<PAGE>
File No. 70-8675
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 2
TO
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NEW ENGLAND ELECTRIC SYSTEM
NEW ENGLAND POWER COMPANY
MASSACHUSETTS ELECTRIC COMPANY
25 Research Drive
Westborough, Massachusetts 01582
(Name of company filing this statement and
address of principal executive office)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Robert King Wulff
Treasurer Corporation Counsel
25 Research Drive 25 Research Drive
Westborough, Massachusetts 01582 Westborough, Massachusetts 01582
(Names and addresses of agents for service)
<PAGE>
Form U-1 Application/Declaration under the Public Utility
Holding Company Act of the 1935, File No. 70-8675 amended by
Amendment No. 1 dated November 9, 1995, is hereby further amended
by this Amendment No. 2.
A. Under Item 1. Description of Proposed Transaction, A.
Proposed Acquisition of NEC, 4. Benefits to NEC of Becoming a
Part of the Company's System as amended in Amendment No. 1, is
hereby further amended by deleting the fourth paragraph thereof
and replacing it with the following new paragraph:
Furthermore, as a condition to the merger, NEC customers
will receive a five percent reduction in their base rates upon
consummation of the merger. On the in-service date of the Cable
Project (as hereinafter described), NEC's customers' rates will
be set at that point and going forward at MEC's then-current rate
schedules plus a Cable Project surcharge with a commitment that
during the first year these new rates will be no greater than the
rates before the in-service date. The Cable Project surcharge
will be designed to recover the long-term debt provided by MIFA
and equity funds provided by the Company to finance the Cable
Project. This rate plan will provide NEC customers with lower,
more stable rates and has been approved by the DPU.
B. Under Item 1. Description of Proposed Transaction, A.
Proposed Acquisition of NEC, 5. Proposed Cable Project and
Financing as amended by Amendment No. 1 is hereby further amended
as follows:
(1) by adding the following sentence to the end of the first
paragraph: "The construction of the Cable Project is currently
scheduled for completion in the first quarter of 1997."
(2) by adding the following sentence to the end of the third
paragraph: "As a result of the DPU order approving this
financing, the issuance of the New Bonds meets the requirements
of Rule 52."
<PAGE>
(3) by adding the following sentence to the end of the sixth
paragraph: "The Company represents that pursuant to Rule 54, the
criteria of Rule 53(a) and (b) have been satisfied."
c. Under Item 1. Description of Proposed Transaction, A.
Proposed Acquisition of NEC, 6. Effects on the Company's System
as amended by Amendment No. 1 is hereby further amended by
deleting the first paragraph thereof and replacing it with the
following:
It is not anticipated that the acquisition of NEC by the
Company will have any material effect on the consolidated
earnings per share of the Company. As shown in the financial
statements, the proposed acquisition of NEC will have a de
minimus impact on the Company's system. The Company's system had
a peak load of 4,385 Mws in 1994 and had operating revenue of
$2,243,029,000 in 1994. NEC had a peak load of 22.8 Mws in 1994
and had operating revenue of $12,351,000 in 1994. The Company
represents approximately 21.37% of New England Power Pool's peak
load. The addition of NEC to the NEES System will increase this
percentage by only 0.11%. NEC's revenues and customers represent
less than 1% of MEC's revenues and customers. The acquisition of
NEC makes sense to the Company at this time because NEP will be
the wholesale supplier of electricity to NEC for the foreseeable
future.
D. Under Item 1. Description of Proposed Transaction, A.
Proposed Acquisition of NEC, 6. Effects on the Company's System
as previously amended by Amendment No. 1 is hereby further
amended by adding the following sentences to the end of paragraph
2.
"The Company expects through appropriate rate action that
this income stream shall continue in the near future before
consideration of savings from synergies. In addition, the
Company estimates potential pre-tax savings in NEC's
operations of between $500 thousand and $1 million, which
could also result in increased net income. As noted above,
the Cable Project surcharge will collect a return on equity
which will allow the Company to earn a return on its equity
provided to NEC for investment in the Cable Project equal to
MEC's current allowed return (initially 11%)."
E. Description of Proposed Transaction, C. Money Pool and
Short-term Borrowing, 1. Borrowing from Money Pool, please add
the following sentence to the end thereof as amended by Amendment
No. 1: "The only change to the current Money Pool terms is to add
the Surviving Corporation as a borrower from and investor in the
Money Pool."
<PAGE>
F. Under Item 3. Applicable Statutory Provisions, in the
second paragraph, please delete (5) as amended by Amendment No. 1
and replace it with the following:
"5. The payment of indebtedness by NEC under the short term
borrowing authority is exempted from Sections 9(a) and
12 and Rule 42 by said Rule."
G. By supplying the following exhibits under Item 6. Exhibits
and Financial Statements
(a) Exhibits
B-3 Draft form of MEC Guarantee
D-2(a) FERC Approval
F Opinion of Counsel
G Statement of Estimated Fees and Expenses
Exhibits A-5 through A-11 will be filed by post effective
amendment.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this Amendment No. 2 to Form U-1 Application/Declaration
(Commission's File No. 70-8675) to be signed on its behalf by the
undersigned officer thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
MASSACHUSETTS ELECTRIC COMPANY
NEW ENGLAND POWER COMPANY
s/Michael E. Jesanis
By: ________________________
Michael E. Jesanis
Treasurer of each company
Date: December 26, 1995
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent thereof assumes
or shall be held to any liability therefor.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
B-3 Draft form of MEC Guarantee Filed herewith
D-2(a) FERC Approval Filed herewith
F Opinion of Counsel Filed herewith
G Statement of Estimated Fees and Filed herewith
Expenses
<PAGE>
Exhibit B-3
DRAFT
FORM OF GUARANTY
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and to induce, a
___________ corporation (herein, with its participants,
successors and assigns, called "Lender"), at its option, at any
time or from time to time to make loans or extend other
accommodations to or for the account of ("Issuer") and
("Borrower") or to engage in any other transactions with Borrower
and Issuer, the undersigned hereby: absolutely and
unconditionally guarantees to Lender the full and prompt payment
when due, whether at maturity or earlier by reason of
acceleration or otherwise, of any and all present and future
debts, liabilities and obligations owed by Borrower or Issuer to
Lender evidenced by or arising out of the Loan Agreement dated as
of _________ among Lender, Borrower and Issuer (the
"Indebtedness") and subject to prior written consent of
undersigned, any and all extensions, renewals, modifications,
supplements or amendments thereto or thereof and any related
agreements which upon such consent shall become Indebtedness.
1. The undersigned represents and warrants to Lender that
(a) the undersigned is a corporation duly organized and existing
in good standing and has full power and authority to make and
deliver this Guaranty; (b) the execution, delivery and
performance of this Guaranty by the undersigned have been duly
authorized by all necessary action of its directors and do not
and will not violate the provisions of, or constitute a default
under, any presently applicable law or its articles of
incorporation or bylaws or any agreement presently binding on it;
(c) this Guaranty has been duly executed and delivered by the
authorized officers of the undersigned and constitutes its
lawful, binding and legally enforceable obligation; and (d) the
authorization, execution, delivery and performance of this
Guaranty do not require notification to, registration with, or
consent or approval by, any federal, state or local regulatory
body or administrative agency.
2. No act or thing need occur to establish the liability
of the undersigned hereunder, and no act or thing, except full
payment and discharge of all Indebtedness, shall in any way
exonerate the undersigned hereunder or modify, reduce, limit or
release the liability of the undersigned hereunder. This is an
absolute, unconditional and continuing guaranty of payment of the
Indebtedness. The dissolution, adjudication of bankruptcy of the
undersigned shall not revoke this Guaranty.
<PAGE>
3. The undersigned represents and warrants to Lender that
the undersigned has an economic interest in Borrower and expects
to derive benefits therefrom and from any loans resulting in the
creation of Indebtedness guaranteed hereby, and that this
Guaranty is given for a corporate purpose. This Guaranty shall
be effective and enforceable by Lender without regard to the
receipt, nature or value of any such benefits.
4. If the undersigned shall be dissolved or shall be or
become insolvent (however defined), then Lender shall have the
right to declare immediately due and payable, and the undersigned
will forthwith pay to Lender, the full amount of all Indebtedness
whether due and payable or unmatured. If the undersigned
voluntarily commences or there is commenced involuntarily against
the undersigned a case under the United States Bankruptcy Code,
the full amount of all Indebtedness, whether due and payable or
unmatured, shall be immediately due and payable without demand or
notice thereof.
5. The undersigned will not exercise or enforce any right
of contribution, reimbursement, recourse or subrogation available
to the undersigned as to any Indebtedness, or against any person
liable therefor, or as to any collateral security therefor,
unless and until all Indebtedness shall have been fully paid and
discharged.
6. The undersigned will pay or reimburse Lender for all
costs and expenses (including reasonable attorneys' fees and
legal expenses) incurred by Lender in connection with the
protection, defense or enforcement of this Guaranty in any
litigation or bankruptcy or insolvency proceedings.
7. Lender shall not be obligated by reason of its
acceptance of this Guaranty to engage in any transactions with or
for Borrower or Issuer. Whether or not any existing relationship
between the undersigned and Borrower has been changed or ended,
Lender may enter into transactions resulting in the creation or
continuance of Indebtedness and may otherwise agree, consent to,
or suffer the creation or continuance of any Indebtedness,
without any consent or approval by the undersigned and without
any prior or subsequent notice to the undersigned. The liability
of the undersigned shall not be affected or impaired by any of
the following acts or things (which Lender is expressly
authorized to do, omit or suffer from time to time, both before
and after revocation of this Guaranty, without consent or
approval by or notice to the undersigned): (a) any acceptance of
collateral security, guarantors, accommodation parties or
sureties for any or all Indebtedness; (b) one or more extensions
or renewals of Indebtedness (whether or not for longer than the
original period) or any modification of the interest rates,
maturities or other contractual terms applicable to any
<PAGE>
Indebtedness; (c) any waiver or indulgence granted to Borrower or
Issuer, any delay or lack of diligence in the enforcement of
Indebtedness, or any failure to institute proceedings, file a
claim, give any required notices or otherwise protect any
Indebtedness; (d) any full or partial release of, compromise or
settlement with, or agreement not to sue, Borrower, Issuer or any
guarantor or other person liable in respect of any Indebtedness;
(e) any release, surrender, cancellation or other discharge of
any evidence of Indebtedness or the acceptance of any instrument
in renewal or substitution therefor; (f) any failure to obtain
collateral security (including rights of setoff) for
Indebtedness, or to see to the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to
preserve, protect, insure, care for, exercise or enforce any
collateral security; or any modification, alteration,
substitution, exchange, surrender, cancellation, termination,
release or other change, impairment, limitation, loss or
discharge of any collateral security; (g) any collection, sale,
lease or disposition of, or any other foreclosure or enforcement
of or realization on, any collateral security; (h) any
assignment, pledge or other transfer of any Indebtedness or any
evidence thereof; (i) any manner, order or method of application
of any payments or credits upon Indebtedness; (j) any election
by Lender under Section 1111(b) of the United States Bankruptcy
Code. The undersigned waives any and all defenses and discharges
available to a surety, guarantor, or accommodation co-obligor.
8. The undersigned waives any and all defenses, claims,
setoffs, and discharges of Borrower or Issuer, or any other
obligor, pertaining to Indebtedness, except the defense of
discharge by payment in full. Without limiting the generality of
the foregoing, the undersigned will not assert, plead or enforce
against Lender any defense of waiver, release, discharge in
bankruptcy, statute of limitations, res judicata, statute of
frauds, anti-deficiency statute, fraud, incapacity, minority,
usury, illegality or unenforceability which may be available to
Borrower or Issuer or any other person liable in respect of any
Indebtedness, or any setoff available against Lender to Borrower
or Issuer or any other such person, whether or not on account of
a related transaction. The undersigned expressly agrees that the
undersigned shall be and remain liable for any deficiency
remaining after foreclosure of any mortgage or security interest
securing Indebtedness, whether or not the liability of Borrower
or Issuer or any other obligor for such deficiency is discharged
pursuant to statute or judicial decision. The liability of the
undersigned shall not be affected or impaired by any voluntary or
involuntary liquidation, dissolution, sale or other disposition
of all or substantially all the assets, marshalling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar event or
<PAGE>
proceeding affecting Borrower or Issuer or any of their
respective assets. The undersigned will not assert, plead or
enforce against Lender any claim, defense or setoff available to
the undersigned against Borrower or Issuer.
9. The undersigned waives presentment, demand for payment,
notice of dishonor or nonpayment, and protest of any instrument
evidencing Indebtedness. Lender shall not be required first to
resort for payment of the Indebtedness to Borrower or Issuer or
other persons, or their properties, or first to enforce, realize
upon or exhaust any collateral security for Indebtedness, before
enforcing this Guaranty.
10. If any payment applied by Lender to Indebtedness in
thereafter set aside, recovered, rescinded or required to be
returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of Borrower or Issuer or
any other obligor), the Indebtedness to which such payment was
applied shall for the purpose of this Guaranty be deemed to have
continued in existence, notwithstanding such application, and
this Guaranty shall be enforceable as to such Indebtedness as
fully as if such application had never been made.
11. The liability of the undersigned under this Guaranty is
in addition to and shall be cumulative with all other liabilities
of the undersigned to Lender as guarantor, surety, endorser,
accommodation co-obligor or otherwise of any Indebtedness or
obligation of Borrower or Issuer, without any limitation as to
amount, unless the instrument or agreement evidencing or creating
such other liability specifically provides to the contrary.
12. This Guaranty shall be effective upon delivery to
Lender, without further act, condition or acceptance by Lender,
shall be binding upon the undersigned and the successors and
assigns of the undersigned and shall inure to the benefit of
Lender and its participants, successors and assigns. Any
invalidity or unenforceability of any provision or application of
this Guaranty shall not affect other lawful provisions and
application hereof, and to this end the provisions of this
Guaranty are declared to be severable. This Guaranty may not be
waived, modified, amended, terminated, released or otherwise
changed except by a writing signed by the undersigned and Lender.
This Guaranty shall be governed by the laws of the ___________.
The undersigned waives notice of Lender's acceptance hereof and
waives the right to trial by jury in any action based on or
pertaining to this Guaranty.
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed on
behalf of the undersigned by its duly authorized officer as of
the day and year first above written.
MASSACHUSETTS ELECTRIC COMPANY
By: _____________________________
Title: ___________________________
STATE OF ______________________)
COUNTY OF______________________)
The foregoing instrument was acknowledged before me this
____ day of _____________, by _______________, the
_________________ of ______________, a _____________ corporation,
on behalf of the corporation.
_____________________________
Notary Public
[Please note that this Draft Form of Guaranty has not been
reviewed by the Lender and its counsel.]
<PAGE>
Exhibit D-2(a)
UNITED STATES OF AMERICA 73 FERC paragraph 62,181
FEDERAL ENERGY REGULATORY COMMISSION
Nantucket Electric Company and ) Docket Nos. EC95-20-000
New England Electric System ) EL95-74-000
ORDER AUTHORIZING DISPOSITION OF JURISDICTIONAL FACILITIES
(Issued December 19, 1995)
On August 18, 1995, New England Electric System (NEES) and
Nantucket Electric Company (Nantucket) (collectively, Applicants)
jointly filed a petition for declaratory order disclaiming
jurisdiction and, in the alternative, an application under section
203 of the Federal Power Act (FPA) 1/ for Commission
authorization for Nantucket to merge into NEES. In light of
Applicants' request for action in this matter and their alternative
application under section 203, jurisdiction over Nantucket's
proposed disposition of facilities is assumed and action is taken
on the application without prejudice to Applicants' petition. As
discussed below, Nantucket's disposition of jurisdictional
facilities as part of the merger of Nantucket into NEES is
consistent with the public interest.
Background
Nantucket owns and operates an electric system on the island
of Nantucket, Massachusetts. Nantucket, which serves approximately
8,600 retail customers, currently is not interconnected with
another electric utility. In 1994, Nantucket and New England Power
Company (NEP), a NEES subsidiary, entered into a number of
agreements related to the construction of a 26-mile, 46 kV undersea
cable to link Nantucket's electric facilities with NEES' mainland
transmission network. 2/ One of the agreements is a Power Sales
Agreement, the terms of which provide for NEP to supply Nantucket
with partial requirements service for 20 years and for Nantucket to
sell capacity and energy to NEP for dispatch in the New England
Power Pool in return for capacity credits and reimbursement for
energy-related costs. 3/ After further negotiations, Nantucket
1/ 16 U.S.C. section 824(b)(1988).
2/ Initially, Nantucket Cable Electric Company, a subsidiary of
NEES, agreed to construct, own and operate the undersea cable
and related facilities (Cable Facilities). Under the terms of
the revised arrangement, which is described infra, Nantucket
will construct and operate the Cable Facilities. According to
the application, the Cable Facilities are expected to enter
service in early 1997.
3/ The Power Sales Agreement, which was accepted for filing by
unpublished Commission letter order dated December 14, 1994 in
<PAGE>
2
Nantucket Electric Company, et al. -- Docket No. EC95-20-000
and NEES now propose to merge Nantucket into NEES as a separate
subsidiary with Nantucket to take full requirements service from
NEP once the undersea cable is completed. The new service
arrangement will supersede the terms of the Power Sales
Agreement. 4/
Description of the Proposed Merger
Under an executed merger agreement dated March 22, 1995
(Merger Agreement), Nantucket will be merged into NEWCO, a wholly-
owned NEES subsidiary that has been formed for the specific purpose
of merging with Nantucket. The surviving company will be named
Nantucket and will be a wholly-owned subsidiary of NEES.
The Merger Agreement provides that current Nantucket
shareholders will receive NEES common shares equivalent to (1) $125
per Nantucket share, plus (2) interest on $125 per Nantucket share,
based on the First National Bank of Boston prime rate, from March
22, 1995 until the closing date of the merger. 5/
The Merger Agreement also provides that, after the Cable
Facilities are constructed, (1) NEP will acquire certain of
Nantucket's generation facilities (approximately 15 MW), which will
remain in operation, and (2) Nantucket will remove from service and
decommission its other generation facilities. 6/
3/(...continued)
Docket No. ER94-1155-000, is designated as Nantucket Rate
Schedule No. 1 and NEP Rate Schedule No. 437.
4/ Applicants indicate that the Power Sales Agreement will be
superseded (and all other agreements will be cancelled) if the
merger is approved. If the merger is not approved,
interconnection of the systems and sales of power and energy
will be accomplished in accordance with the terms of the Power
Sales Agreement.
5/ The total value of NEES shares to be issued is expected to be
$3.5 million (plus interest), based on 28,000 shares of
Nantucket common stock outstanding.
6/ Merger Agreement at 35; Application at 14 and Exhibit G,
Testimony of John G. Cochrane before the Massachusetts
Department of Public Utilities at 18.
<PAGE>
3
Nantucket Electric Company, et al. -- Docket No. EC95-20-000
Request for Waiver
Nantucket requests waiver of the requirements of section
33.2(g) that plant account data submitted for Nantucket conform to
the Commission's Uniform System of Accounts (USofA). Nantucket
states that it does not maintain its plant accounts in strict
conformance with the USofA. In light of the cost to reconstruct
its books, Nantucket requests waiver of this requirement.
Nantucket also requests waiver of the requirement of Exhibits C and
E of section 33.3 that balance sheets and income statements for the
most recent twelve-month period be provided on a pro forma basis,
claiming that the pro forma effects of the merger are immaterial.
Good cause has been shown for granting waiver of the requested
waivers. Applicants, however, shall comply with the accounting
requirements set forth below.
Notice of Filing
Notice of the application was published in the Federal
Register with comments due on or before September 7, 1995. No
comments were received.
Discussion
1. Effect on Costs and Rate Levels
Nantucket states that the proposed merger will produce cost
savings and lower rates for its customers. The merger is expected
to reduce administrative and general costs as a result of
reductions in outside vendor costs for legal and other consultants,
economies of scale in purchases of fuel and other materials,
automation and/or consolidation of support functions and
administrative and reporting requirements. According to the
application, the merger will save Nantucket's customers $13 million
over the period from 1996-2016 compared with the costs associated
with Nantucket remaining an independent company and receiving
service from NEP under the terms of the Power Sales Agreement. 7/
Nantucket also indicates that there should be savings in financing
costs due to the improved credit quality of the company as a
subsidiary of NEES. Furthermore, as a condition to the merger,
Nantucket's customers will receive a five percent reduction in
their base rates upon consummation of the merger. Upon
consideration of the above, and in the absence of opposition to
7/ See Application at 26-27, and Exhibit G, Testimony of James E.
Joynt before the Massachusetts Department of Public Utilities
at 3-4.
<PAGE>
4
Nantucket Electric Company, et al. -- Docket No. EC95-20-000
Applicants' projections, it is concluded that the proposed
transaction will not adversely affect costs or rates.
2. Proposed Accounting Treatment
Nantucket indicates that the merger will be accounted for
under the purchase method of accounting. In addition, based on the
$125 per share exchange price for Nantucket common stock, Nantucket
states that the transaction will result in a negative acquisition
adjustment of $500,000 to $1,000,000. Subject to Nantucket's
compliance with the accounting requirements set forth below, the
proposed accounting for the transaction will not adversely affect
the public interest.
Nantucket shall record any negative acquisition adjustment
associated with the merger transaction in Account 114, Electric
Plant Acquisition Adjustments, and shall amortize such amount to
Account 108, Accumulated Provision for Depreciation of Electric
Utility Plant, in accordance with the requirements of those
accounts.
Nantucket shall use appropriate accounting procedures to
determine costs properly assignable to units of property retired
from service. Such procedures shall be consistent with Electric
Plant Instructions 10 and 11 of the USofA and Part 116, Units of
Property for Use in Accounting for Additions and Retirements of
Electric Plant, of the Commission's regulations. 8/
Nantucket also shall account for the transaction in accordance
with the requirements of Electric Plant Instruction 5 and Account
102, Electric Plant Purchased or Sold, of the USofA. Nantucket
shall record any transaction costs incurred as a result of the
merger in Account 426.5, Other Deductions. In accordance with the
requirements of Account 102, Nantucket shall submit a filing to the
Commission's Chief Accountant, within six months of the date of
merger closing, that identifies the proposed accounting for the
effects of the merger, including accounting for transaction costs.
3. Reasonableness of the Purchase Price and Evidence of
Coercion
Nantucket indicates that the proposed merger, including the
purchase price, was the result of arms-length negotiations between
NEES and Nantucket. Furthermore, there is no evidence that the
proposed transaction results from coercion. Therefore, the
reasonableness of the purchase price and evidence of coercion are
8/ 18 C.F.R. Parts 101 and 116 (1995).
<PAGE>
5
Nantucket Electric Company, et al. -- Docket No. EC95-20-000
not relevant concerns here.
4. Effect of the Transaction on Competition
Applicants state that the merger will not adversely affect the
existing competitive situation because Nantucket currently is
electrically isolated and thus does not compete in any mainland
power markets. Moreover, the Merger Agreement provides for
Nantucket to transfer ownership of 15 MW of generation to NEP and
to decommission its remaining, apparently obsolete, generation.
According to the Application, NEP currently has in effect
tariffs offering firm point-to-point, nonfirm point-to-point, and
network service for transmission-dependent utilities. NEP commits
that, post-merger, any transmission facilities owned by Nantucket
will be made available under these tariffs. Furthermore, if NEP
has not been required to file revised transmission tariffs pursuant
to Commission order (e.g., in Docket No. RM95-8-000), or has not
otherwise filed revised transmission tariffs earlier, NEP also
commits to file revised transmission tariffs not later than sixty
days before the Cable Facilities are expected to enter
service. 9/ Upon consideration of the above, including the
commitments made by NEP, and in the absence of opposition, the
disposition of jurisdictional facilities by Nantucket will not
adversely affect competition.
5. Impairment of Effective Regulation
After the merger, Nantucket's rates will remain subject to the
jurisdiction of the Massachusetts Department of Public Utilities.
Upon completion of the Cable Facilities, Nantucket will become a
wholesale customer of NEP. The Commission will continue to have
jurisdiction over NEP's wholesale rates, including those for
service to Nantucket. Consequently, there is no evidence that
effective regulation will be impaired.
Conclusion
Based on the foregoing analysis and the absence of opposition
to the Application, it is concluded that the disposition of
jurisdictional facilities by Nantucket will be consistent with the
public interest and is authorized subject to the following
conditions:
(1) The proposed transaction is authorized upon the terms and
conditions and for the purposes set forth in the
9/ Merger Application at 14-15.
<PAGE>
6
Nantucket Electric Company, et al. -- Docket No. EC95-20-000
application;
(2) The Commission retains the authority under section 203(b)
of the Federal Power Act to issue supplemental orders as
appropriate;
(3) The foregoing authorization is without prejudice to the
authority of this Commission or any other regulatory body
with respect to rates, service, accounts, valuation,
estimates or determinations of cost, or any other matter
whatsoever now pending or which may come before the
Commission;
(4) Nothing in this order shall be construed to imply
acquiescence in any estimate of determination of cost or
any valuation of property claimed or asserted; and
(5) Nantucket shall comply with the accounting requirements
as discussed in the body of this order.
Authority to act on this matter is delegated to the Director,
Division of Opinions and Systems Analysis, pursuant to 18 C.F.R.
section 375.308. This order constitutes final agency action.
Requests for rehearing by the Commission may be filed within
thirty (30) days of the date of issuance of this order, pursuant to
18 C.F.R. section 385.713.
Robert E. Cackowski
Director, Division of Opinions
and Systems Analysis
<PAGE>
Exhibit F
25 RESEARCH DRIVE, WESTBOROUGH, MASSACHUSETTS 01582
===================================================
December 26, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Commission File No. 70-8675
Dear Ladies and Gentlemen:
I am of counsel to New England Electric System (the
Company), New England Power Company (NEP), and Massachusetts
Electric Company (MEC) (collectively, the Applicants), with
respect to certain transactions in connection with the Company's
proposed acquisition of Nantucket Electric Company (NEC). I am
furnishing this opinion to you in connection with the joint
application/declaration (the Application) on Form U-1, as
amended, of the Applicants. Terms not otherwise defined herein
have the meanings attributed to them in the Application.
As more fully set forth in the Application, the Company
proposes to acquire NEC for the Company's common shares based on
a purchase price of $125 per share or $3.5 million plus an
interest rate equivalent to the amount from March 22, 1995 to the
closing. To facilitate this transaction, the Company proposes to
form NEWCO, a wholly-owned subsidiary of the Company, to merge
with and into NEC, with the surviving corporation (Surviving
Corporation) having all the rights, interests, and obligations of
NEC. To accomplish this transaction the Company would have to
issue not in excess of 160,000 of its common shares.
The Surviving Corporation proposes to finance certain Cable
Facilities through the issuance of tax-exempt debt and equity
funds. The Surviving Corporation would issue to the
Massachusetts Industrial Finance Agency (MIFA) up to $28 million
of New Bonds. The issuance of these New Bonds should meet the
requirements of Rule 52 since the Massachusetts Department of
Public Utilities (MDPU) has specifically approved their issuance
and sale by Order dated October 10, 1995. MEC has agreed to
enter into a Credit and Operating Support Agreement with
Surviving Corporation and to provide guarantees of indebtedness
to MIFA. The MDPU has also specifically approved these
commitments by MEC.
<PAGE>
Securities and Exchange Commission
Page Two
December 26, 1995
The Surviving Corporation also seeks short-term borrowing
authority of $5,000,000 through October 31, 1997 and authority to
borrow and lend money in the Company's Money Pool (approved by
the Commission in its File No. 70-7765).
Finally, NEP proposes to acquire certain generation assets
of Surviving Corporation as set forth in the Application.
I am a member of the bar of the Commonwealth of
Massachusetts. Based upon the foregoing, it is my opinion that,
if the proposed transactions for which approval has been
requested are consummated in accordance with the Application, and
subject to appropriate action by your Commission under the Act:
(a) All state laws applicable to the proposed
transactions will have been complied with;
(b) Each of the applicants are validly organized and
duly existing; and the common shares issued by the
Company has been validly issued, fully paid and
nonassessable, and the holders thereof are
entitled to the rights and privileges appertaining
thereto set forth in the Company's Declaration of
Trust defining such rights and privileges;
(c) Consummation of the proposed transactions will not
violate the rights of the holders of any
securities issued by the Applicants or any
associate company thereof.
I hereby consent to the use of this opinion as part of the
filing of the Application in connection with the proposed
transactions.
Very truly yours,
s/Kirk L. Ramsauer
Kirk L. Ramsauer
Assistant General Counsel
<PAGE>
Exhibit G
Schedule of Estimated Fees and Expenses in
Connection with the Proposed Transaction
Fees for filing under the 1935 Act $ 2,000
Fees for filing under the 1933 Act 1,900
Services of NEPSCO*:
Executive and Administrative Department 5,000
Corporate Department (including attorneys) 75,000
Treasury Department 55,100
Other Departments 17,000
--------
Subtotal $152,100
Services of Outside Counsel: 40,000
Miscellaneous 4,000
========
TOTAL $200,000
* New England Power Service Company (NEPSCO) is an affiliated
service company operating pursuant to the provisions of
Section 13 of the Act and the Commission's rules thereunder.
The services of NEPSCO are performed at the actual cost
thereof.
