<PAGE>
File No. 70-9089
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
(the Act)
GRANITE STATE ELECTRIC COMPANY (Granite)
MASSACHUSETTS ELECTRIC COMPANY (Mass Electric)
NANTUCKET ELECTRIC COMPANY (Nantucket)
THE NARRAGANSETT ELECTRIC COMPANY (Narragansett)
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION (NEET)
NEW ENGLAND ENERGY INCORPORATED (NEEI)
NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC.(Mass Hydro)
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION (NH Hydro)
NEW ENGLAND POWER COMPANY (Power Company)
NATIONAL GRID USA SERVICE COMPANY, INC. (Service Company)
and
NATIONAL GRID USA (National Grid)
(Names of companies filing this statement)
25 Research Drive, Westborough, Massachusetts 01582
407 Miracle Mile, Suite 1, Lebanon, NH 03766 (Granite)
25 Fairgrounds Road, Nantucket, MA 02554 (Nantucket)
280 Melrose Street, Providence, RI 02901 (Narragansett)
(Addresses of principal executive offices)
THE NATIONAL GRID GROUP plc (NGG)
(Name of top registered holding company parent
of the participating companies herein)
John G. Cochrane Kirk L. Ramsauer
Vice President and Treasurer Deputy General Counsel
National Grid USA National Grid USA
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 dated August 18, 1997 (Commission's File
No. 70-9089), which became effective by Order of the Commission dated October
29, 1997 (HCAR No. 26768), was amended by Post-Effective Amendment Nos. 1 and
2 and, as amended, became effective by Order of the Commission dated June 2,
1998 (HCAR No. 26881) and is hereby further amended by this Post-Effective
Amendment No. 3 as follows:
Item 1. Description of Proposed Transactions
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Introduction
------------
By Orders of the Commission dated October 29, 1997 (HCAR No. 26768) and
June 2, 1998 (HCAR No. 26881) in File No. 70-9089, certain subsidiaries of the
New England Electric System (NEES)(now, National Grid USA (National Grid))
were authorized to enter into short-term borrowing arrangements through
October 31, 2001.
By Order of the Commission dated March 15, 2000 (HCAR No. 35-27154) in
File No. 70-9519, the existing financing authority was extended through May
31, 2003, and the addition as lenders to the Money Pool of Intermediate
Companies (as defined in the Order) and all other newly formed or acquired or
nonparticipating National Grid subsidiaries was authorized.
By Orders of the Commission dated April 15, 1997 (HCAR No. 26704) and
March 20, 1998 (HCAR No. 26875) in File No. 70-8955, Eastern Utilities
Associates (EUA) and certain of its subsidiaries were authorized to enter into
certain borrowing arrangements through July 31, 2002.
On April 19, 2000, pursuant to order of the Commission dated April 14,
2000 (HCAR 27166) in File No. 70-9537, EUA was merged into National Grid. On
May 1, 2000, certain EUA subsidiaries were merged into certain National Grid
subsidiaries, as follows:
EUA Company National Grid Company
Blackstone Valley Electric Narragansett
Company (Blackstone)
Eastern Edison Company (Eastern) Mass. Electric
EUA Service Corporation (EUA Service) Service Company
Montaup Electric Company (Montaup) Power Company
Newport Electric Corporation Narragansett
(Newport)
On April 28, 2000, the Service Company filed an Application/Declaration
in File No. 70-9673 proposing, among other things, to restructure its
capitalization to reduce its equity capital by approximately $11 million.
The below-listed companies now seek to amend their borrowing authority to
reflect their current corporate structures and cash requirements.
<PAGE>Borrowing Limits
----------------
On May 1, 2000, the EUA operating companies and service company were
consolidated into the National Grid companies listed below. As a result of
this consolidation, the existing borrowing authorities for the surviving
National Grid companies need to be increased. This will cover their expanded
requirements following consolidation. The companies propose to adjust their
maximum outstanding amounts as shown below:
Borrowing Company Borrowing Authority
Old Requested
Mass. Electric $150,000,000 $275,000,000
(Eastern Edison) $ 75,000,000
Nantucket $ 5,000,000 $ 6,000,000
Narragansett $100,000,000 $145,000,000
(Blackstone) $ 20,000,000
(Newport) $ 25,000,000
Service Company $ 12,000,000 $ 60,000,000
(EUA Service) $ 15,000,000
As a result of the consolidation of Eastern Edison into Mass. Electric,
Mass. Electric's peak borrowing during May was very close to its borrowing
limit. Furthermore, Mass. Electric has experienced a trend of customers
returning to default service from competitive suppliers. If this trend
continues, the company may have a significant under-recovery (up to $62
million). This money would be recovered over time, but, until then, would
obviously put significant pressure on Mass. Electric's short-term borrowing
capacity. Based upon this potential cash requirement and upon the previously
existing borrowing authorizations, Mass. Electric is proposing that its
borrowing limit be increased to $275 million to cover peak borrowings.
Nantucket is proposing that its borrowing limit be increased to $6
million to provide additional flexibility to cover peak borrowings. During
the third quarter, Nantucket's peak borrowing was almost $5 million.
As shown, the borrowing level for Narragansett reflects the previous
authority granted its component parts.
Immediately prior to the merger with the Service Company, EUA Service
paid off $4 million of its existing 10.2% debt. In 1999, the then NEES
Companies established a Rabbi Trust to provide additional security to
participants in certain executive benefit programs. As a result of benefits
triggered by the merger of NEES and The National Grid Group plc, the Service
Company has transferred an additional $8 million into the Trust. The Service
Company has also made other compensation payments to executives as a result of
the National Grid merger and the acquisition of EUA. During the past year,
the cost of system computer enhancements has been putting pressure on the
existing borrowing limits of the Service Company. Finally, as described
above, the Service Company is reducing its equity capital by approximately $12
million. Based upon these potential cash demands and upon the previously
existing borrowing authorizations, the Service Company is proposing that its
borrowing limit be increased to $60 million.
<PAGE>
No increase in borrowing authority is requested for the other Borrowing
Companies.
Sale of Commercial Paper to Dealers
-----------------------------------
Mass. Electric, Narragansett, and the Power Company (the CP Issuers)
propose to issue and sell commercial paper directly to one or more nationally
recognized commercial paper dealers (CP Dealer). The CP Programs for Mass.
Electric and Narragansett are not now active. Currently, the CP Dealer for
the Power Company is CS First Boston Corporation and/or Merrill Lynch Money
Markets Incorporated, but this may change as warranted.
The commercial paper so issued and sold will satisfy the requirements of
Section 3(a)(3) of the Securities Act of 1933 and be in the form of unsecured
promissory notes having varying maturities of not more than 270 days. Actual
maturities will be determined by market conditions, the effective interest
cost to the issuer, and the issuer's cash requirements at the time of
issuance. The commercial paper will be in denominations of not less than
$50,000. The terms of the commercial paper will not provide for prepayment
prior to maturity. The commercial paper will be purchased by the CP Dealer
from the issuer at a discount which will not be in excess of the discount then
prevailing for commercial paper of comparable quality and maturity which is
sold by public utility issuers to commercial paper dealers. The CP Dealer
will initially reoffer the commercial paper at a discount rate not more than
1/8 of 1% per annum less than the prevailing discount rate to the issuer.
The effective interest cost to the issuer of commercial paper will
generally not exceed the effective interest cost of the base lending rate at
Fleet/Boston (formerly BankBoston). However, the effective interest cost of
such paper is based on the supply of, and demand for, similar paper at the
time of sale. Specifically, on several previous occasions short-term money
markets have become very volatile during brief periods of extraordinary
demand, and the interest costs of commercial paper have exceeded bank base
rates. Bank borrowing agreements, under which the CP Issuers must borrow as
an alternative to selling commercial paper, generally provide that the
interest rate of such borrowings shall be the then current money market rate.
Although under the described circumstances the interest cost of commercial
paper may exceed the bank base rate, it may still be less than the alternative
money market rates at which the CP Issuers would otherwise then be forced to
borrow. Likewise, the CP Issuers may be able to negotiate a shorter borrowing
period in the commercial paper market than from banks. Because such volatile
market conditions usually exist for brief periods, it is not anticipated that
any sale of commercial paper with interest costs in excess of bank base rates
would have a significant marginal impact on the annual interest cost of the CP
Issuers.
The CP Issuers will issue commercial paper or borrow from banks if there
are not sufficient surplus funds available from the Money Pool to meet their
needs. The decision to borrow from banks or issue commercial paper will be
based on the cost of such funds and their availability for the anticipated
borrowing period.
<PAGE>Borrowings from and Loans to the Money Pool
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The Borrowing Companies propose to reduce their need for outside
borrowing through the continued use of the Money Pool. Under the Money Pool,
surplus funds that may be available from day to day in the treasuries of the
Participating Companies are used to make loans to the Borrowing Companies in
need of short-term funds. The CP Issuers will pay interest at a rate equal to
the rated monthly average of the rates of their individual outstanding
commercial paper. For periods when a CP Issuer does not have outstanding
commercial paper, its rate will be the monthly average of the rate for high-
grade 30-day commercial paper as published in the Wall Street Journal. The
rate for all other borrowing will be 108% of the monthly average of the rate
for high grade 30-day commercial paper sold through dealers by major
corporations as published in the Wall Street Journal. Although there are no
stated maturities, the loans made by the Money Pool are payable on demand, and
may be prepaid by the borrower without penalty. Borrowings may, but need not
be, evidenced by notes. Borrowings will be available first to the wholly
owned subsidiaries of National Grid (The Group I Borrowers). Thereafter, if
the Money Pool still has additional funds, these will be available to the non-
wholly owned subsidiaries of National Grid participating in the pool (the
Group II Borrowers) before external investments are made. All funds borrowed
by the Group II Borrowers will be used for their own internal financing and
will not be loaned to stockholders. Each of the companies listed on the cover
hereof, including National Grid, (the Participating Companies) has been
granted authority to lend money in the Money Pool under the current terms
thereof. As noted under "Introduction" above, all National Grid subsidiaries,
including former EUA companies, are authorized to participate in the Money
Pool.
Each member determines each day, on the basis of cash flow projections,
the amount of surplus funds it has available for investment in the Money
Pool. The surplus funds are transferred to a Service Company account. The
Service Company administers and maintains, as agent, the Money Pool for the
member companies.
The current terms of the Money Pool are unchanged (authorized in
Commission's File No. 70-8675 and shown in Exhibit G thereto).
Borrowings from Banks
---------------------
The proposed borrowings by the Borrowing Companies from banks will be
evidenced by notes maturing in less than one year from the date of issuance.
The Borrowing Companies will negotiate with the banks the interest costs of
such borrowings. The Borrowing Companies maintain lines of credit for limited
amounts with banks. In connection with these lines, the Borrowing Companies
pay commitment fees in lieu of compensating balances. The effective interest
cost of borrowings from a bank will not exceed the greater of the bank's base
or prime lending rate, or the rate published in the Wall Street Journal as the
high federal funds rate, plus, in either case, one percent. Based on the
current base lending rate of 9.5% and an equivalent or lower high federal
funds rate, the effective interest costs of such a borrowing today would not
exceed 10.5% per annum.
Certain of such borrowings may be without prepayment privileges. Payment
of any short-term promissory notes prior to maturity will be made on the basis
most favorable to the Borrowing Companies, taking into account fixed
maturities, interest rates, and any other relevant financial considerations.
<PAGE>
The Borrowing Companies have made arrangements with certain banks for
lines of credit, for various purposes, including support of commercial paper.
Direct Loans by National Grid
-----------------------------
The Service Company and National Grid further seek authorization for the
option of meeting the Service Company's borrowing requirements by direct loans
from National Grid to the Service Company. As previously agreed to with the
Commission staff in connection with the Staff's audit of the Service Company,
such loans would be at the rate equal to the prime rate for Fleet/Boston less
1%. Based on the current prime rate of 9.5%, the effective interest costs of
such borrowings would be 8.5%. Although there will be no stated maturities,
such borrowings may be prepaid by the Service Company without penalty. The
borrowings may, but need not, be evidenced by notes.
Filing of Certificates of Notification
--------------------------------------
Within 45 days after the end of each calendar quarter, the Participating
Companies will file a certificate of notification covering the transactions
effected pursuant to the authority requested herein during such quarter. Such
certificate will show the names of the borrowers, and for each borrower, the
dates and amounts of all new money borrowings, whether by issuance of notes to
banks, or by sale of commercial paper (including money borrowed from banks to
pay the Money Pool or CP Dealers, or borrowed from the Money Pool to pay banks
or CP Dealers, or borrowed by sale of commercial paper to pay the Money Pool
or banks), the names of the lenders, the maximum concurrent amount of notes
outstanding to banks, the Money Pool and CP Dealers, the aggregate total
outstanding at any one time, and the aggregate total outstanding at the end of
such quarter. Each certificate will include, with respect to the issue and
sale of commercial paper, the effective interest cost for such promissory note
issued as commercial paper. The final certificate of notification will be
accompanied by the required past tense opinion of counsel.
Rule 53
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NGG has an ownership interest in foreign utility companies (FUCO) as
defined in Section 33 of the Act, as authorized by Order of the Commission
dated March 15, 2000 (HCAR No. 35-27154).
Neither National Grid nor any of its subsidiaries has an ownership
interest in an exempt wholesale generator (EWG) as defined in Section 32 of
the Act or in a FUCO. Additionally, neither National Grid nor any subsidiary
thereof is a party to, or has any rights under, a service, sales, or
construction agreement with an EWG or a FUCO. National Grid and its
subsidiaries shall comply with the requirements of Rule 53 of the Act in
connection with EWG and FUCO acquisitions and financings.
None of the monies from the borrowings hereunder will be used, directly
or indirectly, to invest in, or otherwise acquire an interest in the business
of, any EWGs or FUCOs.
Item 3. Applicable Statutory Provisions
----------------------------------------
Item 3, Applicable Statutory Provisions, is amended by the addition of:
(8)The issuance of Notes to National Grid by Service Company and Loans by Grid
to Service Company: Sections 6(a), 7, 9(a), 10, and 12 and Rule 43 and
exempted from Rule 45(a) by subparagraph (b)(1) thereof.
<PAGE>Item 5. Procedure
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It is requested that the Commission take action with respect to this
Post-Effective Amendment without a hearing being held and that an order
allowing this Post-Effective Amendment to become effective on August 1, 2000,
or as soon as practicable.
The companies (i) do not request a recommended decision by a hearing
officer, (ii) do not request a recommended decision by any other responsible
officer of the Commission, (iii) hereby specify that the Division of Corporate
Regulation may assist in the preparation of the Commission's decision, and
(iv) hereby request that there be no 30-day waiting period between the date of
issuance of the Commission's Order and the date on which it is to become
effective.
Item 6. Exhibits and Financial Statements
------------------------------------------
Item 6(a), Exhibits, is hereby amended by adding the following exhibits:
(a) Exhibits
D-1 (a)(1)Petition of Massachusetts Electric Company and New England
Power Company and Eastern Edison Company to the Massachusetts Department of
Telecommunications and Energy with respect to merger (incorporated by
reference to Exhibit D-2 in File No. 70-9537)
D-2 (a)(1)Certified copy of the Order of the Massachusetts
Department of Telecommunications and Energy with respect to mergers
(incorporated by reference to Exhibit D-2.A in File No. 70-9537)
* F-2 Opinion of Counsel
H-1 Proposed Form of Notice
(b) Financial Statements
Item 6(b), Financial Statements, is hereby amended by adding the
following exhibits:
1Balance Sheets of National Grid and of National Grid and
Subsidiaries Consolidated, Mass. Electric, Nantucket, Narragansett, and
Service Company as of March 31, 2000.
The proposed transactions will have no material effect on the
Balance Sheets of National Grid or of National Grid and Subsidiaries
Consolidated, Mass. Electric, Nantucket, Narragansett, and Service Company;
pro forma statements, therefore, are omitted.
2Statements of Income and Retained Earnings of National Grid and
National Grid and Subsidiaries Consolidated, Mass. Electric, Nantucket,
Narragansett, and Service Company for the twelve months ended March 31, 2000,
on an actual basis.
<PAGE>
Because the amount of short-term debt fluctuate widely during any period, it
is not practicable to give the pro forma effect of the proposed transactions.
** 3Estimated Sources and Applications of Funds and Capitalization
for each of the Borrowing Companies.
Since the date of the Balance Sheets, there have been no material changes
which were not in the ordinary course of business.
Financial Data Schedules are being filed for each company.
* to be filed by amendment
** Previously provided in this file and with respect to those former
EUA companies merged into the Borrowing Companies, as provided in
File No. 70-8955.
<PAGE> SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each undersigned company has duly caused this Post-Effective Amendment
No. 3, Commission's File No. 70-9089, to be signed on its behalf by the
undersigned officers thereunto duly authorized.
NATIONAL GRID USA
NATIONAL GRID USA SERVICE COMPANY, INC.
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
NEW ENGLAND ENERGY INCORPORATED
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION
NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC.
NEW ENGLAND POWER COMPANY
s/ John G. Cochrane
By ______________________________
John G. Cochrane
Treasurer
GRANITE STATE ELECTRIC COMPANY
MASSACHUSETTS ELECTRIC COMPANY
NANTUCKET ELECTRIC COMPANY
THE NARRAGANSETT ELECTRIC COMPANY
s/ Nancy B. Kellogg
By _______________________________
Nancy B. Kellogg
Assistant Treasurer
Date: June 12, 2000
