FILE NO. 70-8875
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 5
(AMENDMENT NO. 7)
TO
FORM U-1
APPLICATION/DECLARATION WITH RESPECT TO (1) PROPOSED REVOLVING CREDIT
FACILITY FOR NORTHEAST UTILITIES ("NU"), THE CONNECTICUT LIGHT AND POWER
COMPANY ("CL&P") AND WESTERN MASSACHUSETTS ELECTRIC COMPANY ("WMECO") AND
(2) INCREASES AND EXTENSIONS OF SHORT-TERM BORROWING LIMITS OF NU, CL&P,
WMECO, PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE,
HOLYOKE WATER POWER COMPANY AND NORTH ATLANTIC
ENERGY CORPORATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Northeast Utilities The Connecticut Light
Western Massachusetts Electric Company and Power Company
174 Brush Hill Avenue 107 Selden Street
West Springfield, MA 01090-0010 Berlin, CT 06037
Holyoke Water Power Company Public Service Company of New Hampshire
Canal Street North Atlantic Energy Corporation
Holyoke, MA 01040 1000 Elm Street
Manchester, NH 03015
(Name of companies filing this statement and addresses of
principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Robert P. Wax, Esq.
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to
Jeffrey C. Miller, Esq. David R. McHale Richard C. MacKenzie, Esq.
Assistant General Assistant Treasurer - Day, Berry & Howard
Counsel Finance CityPlace I
Northeast Utilities Northeast Utilities Hartford, CT 06103-3499
Service Company Service Company
107 Selden Street 107 Selden Street
Berlin, CT 06037 Berlin, CT 06037
<PAGE>
The following exhibits are filed herewith:
D.10 Certified copy of the Order of the Massachusetts
Department of Public Utilities approving the
collateralization of the Facility.
D.11 Certified copy of Decision of the Connecticut Department
of Public Utility Control waiving jurisdiction with
respect to the issuance of WMECO collateral bonds.
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned have duly caused this Amendment to be
signed on behalf of each of them by the undersigned thereunto duly authorized.
Date: May 28, 1997
NORTHEAST UTILITIES
THE CONNECTICUT LIGHT AND POWER COMPANY
WESTERN MASSACHUSETTS ELECTRIC COMPANY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
HOLYOKE WATER POWER COMPANY
NORTH ATLANTIC ENERGY CORPORATION
By: Day, Berry & Howard
CityPlace I
Hartford, Connecticut 06103-3499
By: /s/ Richard C. MacKenzie
A Partner
<PAGE>
Exhibit D.10
THE COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF PUBLIC UTILITIES
May 23, 1997
D.P.U. 97-33
Petition of Western Massachusetts Electric Company for approval by the
Department of Public Utilities, pursuant to G.L. c.164, <section> 14, to issue
first mortgage bonds in the aggregate principal amount of up to $150 million.
APPEARANCES: Jane P. Seidl, Senior Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
-and-
Stephen Klionsky, Esq.
260 Franklin Street, 21st Floor
Boston, MA 02110-3179
FOR: WESTERN MASSACHUSETTS ELECTRIC COMPANY
Petitioner
<PAGE>
I. INTRODUCTION
On April 8, 1997, pursuant to G.L. c. 164, <section> 14, Western
Massachusetts Electric Company ("WMECo" or "Company") filed an application with
the Department of Public Utilities ("Department") for approval to issue first
mortgage bonds in the aggregate principal amount of up to $150 million. The
Company proposes to issue the bonds during the period from the date of this
order through June 30, 1997 to secure the Company's obligations to repay its
short-term borrowings under its 1996 Revolving Credit Agreement
("Agreement"){1} with banks. The Company's petition was docketed as D.P.U. 97-
33.
Pursuant to notice duly issued, a hearing was held at the Department's
offices in Boston on May 6, 1997. There were no petitions for leave to
intervene filed. At the hearing, the Company sponsored the testimony of John
B. Keane, vice president and treasurer of Northeast Utilities Service
Company.{2} The evidentiary record contains ten Company exhibits, fourteen
Department exhibits, and four responses to record requests of the Department.
II. DESCRIPTION OF THE PROPOSED FINANCING
The Company proposes to issue, on or before June 30, 1997, up to a
total of $150 million aggregate principal amount of bonds (Exh. 10, at 7). The
first mortgage bonds which WMECo proposes to issue will be issued under, and
secured by, the First Mortgage Indenture and Deed of Trust dated August 1, 1954
between the Company and State Street Bank and Trust Company, Successor Trustee
(id.). The aggregate principal amount of first mortgage bonds issued
hereunder will be reduced by the principal amount of first mortgage bonds, if
any, to be issued pursuant to the authority granted in Western Massachusetts
Electric Company, D.P.U. 96-96 (1997){3} (id.).
WMECo states that the bonds will be issued only to secure the Company's
repayment obligations under the Agreement (id.). WMECo states that the bonds
will have a term of not more than three years; but in no event will exceed the
remaining term of the Agreement{4} (id.). WMECo states that the banks will only
foreclose upon the bonds if the Company fails to meet its obligations under the
Agreement (Tr. at 16-17). WMECo states that the bonds will bear interest
in such amounts as is sufficient to pay all interest on advances made to WMECo
under the Agreement and the related facility fee, subject to a cap amount which
may be negotiated (Exh. 10, at 7). However, the cap amount cannot exceed 9.3
percent (Tr. at 36).
WMECo seeks the flexibility to determine redemption and reacquisition
terms at the time of the issuance in order to attain terms and provisions that
are favorable to WMECo while still being acceptable to the banks (Exh. 10, at
7). In addition, WMECo seeks the flexibility to determine, at the time of the
issuance based upon market conditions, whether the bonds shall have a sinking
fund provision (id.).
III. STANDARD OF REVIEW
In order for the Department to approve the issuance of stock, bonds,
coupon notes, or other types of long-term indebtedness{5} by an electric or gas
company, the Department must determine that the proposed issuance meets two
tests. First, the Department must assess whether the proposed issuance is
reasonably necessary to accomplish some legitimate purpose in meeting
a company's service obligations, pursuant to G.L. c. 164, <section> 14.
Fitchburg Gas & Electric Light Company v. Department of Public Utilities, 395
Mass. 836, 842 (1985) ("Fitchburg II"), citing Fitchburg Gas & Electric Light
Company v. Department of Public Utilities, 394 Mass. 671, 678 (1985)
("Fitchburg I"). Second, the Department must determine whether the Company has
met the net plant test.{6} Colonial Gas Company, D.P.U. 84-96 (1984).
The Court has found that, for the purposes of G.L. c. 164,
<section>14, "reasonably necessary" means "reasonably necessary for the
accomplishment of some purpose having to do with the obligations of the company
to the public and its ability to carry out those obligations with the
greatest possible efficiency." Fitchburg II at 836, citing Lowell Gas Light
Company v. Department of Public Utilities, 319 Mass. 46, 52 (1946). In cases
where no issue exists about the reasonableness of management decisions
regarding the requested financing, the Department limits its Section 14 review
to the facial reasonableness of the purpose to which the proceeds of
the proposed issuance will be put. Canal Electric Company, et al., D.P.U. 84-
152, at 20 (1984); see, e.g., Colonial Gas Company, D.P.U. 90-50, at 6 (1990).
The Fitchburg I and II and Lowell Gas cases also established that the
burden of proving that an issuance is reasonably necessary rests with the
company proposing the issuance, and that the Department's authority to review a
proposed issuance "is not limited to a 'perfunctory review.'" Fitchburg I at
678; Fitchburg II at 842, citing Lowell Gas at 52. Regarding the net
plant test, a company is required to present evidence that its net utility
plant (original cost of capitalizable plant, less accumulated depreciation)
equals or exceeds its total capitalization (the sum of its long-term debt and
its preferred and common stock outstanding) and will continue to do so
following the proposed issuance. Colonial Gas Company, D.P.U. 84-96, at 5
(1984).
Where issues concerning the prudence of the Company's capital financing
have not been raised or adjudicated in a proceeding, the Department's decision
in such a case does not represent a determination that any specific project is
economically beneficial to a company or to its customers. In such
circumstances, the Department's determination in its Order may not in any
way be construed as ruling on the appropriate ratemaking treatment to be
accorded any costs associated with the proposed financing. See, e.g., Boston
Gas Company, D.P.U. 95-66, at 7 (1995).
IV. CAPITAL STRUCTURE OF THE COMPANY
As of March 31, 1997, the Company's utility plant was $1,261,681,000
(RR-DPU-2, at 12). The Company reported $30,470,000 in Nuclear Fuel (id.).
The accumulated depreciation against this plant was $514,412,000 (id.). As of
March 31, 1997, the Company's total capitalization was $554,031,000 (id.). The
Company reported total common and preferred stock of $218,788,000 and total
long-term debt of $335,243,000 (id.). Thus, as of March 31, 1997, the Company
had net utility plant, including nuclear fuel but excluding accumulated
depreciation, of $777,739,000 ($1,261,681,000 + $30,470,000 - $514,412,000) and
an excess of net utility plant over outstanding capital, excluding retained
earnings, of $223,708,000 ($777,739,000 - $554,031,000) (id.). Inclusion of
the proposed issuance of $150,000,000 in first mortgage bonds results in excess
net utility plant of $73,708,000 ($223,708,000 - $150,000,000) (id.).
V. ANALYSIS AND FINDINGS
Based on the foregoing, the Department finds that the proposed issuance
and sale of up to $150,000,000 of first mortgage bonds to be issued during the
period from the date of this order through June 30, 1997 and bearing an
interest rate not to exceed 9.3 percent is reasonably necessary to accomplish
some legitimate purpose in meeting the Company's service obligations
in accordance with G.L. c 164, <section> 14. We find that the aggregate
principal amount of bonds to be issued hereunder must be reduced by the
principal amount of first mortgage bonds, if any, to be issued pursuant to the
authority granted by the Department in D.P.U. 96-96. Accordingly, the
aggregate principal amount of first mortgage bonds to be issued and outstanding
at any one time pursuant to this proposed issuance and any issuance pursuant to
D.P.U. 96-96 will not exceed $150 million.
Based on the Company's estimated net proceeds to be received from its
proposed issuance of up to $150,000,000 of first mortgage bonds, there will
continue to be an excess of net utility plant to total securities at the
completion of the Company's proposed financing. The Department finds that the
Company's proposed issuance and sale of first mortgage bonds meets the net
plant test, since the Company's total capital stock and long-term debt will not
exceed the Company's net plant after the proposed issuance.{7}
Issues concerning the prudence of the Company's capital financing have
not been raised in this proceeding, and the Department's decision in this case
does not represent a determination that any project is economically beneficial
to the Company or its customers. The Department's determination in this Order
is not in any way to be construed as a ruling relative to the appropriate
ratemaking treatment to be accorded any costs associated with the proposed
financing.
Finally, the Department notes its concern with any negative effect
financings may have on a company's restructuring initiatives. The type and
specific structure of a company's financing affects its obligation to its
shareholders and bondholders as well as its credit rating. Such obligations
and corporate financial health may dictate to some extent the corporate
structure and thus may hinder the company from choosing a revised corporate
structure such as the divestiture or even the functional separation of
generation assets. The Department notes that WMECo stated that the instant
financing would not affect its restructuring initiatives and its ability to
divest its generating assets (Exh. DPU-13; Exh. DPU-14).
VI. ORDER
Accordingly, after due notice, hearing, and consideration, the
Department
VOTES: That the issuance by Western Massachusetts Electric Company of
first mortgage bonds in the aggregate principal amount of up to $150 million,
at an interest rate not to exceed 9.3 percent, is reasonably necessary for the
purpose for which such issues have been authorized; and it is
ORDERED: That the Department hereby approves and authorizes the
issuance of up to $150 million of first mortgage bonds, at an interest rate not
to exceed 9.3 percent, from the date of this order through June 30, 1997; and
it is
FURTHER ORDERED: That the net proceeds from such sale of first mortgage
bonds shall be used for purposes as set forth herein; and it is
FURTHER ORDERED: That the Secretary of the Department shall within
three days of the issuance of this Order cause a certified copy of it to be
filed with the Secretary of the Commonwealth.
By Order of the Department,
/s/ John B. Howe
John B. Howe, Chairman
/s/ Janet Gail Besser
Janet Gail Besser, Commissioner
A true copy
Attest:
/s/ Mary L. Cottrell
MARY L. COTTRELL
Secretary
**FOOTNOTES**
{1} The Agreement is a short-term debt instrument that the Company
signedin November, 1996 (Exh. 1, at 2). The parties involved in the Agreement
aretwelve lending institutions, Northeast Utilities, Connecticut Light and
Powerand WMECo (id.). The Agreement allows WMECo access to short-term debt to
meetits cash needs (id.).
{2} Northeast Utilities Service Company provides engineering,
technical, and other services to WMECo. Western Massachusetts Electric
Company, D.P.U. 96-8D at 2 (1996).
{3} On March 21, the Department authorized the Company to issue up to
an aggregate principal amount of $60 million of its first mortgage bonds and/or
Class A preferred stock through October 1, 1998.
{4} The Agreement is scheduled to expire in November 1999 (Exh. 10,
at 4).
{5} Long-term refers to periods of more than one year after the date
of ssuance. G.L. c. 164, <section> 14.
{6} The net plant test is derived from G.L. c. 164, <section> 16.
{7} The company has indicated that, in the event that the bonds are
issued, they will be issued on a dollar for dollar basis pursuant to the
evolving credit agreement with the lending institutions (i.e. the bonds will be
issued at their face amount) (Tr. at 34; RR-DPU-3). Therefore, since the
Company claims that the bonds will not be issued at any time at below par
value, the Department finds that the proposed financing complies
with G.L. c. 164, <section> 15A.
<PAGE>
Appeal as to matters of law from any final decision, order or ruling of the
Commission may be taken to the Supreme Judicial Court by an aggrieved party in
interest by the filing of a written petition praying that the Order of the
Commission be modified or set aside in whole or in part.
Such petition for appeal shall be filed with the Secretary of the Commission
within twenty days after the date of service of the decision, order or ruling
of the Commission, or within such further time as the Commission may allow upon
request filed prior to the expiration of twenty days after the date of service
of said decision, order or ruling. Within ten days after such petition has
been filed, the appealing party shall enter the appeal in the Supreme Judicial
Court sitting in Suffolk County by filing a copy thereof with the Clerk of said
Court. (Sec. 5, Chapter 25, G.L. Ter. Ed., as most recently amended by Chapter
485 of the Acts of 1971).
<PAGE>
Exhibit D.11
STATE OF CONNECTICUT
DEPARTMENT OF PUBLIC UTILITY CONTROL
TEN FRANKLIN SQUARE
NEW BRITAIN, CT 06051
DOCKET NO. 97-05-03 APPLICATION OF WESTERN MASSACHUSETTS ELECTRIC COMPANY TO
ISSUE FIRST MORTGAGE BONDS
May 28, 1997
By the following Commissioners:
Reginald J. Smith
Glenn Arthur
Thomas M. Benedict
DECISION
I. INTRODUCTION
By application filed with the Department of Public Utility Control
(Department) on May 6, 1997, Western Massachusetts Electric Company (WMECO or
Company), an electric utility incorporated under the laws of the State of
Massachusetts and a foreign electric company within the meaning of <section>16-
246(c) of the General Statutes of Connecticut (Conn. Gen. Stat.), seeks this
Department's waiver, pursuant to Conn. Gen. Stat. <section>16-246(c), of the
approval requirements of Conn. Gen. Stat. <section>16-43 with respect to the
issue and sale of up to $150,000,000 of its First Mortgage Bonds (Bonds), in
one or more separate series, at any time or from time to time through June 30,
1997.
There was no statutory requirement for a hearing and none was held.
II. APPLICANT'S EVIDENCE
The Company proposes to issue and sell at any time or from time to time
through June 30, 1997, up to an aggregate of $150,000,000 of its Bonds. WMECO
owns an interest in Millstone Units No. 1, 2 and 3 (19%, 19% and 12%,
respectively) located in Waterford, Connecticut. Therefore, pursuant to the
provisions of Conn. Gen. Stat. <section>16-246(c), WMECO constitutes a foreign
electric company and is subject to the approval requirements of Conn. Gen.
Stat. <section>16-43 with respect to the proposed financing. WMECO requests
that the Department waive the requirements of Conn. Gen. Stat. <section>16-43,
pursuant to Conn. Gen. Stat. <section>16-246(c), which allows the Department to
grant such waiver upon its determination that authority over such borrowing or
issue has been exercised by the state of domicile of such foreign electric
company. On May 23, 1997, the Massachusetts Department of Public Utilities
(MDPU) issued an Order authorizing the financing issue described above.
III. CONCLUSION
Pursuant to Conn. Gen. Stat. <section>16-246(c), the Department hereby
waives the requirements of Conn. Gen. Stat. <section>16-43 subject to WMECOs
compliance with the following requirement: The issuance of the Bonds shall be
in conformity with the terms and conditions set forth in the Orders of the MDPU
and any Supplemental Orders thereto.
<PAGE>
DOCKET NO. 97-05-03 APPLICATION OF WESTERN MASSACHUSETTS ELECTRIC
COMPANY TO ISSUE FIRST MORTGAGE BONDS
This Decision is adopted by the following Commissioners:
/s/ Reginald J. Smith
Reginald J. Smith
/s/ Glenn Arthur
Glenn Arthur
/s/ Thomas M. Benedict
Thomas M. Benedict
CERTIFICATE OF SERVICE
The foregoing is a true and correct copy of the Decision issued by the
Department of Public Utility Control, State of Connecticut, and was forwarded
by Certified Mail to all parties of record in this proceeding on the date
indicated.
/s/ Robert J. Murphy May 28, 1997
Robert J. Murphy Date
<PAGE>
