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File No. 70-8819
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
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
(Name of company filing this statement)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
Michael E. Jesanis Kirk L. Ramsauer
Treasurer Associate General Counsel
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
(Names and address of agents for service)
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Item 1, Part A, is hereby amended by adding the following new
paragraph thereto:
"NEES Trans will be formed to further two goals: first, to
provide assurance to unaffiliated third party transmission service
customers that they will be treated fairly on a basis comparable
to NEES affiliates in the open access marketplace, and, second, to
serve as an initial step towards disaggregation of generation and
transmission functions which NEES believes may, as a practical
matter, evolve as a result of state legislation and rulemaking to
competitively restructure the electric utility industry in some or
all of the New England states. NEES Trans functions will be
performed by a combination of its own personnel and personnel of
NEES affiliated companies; thus, by keeping the transmission
operation function within the NEES system, rather than contracting
with a third party to perform such services, NEES believes it will
be positioned better to meet the more competitive future.
Personnel assigned to NEES Trans will include employees of
affiliated companies who currently perform transmission related
functions. Between 20 and 30 of these employees are expected to be
dedicated full time to NEES Trans operations. Current plans are
to review the status of these dedicated employees before the end
of 1996 to decide whether or not to put them on the NEES Trans
payroll as NEES Trans employees.
No tangible assets will be transferred to NEES Trans, nor
will any tangible assets of NEES affiliates be sold, liquidated,
or eliminated due to the formation of NEES Trans or the transfer of
operational control to it as set forth in this filing. Pursuant to
the Transmission and Distribution Support Agreement, NEES Trans
will compensate NEP and the Retail Companies for their respective
total transmission costs of service and distribution costs
associated with wholesale transactions. This compensation to NEP
and the Retail Companies will include cost of capital and return
on equity components. NEES Trans' compensation to NEP and the
Retail Companies is incorporated in FERC accepted transmission
tariffs; NEES Trans is structured as a pass-through entity which
will charge transmission rates to transmission customers,
including its affiliates, that recover the costs of service of NEP
and the Retail Companies determined in accordance with the FERC
accepted cost of service methods. Pursuant to the FERC accepted
tariffs, NEES Trans may be directly billed via intercompany
billing for certain incremental costs associated with its
formation and existence such as those incurred in financial
reporting, revenue accounting, compensation of officers, and other
similar costs. When the transactions proposed herein are carried
out, there will be no change in the physical interconnection of
the NEES system and no change in the financial position of NEP and
the Retail Companies. The NEES system will continue to be a single
interconnected and coordinated system confined in its operations
to a single area or region. Given impending actions by state
jurisdictions in NEES' service territory, NEES believes that the
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transactions proposed in this filing will promote the continued
economic and efficient operation of the NEES system as a single
integrated public-utility system. Accordingly, following the
formation of NEES Trans, the NEES system will continue to meet the
definition of an 'integrated public-utility system' set forth in
section 2(a)(29)(A) of the Act.
NEES Trans' function will be operation of the transmission
assets as described above. NEES Trans will not perform
construction services for affiliated companies or for
non-affiliates. NEES Trans may, as part of its operational
function, inform NEP and/or the Retail Companies, as the case may
be, of an identified construction need with respect to the
transmission assets. NEP and/or the Retail Companies will be
responsible for performing any such construction to be paid for by
customers in accordance with FERC accepted transmission tariffs."
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
Amendment No. 2 to its Application/Declaration on Form U-1 to be
signed on its behalf, as indicated by the undersigned officer
thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
_______________________________
Michael E. Jesanis, Treasurer
Dated: June 10, 1996
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 therefore.
