File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
Under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NORTHEAST UTILITIES
174 Brush Hill Avenue
West Springfield, Massachusetts 08109
THE CONNECTICUT LIGHT AND POWER COMPANY
107 Selden Street
Berlin, Connecticut 06037
(Name of companies filing this statement and address of principal executive
offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Cheryl W. Grise, Esq.
Senior Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141-0270
(Name of address of agent for service)
The Commission is requested to mail signed copies of all orders, notices and
communications to:
Randy A. Shoop Jeffrey C. Miller
Treasurer Assistant General Counsel
The Connecticut Light and Power Company Richard M. Early, Esq.
P.O. Box 270 Senior Counsel
Hartford, Connecticut 06141-0270 Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141-0270
ITEM 1. Description of Proposed Transaction
1. The purpose of this Application/Declaration is to seek the
Commission's order approving the sale by deed in lieu of condemnation of the
South Meadow electric generating station (the "Station") by The Connecticut
Light and Power Company ("CL&P") to the Connecticut Resources Recovery
Authority ("CRRA"). CL&P is an electric company subsidiary of Northeast
Utilities ("NU"), a registered holding company. CRRA is a public
instrumentality and political subdivision of the State of Connecticut
established by statute for the performance of essential public and
governmental functions involving handling and disposal of solid waste, and
resource recovery in Connecticut.
2. The proposed sale of the Station (the "Transaction") is documented in
a Title Transfer Agreement, a copy of which is attached as Exhibit B.1 to
this Application/Declaration. The Station generates electricity (a) from
steam derived from combustion of municipal solid waste in boilers owned by
CRRA turning two steam turbines owned by CL&P and (b) by use of four jet
turbine sets owned by CL&P. The capability of the Station is approximately
250 megawatts. As of November 30, 2000 the net book value (excluding
dismantlement reserves) of the Station was approximately $2.9 million, as
shown below:
Description Amount
Historical Cost $96,032,021
Accumulated Depreciation (FN 1) 93,106,687
Net Book Value $2,925,334
Dismantlement Reserves 5,075,961
Net Book Value, with Dismantlement ($2,150,627)
CRRA will pay CL&P $10 million for the property, plus a full assumption by
CRRA of all but $2 million of on-site environmental obligations. Minor
amounts of FERC-jurisdictional "transmission" assets will be included with
the Station. CL&P will retain either a fee interest or adequate easement
rights for the existing substation, switchyard and related transmission and
distribution facilities, which CL&P intends to retain. CRRA will continue to
use the Station to process municipal solid waste and to generate electricity
for sale to CL&P and in the New England competitive markets.
FN 1. The provision for depreciation is calculated using the straight-line
method based on the estimated remaining useful lives of depreciable utility
plant-on-service, adjusted for salvage value and removal costs, as approved
by the appropriate regulatory agency where applicable. Except for major
facilities, depreciation rates are applied to the average plant-in-service
during the period. Major facilities are depreciated from the time they are
placed in service. When plant is retired from service, the original cost of
the plant, including costs of removal less salvage, is charged to the
accumulated provision for depreciation. The costs of closure and removal of
nonnuclear facilities are accrued over the life of the plant as a component
of depreciation.
3. The Transaction is consistent with the Connecticut Electric
Restructuring Act ("Restructuring Act"), which requires CL&P to divest all
generating capacity. CL&P has effected the divestiture of its other non-
nuclear generating stations through competitively bid auctions, and had
intended to do so for the Station. However, CRRA, to protect its significant
investment on the Station site in municipal solid waste processing and
combustion facilities, sought and obtained approval of the Connecticut
Department of Public Utility Control ("DPUC") to take the Station by eminent
domain. A copy of CRRA's application to the DPUC is filed herewith as
Exhibit D.1. The taking by CRRA was approved by the DPUC by Decision in
Docket No. 99-06-27 (September 1, 1999), a certified copy of which is filed
herewith as Exhibit D.2. As CRRA and CL&P negotiated the details of the
condemnation, they determined that it would substantially simplify and
expedite the transaction if CL&P tenders a deed in lieu of condemnation to
CRRA for the Station. CRRA and CL&P have jointly requested DPUC approval of
this change in form of the transaction. A copy of this joint request is
filed herewith as Exhibit D.3. CL&P is also seeking approval by the Federal
Energy Regulatory Commission ("FERC") under Section 203 of the Federal Power
Act of CL&P's disposition of FERC-jurisdictional assets, i.e., transmission
facilities used in interstate commerce. A copy of this application is filed
herewith as Exhibit D.4.
4. The Transaction is the result of arm's length negotiations, has been
reviewed and approved by the DPUC and found to be in the public interest, is
subject to additional DPUC review and should be approved by the Commission.
As the DPUC determined, this transaction will not only provide CL&P with a
payment of $10 million, it will also relieve CL&P of significant
environmental liabilities for the Station, which the record of the DPUC
proceedings estimates as being worth an additional $20-$30 million, in
addition to the cash consideration. The Transaction is in compliance with the
Restructuring Act and will enable CL&P to complete the required divestiture
of its non-nuclear generating capacity.
ITEM 2. Fees, Commissions, and Expenses
5. The fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the transactions
described above are estimated as follows:
Northeast Utilities Service Company Not in excess of $10,000
(Legal, Financial, Accounting and
Other Services)
Outside Support (Legal, Environmental approximately $350,000
and Other Services)
ITEM 3. Applicable Statutory Provisions
6. The sections of the Act and the related regulations of the Commission
which are or may be applicable to the transactions as herein proposed are set
forth below:
(i) Sale of utility assets Section 12(d), Rule 44
To the extent any other sections of the Act or rules thereunder may be
applicable to the proposed transactions, the Applicants request appropriate
orders thereunder.
ITEM 4. Regulatory Approval
7. Additional approvals are required from the DPUC and the FERC as
described in Item 1.3 above.
ITEM 5. Procedure
8. The Applicants hereby request that the Commission publish a notice
under Rule 23 with respect to the filing of this Application as soon as
practicable and that the Commission's order be issued as soon as possible. A
form of notice suitable for publication in the Federal Register is attached
hereto as Exhibit H.1. The Applicants respectfully request the Commission's
approval, pursuant to this Application, of all transactions described herein,
whether under the sections of the Act and Rules thereunder enumerated in Item
3 or otherwise. It is further requested that the Commission issue an order
authorizing the transactions proposed herein at the earliest practicable date
but in any event not later than February 15, 2001. Additionally, the
Applicants (i) request that there not be any recommended decision by a
hearing officer or by any responsible officer of the Commission, (ii) consent
to the Office of Public Utility Regulation within the Division of Investment
Management assisting in the preparation of the Commission's decision, and
(iii) 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
immediately.
Other Matters
9. Except in accordance with the Act, neither NU nor any subsidiary
thereof (a) has acquired an ownership interest in an exempt wholesale
generator ("EWG") or a foreign utility company ("FUCO") as defined in
Sections 32 and 33 of the Act, or (b) now is or as a consequence of the
transactions proposed herein will become a party to, or has or will as a
consequence of the transactions proposed herein have a right under, a
service, sales, or construction contract with an EWG or a FUCO. None of the
proceeds from the transactions proposed herein will be used by NU and its
subsidiaries to acquire any securities of, or any interest in, an EWG or a
FUCO.
10. NU currently meets all of the conditions of Rule 53(a),except for
clause (1). At September 30, 2000, NU's "aggregate investment," as defined in
Rule 53(a)(1), in EWGs and FUCOs was approximately $469.5 million, or
approximately 74% of NU's average "consolidated retained earnings," also as
defined in Rule 53(a)(1), for the four quarters ended September 30, 2000
($638.8 million). With respect to Rule 53(a)(1), however, the Commission has
determined that NU's financing of its investment in Northeast Generation
Company ("NGC"), NU's only current EWG or FUCO in an amount not to exceed
$481 million or 83% of its "average consolidated retained earnings" would not
have either of the adverse effects set forth in Rule 53(c). See Northeast
Utilities, Holding Company Act Release No. 27148, dated March 7, 2000 (the
"Rule 53(c) Order"). NU continues to assert that its EWG investment in NGC
will not adversely affect the System.
11. In addition, NU and its subsidiaries are in compliance and will
continue to comply with the other provisions of Rule 53(a) and (b), as
demonstrated by the following determinations:
(i) NGC maintains 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;
(ii) No employees of NU's public utility subsidiaries have rendered
services to NGC;
(iii) NU has submitted (a) a copy of each Form U-1 and Rule 24 certificate
that has been filed with the Commission under Rule 53 and (b) a copy of Item
9 of the Form U5S and Exhibits G and H thereof to each state regulator having
jurisdiction over the retail rates of NU's public utility subsidiaries;
(iv) Neither NU nor any subsidiary has been the subject of a bankruptcy or
similar proceeding unless a plan of reorganization has been confirmed in such
proceeding;
(v) NU's average CREs for the four most recent quarterly periods have not
decreased by 10% or more from the average for the previous four quarterly
periods; and
(vi) In the previous fiscal year, NU did not report operating losses
attributable to its investment in EWGs/FUCOs exceeding 3 percent of NU's
consolidated retained earnings.
12. The proposed transactions, considered in conjunction with the effect
of the capitalization and earnings of NU's EWGs and FUCOs, would not have a
material adverse effect on the financial integrity of the NU system, or an
adverse impact on NU's public-utility subsidiaries, their customers, or the
ability of State commissions to protect such public-utility customers. The
Rule 53(c) Order was predicated, in part, upon an assessment of NU's overall
financial condition which took into account, among other factors, NU's
consolidated capitalization ratio and its retained earnings, both of which
have improved since the date of the order. NU's EWG investment (it has no
FUCO investment) has been profitable for the periods beginning March 7, 2000
and ending March 31, 2000, June 30, 2000 and September 30, 2000,
respectively. As of December 31, 1999, the most recent period for which
financial statement information was evaluated in the Rule 53(c) Order, NU's
consolidated capitalization consisted of 35.3% common equity and 64.7% debt
(including long and short-term debt, preferred stock, capital leases and
guarantees). As of June 30, 2000, the end of the first quarter after the
issuance of the Rule 53(c) Order, the consolidated capitalization ratios of
NU, with consolidated debt including all short-term debt and non-recourse
debt of the EWG was as follows:
As of June 30, 2000
(thousands
of dollars) %
Common shareholders' equity 2,365,854 36.9
Preferred stock 277,700 4.3
Long-term and short-term debt 3,768,353 58.8
6,411,907 100.0
The consolidated capitalization ratios of NU as of September 30, 2000, with
consolidated debt including all short-term debt and non-recourse debt of the
EWG was as follows:
As of September 30, 2000
(thousands
of dollars) %
Common shareholders' equity 2,413,785 37.9
Preferred stock 277,700 4.3
Long-term and short-term debt 3,683,667 57.8
6,375,152 100.0
NU's consolidated retained earnings have increased from $582 million as of
December 31, 1999 to $691 million as of September 30, 2000. NU's interest in
NGC (its only EWG or FUCO) has made a positive contribution to earnings in
that time by contributing $15 million to NU's retained earnings with revenues
of $75.5 million and net income of $15.7 million. Accordingly, since the
date of the Rule 53(c) Order, the capitalization and earnings attributable to
NU's investments in EWGs and FUCOs has not had an adverse impact on NU's
financial integrity.
ITEM 6. Exhibits and Financial Statements
13. The following exhibits and financial statements are filed herewith:
(a) Exhibits
B.1 Form of Title Transfer Agreement
D.1 Application to Connecticut Department of Public Utility Control
D.2 Order of the Connecticut Department of Public Utility Control
D.3 Joint request to DPUC
D.4 Application to Federal Energy Regulatory Commission*
D.5 Order of Federal Energy Regulatory Commission*
E. Map*
F. Opinion of Counsel*
H. Form of Notice
(b) Financial Statements*
* To be filed by Amendment
ITEM 7. Information as to Environmental Effects
14. None of the matters that are the subject of this Application involve
a "major federal action" nor do they "significantly affect the quality of the
human environment" as those terms are used in Section 102(2)(C) of the
National Environmental Policy Act. None of the proposed transactions that are
the subject of this Application will result in changes in the operation of
the Applicants that will have an impact on the environment. The Applicants
are not aware of any federal agency which has prepared or is preparing an
environmental impact statement with respect to the transactions proposed
herein.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned companies have duly caused this amendment to be signed
on their behalf by the undersigned officer or attorney thereunto duly
authorized.
Date: January 10, 2001
NORTHEAST UTILITIES
By: /s/ Randy A. Shoop
Its Assistant Treasurer
THE CONNECTICUT LIGHT AND POWER COMPANY
By: /s/ Randy A. Shoop
Its Treasurer
