File No. 70-8076
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 9
(Post-Effective Amendment 1)
to
APPLICATION/DECLARATION
ON FORM U-1
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
(The "Act")
NORTHEAST UTILITIES HEC INC.
174 Brush Hill Avenue 24 Prime Parkway
West Springfield, MA 01089 Natick, MA 01760
HEC ENERGY CONSULTING CANADA INC HEC INTERNATIONAL
285 YORKLAND BLVD CORPORATION
Willowdale, Ontario 24 Prime Parkway
M2J 1S5 Natick, MA 01760
HECI
1800 Harrison St.
Oakland, CA 94612
(Name of company filing this statement and address of
principal executive office)
NORTHEAST UTILITIES
(Name of top registered holding company)
Robert P. Wax
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices and
communications to:
Jeffery D. Cochran
Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
The application/declaration in this proceeding, as previously amended,
is further amended as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
Northeast Utilities ("NU"), a registered holding company, HEC Inc.
("HEC"), its non-utility subsidiary formed in 1990 to provide energy
management services, HEC Energy Consulting Canada ("HEC Canada") and HEC
International Corporation ("HEC International"), wholly-owned subsidiaries of
HEC, and HECI, a joint venture subsidiary that is fifty percent owned by HEC
International and fifty percent owned by a non-affiliate (collectively,
except for the non-affiliate, "Applicants"), file this Amendment No. 9
(Post-Effective Amendment No. 1) to their application/declaration (the
"Application") on Form U-1, as heretofore amended, to the Securities and
Exchange Commission (the "Commission") for the purpose of obtaining
authorization for HEC and its subsidiaries to provide energy management and
demand-side management ("DSM") services without regard to the 50% Limitation,
as described below. NU and HEC management believe that the 50% Limitation is
not mandated by the Act or a recent Commission order (hereinafter referred
to) to limit the Applicants' activities and should be removed.
In addition, Applicants request authorization to form joint ventures and
other agreements with utilities outside New England and New York, at any time
during the period through June 30, 1996, for purposes of joining forces with
these utilities, on a joint ownership basis, to market and provide energy
management, DSM and consulting services (i.e., those services HEC and its
subsidiaries have previously been authorized to provide) within designated
regions without the necessity of subsequent Commission approval of
the individual joint ventures. Applicants also request authorization to
invest funds, and/or contribute property or other consideration to pay for
their share of such joint ventures in amounts (and/or value) of no greater
than $1 million per joint venture and no more than $8 million in total for
all such joint ventures invested through June 30, 1996.
The 1990, 1993 & 1994 Orders
The 1990 Order authorized NU's organization of HEC, NU's acquisition of
HEC's capital stock and HEC's provision of energy management services.
Pursuant to the 1990 Order, HEC was authorized to provide various energy
management services and DSM measures, without limitation, to customers in New
England and New York (the "Region"), and limited services outside the Region.
By order dated September 30, 1993 (HCA Rel. 35-25900, the "1993 Order"),
the Commission authorized HEC to provide additional energy management and DSM
services and to enter the consulting business in the energy management and
DSM area. The 1993 Order provided that revenues (other than consulting
revenues) attributed to customers outside the Region would not exceed
revenues (other than consulting revenues) attributed to customers within the
Region (the "50% Limitation"). In general, the 1993 Order imposed no
limitations on consulting revenues.
By order dated August 19, 1994 (HCA Rel. 35-26108, the "1994 Order"),
the Commission authorized HEC to organize and acquire HEC Canada, an Ontario
corporation, and HEC International, a Massachusetts corporation. HEC Canada
was organized to provide energy management, DSM and consulting services to
customers located in Canada. HEC International was organized to participate,
on a fifty-fifty basis, in a joint venture with Barakat & Chamberlin, an
unaffiliated company, to form HECI, a subsidiary of HEC International. HECI
was formed to provide energy management, DSM and consulting services to
customers located in the western United States (Washington, Oregon,
California, Montana, Idaho, Wyoming, Colorado, Utah, New Mexico, Nevada, and
Arizona) and in foreign countries (except Canada).
Under the 1994 Order, the revenues (except consulting revenues) of HEC
Canada and HEC's share of HECI's revenues are combined with HEC's revenues
for purposes of the 50% Limitation.
HEC and its subsidiaries provide energy management, DSM services and
consulting services (as described in the 1993 and 1994 Orders) to their
customers. As of December 31, 1994, HEC and its subsidiaries had assets of
$7.5 million, estimated revenues of $20.7 million and estimated net income of
$221,000 for 1994.
50% Limitation
The Applicants herein request that the Commission amend its prior orders
to authorize HEC's and HEC's direct and indirect subsidiaries' (hereinafter,
referred to collectively as "HEC's") activities, as authorized in the 1990,
1993,and 1994 Orders, without regard to the 50% Limitation for the following
reasons: HEC was originally formed to provide improved energy management and
DSM services primarily to customers in the Region, in order to hold down the
need for additional generating capacity and to contain the associated costs.
The Region's situation has changed since 1990. It now has surplus generating
capacity. Although recent conservation expenditures by some utilities in the
Region have decreased slightly, conservation has become a critical component
of the integrated resource planning of most utilities in the United States.
In addition, conservation is becoming an important part of the customer
service and marketing efforts of some utilities in the Region (including the
NU System operating companies -- i.e., The Connecticut Light and Power
Company, Western Massachusetts Electric Company, and Public Service Company
of New Hampshire) and elsewhere.
As a result of its emphasis on engineering and technical skills, HEC is
uniquely qualified as a provider of energy management and DSM services. HEC
has attained a recognized position in its market.
Consequently, retaining and expanding HEC's unique skills and expertise
in energy management and DSM services is important to the NU System's
competitive position. For example, maintaining HEC's position on the
cutting edge of its business provides the NU System operating companies with
direct access to skills and knowledge that are critical to serving large
electric customers in their increasingly competitive business. Although the
50% Limitation has not yet become an impediment to HEC's business outside the
Region, that development is a definite possibility considering that other
areas of the United States outside the Region and many foreign countries have
a substantial need for the type of competitively-priced energy management and
DSM services that HEC provides when compared to demand for such services
within the Region.
The Applicants believe that removal of the 50% Limitation is necessary
and appropriate in the public interest. Energy management and DSM services
are in the public interest within and outside the United States. More
efficient use of energy and other resources reduces the adverse environmental
and other effects of increased generation and unnecessary consumption of
finite resources. Further, as the Commission noted in a recent order
involving a similar request by one of HEC's competitors, Congress has
confirmed the "strong national interest in promoting energy conservation and
efficiency." Eastern Utilities Associates (HCA Rel. 35-26232; File 70-7287,
February 14, 1995)(hereinafter, "Eastern Utilities") at 8. HEC, as a leader
in energy management and DSM services, has the potential to provide its
services in a broad range of circumstances world-wide. The experience and
skills that HEC can gain from such activity will improve HEC's service to
customers within the Region.
HEC's business has grown substantially since its organization. Through
effective marketing and cost management, HEC's business has produced
increasingly positive operating results, to the benefit of the NU System
investors. Removing the 50% Limitation on HEC's business should help insure
HEC's continued positive trends and leading competitive position. Also,
removing the 50% Limitation on HEC's business will not adversely impact the
NU System or the customers of the NU System operating companies. HEC's
projects normally involve no more than a small investment of funds for
relatively short time periods. Those projects serve customers in various
geographic areas and industries. Consequently, the risk of HEC's activities
is diversified and the potential for adverse impact on NU is minimized.
Further, NU's total investment of capital in HEC and its authorized amount of
lending through the System Money Pool to HEC are small compared to the NU
System's assets and revenues. See the Commission's June 25,1993 Order (HCA
Rel. No. 35-25836) authorizing HEC to participate in the Money Pool, and its
December 28, 1994 Order (HCA Rel. No. 35-26207) authorizing HEC's current
borrowing limit of $11 million.
NU and its shareholders will bear any risks associated with HEC's
increased activities outside of the Region. Applicants will not allocate an
inappropriate amount of time to HEC's activities and expect that the core
utility business within the Region will remain the primary focus of their
management efforts.
Applicants believe that the 50% Limitation on HEC's business is not
mandated by the Act or Commission precedent. See Eastern Utilities; Jersey
Central Power & Light Company HCA Rel. 35-24348 (March 18, 1987); Southern
Company HCA Re. 35-22315 (December 18, 1981) amending HCA Rel. 35-22132 (July
17, 1981). HEC engages in a low-risk, small-investment, electric utility-
related business. HEC's goal is to earn the maximum possible rate of return
for the benefit of NU's investors, while developing and retaining highly
skilled professionals, who are available to serve the energy management and
DSM needs of the NU System operating companies and their customers.
Joint Ventures with Utilities
HEC also requests Commission authorization to form joint ventures with
utilities serving customers in different areas outside of the Region, without
subsequent Commission approval. These joint ventures would be organized to
provide the services that HEC currently provides. The services of each such
joint venture would be provided to customers located in a defined region that
would include, but not be limited to, the service areas of the participating
utility.
These joint ventures would combine the participating utility's knowledge
of the regional market and its established relationships with its customers
with HEC's technical expertise and competitive marketing capabilities. In
this way, the complementary capabilities of the joint venture participants
would be efficiently joined in a comprehensive market offering. The joint
venture structure reduces HEC's risk of expanding in a new regional market by
sharing the requisite financial investment and using existing capabilities.
The utilities benefit by adding more services to their offerings to retain or
acquire new customers and by sharing the investment risk with HEC.
Funding of Joint Ventures
The joint ventures between HEC and the utilities would usually be formed
on a 50/50 ownership basis, although other equity sharing may be negotiated.
HEC and the participating utility would each advance money, property or other
consideration to the joint venture (all of which will be treated as open
account advances) for their respective interests in the joint venture as
needed for the joint venture's operations during the period through June 30,
1996. The joint ventures will reimburse HEC for its cost of money allocable
to such advances. Similarly, each of the joint ventures would also reimburse
the participating utility for its advance at a rate not to exceed the
utility's cost of money.
Some of the joint ventures' expenses may be paid directly by HEC or the
participating utility. For those expenses, the joint venture participant
paying the bill will invoice the other participant's share of the paid
expense. Direct payment of the joint venture's expenses would be treated as
an advance to the joint venture with the same term and interest rate as the
open account advances described above.
HEC's outstanding advances plus the value of any other contributions to
a joint venture combined with HEC's direct payment of any costs associated
with that venture would not exceed $1 million at any time for any of these
joint ventures, unless further Commission authorization is obtained. In
aggregate, HEC's outstanding advances and other payments to all such joint
ventures will not exceed $8 million at any time, unless further Commission
approval is obtained.
The joint ventures would enter into agreements with HEC (and the
participating utilities) to subcontract for their services. Those services
would be provided at cost pursuant to Rule 90 and would not be applied toward
the $1 million per venture limit noted in the previous paragraph. These
subcontract agreements would include provisions prohibiting HEC and the
participating utility from competing with the joint venture.
As the level of their business activities increases, some of these joint
ventures may hire staff to manage the joint venture's activities. Earnings
from the joint ventures' operations will be accounted for on at least a
quarterly basis.
Neither NU nor HEC shall become, as a result of the provision of
consulting, energy management or DSM services described herein, a company
that owns, operates or is an equity participant in (1) any electric utility
company, as defined in section 2(a)(3) of the Act, (2) any exempt wholesale
generator, as defined in the Energy Policy Act of 1992, or (3) any foreign
utility company, as defined in the Energy Policy Act. In addition, neither
NU nor HEC will have any rights or obligations under a service, sales or
construction contract with an exempt wholesale generator or a foreign utility
company as a result of the proposed transactions, except as permitted by the
Act.
The NU System is in compliance with Rule 53(a), (b), and (c), as
demonstrated by the following determinations:
(i) NU's aggregate investment in the EWGs and FUCOs (i.e., amounts invested
in or committed to be invested in EWGs and FUCOs, for which there is
recourse to NU) does not exceed 50% of the NU System's consolidated
retained earnings as reported for the four most recent quarterly
periods on NU's Form 10-K and 10-Qs. At December 31, 1994, the ratio
of such investment $5,417,000) to such consolidated retained earnings
($946,988,000) was 0.6%. NU has also made investments related to a
gas-fired generating project (the "Project") that is being constructed
in Argentina. On March 3, 1995, the Argentinian company (Central
Termica San Miguel de Tucuman, S.A., "C.T.S.M.T.") that will own and
operate the Project filed a Form U-57 notifying the Commission of
foreign utility company status. As of December 31, 1994, NU had made
investments of $5,000,000 associated with the Project.
(ii) Encoe Partners and C.T.S.M.T. (NU's only EWGs or FUCOs at this time)
maintain books and records, and prepares financial statements, in
accordance with Rule 53(a)(2). Furthermore, NU has undertaken to
provide the Commission access to such books and records and financial
statements, as it may request.
(iii) No employees of the NU System's public utility companies have rendered
services to Encoe partners or C.T.S.M.T.
(iv) NU has submitted (a) a copy of each Form U-1 and Rule 24 certificates
that have been filed with the Commission under Rule 53 and (b) a copy
of Item 9 of Form U5S and Exhibits G and H thereof to each state
regulator having jurisdiction over the retail rates of the Operating
Companies.
(v) Neither NU nor any NU subsidiary has been the subject of a bankruptcy
or similar proceeding unless a plan of reorganization has been
confirmed in such proceeding. In addition, NU's average consolidated
retained earnings for the four most recent quarterly periods has not
decreased by 10% or more from the average for the previous four
quarterly periods.
(vi) In the previous fiscal year, NU did not report operating losses
attributable to its investment in Encoe Partners, unless such losses
did not exceed 5 percent of NU's consolidated retained earnings.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
The estimated fees and expenses payable in connection with the
transactions contemplated by this Amendment 9 are as follows:
Commission filing fee $2,000
Legal fees and expenses $3,500
Miscellaneous related expenses
(such as telephone courier and travel) $ 200
TOTAL $5,700
ITEM 3. APPLICABLE STATUTORY PROVISIONS
The sections of the Act and the rules or exemptions thereunder that
Applicants consider applicable to the transactions and the basis for
exemption therefrom are set forth below:
Transactions Section 11(b)(1)
Formation of, and participation Sections 9 and 10
in joint ventures by Applicants Rule 45(a)
Services Provided by HEC Sections 13(b)
to the joint ventures Rules 87, 90 and 91
ITEM 4. REGULATORY APPROVAL
No commission, other than this Commission, has jurisdiction over any of
the proposed transactions described in this application/declaration.
ITEM 5. PROCEDURE
Applicants respectfully request, pursuant to Rule 23(c) of the
Commission's Rules and Regulations under the Act, that the Commission permit
this Amendment to become effective on or before April 30, 1995,
or as soon thereafter as practicable. Applicants hereby waive any
recommended decision by a hearing officer or by any other responsible officer
of the Commission and waive the 30-day waiting period between the issuance of
the Commission's Order and the date on which it is to become effective, since
it is desired that the Commission's Order, when issued, become effective
forthwith. Applicants consent that the Office of Public Utility Regulation
within the Division of the Investment Management may assist in the
preparation of the Commission's decision and/or Order unless the Office
opposes the transactions covered by this application/declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
A. Exhibits
Exhibit A-1 - Copy of Articles of Organization of HEC
(previously filed)*
Exhibit A-2 - Copy of by-laws of HEC (previously filed)*
Exhibit B - Form of Joint Venture Agreement (to be filed by
amendment)
Exhibit F-1 - Opinion of Counsel (to be filed by amendment)
Exhibit G - Form of Notice (filed herewith)
*Filed as exhibits to its 1990 U-1 application/declaration (File No. 70-
7698).
B. Financial Statements
1.1 Balance Sheet - HEC Inc., as of December 31, 1994,
actual and pro-forma (to be filed by amendment).
1.2 Statement of Income - HEC Inc., as of December 31, 1994,
& Retained Earnings actual and pro-forma (to be filed by
amendment).
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
It is believed that the granting and permitting to become effective of
this Amendment will not constitute a major federal action
significantly affecting the quality of the human environment. No other
federal agency has prepared or is preparing an environmental impact statement
with respect to the proposed transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this Amendment to their
application/declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
NORTHEAST UTILITIES
HEC INC.
HEC ENERGY CONSULTING CANADA INC.
HEC INTERNATIONAL CORPORATION
HECI
By /s/Jeffery D. Cochran
____________________
Jeffery D. Cochran
Their Counsel
Dated: March 28, 1995
Exhibit G
PROPOSED FORM OF NOTICE
Northeast Utilities
HEC Inc.
HEC Energy Consulting Canada Inc.
HEC International Corporation
HECI
Northeast Utilities ("NU"), a registered holding company, HEC Inc.("HEC'), a
wholly-owned subsidiary of NU, HEC Energy Consulting Canada Inc. ("HEC
Canada") and HEC International Corporation ("HEC International"), wholly-
owned subsidiaries of HEC, and HECI a joint venture subsidiary 50% owned by
HEC International have filed Amendment No. 9 (Post-Effective Amendment No. 1)
(the "Amendment") to an application/declaration on Form U-1 (File No. 70-8076).
The Amendment is filed pursuant to Sections 9, 10, 11(b)(1), and 13(b) of the
Public Utility Holding Company Act and Rules 45(a), 87, 90 and 91 promulgated
thereunder.
By order September 30, 1993 (HCA Rel. 35-25900, the "1993 Order"), the
Commission authorized HEC to provide additional energy management and DSM
services and to enter the consulting business in the energy management and
DSM area. The 1993 Order provided that revenues (other than consulting
revenues) attributed to customers outside the Region would not exceed
revenues (other than consulting revenues) attributed to customers within the
Region (the "50% Limitation"). In general, the 1993 Order imposed no
limitations on consulting revenues.
By order dated August 19, 1994 (HCA Rel. 35-26108, the "1994 Order"), the
Commission authorized HEC to organize and acquire HEC Canada, an Ontario
corporation, and HEC International, a Massachusetts corporation. HEC Canada
was organized to provide energy management, DSM and consulting services to
customers located in Canada. HEC International was organized to participate,
on a fifty-fifty basis, in a joint venture with an unaffiliated company, to
form HECI, a subsidiary of HEC International. HECI was formed to provide
energy management, DSM and consulting services to customers located in the
western United States (Washington, Oregon, California, Montana, Idaho,
Wyoming, Colorado, Utah, New Mexico, Nevada, and Arizona) and in foreign
countries (except Canada). Under the 1994 Order, the revenues (except
consulting revenues) of HEC Canada and HEC's share of HECI's revenues are
combined with HEC's revenues for purposes of the 50% Limitation.
The Applicants request authorization for HEC and its subsidiaries to provide
energy management and demand-side management ("DSM") services without regard
to the 50% Limitation. NU and HEC management believe that the 50% Limitation
is not mandated by the Act or a recent Commission order (See Eastern
Utilities Associates HCA Rel. 35-26232 (February 14, 1995) and should be
removed.
In addition, Applicants request authorization to form joint ventures and
other agreements with utilities outside New England and New York, at any time
during the period prior to June 30, 1996, for purposes of joining forces with
these utilities, on a joint ownership basis, to market and provide energy
management, DSM and consulting services (i.e., those services HEC and its
subsidiaries have previously been authorized to provide) within designated
regions which include, but will not necessarily be limited to, the utility's
service territories without the necessity of subsequent Commission approval
of the individual joint ventures. Applicants also request authorization to
invest funds, contribute property and/or provide other consideration to
acquire their share of such joint ventures in amounts and/or value of no
greater than $1 million per joint venture and no more than $8 million in
total for all such joint ventures invested through June 30, 1996.
The application/declaration and all amendments thereto are available for
public inspection through the Commission's Office of Public Reference. Any
interested persons should submit their views in writing by _______, 1995 to
the Secretary, Securities and Exchange Commission, Washington, D.C. 20549,
and serve a copy on the Applicants. Proof of service (by affidavit or, in
the case of an attorney at law, by certificate) should be filed with the
request. Any request for hearing shall identify specifically the issues of
fact or law that are disputed. Any person who so requests will be notified
of any hearing, if ordered, and will receive a copy of any notice or order
issued in this matter. After said date, the Amendment, as filed or as may be
further amended, amy be granted.
For the Commission, by the Division of Investment, pursuant to delegated
authority.
