As filed September 5, 2000
File No. 70-9723
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
Amendment No. 1
on
FORM U-1/A
APPLICATION/DECLARATION
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_________________________________________________________
Entergy Corporation
639 Loyola Avenue
New Orleans, LA 70113
(Name of company filing this statement and address of principal
executive office)
_____________________________________________________
Entergy Corporation
(Name of top registered holding company parent)
______________________________________________________
C. John Wilder
Executive Vice President and
Chief Financial Officer
Entergy Corporation
639 Loyola Avenue
New Orleans, LA 70113
(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:
Christopher J. Bernard William T. Baker, Jr.
Entergy Power Marketing Corp. Thelen Reid & Priest LLP
Parkwood 2 Building 40 West 57th Street, Suite 2500
10055 Grogans Mills Road New York, New York 10019
The Woodlands, Texas 77380
Elizabeth A. Martin, Senior Counsel
Entergy Services, Inc.
639 Loyola Avenue
New Orleans, LA 70113
<PAGE>
The Application-Declaration filed in this proceeding on July
25, 2000, is hereby amended and restated in its entirety as
follows:
Item 1. Description of Proposed Transaction.
1.1. Background. Entergy Corporation ("Entergy") is a
registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"). Its public utility
subsidiaries include Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., and
Entergy New Orleans, Inc. (collectively, the "Entergy Operating
Companies"). The Entergy Operating Companies provide public-
utility service to approximately 2.5 million electric customers
in portions of Arkansas, Louisiana, Mississippi, and Texas and
235,000 retail gas customers in portions of Louisiana.
Entergy also engages through subsidiaries in various other
energy-related and non-utility businesses. One such subsidiary,
Entergy Power Marketing Corp. ("EPMC"), was formed in 1995 as an
"exempt wholesale generator" ("EWG") in order to engage in the
marketing and brokering of electric power at wholesale.<FN1>
Pursuant to a Commission order dated January 6, 1998 (Holding Co.
Act Release No. 26812) ("January 1998 Order"), EPMC relinquished
its EWG status and claimed status as an "energy-related company"
under Rule 58. EPMC engages in marketing and trading of physical
and financial energy commodities in wholesale and retail markets
throughout the United States, subject to certain conditions.<FN2>
EPMC currently has physical sales of approximately 200 million
cubic feet of gas per day and, in 1999, sales of about 47.2
million MWh of electricity. Under the January 1998 Order,
Entergy is also authorized to finance the energy marketing
activities of EPMC and to provide guaranties to EPMC.
By further order of the Commission dated June 22, 1999
(Holding Co. Act Release No. 27039) (the "June 1999 Order"),
Entergy and certain of its non-utility subsidiaries (including
EPMC) were authorized, among other things, to acquire, directly
or indirectly, the securities of one or more non-utility
companies (called "New Subsidiaries") organized to engage in the
previously-authorized service and development activities of other
Entergy non-utility subsidiaries and/or to acquire and/or finance
the acquisition of the securities of one or more EWGs, "foreign
utility companies" ("FUCOs"), "exempt telecommunications
companies" ("ETCs"), "energy-related companies" within the
meaning of Rule 58 ("Rule 58 Companies"), and companies formed to
provide operations and maintenance services to nonassociate
companies ("O&M Subs"). New Subsidiaries, EWGs, FUCOs, ETCs,
Rule 58 Companies and other non-utility subsidiaries of Entergy
(including EPMC and O&M Subs) which Entergy is authorized or by
rule permitted to acquire and own are referred to herein (as they
were in the June 1999 Order) collectively as "Nonutility
Companies."
In addition, under the June 1999 Order, the Commission
authorized Entergy and the Nonutility Companies (1) to provide
guaranties and other forms of credit support or enhancements to
or for the benefit of Nonutility Companies in an aggregate amount
outstanding not to exceed $750 million, to the extent such
transactions are not otherwise exempt;<FN3> (2) to engage in various
types of transactions designed to consolidate or reorganize under
one or more New Subsidiaries all or part of Entergy's ownership
interests in Nonutility Companies and New Subsidiaries; and (3)
to provide operations, administrative and consulting services to
other Nonutility Companies at prices determined without regard to
"cost," subject to specified limitations and restrictions.
Entergy is authorized to finance its investments in New
Subsidiaries and O&M Subsidiaries from available cash resources
and from the proceeds of borrowings and common stock sales
authorized in other proceedings.<FN4>
On May 26, 2000, Entergy and Koch Energy, Inc. ("Koch"), an
unaffiliated, privately-held diversified company, entered into an
agreement to form a new Delaware limited partnership to be called
Entergy-Koch, LP ("Entergy-Koch"). Entergy-Koch will be the
vehicle through which Entergy and Koch will combine certain
discrete non-utility energy assets of the two companies and their
respective subsidiaries. Specifically, subject to receiving any
necessary regulatory approvals, Entergy will contribute to
Entergy-Koch its ownership interest in EPMC, and Koch will
contribute to Entergy-Koch its ownership interest in its energy
trading and marketing subsidiary, Koch Energy Trading, Inc.
("KET"). EPMC and KET will thereupon be combined to form a
single new energy marketing and trading company (herein referred
to as "Trading Company").
In addition, Koch will contribute to Entergy-Koch the common
stock of its wholly-owned subsidiary, Koch Gateway Pipeline
Company ("Gateway Pipeline"), which owns and operates an
interstate natural gas pipeline system and related gas gathering
and storage facilities. Gateway Pipeline will remain a separate
subsidiary of Entergy-Koch. Entergy will also contribute,
directly or indirectly, to Entergy-Koch all of the stock of EGT
Holding, Ltd. ("EGT"). EGT is an indirect subsidiary of Entergy
Power Development Corporation ("EPDC"), which, in turn, is a
direct subsidiary of Entergy. EPDC is a FUCO through which
Entergy holds investments in foreign power development projects. <FN5>
EGT's sole asset consists of the stock of Entergy Trading &
Marketing, Ltd. ("ET&M"), which was formed in 1998 principally to
trade energy commodities in order to manage the fuel supply and
power sales risks of certain FUCOs owned by Entergy in the United
Kingdom.
The contributions to Entergy-Koch will be made pursuant to
the terms of a Contribution Agreement. In addition to the assets
and interests described above, the Contribution Agreement
contemplates that the parties will also make contributions of
cash to Entergy-Koch in amounts that will equalize (or "true-up")
the values of the interests in EPMC, KET, Gateway Pipeline and
ET&M. It is also contemplated that Entergy, indirectly through a
non-utility subsidiary, will purchase certain energy accounts
receivable created by KET and then contribute those receivables
to Entergy-Koch as a means to equalize Entergy's and Koch's
investments.
The values placed on the contributions of Entergy and Koch
to Entergy-Koch resulted from arms-length negotiations.
Valuations were determined based on a variety of methodologies
including mark-to-market valuation of energy commodity trading
portfolios, financial analysis (including review of projected
financials) and comparable asset valuations (e.g., trading
comparables, comparable transactions, etc.).
Entergy is not proposing to transfer or contribute any
assets of the Entergy Operating Companies to Entergy-Koch.
Moreover, Entergy's participation in the venture will not have
any effect on the Entergy Operating Companies or on the rates or
credit ratings of the Entergy Operating Companies. The Entergy
Operating Companies will not have an ownership interest, directly
or indirectly, in the venture and will not extend credit to or
assume or become liable for any debts or obligations of the
venture. The only relationships between the Entergy Operating
Companies and Entergy-Koch will be as described below in Item
1.3.5.
The general partner of Entergy-Koch, with a 1% interest,
will be Entergy-Koch, LLC ("EK-LLC"), a Delaware limited
liability company to be formed by Koch and Entergy Power
International Holdings Corporation ("EPIH"), a wholly-owned
subsidiary of Entergy.<FN6> Koch and EPIH will each hold a 50%
interest in EK-LLC. In addition, Entergy and Koch will each
acquire and hold, indirectly, a 49.5% limited partnership
interest in Entergy-Koch. The Entergy limited partnership
interest will be held by two other Delaware limited liability
companies formed by EPIH specifically for that purpose.
The contributions of the Entergy assets and Koch assets will
be made to Entergy-Koch from time to time as and when all
necessary regulatory approvals have been obtained and such
assets, in the judgment of the parties, may be successfully
integrated into the then-existing business of Entergy-Koch. All
of the transactions relating to the formation of Entergy-Koch and
the entities that will hold Entergy's ownership interests in the
venture, the transfer of the Entergy assets and the additional
contributions of cash will be carried out in accordance with
Entergy's authorization under the June 1999 Order. Entergy-Koch
will be a partially-owned New Subsidiary within the meaning of
such order, inasmuch as it will be engaged exclusively in the
business of holding the securities of other Nonutility Companies.
As an indirect subsidiary company of Entergy, Entergy-Koch will
not in the future acquire the securities of or other interest in
any business except in accordance with an order of this
Commission (including without limitation the June 1999 Order) or
pursuant to an available exemption, including, specifically, Rule
58 or Section 32, 33 or 34, as applicable.
1.2 Summary of Authorizations Requested. Entergy herein
requests approval for (a) Entergy to invest, indirectly through
one or more Nonutility Companies, including but not limited to
Entergy-Koch, up to $1.2 billion in specified types of energy-
related, non-utility assets ("Energy-Related Assets") that are
incidental to the energy marketing and brokering activities of
Trading Company; (b) the expansion of the energy marketing and
brokering activities of Trading Company and of any other energy
marketing affiliate hereafter formed or acquired by Entergy-Koch
to include marketing and brokering of energy commodities in
Canada; (c) the issuance of guaranties and other forms of credit
support by Entergy-Koch on behalf or for the benefit of its
direct and indirect subsidiaries; (d) the declaration and payment
of dividends out of capital or unearned surplus by Entergy-Koch
and its direct and indirect subsidiaries; and (e), to the extent
not otherwise permitted or exempt under the Commission's rules,
the sale of goods and services by and between Entergy-Koch's
subsidiaries and the Entergy Operating Companies and Nonutility
Companies.
Entergy will fund its cash contributions to Entergy-Koch and
purchases of energy receivables created by KET (which will
immediately be contributed to Entergy-Koch), as well as any
future acquisitions of or investments in Energy Assets using
available cash and/or the proceeds of financings previously
authorized by the Commission (see fn. 4, above) or as authorized
in other future proceedings. Accordingly, Entergy is not
requesting authority in this proceeding to issue any additional
securities.
1.3 Specific Approvals Requested.
1.3.1 Investments in Energy-Related Assets.
Entergy, directly or indirectly through one or more New
Subsidiaries or other Nonutility Subsidiaries (including Entergy-
Koch), requests authority to invest, from time to time through
December 31, 2005, up to $1.2 billion (the "Investment
Limitation") in Energy-Related Assets and/or the equity
securities of companies substantially all of whose physical
assets consist of such Energy-Related Assets. Such Energy-
Related Assets would include, without limitation, natural gas
production, gathering, processing, storage and transportation
facilities and equipment, liquid oil reserves and storage
facilities, and associated facilities, that would be incidental
to and would assist the Trading Company or any other energy
marketing and brokering subsidiary hereafter acquired by Entergy<FN7>
in connection with energy marketing, brokering and trading.
Initially, Entergy will acquire, indirectly through Entergy-
Koch, the stock of Gateway Pipeline to be contributed to Entergy-
Koch by Koch. Gateway Pipeline (formerly United Gas Pipe Line
Company) owns and operates an interstate natural gas pipeline
system that is engaged in gathering, storage and transportation
of gas from the producing areas in Texas, Louisiana and the Gulf
of Mexico, offshore Alabama and Mississippi. Gateway Pipeline
owns approximately 9,000 miles of interstate pipeline (including
both transportation and gathering lines), 31 compressor stations,
and two gas storage facilities. The pipeline is interconnected
with almost all of the other major interstate pipelines that
serve the Midwest, Northeast and Southwest markets. It also
connects to the Henry Hub, which serves as the designated
delivery point for natural gas futures contracts traded on the
New York Mercantile Exchange.
In the future, Entergy proposes to acquire or construct
other similar Energy-Related Assets through new or existing
subsidiaries (including Entergy-Koch). Such Energy-Related
Assets (or equity securities of companies owning such assets) may
be acquired for cash or in exchange for stock or other securities
of Entergy, or any combination of the foregoing. If common stock
of Entergy is used as consideration in connection with an
acquisition of Energy-Related Assets, the market value thereof on
the date of issuance will be counted against the proposed
Investment Limitation. The principal amount or stated amount of
any other securities issued as consideration will also be counted
against the proposed Investment Limitation. Under no
circumstances will Entergy acquire, directly or indirectly, any
assets or properties that would cause the owner or operator
thereof to be considered an "electric utility company" or "gas
utility company" as defined under the Act.
The Commission has previously recognized that, to be
successful, a marketer of energy commodities must be able to
control significant physical assets that are incidental and
reasonably necessary in its day-to-day operations.<FN8> Gas
marketers today must be able to offer their customers a variety
of value-added, or "bundled," services, such as gas storage and
processing, that the interstate pipelines offered prior to the
issuance by the Federal Energy Regulatory Commission ("FERC") of
Order 636.<FN9> In order to provide such value-added services, many
of the leading gas marketers have invested in production,
gathering, processing, and storage capacity at or near the
principal gas producing areas and hubs and market centers in the
U.S. Similarly, in order to compete with both interstate
pipelines and local distribution companies for industrial and
electric utility sales, marketers must have the flexibility to
acquire or construct such supply facilities. In fact, most of
the large marketers today with which EPMC and KET compete own
substantial physical assets of the type described herein.
Importantly, the acquisition of gas production, gathering,
processing, and storage capacity provides energy marketers the
opportunity to hedge the price of future supplies of natural gas
against changes in demand brought about due to weather, increased
usage requirements by end use customers, or other volatility
imposed by the market. Storage and pipeline assets allow energy
marketers to "bank" low cost supplies for use during periods of
high volatility or take advantage of differential price spreads
between different markets. Energy marketers with strong and
balanced physical asset portfolios are able to originate tolling
or reverse tolling of gas and electric commodities, whereby the
payment is made in one or the other commodity. The integration
of production, gathering, and storage assets offer energy
marketers the opportunity to provide either gas or electric
products and services to energy users, at their discretion,
depending on user requirements and needs. Finally, the physical
assets underlying an energy marketer's balance sheet may provide
substantial credit support for the financial transactions
undertaken by the marketer.
It is the intention of Entergy to add to its subsidiaries'
existing base of non-utility, energy-related, assets as and when
market conditions warrant, whether through acquisitions of
specific assets or groups of assets that are offered for sale, by
constructing such assets, or by acquiring existing companies (for
example, other gas marketing companies which own significant
physical assets in the areas of gas production, processing,
storage, and transportation). Ultimately, it is Entergy's
objective to control a substantial portfolio of Energy-Related
Assets that would provide the Entergy system with the flexibility
and capacity to compete for sales in all major markets in the
United States and, in the future, possibly Canada.
1.3.2 Expansion of Entergy's Energy Marketing and
Trading Activities Outside the United States. Under the terms of
the Commission's January 1998 Order, EPMC is currently authorized
to engage in energy marketing activities in wholesale and retail
markets throughout the United States. By its terms, Rule 58 also
limits the activities of "energy-related companies," which
includes companies engaged in energy marketing and brokering, to
the United States. Notwithstanding, the Commission has
previously authorized several other registered holding companies
to engage in such activities in Canada, and has reserved
jurisdiction over proposals to extend such activities into other
foreign countries.<FN10>
Entergy, on behalf of Trading Company (into which EPMC will
be merged) and any other energy marketing and trading companies
that it may hereafter acquire pursuant to Rule 58 or otherwise,
seeks similar authority to engage in marketing and brokering
activities in Canada and requests that the Commission reserve
jurisdiction over such activities outside of the United States
and Canada pending completion of the record. In support thereof,
Entergy notes that all of the major U.S. marketers with which
Trading Company will compete also conduct operations in Canada.
Canada is the source of a substantial percentage of all of the
gas consumed in the U.S., and also exports significant amounts of
electricity to the U.S. In approving Southern Company's proposal
to engage in energy marketing in Canada, the Commission has
already noted that the U.S. and Canadian energy markets are
highly integrated and that the risks of marketing activities in
Canada (other than currency risk) are substantially the same as
the risks associated with these activities in the United States.
1.3.3 Guaranties by Entergy-Koch. Under the June
1999 Order, the Commission authorized Entergy and the Nonutility
Companies to provide guaranties and other forms of credit support
or enhancements from time to time through December 31, 2002 to or
for the benefit of Nonutility Companies in an aggregate amount at
any time outstanding, not to exceed $750 million, in addition to
guaranties that are otherwise exempt or permitted by rule or
order of the Commission.<FN11> Entergy-Koch is now requesting
authority to provide guaranties and other forms of credit support
or enhancements on behalf or for the benefit of its direct and
indirect subsidiaries (collectively, "Credit Support") from time
to time through December 31, 2005, in an aggregate amount at any
time outstanding not to exceed $2 billion, in addition to Credit
Support that is exempt under Rules 45(b) and 52(b), provided that
any Credit Support outstanding on December 31, 2005 shall
terminate or expire in accordance with its terms. This requested
authorization is separate from and will not be counted against
the $750 million limitation in the June 1999 Order.
A separate Credit Support limit for Entergy-Koch is
warranted for two principal reasons. First, it is the intent of
the parties that all credit support required in connection with
the energy marketing and trading activities of Trading Company
and the other operations of Entergy-Koch's subsidiaries will be
provided by Entergy-Koch, without recourse to or support by
either Entergy or Koch. Second, guaranties of the obligations of
subsidiaries under energy trading and marketing agreements and of
other types of non-financial obligations of subsidiaries are not
exempt under Rules 45(b) and 52(b) in most cases. Hence, it is
expected that Entergy-Koch will realize little if any benefit
from the exemptions that the Commission has provided for
subsidiaries of registered holding companies.
1.3.4 Payment of Dividends Out of Capital and
Unearned Surplus. Under the June 1999 Order, the Nonutility
Companies are authorized to declare and pay dividends out of
capital and unearned surplus through December 31, 2002, subject
to applicable corporate law and any restrictions under financing
agreements. Entergy-Koch, on behalf of itself and its direct and
indirect subsidiaries, requests the same authority, but without
any limitation on the period in which such dividends may be
declared and paid. Entergy believes that approval for such
dividend authority on a permanent basis is warranted in this case
because of the substantial interest in Entergy-Koch that is held
by a nonassociate company that is not subject to any restrictions
under the Act. In this connection, the Commission should
recognize that the policy considerations underlying the exemption
for certain types of non-utility subsidiary companies provided by
Rule 16 should apply equally in this case. Rule 16 exempts a
company, and each affiliate thereof, from all obligations under
the Act imposed upon it as a subsidiary company or affiliate of a
registered holding company if certain conditions are met.
Specifically, no more than 50% of such company's voting
securities may be owned, directly or indirectly, by one or more
registered holding companies, and the company must be organized
to engage primarily in the exploration, development, production,
manufacture, storage, transportation, or supply of natural or
manufactured gas.
As described above, the primary businesses of Entergy-Koch
will be natural gas transportation and storage and the purchase
and sale of energy commodities, a major component of which will
be natural gas. But for the non-gas component of Entergy-Koch's
marketing operations, it is believed that Entergy-Koch would
qualify for exemption under Rule 16. Nevertheless, for purposes
of determining whether the exemption under Section 12(c) of the
Act requested herein is appropriate, the form or type of energy
commodity supplied should be of no importance.
1.3.5 Affiliate Transactions. It is contemplated
that Gateway Pipeline will continue to provide gas transportation
and "unbundled" ancillary services, such as gas storage
(including parking and lending), balancing, nominating and
scheduling, to Entergy Operating Companies in accordance with the
terms of open-access tariffs on file with the FERC.<FN12> Other
subsidiaries of Entergy-Koch (including Trading Company) may from
time to time sell electricity and gas to, and purchase
electricity and gas from, Entergy Operating Companies.<FN13> It is
not contemplated that the Entergy Operating Companies will sell
any property, equipment or goods to Entergy-Koch or its
subsidiaries.
Entergy-Koch, on behalf of itself and its subsidiaries,
requests authority to sell energy commodities other than
electricity and natural gas to Entergy Operating Companies,
including but not limited to oil, coal and risk management
services and products, and, in connection therewith, requests an
exemption under Section 13(b)(2) from Rules 90 and 91 permitting
it to charge market prices determined without regard to Entergy-
Koch's cost for any such goods or services. The applicants
represent that all such transactions will be in compliance with
the terms of the settlement agreement entered into in October
1992 between the Entergy Operating Companies and the state
regulatory commissions (other than the Louisiana Public Service
Commission ("LPSC")) in Entergy's service area and the affiliate
interest conditions approved by the LPSC in May 1993
(collectively, the "Settlement Agreements"). In the event that
any Entergy Operating Company renders services to Entergy-Koch or
any of its subsidiaries, such transactions would also be
performed in accordance with the pricing formula contained in the
Settlement Agreements.<FN14>
Finally, authority is requested for Entergy-Koch and its
subsidiaries and other Nonutility Companies to provide
administrative and consulting services to each other at fair
market prices, subject to the limitations contained in the June
1999 Order.<FN15>
1.4 Other Matters. Pursuant to Rule 24, Entergy proposes
to report on a quarterly basis the amount of Energy-Related
Assets purchased or constructed and the amount of any equity
securities of any company substantially all of whose assets
consist of Energy-Related Assets that were acquired in the
preceding period, including a description of such securities. In
order to simplify reporting obligations, it is proposed that any
marketing activities of "energy-related companies" acquired,
directly or indirectly, by Entergy (including Trading Company)
pursuant to Rule 58 be reported on Form U-9C-3. It is also
proposed that a description of the amount, type, and, if a debt
security, the maturity and interest rate, of securities issued by
Entergy or any Nonutility Company in connection with the
acquisition of Energy-Related Assets (or the equity securities of
any company owing such assets) be included as part of the
quarterly reports filed pursuant to Rule 24 in File No. 70-9123.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses incurred or to be
incurred in connection with the transactions proposed herein are
estimated at not more than $50,000.
Item 3. Applicable Statutory Provisions.
3.1 Sections 9(a) and 10 of the Act are applicable to the
acquisition by Entergy, indirectly through Entergy-Koch, of the
stock of Gateway Pipeline and to the acquisition, directly or
indirectly through one or more Nonutility Companies (including
Entergy-Koch), of any other interest in Energy-Related Assets or
of the equity securities of any company substantially all of
whose assets consist of Energy-Related Assets. Section 12(b) and
Rule 45 are applicable to the provision of Credit Support by
Entergy-Koch. Section 12(c) and Rule 46 are applicable to the
declaration and payment of dividends by Entergy-Koch and its
subsidiaries out of capital and unearned surplus. Section 13(b)
is applicable to the applicants' request for an exemption from
the "at cost" requirements with respect to certain transactions
described in Item 1.3.5, above. Rule 54 also applies to the
proposed transactions.
3.1.1 Standards of Approval under Section 10. The
transactions proposed herein involve an acquisition of
securities, as well as an acquisition of an interest in any other
(i.e., non-utility) business, and are therefore subject to the
approval of this Commission under Section 10. The relevant
standards for approval under Section 10 are set forth in
subsections (b), (c), and (f). In this case, the requirements of
Section 10(c) are met and there is no basis for the Commission to
make any negative findings under Section 10(b).
As applied to interests in non-utility businesses, Section
10(c)(1) of the Act provides that the Commission shall not
approve an acquisition that is "detrimental to the carrying out
of the provisions of section 11." Section 11(b)(1), in turn,
directs the Commission to limit the operations of a holding
company system to a single integrated public-utility system,
provided that, subject to making certain specified findings, the
Commission may permit a registered holding company to control one
or more additional public-utility systems.<FN16> Further, the
Commission may permit the retention by a registered holding
company of an interest in any non-utility business that is
"reasonably incidental, or economically necessary or appropriate
to the operations" of its integrated system or systems. The
Commission has interpreted Sections 10(c)(1) and 11(b)(1), read
together, as expressing a Congressional policy against non-
utility acquisitions that bear no functional relation to a
holding company's utility operations.<FN17>
As described above, Entergy, through Entergy-Koch and other
Nonutility Companies, is seeking approval to acquire Gateway
Pipeline and other non-utility, energy-related, assets that will
be used in connection with the existing and future energy
marketing operations of Trading Company (the successor of EPMC)
and other Nonutility Companies. As indicated, supra fn. 8, the
Commission has previously authorized other registered holding
companies to acquire or construct substantially similar kinds of
non-utility energy assets.<FN18>
3.1.2 Exemption from "At Cost" Standard. Under
Section 13(b)(2) of the Act, the Commission may exempt a
subsidiary of a registered holding company from the "at cost"
standard of Section 13(b) and Rules 90 and 91 with respect to the
performance of any sales, service or construction contract with
an associate company if there are "special or unusual
circumstances."<FN19> The applicants believe that, in this case,
there are "special or unusual circumstances" that warrant
allowing Entergy-Koch to sell oil, coal, risk management products
and other energy goods to any Entergy Operating Company at market-
based prices. First, the Commission should recognize that
Entergy-Koch is only a 50% owned subsidiary of Entergy; the other
50% being owned by a non-associate company which already engages
in market-based transactions in oil, coal and risk management
products with Entergy Operating Companies. If Trading Company
and other subsidiaries of Entergy-Koch were limited to charging
"cost," as determined in accordance with Rules 90 and 91, the
practical effect would be that such companies would simply
decline to do business with the Entergy Operating Companies.
From the perspective of the Entergy Operating Companies, this
would have the unintended effect of limiting competition among
suppliers of oil, coal and risk management products. Second, the
Commission should recognize that the condition set forth in the
Settlement Agreements requiring that procurements by Entergy
Operating Companies from associate companies be pursuant to
competitive bidding or similar procedures will serve as an added
layer of protection against affiliate abuse.
3.1.3 Rule 54 Analysis. The transactions proposed
herein are also subject to 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"), 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.
Rule 53(a)(1) limits a registered holding company's
financing of investments in EWGs if such holding company's
"aggregate investment" in EWGs and FUCOs exceeds 50% of its
"consolidated retained earnings." On June 13, 2000, the
Commission issued an order modifying certain previous orders
issued to Entergy in order to permit Entergy to use the proceeds
of financing to invest in EWGs and FUCOs in an amount up to 100%
of "consolidated retained earnings." See Entergy Corporation,
Holding Co. Act Release No. 27184 (June 13, 2000). Entergy's
"aggregate investment" (as defined in Rule 53(a)(1)(i)) in all
EWGs and FUCOs is currently equal to 36.63% of Entergy's
"consolidated retained earnings" (as defined in Rule
53(a)(1)(ii)) for the four quarters ended June 30, 2000. In
addition, Entergy 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 Entergy system's domestic public-
utility 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 regulatory
commissions. At the present time, therefore, Entergy satisfies
all of the requirements of Rule 53(a). Further, none of the
circumstances described in Rule 53(b) has occurred or is
continuing.
Item 4. Regulatory Approvals.
No state commission and no federal commission, other than
this Commission, has jurisdiction over Entergy's acquisition of
an interest in Entergy-Koch. The FERC has jurisdiction under the
Federal Power Act over the merger of the power marketing
operations of EPMC and KET. In addition, the pre-notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 may apply to certain future acquisitions of Energy-
Related Assets by Entergy, depending upon, among other factors,
the dollar amount of any such transaction. Entergy will not
consummate any acquisition of Energy-Related Assets or of the
equity securities of any company substantially all of whose
assets consist of Energy-Related Assets unless it has obtained
all other applicable state or federal regulatory approvals.
Item 5. Procedure.
The Commission is requested to publish a notice under Rule
23 with respect to the filing of this Application or Declaration
as soon as practicable. The applicants request that the
Commission's Order be issued as soon as the rules allow, and 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. The applicants 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.
Item 6. Exhibits and Financial Statements.
A. Exhibits.
A None.
B None.
C None.
D None.
E None.
F Opinion of Counsel. (To be filed by amendment).
G Not Applicable.
H Proposed Form of Federal Register Notice.
(Previously filed).
B. Financial Statements.
1.1 Balance Sheet of Entergy and consolidated
subsidiaries, as of June 30, 2000 (incorporated by
reference to the Quarterly Report on Form 10-Q of
Entergy for the period ended June 30, 2000) (File
No. 1-11299).
1.2 Statement of Income of Entergy and consolidated
subsidiaries for the period ended June 30, 2000
(incorporated by reference to the Quarterly Report
on Form 10-Q of Entergy for the period ended June
30, 2000) (File No. 1-11299).
Item 7. Information as to Environmental Effects.
The transactions that are the subject of this Application or
Declaration do not 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. Further, such transactions will not
result in changes in the operation of the applicants that will
have an impact on the environment. The applicant is 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.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned company has duly
caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Entergy Corporation
By: /s/ Michael G. Thompson
Name: Michael G. Thompson
Title: Senior Vice President, General Counsel
and Secretary
Date: September 5, 2000
_______________________________
<FN1> See Entergy Power Marketing Corp., 73 FERC 161,063 (1995).
<FN2> See Entergy Services, Inc., 74 FERC 61,137 (1996)
(authorizing EPMC to sell power at market based rates) and
Entergy Power Marketing Corp., 75 FERC 61,282 (1996) (order
on compliance filing).
<FN3> In a separate proceeding (File No. 70-9123), Entergy and its
nonutility subsidiaries are seeking authority to increase the
limitation on guaranties to $2 billion. See Holding Co. Act
Release No. 27197 (July 7, 2000).
<FN4> See Entergy Corporation, Holding Co. Act Release No. 26693
(March 25, 1997) (authorizing Entergy to issue and sell up to
30 million additional shares of its common stock through
December 31, 2000 pursuant to its dividend reinvestment and
stock purchase plan); and Entergy Corporation, Holding Co. Act
Release No. 26674 (February 26, 1997) (authorizing Entergy to
issue and sell short-term notes from time to time through
December 31, 2002, in an aggregate principal amount at any
time outstanding not to exceed $500 million).
<FN5> EPDC is currently constructing two combined cycle gas turbine
merchant power plants in the UK through FUCO subsidiaries.
One is the Saltend Project, a 1,200 MW plant that will produce
both steam and electricity, and the other is the Damhead Creek
project, an 800 MW facility. Both are expected to go into
commercial operation in 2000.
<FN6> EPIH, a Delaware corporation, is currently a FUCO but will
relinquish its status as such and instead serve as a New
Subsidiary (within the meaning of the June 1999 Order) for the
purpose of acquiring and holding an interest in Entergy-Koch.
<FN7> Specifically, it is contemplated that Entergy may acquire,
directly or indirectly, the securities of one or more
companies, other than EPMC, that are engaged in energy
marketing, brokering, and trading pursuant to Rule 58.
<FN8> See e.g., SEI Holdings, Inc., 62 SEC Docket 2493 (September
26, 1996); American Electric Power Company, Inc., et al., 68
SEC Docket 1251 (November 2, 1998).
<FN9> See FERC Order 636, FERC Stats. & Regs. 30,939, "Pipeline
Service Obligations and Revisions to Regulations Governing
Self-Implementing Transportation; and Regulation of Natural
Gas Pipelines After Partial Wellhead Decontrol," 57 Fed. Reg.
13,270 (April 16, 1992).
<FN10> See Southern Energy, Inc., Holding Co. Act Rel. No. 27020 (May
13, 1999), in which the Commission authorized a subsidiary of
Southern Company to expand its energy marketing activities
into Canada. Subsequently, the SEC has granted similar
approvals to several other registered holding companies. See
e.g., Ameren Corp., Holding Co. Act Release No. 27053 (July
23, 1999); American Electric Power Co., et al., Holding Co.
Act Release No. 27062 (August 19, 1999); and Interstate Energy
Corporation, Holding Co. Act Release No. 27069 (August 26,
1999).
<FN11> As indicated above, fn. 3, Entergy has filed a separate
application seeking to increase its guaranty authority.
<FN12> Such transactions are generally exempt under the Act pursuant
to Rule 81.
<FN13> Electricity and natural gas are expressly excluded from the
definition of "goods" under Rule 80.
<FN14> See Entergy Corporation, et al., Holding Co. Act Release No.
27040 (June 22, 1999), in which the Commission granted an
exemption under Section 13(b)(2) of the Act in order to allow
the Entergy Operating Companies and certain other regulated
subsidiaries of Entergy (collectively, the "Regulated
Utilities") to charge cost plus 5%, in accordance with the
Settlement Agreements, for services rendered to Entergy's
unregulated non-utility subsidiaries (collectively,
"Nonregulated Businesses"). The other pricing provisions in
the Settlement Agreements are as follows: (1) transfers of
generating assets, fuel and fuel-related assets and of market,
technological or similar data by a Regulated Utility to a
Nonregulated Business must be priced at market value, (2)
profits on the sale of products developed by a Regulated
Utility and marketed by a Nonregulated Business must be
divided equally between the two companies, after deduction for
the incremental costs associated with making the products
available for sale, (3) development of royalty payments on a
case-by-case basis in connection with transfers of product
rights, patents, copyrights, or similar rights from a
Regulated Utility to a Nonregulated Business, and (4) use of
competitive bidding or similar procedures approved by the
appropriate state commission to price any procurements with a
fair market value in excess of $100,000.
<FN15> The June 1999 Order authorizes Nonutility Subsidiaries to sell
administrative and consulting services at fair market prices
to specified types of exempt non-utility associate companies
(specifically, EWGs, FUCOs, and "qualifying facilities"),
subject to certain limitations, and to partially-owned non-
utility associate companies (like Entergy-Koch), provided that
the ultimate purchaser of these services is not an Entergy
Operating Company or any other subsidiary of Entergy whose
activities and operations are primarily related to the
provision of services or goods to such companies.
<FN16> In its order approving the acquisition of Gulf States Power
Company, the Commission made findings under Section 11(b)(1)
permitting the retention of Gulf States Utilities Company's
gas utility business as an additional integrated system. See
Entergy Corp., et al., Holding Co. Act Release No. 25952
(December 17, 1993).
<FN17> See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-65
(1970), aff'd 444 F.2d 913 (D.C. Cir. 1971).
<FN18> Pursuant to the authorization granted by the Commission in
American Electric Power Co., supra fn. 8, American Electric
Power in late 1998 acquired the "mid-stream assets" of
Equitable Resources, Inc., consisting of the Louisiana
Interstate Gas Company, the largest intrastate pipeline
company in Louisiana with nearly 1900 miles of pipeline and a
liquids processing plant, and a gas storage company. The
Equitable Resources "midstream" assets acquired by American
Electric Power are of the same general character, and perform
the same general functions (e.g., gas transportation, storage
and processing) as the Koch Gateway assets.
<FN19> See e.g., New England Electric System, Holding Co. Act Release
No. 22309 (Dec. 9, 1981).
