File No. 70-8541
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
AMENDMENT NO. 4 TO
FORM U-1
APPLICATION OR DECLARATION
under
the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
National Fuel Gas Company National Fuel Gas
10 Lafayette Square Distribution Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
Seneca Resources Corporation National Fuel Gas Supply
10 Lafayette Square Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
National Fuel Resources, Inc. Utility Constructors, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
(Names of companies filing this statement
and addresses of principal executive offices)
_____________________________________________
NATIONAL FUEL GAS COMPANY
(Name of top registered holding company)
_____________________________________________
Philip C. Ackerman Robert J. Reger, Jr., Esq.
Senior Vice President Reid & Priest LLP
National Fuel Gas Company 40 West 57th Street
10 Lafayette Square New York, New York 10019
Buffalo, New York 14203
(Names and addresses of agents for service)
<PAGE>
Item 1. Description of the Proposed Transaction.
The following paragraph is hereby added to Item 1:
"National requests that the Commission reserve
jurisdiction over National's ability to enter into Swaps and
Derivative Transactions."
Item 6. Exhibits and Financial Statements.
The following exhibits are made a part of this
statement:
(A) Exhibits
D-1A Copy of Supplement to Distribution's
Petition to the Public Service
Commission of New York along with
Revised Schedule F.
D-4 Copy of Pennsylvania Public Utility
Commission's Securities Certificates
No. S-00950489 and G-00950434.
-1-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned companies have duly
caused this amendment to be signed on their behalf by the
undersigned thereunto duly authorized.
NATIONAL FUEL GAS COMPANY
By /s/ Gerald T. Wehrlin
------------------------
Gerald T. Wehrlin
Controller
NATIONAL FUEL GAS
DISTRIBUTION CORPORATION
By /s/ Gerald T. Wehrlin
------------------------
Gerald T. Wehrlin
Senior Vice President,
Controller
SENECA RESOURCES CORPORATION
By /s/ Gerald T. Wehrlin
------------------------
Gerald T. Wehrlin
Secretary, Treasurer and
Controller
NATIONAL FUEL GAS SUPPLY
CORPORATION
By /s/ Joseph P. Pawlowski
------------------------
Joseph P. Pawlowski
Treasurer
-2-
<PAGE>
NATIONAL FUEL RESOURCES, INC.
By /s/ David F. Smith
------------------------
David F. Smith
President
UTILITY CONSTRUCTORS, INC.
By /s/ Joseph P. Pawlowski
------------------------
Joseph P. Pawlowski
Treasurer
DATED: April 19, 1995
-3-
<PAGE>
EXHIBIT INDEX
Exhibit Page
------- ----
D-1A Copy of Supplement to Distribution's Petition
to the Public Service Commission of New York
along with Revised Schedule F.
D-4 Copy of Pennsylvania Public Utility Commission's
Securities Certificates No. S-00950489 and
G-00950434.
<PAGE 1>
EXHIBIT D-1A
NATIONAL FUEL GAS DISTRIBUTION CORPORATION
SUPPLEMENT TO FINANCE PETITION
CASE #95-G-0090
<PAGE 2>
EXHIBIT A
Page 1 of 3
A. The Petition's caption is hereby modified to read as follows:
STATE OF NEW YORK PUBLIC SERVICE COMMISSION
STATE DIVISION, DEPARTMENT OF PUBLIC SERVICE
In the Matter of the Application
-of-
NATIONAL FUEL GAS DISTRIBUTION CORPORATION, to PETITION
the Public Service Commission, for authorization
to issue and sell promissory notes in the aggregate
amount of $250,000,000, and to assume the costs
and benefits of certain derivative instruments
B. Paragraph #7, Schedule H, in the text of the Petition is hereby amended
to read as follows:
Agreements between Petitioner and National Fuel Gas Company including
forms of Credit Agreement, Note and Derivative Agreement.
C. The footnotes in the Petition that read as follows: "*Maturity date
for subsidiary is 6/24/95," are hereby deleted.
D. The Petition is hereby amended to add a Paragraph 12, which shall read
as follows:
12. National may also from time to time enter into or terminate
agreements providing for interest rate swaps, caps, collars and
floors (collectively, "derivative instruments"), during the
24-month period beginning on the date of the order. For example,
National may enter into an interest rate swap agreement with a
counterparty, whereby National would pay a fixed interest rate and
receive a floating interest rate. Conversely, National may enter
into a swap agreement whereby it would pay a floating rate and
receive a fixed rate. National may also enter into agreements
concerning other derivative instruments in connection with such
swaps or its new or existing debt. The purpose of such agreements
would be, respectively, to "convert" floating rate interest
payments to fixed rate payments, to "convert" fixed rate interest
payments to floating rate payments, or to limit the risk of
interest rate changes. If National enters into any such
agreements, Distribution may agree to assume the costs and benefits
of National's derivative instruments, and thus effectively
"convert" its floating rate interest payments to fixed rate
payments, "convert" its fixed rate interest payments to floating
rate payments, or limit the risk of interest rate changes.
<PAGE 3>
EXHIBIT A
Page 2 of 3
The application-declaration referenced in paragraph 6 of the
Petition also seeks SEC authorization to enter into these
agreements respecting up to $350,000,000 notional amount of
interest rate swaps, caps, collars and floors. The notional amount
of the derivative instruments that may be obtained by National, and
the costs and benefits of which may be assumed by Distribution,
shall not exceed $350,000,000. The ceiling on Distribution's
assumption of the costs and benefits of such derivative instruments
exceeds the ceiling on the amount of Distribution's promissory
notes because the derivative instruments may pertain to
Distribution's existing debt as well as future debt that
Distribution may incur. The SEC authorization so requested would
expire on December 31, 1997.
See Schedule H for the form of agreement to be used in the event
National enters into, and Distribution assumes the costs and
benefits of, agreements concerning such derivative instruments.
See Schedule J for a more detailed description of the purposes for
which National and Distribution may enter into such agreements, as
well as several examples of how such transactions work.
Note that Distribution is not, through this Financing Petition,
seeking the recovery in rates of the costs associated with such
derivative instruments. Distribution is only hereby requesting
authorization to assume the costs and benefits of such derivative
instruments.
E. The Petition is hereby amended to add a Paragraph 13, which shall read
as follows:
13. If Distribution assumes the costs and benefits of any derivative
instruments, those costs and benefits will affect its retained
earnings, but the notional amount, from a pure accounting
standpoint, of those derivatives will have no effect on
Distribution's capital structure.
F. The Wherefore clause in the Petition is hereby amended to read as
follows:
WHEREFORE, Petitioner respectfully requests the Commission to issue
an order (1) authorizing the issuance and sale by Petitioner from
time-to-time, for a 24-month period beginning on the date of the order,
at Petitioner's option, of $250,000,000 principal amount of promissory
notes in accordance with the terms of the Agreement between Petitioner
and National (Schedule H); (2) authorizing Petitioner to apply not more
than $250,000,000 of the proceeds of the sale of such notes toward (a)
reimbursement of its treasury for equivalent moneys expended during the
above 24-month period, for capital purposes; (b) repayment of notes held
by National and issued by Petitioner to National in exchange for loans
from National to Petitioner in connection with the issue and sale by
National of its 6.21% medium-term notes (MTN's) due May 1, 1995, its
<PAGE 4>
EXHIBIT A
Page 3 of 3
9.45% MTN's due June 8, 1995, its 6.23% MTN's due June 23, 1995, its
6.24% MTN's due May 1, 1995, its 9.0% MTN's due December 18, 1995, its
9.03% MTN's due December 18, 1995 and its 9.03% MTN's due December 20,
1995 (Petitioner will be required to pay National $94,000,000 in 1995 to
repay National's loans to Petitioner using some of the proceeds of such
MTN issues); (c) payment for gross additions during calendar years 1995
and 1996 to utility plant used and useful in the public service over and
above additions constructed through funds originating from credits to
the depreciation reserve and net salvage; (d) use for other corporate
purposes; and (e) reduction of short-term debt balances incurred to
finance previous years' construction programs; with the provision that
temporary withdrawals of all or a portion of said $250,000,000 from a
special fund may be made during the 24-month period beginning with the
date of the order, provided such temporary withdrawals are restored to
said special fund not later than 24 months after the date of the order;
and (3) authorizing Petitioner to enter into or terminate agreements
with National whereby Petitioner will assume the costs and benefits of
agreements providing for derivative instruments, during the 24-month
period beginning on the date of the order. The notional amount of the
derivative instruments whose costs and benefits may be assumed by
Petitioner shall not exceed $350,000,000.
<PAGE 5>
EXHIBIT B
Page 1 of 4
SCHEDULE H
Sheet 1 of 5
CREDIT AGREEMENT
THIS AGREEMENT dated ; by and between NATIONAL FUEL GAS
COMPANY (hereinafter called "National"), a New Jersey corporation, and
NATIONAL FUEL GAS DISTRIBUTION CORPORATION (hereinafter called "Distribution
Corporation"), a New York corporation and a subsidiary of National.
W I T N E S S E T H:
1. In order to provide funds to Distribution Corporation for working
capital and its construction program, National agrees to extend credit to
Distribution Corporation from time-to-time, upon mutual consent and upon the
further terms and conditions set forth in this Agreement.
2. Each borrowing made hereunder shall be made against delivery to
National of Distribution Corporation's promissory note to evidence the amount
borrowed each time. Each promissory note shall be dated as of the date of
issue and shall bear interest payable at such time as provided for in, and at
the effective interest rate or yield to maturity cost rate of, National's
debenture or note or other debt issue that provides the proceeds from which
Distribution Corporation has borrowed hereunder. Such interest rate or cost
shall reflect actual underwriters' or agents' fees and commissions, plus five
basis points per annum additional interest per issue to reflect expenses of
National relating to debt issuance (such as legal fees and bond rating
agencies' fees). The resulting effective annual interest rate shall be
rounded up to the next highest 1/100th of 1%. Each promissory note shall
mature at such time as National's corresponding debenture, note or other debt
issue matures.
3. It is agreed that if a default occurs with respect to the punctual
payment of any principal or interest due under this, or any other agreement
or note of Distribution Corporation, or if Distribution Corporation makes an
assignment for the benefit of creditors or files a petition in bankruptcy or
is adjudicated insolvent or bankrupt, or if there is commenced against
Distribution Corporation any such proceeding, then the entire amount of the
principal and interest on all of the notes issued under this Agreement may be
declared by National to be forthwith due and payable.
4. If the debentures, notes or other debt issued by National, or the
indenture, supplemental indenture or other documents governing the terms
thereof, give National the right or obligation to early redeem all or part of
said debentures, notes or other debt, and National exercises that right in
whole or in part, prior to their maturity, or if National tenders for or
otherwise discharges such debentures, notes or other debt prior to their
maturity, or modifies the terms thereof, then Distribution Corporation shall
prepay to National a principal amount of the note or notes issued hereunder
as shall equal the principal amount of such debentures, notes or other debt
of National that are early redeemed or discharged, together with accrued
interest on the prepaid principal amount of National's debentures, notes or
other debt, together with the premium, if any, that is paid in connection
with any such redemption or discharge, and together with unrecovered
(unamortized) debt issuance discounts and costs, or Distribution Corporation
shall agree to make payments to National in accordance with such modified
terms, as the case may be.
<PAGE 6>
EXHIBIT B
Page 2 of 4
SCHEDULE H
Sheet 2 of 5
5. This Agreement shall become effective when approvals have been
obtained from the regulatory commissions having jurisdiction over this
Agreement.
6. This Agreement shall be binding upon the successors and assigns of
the parties hereto. This Agreement shall be construed and enforced under and
in accordance with the laws of the state of New York. This Agreement may be
executed in counterparts, each one of which, when fully executed, shall be
deemed to have the same dignity, force and effect as an original.
IN WITNESS WHEREOF, the parties hereto have caused their authorized
officers to execute this Agreement and to have their corporate seals affixed
and attested the day and year first above written.
NATIONAL FUEL GAS COMPANY
ATTEST:
President
NATIONAL FUEL GAS DISTRIBUTION
CORPORATION
ATTEST:
President
<PAGE 7>
EXHIBIT B
Page 3 of 4
SCHEDULE H
Sheet 4 of 5
FORM OF DERIVATIVE AGREEMENT
THIS AGREEMENT dated as of ; by and between NATIONAL FUEL GAS
COMPANY (hereinafter called "National"), a New Jersey corporation, and
NATIONAL FUEL GAS DISTRIBUTION CORPORATION (hereinafter called "Distribution
Corporation"), a New York corporation and a subsidiary of National.
W I T N E S S E T H:
1. If National from time-to-time enters into agreements concerning
interest rate swaps, caps, collars, and/or floors (hereinafter called
"derivative instruments"), and Distribution Corporation desires to obtain the
benefits and pay the costs thereof, this Agreement, together with any
attachments as may be necessary to further describe the terms of such
derivative instruments and the allocation of such costs and benefits, shall
govern the terms of such arrangements.
2.(a) If National desires to enter into, and Distribution desires to
assume the costs and benefits of, an interest rate swap whereby National
makes fixed rate payments to, and receives floating rate payments from, a
counterparty, in lieu of: (i) National's issuance of long-term debt and
liquidation of short-term debt, (ii) National's lending of the proceeds from
such issuance of long-term debt to Distribution, (iii) Distribution's
liquidation of short-term debt, and (iv) Distribution's issuance of a
promissory note to National, National shall pay to Distribution any amounts
received by National from the counterparty in connection with such swap, and
Distribution shall pay to National any amounts that National must pay to the
counterparty in connection with such swap.
(b) If National desires to enter into, and Distribution desires to
assume the costs and benefits of, agreements that provide caps, collars or
floors in connection with such swap, National shall pay to Distribution any
amounts received by it from the counterparty in connection therewith, and
Distribution shall pay to National any amounts that National must pay the
counterparty in connection therewith.
3. If transactions as are described in Paragraph 2 occur, Distribution
shall continue to pay interest on its underlying short-term debt.
4. If National desires to enter into, and Distribution desires to
assume the costs and benefits of, an interest rate swap whereby National
makes floating rate payments to, and receives fixed rate payments from, a
counterparty, in order to effectively convert, in whole or in part,
National's existing fixed rate interest payments to floating rate payments,
and likewise convert Distribution's payments pursuant to its promissory note
to National, National shall pay to Distribution any amounts received by
National from the counterparty pursuant to such swap, and Distribution shall
pay to National any amounts that National must pay to the counterparty in
connection with such swap. If National enters into agreements that provide
caps, collars or floors in connection with such swap, the provisions set
forth in paragraph 2(b) concerning this matter shall apply.
<PAGE 8>
EXHIBIT B
Page 4 of 4
SCHEDULE H
Sheet 5 of 5
5. If National desires to enter into, and Distribution desires to
assume the costs and benefits of, agreements that provide caps, collars or
floors in connection with existing floating rate medium-term notes or
debentures or short-term debt of National, the proceeds of which have been
loaned to Distribution, the provisions set forth in paragraph 2(b) shall
apply.
6. If National terminates or "unwinds" one of the above-described
derivative instruments, and either makes or receives payments, or assumes
other obligations or benefits in connection therewith, National shall pay to
Distribution any such receipts, and Distribution shall reimburse National for
any payments National makes, and Distribution shall further assume any
ongoing obligations and receive any ongoing benefits.
7. National and Distribution shall net the above payments to the extent
practicable.
8. If Distribution defaults on its obligations hereunder, National
shall have such remedies respecting Distribution as National's counterparty
would have respecting National, if National made a similar default vis-a-vis
the counterparty, without necessity of demand, notice, presentment or
protest. Likewise, Distribution shall have similar remedies against
National, should National default.
9. This Agreement shall become effective when approvals have been
obtained from the regulatory commissions having jurisdiction over this
Agreement. This Agreement shall be subject to additional terms and
conditions as may be set forth in the Application-Declaration on Form U-1 in
SEC File 70-8541, which was filed by National, Distribution, and certain
other subsidiaries of National, and in the order(s) that may be issued
thereunder.
10. This Agreement shall be binding upon the successors and assigns of
the parties hereto. This Agreement shall be construed and enforced under and
in accordance with the laws of the state of New York. This Agreement may be
executed in counterparts, each one of which, when fully executed, shall be
deemed to have the same dignity, force and effect as an original.
IN WITNESS WHEREOF, the parties hereto have caused their authorized
officers to execute this Agreement and to have their corporate seals affixed
and attested the day and year first above written.
NATIONAL FUEL GAS COMPANY
ATTEST:
President
NATIONAL FUEL GAS DISTRIBUTION
CORPORATION
ATTEST:
President
<PAGE 9>
March 31, 1995
Public Service Commission
State of New York
Empire State Plaza
Albany, New York 12223
Attn: Honorable John J. Kelliher
Re: Revision of reimbursement Margin (Schedule F) of
National Fuel Gas Distribution Corporation's
Financing Petition for Calendar Years 1995-1996,
Case #95-G-0090, filed January 25, 1995
Gentlemen:
We are enclosing three (3) copies of a revised Reimbursement
Margin for the period September 30, 1992 through September 30, 1994,
(Schedule F), for the Finance Petition of National Fuel Gas Distribution
Corporation, Case #95-G-0090, filed January 25, 1995.
Thank you for your prompt consideration in this matter. We also
respectfully request your acknowledgment of receipt of this revision. If you
have any questions, please call Dolores Connors at (716) 857-7767 or Kathy
Frank at (716) 857-7828.
Very truly yours,
/s/ Curtis W. Lee
Curtis W. Lee
General Manager-Finance
Encl.
<PAGE 10>
REVISED 3/31/95
SCHEDULE F
Sheet 1 of 1
NATIONAL FUEL GAS DISTRIBUTION CORPORATION
REIMBURSEMENT MARGIN
FOR THE PERIOD SEPTEMBER 30, 1992 THROUGH SEPTEMBER 30, 1994
$
Reimbursement Margin - Case 93G0154
September 30, 1992 262,406,171
FUNDS EXPENDED
Additions to Utility Plant 120,915,363
Net Change in Construction Work in Progress (1,262,276)
Payment and Discharge of Notes:
Other Long-Term Debt 56,221
Redemption of Notes Payable 100,000,000
Premium on Redemption of Notes Payable 8,107,255
Total Funds Expended 227,816,563
SOURCE OF FUNDS
Depreciation Accruals 55,478,374
Salvage 241,297
Cost of Removal (3,994,076)
Net Change in Retirement Work in Progress (65,398)
Net Transfers/Adjustments (46,101)
Normalization of Accelerated Depreciation 14,614,839
Normalization of Investment Tax Credit (1,345,976)
Normalization of Investment Tax Credit-
Meter Stations Transfers 8,482
Deferred Tax - Premium on Reacquired Debt 1,879,507
Deferred Tax - Uniform Capitalization Adjustment (1,462,912)
Deferred Tax - Chicora Sale 120,096
Amortization of Premium on Reacquired Debt 2,699,080
Customer Advances for Construction 288,625
Advances from Associated Companies 126,000,000
Capital Contributions 86,247,500
Total Source of Funds 280,663,337
Reimbursement Margin September 30, 1994 209,559,397
<PAGE 1>
EXHIBIT D-4
COMMONWEALTH OF PENNSYLVANIA
PENNSYLVANIA PUBLIC UTILITY COMMISSION
P. O. BOX 3265, HARRISBURG, PA 17105-3265
IN REPLY PLEASE
REFER TO OUR FILE
MARCH 16, 1995
S-00950489
CURTIS W LEE GEN MANAGER
NATIONAL FUEL GAS DIST CORP
10 LAFAYETTE SQUARE
BUFFALO NY 14203
Securities Certificate of National Fuel Gas Distribution Corporation for the
issuance of promissory notes to its parent, not in excess of $250 million.
To Whom It May Concern:
This is to advise you that an Opinion and Order has been adopted by the
Commission in Public Meeting on March 16, 1995 in the above entitled
proceeding.
An Opinion and Order has been enclosed for your records.
Very truly yours,
/s/ John G. Alford,
John G. Alford, Secretary
smk
Encls.
Cert. Mail
<PAGE 2>
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held March 16, 1995
Commissioners Present:
John M. Quain, Chairman
Joseph Rhodes, Jr., Vice Chairman
Lisa Crutchfield
John Hanger
David W. Rolka
Securities Certificate of National Fuel S-00950489
Gas Distribution Corporation for the
issuance of promissory notes to its
parent, not in excess of $250 million
OPINION AND ORDER
BY THE COMMISSION:
On February 8, 1995, National Fuel Gas Distribution Corporation
(NFGDC) filed for registration pursuant to Chapter 19 of the Pennsylvania
Public Utility Code, 66 Pa. C.S sections 1901 et seq., a Securities
Certificate for the issuance of promissory notes to its parent, not in excess
of $250 million. On March 9, 1995, the Commission extended the statutory
period for consideration to March 17, 1995.
NFGDC filed concurrently with S-00950489 an Affiliated Interest
Agreement docketed at G-00950434 concerning certain credit transactions
between NFGDC and National. The instant Securities Certificate is directly
affect by the terms of the credit transaction between NFGDC and National and
has been considered in conjunction with G-00950434.
NFGDC, a Pennsylvania jurisdictional utility, proposes to issue
notes in one or more series prior to April 1, 1997 to its parent, National
<PAGE 3>
Fuel Gas Company, Inc. (National), a registered public utility holding
company. National is proposing to issue notes or debentures and lend up to
$250 million of the proceeds to NFGDC. NFGDC will in turn issue promissory
notes to National to secure the funds that National has obtained through the
issuance of long-term debt. The terms on the promissory notes issued by
NFGDC would be substantially similar to the terms on the corresponding debt
issued by National.
NFGDC is proposing to issue notes that have an effective interest
rate cost equal to the sum of: the interest rate of National's related
notes; the amortized costs of the discount and actual expenses such as fees
and commission; plus an additional five basis points to reflect an estimate
of other expenses, such as legal fees and bond rating agencies' fees related
to debt issuances incurred by National. Currently, actual issuance expenses
are used in the determination of the effective cost of debt. An estimate of
expenses would be inconsistent with the current evaluation procedure used for
determining effective cost of debt for ratemaking purposes. We shall
disallow NFGDC's request to add five basis points to every issuance to cover
other issuance costs. Actual costs incurred should be used in the
determination of the amount of other issuance costs to be borne by NFGDC.
Proceeds from the issuance will be used for early redemption of one
or more higher-costs notes previously issued to the parent; to fund NFGDC's
construction program; to decrease short-term debt balances; and for general
corporate purposes.
We have examined NFGDC's instant Securities Certificate and have
determined that the proposed issuance of promissory notes appears to be
necessary or proper for the present and probable future capital needs of the
company, and as a result the Securities Certificate should be registered;
THEREFORE,
<PAGE 4>
IT IS ORDERED:
That the Securities Certificate filed on February 8, 1995 by
National Fuel Gas Distribution Corporation for the issuance of promissory
notes not in excess of the principal amount of $250 million is hereby
registered.
BY THE COMMISSION,
/S/ John G. Alford
John G. Alford
Secretary
(SEAL)
ORDER ADOPTED: March 16, 1995
ORDER ENTERED: March 16, 1995
<PAGE 5>
COMMONWEALTH OF PENNSYLVANIA
PENNSYLVANIA PUBLIC UTILITY COMMISSION
P. O. BOX 3265, HARRISBURG, PA 17105-3265
IN REPLY PLEASE
REFER TO OUR FILE
APRIL 5, 1995
G-00950434
CURTIS W LEE GENERAL MANAGER
NATIONAL FUEL GAS DISTRIBUTION CORPORATION
FINANCE DEPARTMENT
10 LAFAYETTE SQUARE
BUFFALO NY 14203
Affiliated Interest Agreement Concerning Credit Transactions between National
Fuel Gas Distribution Corporation and National Fuel Gas Company
To Whom It May Concern:
This is to advise you that a Corrected Opinion and Order has been adopted
by the Commission in Public Meeting on March 16, 1995 in the above entitled
proceeding.
A Corrected Opinion and Order has been enclosed for your records.
Very truly yours,
/s/ John G. Alford,
John G. Alford, Secretary
Enclosure
Certified Mail
JEP
<PAGE 6>
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held March 16, 1995
Commissioners Present:
John M. Quain, Chairman
Joseph Rhodes, Jr., Vice-Chairman
Lisa Crutchfield
John Hanger
David W. Rolka
Affiliated Interest Agreement Concerning G-00950434
Credit Transactions between National Fuel Gas
Distribution Corporation and National Fuel Gas
Company
CORRECTED OPINION AND ORDER
BY THE COMMISSION:
On February 8, 1995, National Fuel Gas Distribution Company (NFGDC)
filed for approval pursuant to Chapter 21 of the Pennsylvania Public Utility
Code, 66 Pa. C.S sections 2101 et seq., an Affiliated Interest Agreement
concerning credit transactions between NFGDC and its parent, National Fuel
Gas Company (National). The credit transactions consist of a Credit
Agreement and a Derivative Agreement. On March 9, 1995, the Commission
extended the statutory period for consideration to March 17, 1995.
NFGDC filed concurrently with G-00950434 a Securities Certificated
docketed at S-00950489 for the issuance of promissory notes to its parent,
not in excess of $250 million. The instant Affiliated Interest Agreement has
been considered in conjunction with S-00950489.
National issues publicly its own notes and debentures and lends
proceeds from the issuances to NFGDC. The proposed Affiliated Interest
Agreement is intended to govern the relationship between notes issued by
<PAGE 7>
NFGDC and the related debt securities issued by National, both those to be
issued pursuant to the concurrently filed Securities Certificate and those to
be issued in future years. The agreement replaces an agreement docketed at
G-910283 and approved by Commission Order entered February 13, 1992.
Pursuant to the instant Affiliated Interest Agreement, NFGDC is
proposing by the Credit Agreement that all notes issued in the future have an
effective interest rate cost equal to the sum of: the interest rate of
National's related notes; the amortized costs of the discount and actual
expenses such as fees and commission; plus an additional five basis points to
reflect an estimate of other issuance expenses, such as legal fees and bond
rating agencies' fees related. Currently, actual issuance expenses are used
in the determination of the effective cost of debt. An estimate of expenses
would be inconsistent with the current evaluation procedure used for
determining effective cost of debt for ratemaking purposes. We will disallow
NFGDCs request to add five basis points to every issuance to cover other
issuance costs. Actual costs incurred should be used in the determination of
the amount of other issuance costs to be borne by NFGDC.
NFGDC is also requesting approval the Derivative Agreement which
governs the assumption by NFGDC of the costs and benefits of up to $350
million of certain derivative transactions which National may enter into in
conjunction with debt that National issues and in turn lends the proceeds
thereof to NFGDC. Such costs and benefits may be related to NFGDC's existing
debt as well as future debt NFGDC may incur.
The Commission has examined the instant Affiliated Interest
Agreement concerning the credit and derivative transactions between the
affiliated interests and has determined that the terms and conditions, except
as noted above, appear to be reasonable and consistent with the public
interest. While noting that such a determination is not binding for
ratemaking purposes, the Commission finds that the Agreement should be
approved; THEREFORE,
<PAGE 8>
IT IS ORDERED:
1. That the Credit Agreement portion of the Affiliated Interest
Agreement between National Fuel Gas Distribution Corporation and National
Fuel Gas Company relating to the addition of five basis points to the
effective cost of funds that National Fuel Gas Distribution Corporation
borrows from its parent is hereby disapproved.
2. That to the extent that it is consistent with Ordering
Paragraph No. 1, above, the Credit Agreement portion of the Affiliated
Interest Agreement between National Fuel Gas Distribution Corporation and
National Fuel Gas Company is hereby approved.
3. That the Derivative Agreement portion of the Affiliated
Interest Agreement between National Fuel Gas Distribution Corporation and
National Fuel Gas Company is hereby approved.
BY THE COMMISSION,
/s/ John G. Alford
John G. Alford
Secretary
(SEAL)
ORDER ADOPTED: March 16, 1995
ORDER ENTERED: Apr. 5, 1995
