File No. 70-9145
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
__________________________________
AMENDMENT NO. 4
TO
FORM U-1
__________________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
AEP RESOURCES, INC.
AEP RESOURCES SERVICE COMPANY
AEP ENERGY SERVICES, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of company or companies filing this statement
and addresses of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
Susan Tomasky, General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza Columbus, Ohio 43215
Jeffrey D. Cross, General Counsel
AEP RESOURCES, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
American Electric Power Company, Inc., a holding company
registered under the Public Utility Holding Company Act of 1935, as
amended, and AEP Resources, Inc., AEP Resources Service Company and
AEP Energy Services, Inc., wholly-owned non-utility subsidiaries of
American, hereby amend their Application or Declaration on Form U-1
in File No. 70-9145 as follows:
1. By amending and restating the first paragraph of ITEM 1.
DESCRIPTION OF PROPOSED TRANSACTION:
"American Electric Power Company, Inc. ('American'), a holding
company registered under the Public Utility Holding Company Act of
1935, as amended ('1935 Act'), and AEP Resources, Inc.
('Resources'), a wholly-owned non-utility subsidiary of American,
FN1
FN1 Resources invests in exempt wholesale generators and foreign
utility companies and other independent energy projects.
request authority (i) for Resources, or a wholly-owned subsidiary,
to form a subsidiary ('Management Company') that will provide
energy services to industrial, commercial and institutional
customers; (ii) for Resources, or a wholly-owned subsidiary, to
form a subsidiary ('Capital Company') that will provide financing
for energy-related assets to customers of Management Company; (iii)
for American to guarantee the obligations of Resources to make
capital investments up to $250 million in Capital Company and $50
million in Management Company through December 31, 2002; (iv) for
American or Resources to provide Management Company and Capital
Company and their subsidiaries with up to $250 million in
guarantees of operational obligations through December 31, 2002;
(v) for Resources to form, and for American and Resources to
guarantee the obligations of, special purpose subsidiaries; (vi)
for Capital Company or Management Company to form, and guarantee
the obligations of, one or more subsidiaries; (vii) for Capital
Company, Management Company and their subsidiaries to issue
membership or partnership interests; and (viii) for Capital
Company, Management Company and their subsidiaries to pay dividends
out of capital or unearned surplus to the extent permitted by
applicable law."
2. By amending and restating the first two paragraphs of
Item 1.B.(1):
"(1) General
Many industrial, commercial and institutional entities
have energy functions which produce (or procure) and distribute
thermal energy, electricity, fuels and other similar products
(collectively, "Products") to the entity's facilities. The
Products then are used, among other things, to heat or cool
products, machinery and buildings, to power machinery and lighting
and for other functions in the entity's business. The facilities
used for these functions often have a distinct physical location on
the site and their staffs often are organized separately from the
rest of the site staffs.
Industrial entities have boilers to produce steam and
related fuel handling and waste disposal facilities, air
compressors, electric generators, chillers, electric substations,
tanks to store industrial gases and facilities to distribute the
Products throughout the industrial facility. Commercial and
institutional entities sometimes have similar energy functions.
For example, a hospital or university complex may have a steam
plant to heat buildings, an electric generator or a central air
conditioning or chilled water facility. Sometimes these energy
facilities may serve two or more neighboring entities."
3. By amending and restating Item 1.B.(3):
"(3) Management Company
Management Company will provide the following services:
(a) 'Energy Facility Management Services' include
the day-to-day operations, maintenance, and management, and other
technical and administrative services required to operate, maintain
and manage the Energy Facilities, as well as long-term planning and
budgeting for and evaluation of improvements to Energy Facilities.
(b) 'Energy Conservation Services' include (1)
identification (through energy audits or otherwise) of energy and
other resource (water, labor, maintenance, materials, etc.) cost
reduction or efficiency opportunities; (2) design of facility or
process modifications or enhancements to realize such
opportunities; (3) management, or direct construction or
installation, of energy conservation or efficiency equipment; (4)
training of customer personnel in the operation of equipment; (5)
maintenance of energy systems; (6) design, management or direct
construction and installation of new and retrofit heating,
ventilating, and air conditioning ('HVAC'), electrical and power
systems, motors, pumps, lighting, water and plumbing systems, and
related structures, to realize energy and other resource efficiency
goals or to otherwise meet a customer's energy-related needs; (7)
system commissioning (i.e., monitoring the operation of an
installed system to ensure that it meets design specifications);
(8) reporting of system results; (9) design of energy conservation
programs; (10) implementation of energy conservation programs; (11)
provision of conditioned power services (i.e., services designed to
prevent, control or mitigate adverse effects of power disturbances
on a customer's electrical system to ensure the level of power
quality required by the customer, particularly with respect to
sensitive electronic equipment); and (12) other similar or related
activities.
(c) 'Procurement Services' include arranging as
agent or broker for a customer to purchase electricity, natural
gas, oil, propane, and industrial gases ('Energy Commodities') and
to purchase other commodities and supplies used by or distributed
through Energy Facilities on behalf of customers of Energy
Facilities Management or Energy Conservation Services. Procurement
Services also include the purchase and sale, as principal, of
electricity and natural gas, to the extent permitted by state law
and state commission orders, and other Energy Commodities.FN2
FN2 Such services were previously authorized for the AEP System by
the Commission in Orders dated May 2, 1997 (HCAR No. 26713),
September 27, 1996 (HCAR No. 26583) and September 13, 1996
(HCAR No. 26572).
(d) 'Other Energy Services' include development,
design, construction, ownership, and sale of Energy Facilities and
equipment used in and improvements to Energy Facilities.
(e) 'Incidental Services' include products and
services that are incidental to Energy Facilities Management
Services, Energy Conservation Services, Procurement Services and
Other Energy Services. These incidental products and services will
not involve the manufacture of energy-consuming equipment, but be
closely related to the consumption of energy and/or the maintenance
of Energy Facilities.
All services rendered by Management Company to companies
that are not affiliates of American will be based upon the fair
market value thereof and will be subject to such other terms,
conditions and standards of performance as are negotiated on a
case-by-case basis, taking into account the kind and scope of
services involved, the duration of the contract, the levels of
warranties and indemnities that may be negotiated, and other
factors that are unique to each transaction. Payment for services
will vary by project and may include fee-for-service, fixed price,
time and materials, progress payments, turnkey payment, Capital
Company or third-party financing arrangements, performance
contracts with a savings guarantee or payment based on the energy
or other resource savings achieved, the output of equipment (for
example, steam, water, chilled water, air or heat), commissions,
and other payment structures.
Similarly, Management Company will provide such services
to any associate company in the American Electric Power System that
is an EWG, FUCO or QF at fair market prices, and requests an
exemption under Section 13(b) from the requirements of Rules 90 and
91 as applicable to such transaction in any case in which any one
or more of the following circumstances shall apply:
(1) Such entity is a FUCO, or is an EWG which derives no
part of its income, directly or indirectly, from the
generation, transmission or distribution of electric energy
for sale within the United States; or
(2) Such entity is an EWG which sells electricity at
market-based rates which have been approved by the Federal
Energy Regulatory Commission ('FERC') or the appropriate state
public utility commission, provided that the purchaser of such
electricity is not an associate company within the American
Electric Power System;
(3) Such entity is a QF that sells electricity
exclusively (i) at rates negotiated at arms'-length to one or
more industrial or commercial customers purchasing such
electricity for their own use, and/or (ii) to an electric
utility company not an associate company within the American
Electric Power System at the purchaser's 'avoided cost' as
determined in accordance with the regulations under the Public
Utility Regulatory Policies Act of 1978; or
(4) Such entity is an EWG or QF that sells electricity
at rates based upon its cost of service, as approved by FERC
or any state public utility commission having jurisdiction,
provided that the purchaser of such electricity is not an
associate company within the American Electric Power System.
The Commission previously authorized such fair market
value pricing for AEP Energy Services, Inc., a wholly-owned
subsidiary of American, in American Electric Power Company, Inc.,
et al., HCAR No. 26267 (April 5, 1995).
Resources will contribute equity capital to Management
Company for the purpose of providing working capital for Management
Company. Management Company may also obtain debt financing from
American, Resources or unaffiliated third parties such as
commercial banks. Loans from American or Resources to Management
Company will be made at the cost of funds incurred by American or
Resources in accordance with Rule 52.
Management Company will be staffed primarily by current
employees at the facilities managed. It is expected that initially
not more than 25 employees of AEPSC and the Utility Subsidiaries
will be transferred to Management Company. In addition, AEPSC, the
Utility Subsidiaries, RESCo, AEPES and other subsidiaries of
Resources may provide services or sell goods to Management
Company.FN3
FN3 In accordance with Rules 87(a) and 90, services and goods
provided by AEPSC or the Utility Subsidiaries to Management
and Capital Company and their subsidiaries will be at cost.
Exception is requested from Section 13(b) of the 1935 Act for
services and goods to be provided by RESCo, AEPES and other
subsidiaries of Resources at other than cost to Management
Company and Capital Company and their subsidiaries.
It is anticipated that AEPSC will provide services, such
as development, engineering, procurement, human resources, and
energy services, to Management and Capital Company.
Initially, it is not anticipated that the Utility
Subsidiaries, RESCo or AEPES will provide services to
Management and Capital Company. RESCo, AEPES and their
subsidiaries will only provide to Management or Capital
Company services in which RESCo, AEPES and their subsidiaries
themselves provide substance.
If Management or Capital Company sells or licenses any
intellectual property developed by AEPSC or the Utility
Subsidiaries for their own use, Management or Capital Company
will pay the following amounts to such company: (1) 70% of the
revenues from the intellectual property until the developing
company recovers its programming and development costs; and
(2) 20% of the revenues thereafter. Intellectual property
developed by Management or Capital Company will be made
available to AEPSC and the Utility Subsidiaries without
charge, except for actual expenses incurred in connection with
making such intellectual property available.
In no event will more than 2% of the total employees of AEPSC and
the Utility Subsidiaries render services to Management Company at
any one time."
4. By amending and restating the first paragraph of Item
1.B.4:
"(4) Capital Company
Capital Company will offer financing for existing Energy
Facilities and improvements and provide new capital for Energy
Facilities for customers of Management Company through sale and
leaseback, project financing or other creative financing
facilities. Assets financed by Capital Company generally will be
managed by Management Company. In addition, Capital Company will
make its financing services available to customers of Management
Company to assist Management Company in connection with its program
to provide energy management and related services to its
customers."
5. By amending and restating Item 1.B.(5):
"(5) Guarantees
American may guarantee to a third party the obligations
of Resources to invest up to $250 million in the Capital Company
and up to $50 million in the Management Company through December
31, 2002.
American or Resources may also guarantee the debt and
other obligations of Capital and Management Company. Debt
financing of Capital and Management Company which is guaranteed by
American will not (i) exceed a term of 15 years or (ii) (a) bear a
floating interest rate in excess of 2% over the prime rate, London
Interbank Offered Rate or other appropriate index in effect from
time to time or (b) bear a fixed interest rate in excess of 2.5%
above the yield at the time of issuance of United States Treasury
obligations of a comparable maturity. Nondebt obligations of
Capital and Management Company which may be guaranteed by American
may take the form of bid bonds or performance or other direct or
indirect guarantees of contractual or other obligations.
American and Resources request authority to have through
December 31, 2002, up to $250 million of these guaranties
outstanding, provided that any guaranty outstanding on December 31,
2002 would expire or terminate in accordance with its terms.FN4
FN4 Authorization is not requested in this Section and the next
Section to the extent that guaranties of securities by
Resources, Capital Company or Management Company are permitted
under Rules 45(b)(7) and 52, as amended in HCAR No. 26826.
These guarantees are in addition to those authorized in the Orders
dated November 30, 1998 (HCAR No. 26947), April 27, 1998 (HCAR No.
26864 and November 2, 1998 (HCAR No. 26933)."
6. By amending and restating Item 1.B.(6):
"(6) Additional Subsidiaries
Resources may form special purpose subsidiaries to hold
its interests in Management Company and Capital Company. American
and Resources may guarantee the obligationsFN5
FN5 These obligations may include financing, debt and non-debt
performance obligations.
of these subsidiaries and American is authorized to guarantee the
obligations of Resources.
From time to time it may be advantageous for Capital
Company or Management Company to form subsidiaries to undertake one
or more of the activities described herein. These subsidiaries may
be organized (i) in order to facilitate the making of proposals to
a prospective customer; or (ii) after the award of a bid proposal,
in order to facilitate closing on the purchase or financing of the
underlying assets; or (iii) at any time after the consummation of
a transaction in order, among other things, to comply with
applicable federal or state laws; or (iv) as part of tax planning,
to limit exposure to U.S. and state taxes; or (v) for other lawful
business purposes. American, Resources, Capital Company and
Management Company may guarantee the debt and other obligations of
these subsidiaries. In addition, Management Company, Capital
Company, AEPSC, the Utility Subsidiaries, RESCo, AEPES and other
subsidiaries of Resources may provide services to Management and
Capital Company's special purpose subsidiaries upon the same terms
and conditions that they could provide services to Management
Company and Capital Company. No special purpose subsidy or
subsidiary of Management Company or Capital Company will be a
public utility company as defined in the 1935 Act, and, without
further Commission approval, no such subsidiary will undertake any
activity if, as a result, it would become a public utility company
as defined in the 1935 Act."
7. By amending and restating Item 1C:
C. Compliance with Rule 54.
"Rule 54 provides that in determining whether to approve
certain transactions other than those involving an exempt wholesale
generator ('EWG') or a foreign utility company ('FUCO'), as defined
in the 1935 Act, the Commission will not consider the effect of the
capitalization or earnings of any subsidiary which is an EWG or
FUCO if Rule 53(a), (b) and (c) are satisfied. As set forth below,
all applicable conditions of Rule 53(a) are currently satisfied and
none of the conditions set forth in Rule 53(b) exist or will exist
as a result of the transactions proposed herein, thereby satisfying
such provision and making Rule 53(c) inapplicable.
Rule 53(a)(1). As of September 30, 1998, American, through
its subsidiary, AEP Resources, Inc., had aggregate investment in
FUCOs of $463,536,000. This investment represents approximately
28.0% of $1,654,505,000, the average of the consolidated retained
earnings of American reported on Forms 10-Q and 10-K for the four
consecutive quarters ended September 30, 1998.
Rule 53(a)(2). Each FUCO in which American invests will
maintain books and records and make available the books and records
required by Rule 53(a)(2).
Rule 53(a)(3). No more than 2% of the employees of the
Utility Subsidiaries of American will, at any one time, directly or
indirectly, render services to any FUCO.
Rule 53(a)(4). American has submitted and will submit a copy
of Item 9 and Exhibits G and H of American's Form U5S to each of
the public service commissions having jurisdiction over the retail
rates of American's Utility Subsidiaries.
Rule 53(b). (i) Neither American nor any subsidiary of
American is the subject of any pending bankruptcy or similar
proceeding; (ii) American's average consolidated retained earnings
for the four most recent quarterly periods ($1,654,585,000)
represented an increase of approximately $63,768,000 (or 4%) in the
average consolidated retained earnings from the previous four
quarterly periods ($1,590,817,000); and (iii) for the fiscal year
ended December 31, 1997, American did not report operating losses
attributable to American's direct or indirect investments in EWGs
and FUCOs.
American was authorized to invest up to 100% of its
consolidated retained earnings in EWGs and FUCOs (HCAR No. 26864,
April 27, 1998) (the '100% Order') in File No. 70-9021. In
connection with its consideration of American's application for the
100% Order, the Commission reviewed American's procedures for
evaluating EWG or FUCO investments. Based on projected financial
ratios and on procedures and conditions established to limit the
risks to American involved with investments in EWGs and FUCOs, the
Commission determined that permitting American to invest up to 100%
of its consolidated retained earnings in EWGs and FUCOs would not
have a substantial adverse impact upon the financial integrity of
the AEP System, nor would it have an adverse impact on any of the
Utility Subsidiaries or their customers, or on the ability of state
commissions to protect the Utility Subsidiaries or their customers.
Since similar considerations are involved hereunder with respect to
Rule 54, Applicants should not be required to make subsequent Rule
54 filings once American's aggregate investment in EWGs and FUCOs
exceeds 50% of its consolidated retained earnings."
8. By amending and restating the first sentence of Item
3(d):
"(d) Sections 6(a) and 7 and Rule 45(a) may apply to the sale
of securities by Resources, Capital Company, Management Company and
their subsidiaries."
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.
AMERICAN ELECTRIC POWER COMPANY, INC.
AEP RESOURCES, INC.
AEP RESOURCES SERVICE COMPANY
AEP ENERGY SERVICES, INC.
By_/s/ A. A. Pena_____________________
Treasurer
Dated: March 12, 1999
