File No. 70-9437
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
to
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
GEORGIA POWER COMPANY
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308-3374
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent
of each applicant or declarant)
Judy M. Anderson
Vice President and Secretary
Georgia Power Company
241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308-3374
(Names and addresses of agents for service)
The Commission is requested to mail signed copies of all
orders, notices and communications to:
W. L. Westbrook
Financial Vice President
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Wayne T. Dahlke John D. McLanahan, Esq.
Power Delivery Senior Vice President Troutman Sanders LLP
Georgia Power Company 600 Peachtree Street, N.E.
241 Ralph McGill Boulevard, N.E. Suite 5200
Atlanta, Georgia 30308-3374 Atlanta, Georgia 30308
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INFORMATION REQUIRED
Item 3. Applicable Statutory Provisions.
Item 3.3 is hereby amended to read in its entirety as follows:
3.3 Rule 54 Analysis: The proposed transaction is also subject to
Rule 54, which provides that, in determining whether to approve an application
which does not relate to any "exempt wholesale generator" ("EWG") or "foreign
utility company" ("FUCO"), the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53(a), (b) and (c) are
satisfied.
Southern currently meets all of the conditions of Rule 53(a),
except for clause (1). At May 31, 1999, Southern's "aggregate investment," as
defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $3.549 billion, or
about 89.87% of Southern's "consolidated retained earnings," also as defined in
Rule 53(a)(1), for the four quarters ended March 31, 1999 ($3.949 billion). With
respect to Rule 53(a)(1), however, the Commission has determined that Southern's
financing of investments in EWGs and FUCOs in an amount greater than the amount
that would otherwise be allowed by Rule 53(a)(1) would not have either of the
adverse effects set forth in Rule 53(c). See The Southern Company, Holding
Company Act Release No. 26501, dated April 1, 1996 (the "Rule 53(c) Order"); and
Holding Company Act Release No. 26646, dated January 15, 1997 (order denying
request for reconsideration and motion to stay).
In addition, Southern has complied and will continue to comply
with the record-keeping requirements of Rule 53(a)(2), the limitation under Rule
53(a)(3) on the use of Operating Company 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 rate regulatory commissions.
Further, none of the circumstances described in Rule 53(b) has occurred.
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Moreover, even if the effect of the capitalization and earnings of
EWGs and FUCOs in which Southern has an ownership interest upon the Southern
holding company system were considered, there would be no basis for the
Commission to withhold or deny approval for the proposal made in this
Application-Declaration. The action requested in the instant filing (viz.
like-kind exchange of substations between GTC and Georgia Power) would not, by
itself, or even considered in conjunction with the effect of the capitalization
and earnings of Southern's EWGs and FUCOs, have a material adverse effect on the
financial integrity of the Southern system, or an adverse impact on Southern's
public-utility subsidiaries, their customers, or the ability of State
commissions to protect such public-utility customers.
The Rule 53(c) Order was predicated, in part, upon an assessment
of Southern's overall financial condition which took into account, among other
factors, Southern's consolidated capitalization ratio and the recent growth
trend in Southern's retained earnings. As of December 31, 1995, the most recent
fiscal year preceding the Rule 53(c) Order, Southern's consolidated
capitalization consisted of 49.3% equity (including mandatorily redeemable
preferred securities) and 50.7% debt (including $1.68 billion of long-term,
non-recourse debt and short-term debt related to EWGs and FUCOs). Southern's
consolidated capitalization as of March 31, 1999, was 48.2% equity and 51.8%
debt including all non-recourse debt, and 59.7% equity and 40.3% debt excluding
all non-recourse debt. Both are within accepted industry ranges and within the
limits set by independent rating agencies (such as Standard and Poor's) for "A"
rated utilities.
Thus, since the date of the Rule 53(c) Order, there has been no
material change in Southern's consolidated capitalization ratio, which remains
within acceptable ranges and limits of rating agencies as evident by the
continued "A" corporate credit rating of Southern. Specifically, in January 1997
Standard & Poor's assigned Southern its corporate credit rating of "A" which was
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consistent with the implied corporate rating previously held by Southern. This
implied rating had been in effect since May 1995. Therefore, since the April
1996 issue of the Rule 53(c) Order, the Southern consolidated credit rating has
remained at "A" thereby demonstrating Southern's continued strong financial
integrity. In addition, the underlying ratings of the affiliated operating
companies, which have a strong influence on the Southern corporate rating, are
all "A+" or better. As a point of reference, the percentage of debt in the total
capital structure of the Southern domestic operating utility companies is 45.1%,
which is at the median total debt ratio of the Standard & Poor's "A" rated
vertically integrated utilities.1
Southern's consolidated retained earnings grew on average
approximately 5.5% per year over the last five years. Excluding the $111 million
one-time windfall profits tax assessed against South Western Electricity in the
United Kingdom and the write down of assets in 1998, the average growth would be
7.2%. In 1998, consolidated retained earnings increased $36 million, or slightly
less than 1%. Southern's interests in EWGs and FUCOs have made a positive
contribution to earnings in the three calendar years ending after the Rule 53(c)
order.
Accordingly, since the date of the Rule 53(c) Order, the
capitalization and earnings attributable to Southern's investments in EWGs and
FUCOs has not had any adverse impact on Southern's financial integrity.
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1 Currently, capitalization ratios, including short-term debt, for "A" rated
vertically integrated electric utilities have a median total debt to total
capital ratio of 45% as noted by Standard & Poor's in May 1997 for companies
rated both publicly and confidentially. Prior to issuing this rating standard,
the Standard & Poor's total debt to total capital benchmark for an "A" rated
vertically integrated investor-owned-utility having an average business position
was 47%.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this statement to be signed
on its behalf by the undersigned thereunto duly authorized.
Dated: June 18, 1999 GEORGIA POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
