area. Specifically, before entering into any purchase order
with ReGENco, an Operating Company must seek competitive quotes from one or more
unaffiliated vendors of similar services (e.g., General Electric).
Services to all customers (including the Operating Companies) will be
provided by ReGENco pursuant to terms and conditions set forth in standard
master agreements for equipment repair and/or for engineering services. See
Exhibits B-1 and B-2 hereto. The scope of work will be as set forth in
individual purchase orders, and the terms of payment will be as set forth in
rate sheets that are attached to each standard agreement. The rate sheets list
standard labor dollars that will be applied to different categories of work
(e.g., shop repair for generators or turbines, machining, field service, etc.).
The rates used for affiliate work will be no higher than the rates ReGENco will
offer non-affiliates.
ITEM 2. FEES COMMISSIONS AND EXPENSES.
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The estimated fees, commissions and expenses to be incurred in connection
with the filing of this Application-Declaration are $5,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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ReGENco's request to provide services to the Operating Companies at market
prices is subject to Section 13(b) of the Act and Rules 54, 87, 90 and 91
thereunder. Section 13(b) provides that:
"[I]t shall be unlawful for any subsidiary company of any registered
holding company or for any mutual service company, by use of the mails or
any means or instrumentality of interstate commerce, or otherwise, to enter
into or take any step in the performance of any service, sales, or
construction contract by which such company undertakes to perform services
or construction work for, or sell goods to, any associate company thereof
except in accordance with such terms and prohibitions as the Commission by
rules and regulations or order shall prescribe as necessary or appropriate
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in the public interest or for the protection of investors or consumers and
to insure that such contracts are performed economically and efficiently
for the benefit of such associate companies at cost, fairly, and equitably
allocated among such companies. This provision shall not apply to such
transactions as the Commission by rules and regulations or order may
conditionally or unconditionally exempt as being necessary or appropriate
in the public interest or for the protection of investors or consumers, if
such transactions (1) are with any associate company which does not derive,
directly or indirectly, any material part of its income from sources within
the United States and which is not a public-utility company operating
within the United States, or (2) involve special or unusual circumstances
or are not in the ordinary course of business."
Although Section 13(b) generally requires that intrasystem service, sales
and construction contracts for the provision of services, construction work and
goods be performed "at cost," as determined in accordance with Rules 90 and 91,
the Commission has recognized, most recently in Entergy Corporation, et al.,
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Holding Co. Act Release No. 27040 (June 22, 1999) ("Entergy"), that Section
13(b) provides it with flexibility to exempt from the "at cost" requirement of
Section 13(b) transactions that involve "special or unusual circumstances and
not in the ordinary course of business."
In Entergy, the Commission authorized the operating public utility
subsidiaries of Entergy Corporation to charge for services rendered to
non-utility associate companies an amount equal to "cost" plus 5%. The
Commission indicated that its decision to grant the exemption was influenced,
among other things, by the actions of state regulatory commissions having
jurisdiction over Entergy Corporation's operating utilities in approving a
comprehensive settlement agreement that required cost-plus pricing for any
services rendered to non-utility associate companies. In contrast, the present
case involves the rendering of services by a non-utility subsidiary of Alliant
Energy to any of the Operating Companies at market-based prices. However, this
distinction does not appear to be critical in determining whether it is
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appropriate to grant an exemption under Section 13(b). In fact, in Entergy, the
Commission cited instances in which non cost-based pricing had previously been
authorized in cases involving sales of goods or services to regulated utility
associate companies.4
The Commission has also promulgated rules that exempt specified kinds of
transactions from the "at cost" requirement of Section 13(b). For example, Rule
81 exempts from the provisions of Section 13 the sale of water, telephone
service, transportation, or similar commodity or service the sale of which is
"normally subject to public regulation," provided that "comparable services,
construction or goods are offered to customers other than associate companies on
terms which are comparable having due regard to any differences of quality or
quantity." Likewise, Rules 90(d)(1) and 92(b), read together, exempt from the
"at cost" requirement any sale of "goods produced by the seller" to an associate
company, provided that the price charged does not exceed "the price at which the
purchaser might reasonably be expected to obtain comparable goods elsewhere, or
to furnish them itself, giving due regard to quality, quantity, regularity of
supply, and other factors entering into the calculation of a fair price."
Although neither Rule 81 nor Rule 90(d)(1) (as limited by Rule 92(b)) apply
in the specific circumstances of this case, the policy considerations underlying
those exemptions would seem to support the grant of the exemption herein
requested. Clearly, both rules were intended to permit non-utility subsidiaries
of registered holding companies to engage in specified types of business
transactions with both associate and non-associate companies on market-based
pricing terms under circumstances in which comparability of price and quality of
service can be assured. The Commission clearly recognized that, under such
circumstances, public utility subsidiaries will not be subjected to excessive
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4 See Entergy, n. 21.
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charges for services or goods in transactions with associate companies resulting
from "an absence of arm's-length bargaining or from restraint of free and
independent competition." (See Section 1(b)(2) of the Act).
In the present case, the terms and conditions under which ReGENco will do
business will assure comparable treatment of affiliates and non-affiliates
alike. As described in Item 1, this will include the use of standard contracts
and the use of standard rate sheets for similar work performed for all
customers. In addition, as required by each of their state public service
commissions, the Operating Companies will request competitive bids from
third-party vendors for all generator and turbine repair work on which ReGENco
makes a proposal. An Operating Company will not contract with ReGENco in any
case in which the terms proposed by ReGENco are not the most favorable.
In this case, there are other considerations present that warrant the grant
of an exemption under Section 13(b) to ReGENco. First, it is anticipated that
the Operating Companies will account for no more than 10% of ReGENco's overall
operations on an ongoing basis. Hence, this is not a case in which the success
of a non-utility subsidiary is dependent upon revenues from associate companies.
Second, the presence of ReGENco as a supplier to the Operating Companies will
promote rather than limit or reduce competition for generator and turbine
repair/upgrade services. As indicated, with the closure of the
Siemens-Westinghouse Power Corp. facility in West Allis, Wisconsin, the
Operating Companies now have limited options available to them in procuring
services of the type that ReGENco is capable of providing. Third, because of the
substantial investment in ReGENco by third parties, ReGENco could not and would
not agree to limit its charges to the Operating Companies (or to any customer,
for that matter) to its "cost" as determined under Rules 90 and 91, since "cost"
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would not adequately compensate ReGENco for business risks it will undertake. In
this regard, under "at cost" based service arrangements between associate
companies in a registered holding company system, the service provider (for
example, a subsidiary service company) typically does not provide warranties or
back its performance with liquidated damages or other financial penalties or
agree to accept any significant business risks associated with its performance
of services or the products it sells. In contrast, vendors of construction or
maintenance services in the competitive marketplace usually accept these risks.
(For example, see section 7 (Warranty) of the standard form of Agreement for
Equipment Repair). A vendor who provides warranties and/or performance
guaranties would not be adequately compensated for the business risks taken if
it were limited to charging "cost." The element of risk taken by the seller of
goods or services is one that the Commission has considered in granting
exemptions under Section 13(b). See New England Electric System, et al., Holding
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Co. Act Release No. 22309 (December 9, 1981). Thus, if ReGENco were limited to
"cost" in what it charges the Operating Companies, the likely result is that it
would simply decline opportunities to provide any services to the Operating
Companies.
Further, any costs incurred by an Operating Company for the repair or
refurbishment of any of its electrical generating equipment will be subject to
review by the Federal Energy Regulatory Commission ("FERC") and the public
service commission or commissions having jurisdiction over its retail rates. The
grant of an exemption under Section 13(b) in this case will not affect the
authority of FERC or any state commission over rates or prescribe what should be
allowed in rates of any Operating Company for costs incurred for turbine and
generator repair or refurbishment.5 Thus, to the extent that charges by ReGENco
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are determined to be excessive, such commissions may disallow recovery thereof
in rates.
Rule 54 Analysis. The transactions proposed herein are also subject to
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Section 32(h)(4) of the Act and Rule 54 thereunder. Rule 54 provides that, in
determining whether to approve any transaction that does not relate to an
"exempt wholesale generator" ("EWG") or "foreign utility company" ("FUCO"), as
defined in Sections 32 and 33, respectively, the Commission 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 paragraphs (a), (b) and
(c) of Rule 53 are satisfied.
Alliant Energy is in compliance with all requirements of Rule 53(a).
Alliant Energy's "aggregate investment" (as defined in Rule 53(a)(1)(i)) in all
EWGs and FUCOs at March 31, 2000 was $199 million, or about 17% of Alliant
Energy's "consolidated retained earnings" ($1,143 million for the four quarters
ended March 31, 2000 as defined in Rule 53(a)(1)(ii) and including Alliant
Energy's accumulated other comprehensive income). In addition, Alliant Energy
has complied and will comply with the record-keeping requirements of Rule
53(a)(2), the limitation under Rule 53(a)(3) on the use of the Operating
Companies' personnel to render services to EWGs and FUCOs, and the requirements
of Rule 53(a)(4) concerning the submission of copies of certain filings under
the Act to retail regulatory commissions. Finally, none of the circumstances
described in Rule 53(b) has occurred or is continuing. Rule 53(c) is by its
terms inapplicable, as the proposed transaction does not involve the issuance of
securities to finance an investment in any EWG.
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5 See New England Electric System, n. 3.
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ITEM 4. REGULATORY APPROVAL.
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The Public Service Commission of Wisconsin ("PSCW") has approved the
provision of services by ReGENco to WP&L. Copies of the application to and order
of the PSCW will be filed by amendment as Exhibits D-1 and D-2. In addition, IPC
has filed or will file applications with the Public Utilities Commission of
Minnesota and the Illinois Commerce Commission seeking approval for the proposed
service agreements. Copies of the applications to and orders of those
commissions will be filed by amendment as Exhibits D-3 through D-6. IES does not
require the prior approval of the Iowa Utilities Board ("IUB") to enter into an
agreement with ReGENco. However, the IUB has the authority to review and, if
appropriate, disallow costs incurred by IES with affiliated interests. No other
state commission, and no federal commission, other than this Commission, has
jurisdiction over the proposed transactions.
ITEM 5. PROCEDURE.
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The Commission is requested to publish a notice under Rule 23 with respect
to the filing of this Application/Declaration as soon as practicable and to
issue an order approving the proposal contained herein as soon as practicable
after the notice period. The applicants further request that there should not be
a 30-day waiting period between issuance of the Commission's order and the date
on which the order is to become effective, hereby waive a recommended decision
by a hearing officer or any other responsible officer of the Commission, and
consent that the Division of Investment Management may assist in the preparation
of the Commission's decision and/or order, unless the Division opposes the
matters proposed herein.
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ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
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(a) Exhibits
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A Not applicable.
B-1 Standard Terms for Agreement for Equipment Repair.
B-2 Standard Terms for Agreement for Engineering Services.
C Not applicable.
D-1 Application of WP&L to the Public Service Commission of
Wisconsin. */
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D-2 Order of the Public Service Commission of Wisconsin. */
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D-3 Application of IPC to the Minnesota Public Service Commission. */
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D-4 Order of the Minnesota Public Utilities Commission. */
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D-5 Application of IPC to the Illinois Commerce Commission. */
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D-6 Order of the Illinois Commerce Commission. */
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E Not applicable.
F Opinion of Counsel. */
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G Not applicable.
H Form of Federal Register Notice.
*/ To be filed by amendment
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(b) Financial Statements.
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Not applicable.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
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None of the matters that are the subject of this Application or Declaration
involve a "major federal action" nor do they "significantly affect the quality
of the human environment" as those terms are used in section 102(2)(C) of the
National Environmental Policy Act. The transaction that is the subject of this
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Application or Declaration will not result in changes in the operation of the
Applicants that will have an impact on the environment. The Applicants are not
aware of any federal agency that has prepared or is preparing an environmental
impact statement with respect to the transactions that are the subject of this
Application or Declaration.
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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/ Edward M. Gleason
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Name: Edward M. Gleason
Title: Vice President - Treasurer and
Corporate Secretary
REGENCO LLC
By: /s/ John C. Bobrowich
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Name: John C. Bobrowich
Title: President and CEO
Date: July 12, 2000
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