File No. 70-8509
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
AMENDMENT NO. 1
to
APPLICATION - DECLARATION
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Entergy Corporation Entergy Enterprises, Inc.
639 Loyola Avenue Three Financial Centre
New Orleans, Louisiana 70113 900 S. Shackleford Rd., Suite. 210
Little Rock, Arkansas 72211
Entergy Systems and Service, Inc.
4740 Shelby Drive, Suite 105
Memphis, Tennessee 38118
(Names of companies filing this statement and addresses
of principal executive offices)
Entergy Corporation
(Name of top registered holding company
parent of each applicant or declarant)
Michael G. Thompson
Senior Vice President, Chief Legal Officer and Secretary
Entergy Corporation
639 Loyola Avenue
New Orleans, Louisiana 70113
(Name and address of agent for service)
The Commission is also requested to send copies of any
communications in connection with this matter to:
Laurence Mason Hamric, Esq. John L. Bosch
General Attorney Vice President
Entergy Services, Inc. Entergy Systems and Service, Inc.
639 Loyola Avenue 4740 Shelby Drive, Suite 105
New Orleans, Louisiana 70113 Memphis, Tennessee 38118
Mark W. Hoffman, Esq.
Senior Attorney
Entergy Services, Inc.
639 Loyola Avenue
New Orleans, Louisiana 70113
<PAGE>
Item 1. Description of Proposed Transactions.
Item 1 is hereby amended and restated to read in its entirety as
follows:
"Entergy Corporation ("Entergy"), a registered holding
company under the Public Utility Holding Company Act of 1935 (the
"Act"), Entergy Enterprises, Inc. ("Enterprises"), its wholly
owned non-utility subsidiary, and Entergy Systems and Service,
Inc. ("Entergy SASI"), a wholly owned subsidiary of Enterprises
formed in 1992 to provide energy management services, file this
Application-Declaration on Form U-1 (the "Application") to obtain
authorization of the Securities and Exchange Commission (the
"Commission") for (i) Entergy SASI to provide consulting
services relating to energy management and demand side management
("DSM") activities; (ii) Entergy SASI to provide funding for the
implementation of energy conservation measures by other energy
management and DSM contractors; (iii) Entergy to make additional
investments in Entergy SASI, through Enterprises, in the form of
equity investments and/or loans to Entergy SASI of up to an
aggregate amount of $150 million from time to time during the
period through December 31, 1997, which will be used to repay
Entergy SASI's existing indebtedness to Entergy and to provide
for Entergy SASI's working capital and other capital needs; and
(iv) Entergy SASI to issue and sell to non-affiliated third
parties through December 31, 1997 up to $150 million of
commercial paper, promissory notes or other debt securities for
the purpose of providing further funding for its energy
management/consulting services business.
Applicants further request that the Commission remove the
limitation incorporated in its Order dated December 28, 1992
(HCAR No. 25718) in File No. 70-7947 (the "1992 Order"),
requiring that at least 50% of Entergy SASI's annual revenues be
derived from its business activities within the Base Region, as
hereinafter defined (the "50% Revenue Restriction").
A. Introduction.
Pursuant to the 1992 Order, Entergy SASI was organized as a
wholly owned subsidiary of Enterprises that would provide energy
management services to commercial, industrial and institutional
customers, with an initial focus on lighting efficiency.
Specifically, it was expected that, in the conduct of its energy
management services business, Entergy SASI would perform detailed
analyses and audits of customers' energy systems and facilities
to determine potential energy savings and, to assist the customer
in achieving these savings, it would provide the following energy
management services:
(1) design and installation of energy management
technologies and implementation of conservation and
energy management programs (including installation of
controls on lighting, space and water heating, air
conditioning, refrigeration and ventilation equipment
and modification of inefficient equipment);
2) performance of maintenance of such systems;
3) monitoring and reporting on the performance of the
technology and systems; and
4) training of customer personnel in the operation and
maintenance of the systems.
Pursuant to the 1992 Order, Entergy SASI is authorized to
provide energy management services, without limitation, to
customers within (a) the service territories of the Entergy
operating companies: Arkansas Power & Light Company, Gulf States
Utilities Company, Louisiana Power & Light Company, Mississippi
Power & Light Company and New Orleans Public Service Inc.
(collectively, the "Entergy System"), (b) Arkansas, Louisiana and
Mississippi (i.e., states in which the Entergy System sells
electricity at retail), and (c) certain areas outside those
states (the area described in (a) through (c) above being
referred to collectively as the "Base Region").<FN1> The 1992 Order
also permits Entergy SASI to solicit and serve customers outside
the Base Region , subject to the 50% Revenue Restriction.
As part of its initial energy management service activities,
Entergy SASI acquired (subject to an obligation to divest at a
future date pursuant to the 1992 Order, which has since occurred)
approximately 9.95% of the outstanding common stock of Systems
and Service International, Inc. ("SASI"), a closely held company,
engaged through subsidiaries in the development, manufacture and
marketing of energy efficient lighting technologies for
commercial and industrial applications. Entergy SASI also
acquired substantially all of the assets and business of SASI's
wholly owned subsidiary, American Systems & Service, Inc.
("American SASI") which had previously marketed SASI's
technologies and products in the United States. Additionally,
Entergy SASI entered into an Exclusive Distribution Agreement
with SASI (since assigned by SASI to a limited partnership in
which it directly and indirectly owns a 100% interest) under
which Entergy SASI obtained exclusive rights to distribute SASI's
principal proprietary product, the Edison 21 Monitor, within the
Base Region and non-exclusive rights to distribute the Monitor
elsewhere in the United States.<FN2>
_____________________________
<FN1> These areas consist of the service territories of utilities
from which the Entergy System expects to purchase large amounts
of economy and replacement energy, such as the Tennessee Valley
Authority, Union Electric Company and Associate Electric
Cooperative, Inc. In addition, these areas include the service
territories of utilities that would meet the Entergy System's
emergency needs, pursuant to Southwest Power Pool commitments or
otherwise. These utilities include Cajun Electric Power
Cooperative, Central Louisiana Electric Company, Louisiana Energy
and Power Authority, Empire District Electric Company, Oklahoma
Gas and Electric Company, Southwestern Electric Power Company and
Southwestern Power Administration.
<FN2> The Exclusive Distribution Agreement also provides to Entergy
SASI, as distributor, a right of first refusal with respect to
additional proprietary products developed by SASI.
<PAGE>
To finance the acquisition by Entergy SASI of the SASI
common stock and the assets and business of American SASI, and
certain related transactions with SASI, and to provide working
capital for Entergy SASI's ongoing business activities,
Enterprises was authorized under the 1992 Order to issue and sell
to Entergy from time to time through December 31, 1994 up to
17,000 shares of its common stock, at a purchase price of $1,000
per share, for an aggregate consideration not to exceed $17
million. Enterprises, in turn, was authorized to use the
proceeds to purchase from time to time through December 31, 1994
up to 17,000 shares of the common stock of Entergy SASI, at a
purchase price of $1,000 per share, for an aggregate
consideration not to exceed $17 million.<FN3>
To allow Entergy SASI to provide financing for customer
contracts in conjunction with its energy management service
business, the 1992 Order also authorized Entergy SASI, from time
to time through December 31, 1994, to issue and sell promissory
notes to Entergy in an aggregate principal amount not exceeding
$100 million at any one time outstanding.<FN4>
____________________________
<FN3> As of December 31, 1994, pursuant to the Commission's
authorization under the 1992 Order, Entergy has purchased 13,500
shares of Enterprises' common stock for an aggregate cash
consideration of $13.5 million and Enterprises has used the
proceeds of such transactions to purchase 13,500 shares of
Entergy SASI's common stock for an aggregate cash consideration
of $13.5 million.
<FN4> As of December 31, 1994, notes issued by Entergy SASI to Entergy
pursuant to such authorization represent an aggregate principal
indebtedness of $72.3 million.
<PAGE>
B. Entergy SASI's Current and Proposed Energy Management
Services Business.
Entergy SASI has been highly successful in providing energy
management services having entered into customer contracts with a
total of over 4000 commercial, industrial and institutional
customers from its inception in January, 1993 through December
31, 1994. Entergy SASI's current and proposed business
activities include design, development, acquisition and
installation of energy management products and technologies;
design, development and implementation of conservation and energy
management programs; design, development, acquisition,
installation, maintenance and operation of energy efficient
equipment, systems and controls; modification and/or replacement
of inefficient equipment; monitoring and reporting on the
performance of such technologies, equipment and systems; and
training of customers in the operation and maintenance of same.
Although Entergy SASI's business activities have been
principally focused on the design, installation and maintenance
of energy efficient lighting systems for small to medium size
commercial customers, the scope of the business currently is
being expanded to encompass the delivery of similar services,
primarily the design, installation, operation and maintenance of
high efficiency air conditioning, refrigeration and energy
management systems, for large commercial, institutional and
governmental customers. Entergy SASI's services have been
provided, in most instances, under fixed-term, "maintenance free"
contracts under which Entergy SASI receives a monthly fee for its
services and guarantees that such services will result in a
minimum level of energy savings to its customers. Entergy SASI
typically solicits business from commercial and industrial
facilities, undertakes an energy audit of the facilities, and
develops a projection of reduced energy costs that should result
from its services. Entergy SASI then enters into a service
contract with the customer under which Entergy SASI agrees to
install new equipment and/or modify existing equipment and to
maintain the new system. Entergy SASI usually funds the initial
cost of developing, acquiring and installing the systems,
equipment and other energy efficiency applications that are
recommended as a result of the energy audit, and is repaid
through the monthly fees paid by its customer under the service
contract. Although the contracts are for a fixed term, they may
contain an option for prepayment.
Entergy SASI's energy management activities include acting
as an energy services contractor for non-affiliated electric
utilities to assist them in meeting DSM program goals ("DSM
Services"). By entering into "maintenance free" contracts of the
type described above with the utility's commercial and industrial
customers, Entergy SASI works with the utility to achieve its
proposed demand reduction targets.
Additionally, Entergy SASI from time to time acquires
existing energy management contracts from other energy
management and DSM contractors. Entergy SASI hereby requests
authority to provide funding for the implementation of energy
conservation measures by other energy management and DSM
contractors and, in consideration thereof, to acquire by
assignment the benefits under such contracts (in the event that
such activity is determined by the Commission to be subject to
Sections 9(a) and 10 of the Act). Following receipt of the
Commission's authorization, Entergy SASI proposes to acquire such
contract rights or benefits in connection with DSM programs that
may be implemented by one or more of the Entergy System operating
companies. For example, the approved Least Cost Integrated
Resource Plans for the City of New Orleans provides for the
implementation of approved DSM measures by independent local
contractors ("DSM Providers") for the express purpose of reducing
electric demand and/or usage. Entergy SASI intends to offer
funding to such DSM Providers to enable them to carry out (and
provide customer financing for) the approved DSM measures.
Pursuant to the terms of an April 6, 1994 Settlement Agreement
between Louisiana Power & Light Company, New Orleans Public
Service Inc., Enterprises and Entergy SASI, and the Alliance
Against Utility Competition, New Orleans Chapter, such funding is
to be provided (subject to receipt of requisite authorizations)
in the aggregate amount of up to $1 million per month for the
twelve-month period following the adoption of the DSM programs.
Thereafter, the aggregate amount of any additional funding will
be established by mutual agreement of the parties. Although the
precise terms of such arrangements will not be determined until
the time of the applicable transactions, it is anticipated that
Entergy SASI will be repaid through assignments of a portion of
the monthly fees to be paid by customers under contracts relating
to the installation of the DSM measures.<FN5>
____________________
<FN5> The proposed funding arrangements will not involve the
acquisition by Entergy SASI of any promissory notes.
<PAGE>
C. Energy Management and Demand Side Management Consulting
Services.
In the course of performing the energy management services
authorized pursuant to the 1992 Order, Entergy SASI has acquired
considerable expertise relating to a wide variety of energy
conservation technologies and products (and related services ),
including but not limited to (i) lighting efficiency
technologies, (ii) air conditioning and refrigeration/chiller
systems, (iii) boilers, (iv) air handling systems, (v) motor
drives, (vi) internal environmental controls, (vii) electrical,
steam and water systems, (viii) controls, and (ix) energy
management systems in general.
As previously indicated, Entergy SASI provides energy
management services to energy end-users and, in some cases, in
connection with the DSM programs of other utility systems. In
light of the current emphasis on the adoption of measures
designed to reduce electricity demand and conserve energy
resources (in addition to more traditional supply side options),
utility companies comprise a significant segment of the market
for energy management services. In response to the demands of
their regulators, or on their own initiative, utilities
throughout the United States have adopted a wide range of DSM
programs, including energy audits of customer facilities, design
review of new construction and major renovations, direct
installation of energy conservation equipment at customer sites,
subsidies for the installation of such equipment, and monitoring
and reporting on the effectiveness of installed energy management
systems. Entergy SASI's substantial technical and management
expertise in these areas can prove an invaluable asset to other
utilities in developing their own DSM programs, as well as to
other potential providers of energy management services and
energy end-users.<FN6>
_____________________
<FN6> Notwithstanding concerns currently being expressed regarding the
future of utility sponsored DSM programs in the advent of
increased electric utility competition, utilities appear
interested in Entergy SASI's service approach which allows energy
conservation measures to be successfully implemented without
requiring substantial customer subsidies or rebates to be
provided by the utility.
<PAGE>
Utilities and other firms providing energy management
services also need to evaluate the potential impact of their
measures on the use of other resources in a customer's facility
(such as water, sewer services, labor, maintenance and
materials). For example, in providing such services there is
often a trade-off between maximum energy conservation and
conservation of water and other resources that are utilized in a
customer's resource or facility. Because the costs of such
resources (particularly water and sewer services) are
dramatically rising in some areas, energy management service
firms must also take these costs into consideration. In the
process of conducting an audit of a facility, the energy
management firm acquires a detailed knowledge of the facility's
operations. This knowledge (and related expertise in energy
management technologies) enables the energy management service
provider to resolve system design problems and to implement cost
effective conservation measures in a creative and efficient
manner. Entergy SASI has acquired the necessary experience and
skills to provide substantial assistance to utilities and other
customers in developing the desired "all resources" integrated
approach to providing energy management services (or developing
the ability to perform such services with respect to their own
internal facilities and operations).
Based on the substantial and growing emphasis that utilities
are placing on DSM programs, and the national and global interest
in promoting energy and resource conservation, it is proposed
that Entergy SASI be authorized to provide consulting services
relating to energy management and DSM activities on a worldwide
basis. Consulting services would generally involve the
rendering of advice, know-how and management/technical services
for a consulting fee in order to assist energy consumers,
utilities, federal, state and foreign government entities and
others with energy management and/or DSM activities. It is
anticipated that the scope of such services would include, but
not necessarily be limited to, the following: (1) development
and review of architectural, structural and engineering drawings
for energy and other resource efficiency, (2) design, development
and specification of energy consuming or conservation equipment,
controls, systems and technologies, (3) design, development and
marketing of intellectual property relating to the energy
management services business, (4) research and development,
evaluation and testing of energy management technologies, (5)
general technical advice concerning the use, benefits, planning
and/or administration of energy management and/or DSM programs,
and ( 6) general management advice and services relating to the
implementation of functions, practices and procedures incidental
to the conduct of the energy management services business and/or
DSM programs.
Such consulting services would constitute an important
segment of Entergy SASI's overall energy management services
business. Further, the performance of such consulting services
would enable Entergy SASI to utilize and further develop its
expertise in the energy management field and allow such expertise
to be shared with customers needing assistance on these matters.
D. Removal of 50% Revenue Restriction.
The Applicants hereby further request that the Commission
amend the 1992 Order to authorize Entergy SASI to conduct its
business activities outside the Base Region without regard to the
50% Revenue Restriction. Entergy believes that maximum
flexibility to expand its energy management and consulting
businesses will improve its profitability and, indirectly,
benefit the Entergy System , as well as further national energy
policy objectives. Continued subjection of Entergy SASI to the
50% Revenue Restriction serves no consumer or investor interest,
and merely restrains Entergy SASI from fully developing and
realizing the maximum potential energy efficiencies from its
business activities.
The ability to expand its business into other geographic
areas will enable Entergy SASI to make more efficient use of its
existing resources and thereby increase the Company's
profitability with relatively little additional investment. None
of the Entergy operating companies invest in or loan any funds
to Entergy SASI, nor do the operating companies or Entergy
guarantee any of Entergy SASI's obligations. Accordingly,
System ratepayers have not and will not bear any risks
associated with Entergy SASI's business activities, or the
proposed expansion of such business activities outside the Base
Region. In any event, Applicants hereby represent that the
Entergy operating companies will not seek recovery through
higher rates from System utility customers to compensate Entergy
or Entergy SASI for possible future losses at Entergy SASI or
possible inadequate returns on capital invested through Entergy
SASI. Also, because the management of Entergy SASI is separate
and independent from that of the Entergy operating companies,
the proposed business expansion will not cause management time
and attention to be diverted from the System's core utility
operations. Applicants, therefore, submit that the proposed
business expansion should provide an excellent opportunity for
Entergy SASI to increase its profitability by permitting use of
existing resources and expertise to expand revenues with minimal
incremental investment and without any financial support from or
risk to System ratepayers. An economically strong Entergy SASI,
in turn, will be better positioned to broaden the implementation
of energy efficiency technologies that are economic alternatives
to traditional supply side energy production within the Base
Region. This should allow additional reductions in peak load
energy requirements, and avoid the need to construct expensive
new generating capacity, thereby improving the competitiveness
of System operating companies, and increasing the overall
financial strength of the System.
In addition to the anticipated System benefits discussed
above, Applicants believe that elimination of the 50% Revenue
Restriction, as it applies to Entergy SASI's business, is
necessary and appropriate in the public interest, given the
strong national interest in promoting energy conservation and
efficiency evidenced by the adoption of the Energy Policy Act of
1992.
This policy is clearly furthered by permitting expansion of
Entergy SASI's energy management services which have generated
substantial savings in peak energy usage, both within and outside
of the Base Region, thereby increasing the efficiency and
competitiveness of U.S. business by reducing the need for costly
new generating capacity, as well as reducing related negative
environmental effects and dependency on foreign energy resources.
Finally, Applicants submit that the Act does not, and the
Commission should not, impose the 50% Revenue Restriction on the
conduct of energy management and DSM services, or related
consulting activities, which are so clearly and closely related
to the core business of a utility, regardless whether such a
business is carried out directly by utilities or through separate
affiliates. Whether or not a 50% of revenues test may be
appropriate to other businesses, consistent with the Commission's
recent order in Eastern Utilities Associates, et al., HCAR No.
26232 (February 15, 1995), the provision of energy management
services should be deemed permissible without any such
limitations, on the basis that such a business is "necessary or
appropriate in the public interest or for the protection of
investors or consumers and not detrimental to the proper
functioning" of registered holding company systems, and therefore
in accordance with the language and intent of the Act.
The electric utility business today encompasses far more
than merely the "generation, transmission, or distribution of
electric energy for sale." In response to rapidly changing
regulatory policies and market forces, electric utility customers
are increasingly demanding a broader array of energy-related
services and products, especially in the areas of energy
efficiency and conservation. With competition mandated by
regulators (witness PURPA, prospects for retail wheeling ,
transmission access), the provision of services which cost-
effectively avoid the need for additional generating capacity is
a business that has become an intrinsic part of the traditional
utility business of providing kilowatts. These energy-related
services, such as energy management services, DSM services, power
marketing and other derivatives overlap and complement
traditional utility activities. In fact, many state commissions
have adopted regulations to foster DSM services via utility
programs. Although utilities often provide these services
directly to their customers, they may also choose to contract
with non-affiliated "energy service companies" with specialized
and proven expertise and capabilities to provide such services.
As indicated above, the growing importance of such services is
further evidenced by prevailing federal and state policies,
including initiatives in the Energy Policy Act of 1992, which are
directed at promoting utility sponsorship of energy efficiency
and conservation services and products. Therefore, Applicants
believe Entergy SASI's energy management and consulting services
business should be viewed as an extension of Entergy's core
utility business, which is very much consistent with the "public
interest" standards of the Act, and not subject to the
limitations of the 50% Revenue Restriction. Moreover, it has
the advantage of operating independently of any financial support
from or business risk to Entergy's regulated utility
subsidiaries.
E. Entergy and Enterprises Funding of Entergy SASI Activities.
As described above, the 1992 Order authorized Enterprises
to issue and sell to Entergy, from time-to-time through December
31, 1994, up to 17,000 shares of its common stock at a purchase
price of $1,000 per share, for an aggregate cash consideration
not to exceed $17 million. Enterprises, in turn, was authorized
to use the proceeds to purchase from time to time through
December 31, 1994, up to 17,000 shares of the common stock of
Entergy SASI, at a purchase price of $1000 per share, for an
aggregate consideration not in excess of $17 million. In
addition, in order to allow Entergy SASI to provide customer
financing in conjunction with its energy management business,
Entergy SASI was authorized to issue and sell notes to Entergy in
an aggregate principal amount not exceeding $100 million at any
one time outstanding from time-to- time through December 31,
1994.
Entergy believes that the $100 million revolving line of
credit that has provided the funding for Entergy SASI's customer
financing program has negatively affected Entergy SASI's balance
sheet and resulted in unnecessary loss of business opportunities.<FN7>
In order to provide management with the flexibility to establish
a more appropriate capital structure for Entergy SASI, and to
provide for Entergy SASI's working capital and other capital
needs, as described herein, the Applicants hereby request
authorization (a) for Entergy to make additional investments in
Enterprises of up to an aggregate amount of $150 million from
time-to-time through December 31, 1997, with such investments to
be made through any combination of purchases of Enterprises'
common stock and/or capital contributions to Enterprises<FN8>, and
(b) for Enterprises to use the proceeds of such transactions to
make additional equity investments in Entergy SASI and/or loans
to Entergy SASI (including the conversion of any such loans to
equity investments<FN9>), of up to an aggregate amount of $150
million from time to time, during the period through December 31,
1997. Equity investments by Enterprises in Entergy SASI would be
made through any combination of purchases of common stock and/or
capital contributions to Entergy SASI. Any loans made by
Enterprises to Entergy SASI would be evidenced by promissory
notes bearing an interest rate to be determined at the time of
borrowing (but in no event greater than the then prevailing prime
rate, as reported by The Wall Street Journal) and maturing no
later than ten years from the date of borrowing. Upon receipt of
the Commission's authorization, Enterprises proposes to make an
initial equity investment that would be used, at least in part,
to prepay and cancel the outstanding notes previously issued by
Entergy SASI to Entergy (including accrued interest). Such
outstanding notes represent an aggregate principal indebtedness
of $72.3 million. The existing Loan Agreement between Entergy
SASI and Entergy Corporation would be terminated at that time.
___________________
<FN7> Entergy SASI's balance sheet reflects an unacceptably high debt
to equity ratio as a result of the $72.3 million of aggregate
principal indebtedness outstanding under the Entergy credit line.
<FN8> The necessary funding for such investments will be internally
generated by Entergy and will not be derived from external
financing.
<FN9> The conversion of such loans to equity investments would occur,
at the option of Enterprises, through Enterprises' forgiveness of
the debt represented thereby.
<PAGE>
The proposed recapitalization is expected to facilitate
Entergy SASI's access to additional financing from external
sources which is essential to the continued growth of Entergy
SASI's business, particularly in light of the recent expansion of
customer markets and products/services marketed by Entergy SASI.
To provide for such financing, Entergy SASI requests
authorization to issue and sell to non-affiliated third parties
during the period through December 31, 1997, up to $150 million
of commercial paper, promissory notes and/or other debt
securities, secured or unsecured (collectively, the "Debt
Securities"). Each of these Debt Securities will bear interest
at such rate, and will be due and payable on such date, as will
be determined at the time of the applicable transaction;
provided, however, that no Debt Securities will be issued and
sold if the yield to maturity of the Debt Securities would exceed
the then current yield to maturity on U.S. Treasury securities of
comparable maturities (subject to straight-line interpolation
when there is no comparable U.S. Treasury security), plus 400
basis points, and no Debt Securities will be issued for a term of
greater than thirty years.
The investments by Enterprises in Entergy SASI (including
loans), as well as any proceeds derived from the proposed third
party financing, would be used by Entergy SASI from time to time
for the following purposes: (1) to repay its existing
indebtedness under notes issued to Entergy; (2) to provide
financing for customer contracts and funding for the
implementation of energy conservation measures by other energy
management and DSM contractors; and (3) to provide Entergy SASI
with necessary working capital in connection with its ongoing
energy management, consulting and other authorized businesses, as
well as to pay for general and administrative expenses and to
provide for Entergy SASI's other capital needs. The Applicants
currently estimate that up to $12 million of the proceeds of such
investments and financings would be used for the financing of
other energy management service providers, and up to $5 million
would be used to provide working capital for Entergy SASI's
proposed consulting services business. After repayment of
Entergy SASI's existing indebtedness to Entergy, the balance of
the funding would be utilized to provide additional funding for
customer contracts and to satisfy the working capital
requirements of Entergy SASI's energy services business and to
satisfy other capital needs.
F. Reporting Obligations.
Entergy SASI will continue to file quarterly reports with
the Commission on the following revised schedule: The quarterly
report for the first calendar quarter of each year will be filed
on or before August 15 of such year; the quarterly report for the
second calendar quarter of each year will be filed on or before
December 15 of such year; the quarterly report for the third
calendar quarter of each year will be filed on or before February
15 of the immediately succeeding calendar year; and the quarterly
report for the final calendar quarter of each year will be
incorporated into Entergy SASI's annual report for such year,
which annual report shall be filed on or before May 1 of the
immediately succeeding calendar year. Each such quarterly
report will include the financial statements of Entergy SASI as
at the reporting date and for such quarter and such other
information as is required to satisfy the terms and conditions of
Rule 24 promulgated under the Act, in accordance with the
provisions of the 1992 Order. In addition, each quarterly report
will include:
(1) A summary of the total assets and revenues of Entergy
SASI shown separately by type of activity including (i) energy
management services and DSM Services, (ii) consulting services;
and (iii) funding of implementation of energy conservation
measures by other energy management and DSM contractors;
(2) A summary of the total assets and revenues of Entergy
SASI, shown separately by geographic region for (i) the Base
Region, (ii) the United States excluding the Base Region, (iii)
all areas of the world excluding the United States.
Entergy SASI will provide a copy of each such quarterly
report to the Arkansas Public Service Commission, the Louisiana
Public Service Commission, the Mississippi Public Service
Commission, the City of New Orleans and the Public Utilities
Commission of Texas.
G. Annual Reports.
Entergy SASI will file annual reports with the Commission on
or before May 1 of each year for the preceding calendar year.
Such annual reports will include the following:
(1) A statement of estimated kilowatts saved during the
past year and cumulatively, both within and outside of the Base
Region through implementation of its energy management services
and through its DSM Services according to the utility sponsor
(utilities which sponsor programs on behalf of their customers).
(2) A schedule of terminated and/or canceled contracts,
their value, the amount of loss to Entergy SASI, and the reasons
for the termination.
(3) A schedule of actual accounts receivable written off
the books of Entergy SASI (i.e., bad debt expense).
(4) An aging of accounts receivable for account 143 -
Accounts Receivable and account 146 - Accounts Receivable from
Associate Companies.
(5) A schedule of any projects over $100,000 (determined by
contract gross revenues) broken down by DSM Services and energy
management services, including the investment and, based on the
contract, the estimated future total project value (net
realizable value).
Entergy SASI will provide a copy of each such annual report
to each of the local regulatory authorities identified above.
H. Background Information with Respect to Entergy SASI.
As of December 31, 1994, Entergy SASI had assets of $89
million, and for the year ended December 31, 1994, consummated
contracts with customers that will produce for Entergy SASI
approximately $31 million in revenue over the terms of the
respective contracts. For the year ended December 31, 1994,
Entergy SASI reported revenues of $4.3 million and a net loss
of $10.9 million. Entergy SASI estimates that approximately 45%
of its revenues were derived from sources outside the Base
Region."
Item 3. Applicable Statutory Provisions.
Item 3 is hereby amended and restated to read in its entirety as
follows:
"The sections of the Act, and rules thereunder, which
Entergy considers to be applicable to the transactions proposed
herein are set forth below:
(a) Entergy SASI's provision of Sections 9(a) and
consulting services 10
(b) Issuance of Enterprises' common Sections 6(a) and 7
stock to Entergy, Entergy SASI
common stock to Enterprises,
Entergy SASI promissory notes to
Enterprises, and Entergy SASI Debt
Securities to non-affiliated third
parties
(c) Capital contributions by Entergy to Section 12(b) and
Enterprises and by Enterprises to Rule 45
Entergy SASI, loans by Enterprises
to Entergy SASI, and conversions of
loans to equity investments
(d) Acquisition of Enterprises' common Sections 9(a) and
stock by Entergy and Entergy SASI 10
common stock and promissory notes by
Enterprises
(e) Request for authorization for Section 11(b)(1)
Entergy SASI to conduct its business
activities without regard to the 50%
Revenue Restriction
In addition, Entergy SASI's proposed arrangements for
providing funding to other energy management contractors, and/or
the acquisition by Entergy SASI of customer contract rights or
benefits in connection therewith, may be subject to Sections 9(a)
and 10 of the Act.
To the extent that the proposed transactions are considered
by the Commission to require authorization, approval or exemption
under any section of the Act or the rules thereunder, other than
those specifically referred to herein, the Applicants hereby
request such authorization, approval or exemption."
Item 5. Procedure.
The second paragraph of Item 5 is hereby amended and restated to
read in its entirety as follows:
"The Applicants respectfully request authority to file
quarterly and annual reports pursuant to Rule 24 with respect to
the transactions proposed herein, as more specifically set forth
in Paragraph F of Item 1 above."
Item 6. Exhibits and Financial Statements.
(a) Exhibits
H-1 Suggested Form of Revised Notice of Proposed
Transactions for Publication in Federal Register.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this amendment to be signed by the undersigned thereunto duly
authorized.
ENTERGY ENTERPRISES, INC.
ENTERGY CORPORATION
.
By: /s/ Michael G. Thompson
Michael G. Thompson
Senior Vice President,
Chief Legal Officer and Secretary
ENTERGY SYSTEMS AND SERVICE, INC.
By: /s/ Michael G. Thompson
Michael G. Thompson
Vice President and Secretary
Dated: April 25, 1995
Exhibit H-1
SUGGESTED FORM OF NOTICE
Entergy Corporation ("Entergy"), 639 Loyola Avenue, New
Orleans, Louisiana 70113, a registered holding company, and its
wholly owned non-utility subsidiary companies, Entergy
Enterprises, Inc., ("Enterprises"), Three Financial Centre, 900
South Shackleford Road, Suite 210, Little Rock, Arkansas 72211,
and Entergy Systems and Service, Inc. ("Entergy SASI"), 4740
Shelby Drive, Suite 105, Memphis, Tennessee 38118, have filed an
application-declaration under Sections 6(a), 7, 9(a), 10,
11(b)(1),12(b) and Rule 45 of the Public Utility Holding Company
Act of 1935 (the "Act").
Pursuant to order of the Commission dated December 28, 1992
(HCAR No. 25718) in File No. 70-7947 (the "1992 Order"), Entergy
SASI was organized as a wholly owned subsidiary of Enterprises
that would provide energy management services to commercial,
industrial and institutional customers, with an initial focus on
lighting efficiency. Specifically, it was expected that, in the
conduct of its energy management services business, Entergy SASI
would perform detailed analyses and audits of customers' energy
systems and facilities to determine potential energy savings and,
to assist the customer in achieving these savings, it would
provide the following energy management services:
(1) design and installation of energy management
technologies and implementation of conservation and energy
management programs (including installation of controls on
lighting, space and water heating, air conditioning,
refrigeration and ventilation equipment and modification of
inefficient equipment);
(2) performance of maintenance of such systems;
(3) monitoring and reporting on the performance of the
technology and systems; and
(4) training of customer personnel in the operation and
maintenance of the systems.
Pursuant to the 1992 Order, Entergy SASI is authorized to
provide energy management services, without limitation, to
customers within (a) the service territories of the Entergy
operating companies, Arkansas Power & Light Company, Gulf States
Utilities Company, Louisiana Power & Light Company, Mississippi
Power & Light Company and New Orleans Public Service Inc.
(collectively the "Entergy System"), (b) Arkansas, Louisiana and
Mississippi (i.e., states in which the Entergy System sells
electricity at retail), and (c) certain limited areas outside
those states (the area described in (a) through (c) above being
referred to collectively as the "Base Region"). The 1992 Order
also permits Entergy SASI to solicit and serve customers outside
the Base Region to a limited extent and subject to the condition
that at least 50% of the Entergy SASI's annual revenues be
derived from its business activities within the Base Region (the
"50% Revenue Restriction").
The Applicants now seek additional authorization for Entergy
SASI to provide consulting services related to energy management
and demand-side management ("DSM") activities on a world-wide
basis. Such consulting services would generally involve the
rendering of advice, know-how and management/technical services
for a consulting fee in order to assist energy customers,
utilities, federal, state and foreign government entities and
others with energy management and/or DSM activities.
It is anticipated that the scope of Entergy SASI's
consulting services would include, but not necessarily be limited
to, the following: (1) development and review of architectural,
structural and engineering drawings for energy and other resource
efficiency, (2), design, development and specification of energy
consuming or conservation equipment, controls, systems and
technologies, (3) design, development and marketing of
intellectual property relating to the energy management services
business, (4) research and development, evaluation and testing
of energy management technologies, (5) general technical advice
concerning the use, benefits, planning and/or administration of
energy management and/or DSM programs, and (6) general management
advice and services relating to the implementation of functions,
practices and procedures incidental to the conduct of the energy
management services business and/or DSM programs.
In addition, Entergy SASI proposes to provide funding to
other energy management and DSM contractors to enable them to
carry out energy conservation measures. Although the precise
terms of such funding arrangements will not be determined until
the time of the applicable transactions, it is anticipated that
Entergy SASI will be repaid through assignments of a portion of
the monthly fees paid by customers under contracts relating to
the installation of such energy conservation measures. The
Applicants state that the proposed funding arrangements will not
involve the acquisition by Entergy SASI of any promissory notes.
Entergy SASI further requests that the Commission authorize
Entergy SASI to engage in its energy management and proposed
consulting services business without regard to the 50% Revenue
Restriction. In support of this request, Entergy SASI states
that maximum flexibility to expand its authorized business
activities will improve Entergy SASI's profitability and benefit
the Entergy System, and is also necessary and appropriate in the
public interest, given the strong national interest in promoting
energy conservation and efficiency evidenced by adoption of the
Energy Policy Act of 1992. Applicants also maintain that the
Act does not require that the 50% Revenue Restriction be imposed
on the conduct of energy management and DSM services, or related
consulting services, which are so closely related to the core
business of a utility, if not intrinsically a part of the utility
business (regardless whether such a business is carried out
directly by utilities or through separate affiliates). The
Applicants place reliance on the Commission's recent order in
Eastern Utilities Associates, et al., HCAR No. 26232 (February
15, 1995), authorizing the removal of the 50% Limitation with
respect to the energy management services business of EUA Cogenex
Corporation.
Finally, the Applicants request authorization (a) for
Entergy to make additional investments in Enterprises of up to an
aggregate amount of $150 million from time to time through
December 31, 1997, with such investments to be made through any
combination of purchases of Enterprises' common stock and/or
capital contributions to Enterprises, (b) for Enterprises to use
the proceeds of such transactions to make additional investments
in Entergy SASI (in the form of equity investments and/or loans)
of up to $150 million from time to time through December 31,
1997, and (c) for Entergy SASI to issue and sell to non-
affiliated third parties during the same period up to $150
million of commercial paper, promissory notes and/or other debt
securities, secured or unsecured (collectively, the "Debt
Securities). It is proposed that the proceeds derived from
Enterprises' investments, as well as any third party financing,
be used by Entergy SASI for the following purposes: (1) to repay
its existing indebtedness under notes issued to Entergy; (2) to
provide financing for customer contracts and funding for the
implementation of energy conservation measures by other energy
management and DSM contractors; and (3) to provide Entergy SASI
with necessary working capital in connection with its ongoing
energy management, consulting and other authorized businesses, as
well as to pay for general and administrative expenses and to
provide for Entergy SASI's other capital needs.
Any loans made by Enterprises to Entergy SASI would be
evidenced by promissory notes bearing an interest rate to be
determined at time of borrowing (but in no event greater than the
then prevailing prime rate, as reported by The Wall Street
Journal) and maturing no later than ten years from the date of
borrowing. Where Debt Securities issued to non-affiliates are
involved, the yield to maturity of such Debt Securities would not
exceed the then current yield to maturity on U.S. Treasury
securities of comparable maturities (subject to straight line
interpolation when there is no comparable U.S. Treasury
security), plus 400 basis points, and no Debt Securities would be
issued for a term of greater than thirty years. It is further
proposed that any notes issued by Entergy SASI to Enterprises
may, at the option of Enterprises, be converted to capital
contributions to Entergy SASI by the forgiveness of the debt
represented thereby.
