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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 26, 1995
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(January 3, 1995)
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PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact Name of Registrant as Specified in its Charter)
Commission
New Mexico File Number 1-6986 85-0019030
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
Alvarado Square, Albuquerque, New Mexico 87158
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(Address of Principal Executive Offices) (Zip Code)
(505) 848-2700
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(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address if Changed, Since Last Report)
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ITEM 5. OTHER EVENTS
Palo Verde Lease Obligation Bonds ("LOBs")
On January 3, 1995, the New Mexico Public Utility Commission ("NMPUC")
approved the Company's request for authority to retire up to $134 million of
LOBs. (See PART I, ITEM 2,--"MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--LIQUIDITY AND CAPITAL
RESOURCES" in the quarterly report on Form 10-Q for the quarter ended
September 30, 1994.) The bonds to be retired were issued in 1986 by First PV
Funding Corporation ("First PV") in connection with the Company's sale and
leaseback of its interests in PVNGS Units 1 and 2. In 1992, the Company
purchased approximately 22% of the beneficial interests in these leases from
Burnham Leasing Corporation for $17.5 million in cash and recorded $140.8
million as long-term debt (outstanding approximately $132.7 million as of
January 19, 1995) in the Company's consolidated balance sheet. A total of
approximately $615 million in principal amount of LOBs is outstanding,
including the amount ($132.7 million) recorded in the Company's consolidated
balance sheet.
On January 12, 1995, the Company and First PV issued a consent solicitation
to the holders of 10.30% LOBs, Series 1986A due 2014, 9.125% LOBs, Series
1986A due 1996, 10.15% LOBs, Series 1986B due 2016 and 8.95% LOBs, Series
1986B due 1997. Consent of such holders is sought to amend the indenture
governing the LOBs. The proposed amendments to the indenture would permit the
special optional redemption of LOBs maturing 2014 and 2016 (which are the
subject of the invitation referred to below) as well as future special
optional redemptions of LOBs. The consent of holders of the majority in
outstanding principal amount of the LOBs is required to adopt the proposed
amendments. Holders of LOBs who give a valid and unrevoked consent in favor
of the proposed amendments will receive a consent payment of $2.50 per $1,000
principal amount of LOBs.
Concurrently with the consent solicitation, First PV has issued an invitation
to the holders of LOBs due 2014 and 2016 to offer to sell such LOBs for cash
at prices designated by such holders within a range specified by the company
to be not greater than $1,010 and not less than $900 per $1,000 principal
amount of LOBs (plus accrued interest thereon from January 15, 1995). Subject
to the terms and conditions of the offer, First PV will purchase up to
$58,031,000 principal amount of 10.30% LOBs 1986A due 2014 and up to
$63,054,000 principal amount of 10.15%, Series 1986B due 2016 in a modified
Dutch auction tender offer. First PV will not purchase the LOBs if a majority
of holders in outstanding principal amount of LOBS do not consent to the
proposed amendments. The consent solicitation and invitation to tender LOBs
commenced on January 12, 1995 and will expire at 5:00 p.m., New York City
time on Friday, February 10, 1995, unless extended.
The Company expects that the source of funds to retire the LOBs would
ultimately come from the proceeds from the sales of the Company's gas
gathering and processing assets and water division. The Company is currently
awaiting the NMPUC approval of these sales. The Company expects to finalize
the water division sale by the end of second quarter 1995. The schedule for
the sale of the gas gathering and processing assets is discussed below. Cash
on hand, liquidated temporary investments and borrowings under its credit
facilities will be used to effect the retirements of LOBs in advance of these
sales. The Company estimates that retiring the LOBs would save the Company up
to $11.5 million in interest expense in 1995, declining gradually to $11.2
million in 1999.
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Stipulation Reached for the Sale of Gas Gathering and Processing Assets
As previously reported, on February 12, 1994, the Company and its gas
subsidiaries (Sunterra Gas Gathering Company and Sunterra Gas Processing
Company) entered into a purchase and sale agreement with Williams Gas
Processing-Blanco, Inc. ("Williams"), a subsidiary of the Williams Field
Services Group, Inc., for the sale of substantially all of the assets of the
Company's gas subsidiaries, and for the sale of Northwest and Southwest gas
gathering and processing facilities of the Company. The agreement, which is
subject to NMPUC approval, provides for a cash selling price of $155 million,
subject to certain adjustments. The Company filed its application for
approval with the NMPUC on May 20, 1994. (See PART I. ITEM 2.--"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Sale of Gas Gathering and Processing Assets" in the quarterly report on Form
10-Q for the quarter ended September 30, 1994.)
On January 13, 1995, the Company and certain intervenors (the NMPUC Staff,
the New Mexico Attorney General, Williams and GPM Gas Corporation) reached a
stipulated agreement, subject to NMPUC approval, settling certain issues,
including the division of the gain from the sale of the gas gathering and
processing assets. Under the stipulation, the Company would recognize an
after-tax gain of approximately $14.1 million, subject to certain adjustments
at the closing, and would record a liability of approximately $35.5 million
which would be credited to the Company's gas customers' bills over
approximately five years. At the sixth year after the closing, such liability
amount would be recalculated to reflect the actual transaction costs and any
resulting difference would be refunded or billed to customers over a one year
period.
The stipulated agreement provides for the approval of three 10-year
contracts, each with an option to renew for an additional 5-year term, with
Williams for competitively priced gathering and processing services. The
Company believes that the contracts will save customers amounts estimated to
be between $100 million and $128 million over 10 years.
On January 13, 1995, the Company filed the stipulated agreement with the
NMPUC for approval. On January 23, 1995, certain natural gas producers
(Meridian Oil Inc., Marathon Oil Company, Conoco, Inc., Amoco Production
Company and Caulkins Oil Company) filed a statement in opposition to the
stipulation, stating, among other things, that the resulting gain from the
sale was improperly calculated and allocated, the proposed gathering and
processing contracts with Williams are unreasonable and discriminatory to
certain gas gathering and processing customers and the transaction as
proposed is not in their best interest.
Hearings are scheduled to begin on February 13, 1995. The parties to the
stipulation requested a final order from the NMPUC on an expedited basis. If
NMPUC approval is issued on an expedited basis, the Company expects to
finalize the sale by the end of second quarter of 1995. However, the Company
cannot predict the ultimate timing of the NMPUC action.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Public Service Company of New Mexico
(Registrant)
Date: January 26, 1995 /s/ Donna M. Burnett
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Donna M. Burnett
Corporate Controller and
Chief Accounting Officer
BEFORE THE NEW MEXICO PUBLIC UTILITY COMMISSION
IN THE MATTER OF THE APPLICATION OF )
GAS COMPANY OF NEW MEXICO, A DIVISION )
OF PUBLIC SERVICE COMPANY OF NEW )
MEXICO, FOR APPROVAL TO SELL CERTAIN )
NATURAL GAS GATHERING AND PROCESSING ) Case No. 2587
ASSETS AND RELATED ORDERS AND )
APPROVALS, )
)
GAS COMPANY OF NEW MEXICO, )
)
Applicant. )
________________________________________)
STIPULATION
The undersigned (the "Parties") including Gas Company of New
Mexico ("GCNM"), Staff ("Staff") of the New Mexico Public Utility
Commission (the "Commission" or "NMPUC"), the New Mexico Attorney
General ("AG"), Williams Gas Processing-Blanco, Inc.
("Williams"), and GPM Gas Corporation ("GPM") stipulate as
follows:
Statement of the Case
1. On February 12, 1994, Public Service Company of New
Mexico ("PNM"), Sunterra Gas Gathering Company ("SGGC"), and
Sunterra Gas Processing Company ("SGPC") entered into a Purchase
and Sale Agreement (the "Sale Agreement") with Williams, a wholly
owned subsidiary of Williams Field Services Group, Inc. The Sale
Agreement provides for the sale to Williams of substantially all
of the gas gathering and processing assets of GCNM, SGGC, and
SGPC (collectively the "Companies") for $155 million (the
"Purchase Price") subject to certain accounting adjustments to be
made in settling the closing. The Sale Agreement further
entitles Williams to a reduction ("Interim Period Compensation")
of the Purchase Price by $9,637 per day if the sale does not
close by the Effective Date set forth in the Sale Agreement, and
estimated to be April 1, 1995.
2. The Sale Agreement also provides that, upon closing,
the parties will enter into agreements for competitively priced
gathering and processing services ("Service Agreements") for up
to 15 years. The Sale Agreement also includes mutual guarantees
of collection, one by PNM of the obligations of SGGC and SGPC
("PNM Guaranty") and one by Williams Field Services Group, Inc.
of the obligations of its subsidiary Williams. The PNM Guaranty
expressly provides that it is of no force or effect unless and
until approved by the NMPUC. The Service Agreements, as well as
other related agreements, and the PNM Guaranty are attached as
exhibits to the Sale Agreement.
3. On July 27, 1994, Williams entered an agreement to sell
to GPM the gathering and processing assets located in Southeast
New Mexico that Williams will purchase from GCNM if the NMPUC
approves GCNM's application in this proceeding and to assign the
Service Agreements relating to these assets.
4. On May 20, 1994, GCNM filed in this proceeding its
Application and supporting testimony requesting all necessary
approvals to consummate the Sale Agreement with Williams. Staff
and the intervenors filed testimony taking the position, in
general, that they were not opposed to the sale provided that the
Commission adopt their various gain recalculations and gain
allocations along with, in some instances, other terms and
conditions.
I. Class II Transaction Issues
5. Consummation of the Sale Agreement will result in the
disposition of substantially all of the assets of SGGC and SGPC.
PNM intends to continue SGGC and SGPC as its wholly owned
corporate subsidiaries and defer their formal dissolution for
approximately five or more years, but will discontinue
substantially all of their business operations and all of their
gathering and processing activities immediately after
consummating the sale to Williams. A variety of subordinate
agreements and transactions are necessary to accomplish this end
as well as to accomplish the transfer to Williams and to enable
GCNM to continue its transmission, distribution and system supply
operations.
6. These subordinate agreements and transactions include,
inter alia, the PNM Guaranty and future payments made pursuant
thereto as well as transactions necessary to distribute and apply
the proceeds from the sale among the Companies. These
subordinate agreements and transactions are described in the
Supplement to Public Service Company of New Mexico Filings Under
Rule 450.7 attached as Exhibit 1 to GCNM's Application ("Rule
450.7 Supplement").
7. In addition, the Gas Sale and Gathering Agreement
between GCNM and SGGC and the Gas Processing Agreement between
GCNM and SGPC may need to not only be continued as described on
page 3 of the Rule 450.7 Supplement, and may also need to be
substantially modified and assigned to Williams if any shippers
refuse to accept contracts with Williams that recognize GCNM's
capacity priority rights under the Service Agreements. GCNM will
file a "Revised Rule 450.7 Supplement" to reflect this
clarification as well as terms and conditions of this Stipulation
with its Direct Testimony in Support of this Stipulation.
8. GCNM requests in this proceeding (i) approval of and
authorization to consummate the sale of substantially all of the
assets of SGGC and SGPC, (ii) approval of the PNM Guaranty and
authorization to make future payments pursuant thereto, (iii)
approval of and authorization to execute all subordinate
agreements, transactions and activities; and (iv) approval of the
Rule 450.7 Supplement reflecting this Stipulation, all as a Class
II Transaction to the extent required under the New Mexico Public
Utility Act, NMPUC Orders and NMPUC Rule 450. In the event of
formal dissolution of SGGC and SGPC as corporations, GCNM would
seek prior Commission approval for such dissolution.
9. Because all of the subordinate agreements and
transactions, including the PNM Guaranty and future payments to
be made pursuant thereto, are an integral part of the disposition
of substantially all of the assets of SGGC and SGPC and a
constituent part of the proposed sale to Williams, all such
agreements and transactions should be deemed collectively a
single Class II transaction. To the extent there is a question
whether a particular activity included in the proposed sale
constitutes a Class II transaction, Commission approval of the
sale as a divestiture should also include approval and
authorization of all subordinate agreements, transactions and
activities described in the Revised Rule 450.7 Supplement
pursuant to Rule 450. No further limitation should be placed on
the use of the proceeds or distribution of the gain on the sale
except as may be required by NMPUC Rule 450.
III. Allocation, Calculation and Distribution of Gain and Tax
Benefits
10. Based on current estimates of the expenses associated
with the sale, including the Suspended Avalon Amounts described
in Paragraph 18 below, and the resulting estimate of the net book
gain on the sale with all associated tax benefits that may accrue
due to sharing the gain with customers, and in consideration of
all interest savings or interest expenses that may accrue, the
Parties agree to the following:
A. At closing, the Companies will recognize an after-tax
gain resulting from the sale estimated to be approximately
$14,068,000, (reduced by $2,305 per day of Interim Period
Compensation for each day that the closing extends beyond
the Effective Date in the Sale Agreement). The Companies
will also recognize a before-tax loss of approximately
$1,494,683 associated with the SGGC and SGPC Voluntary
Severance Plan ("VSP") portion of the Suspended Avalon
Amounts described in Paragraph 18 below.
B. At closing, GCNM will record on its books a payable in
the total amount of $35,535,000, (reduced by $5,822 per day
of Interim Period Compensation for each day that the closing
extends beyond the Effective Date in the Sale Agreement),
which will be referred to by GCNM for the purpose of
calculating amounts to be credited through a new rate rider
mechanism ("Rate Rider 9") on the bills of customers whose
bills include amounts calculated pursuant to GCNM's Rate
Rider 8. The payable will be recorded as five components,
as follows:
(i) An amount equal to all of the unrecovered
MDL-403 amount due from system supply customers
and non-discounted end-use transportation
customers on the books of GCNM will be recorded
with reference to such unrecovered amount due (but
not as an offset to or a reduction of such
unrecovered amount due);
(ii) Fifty percent (50%) less $1,948,500 of the
remainder will be recorded with reference to the
unrecovered non-interest bearing producer take-or-
pay costs (the "Non-Interest Bearing PTOP Costs")
due from system supply customers (but not as an
offset to or a reduction of such unrecovered
amount due) on such books;
(iii) The $1,948,500 referred to in Paragraph
10.B.ii. above will be recorded with reference to
the unrecovered Non-Interest Bearing PTOP Costs
due from non-discounted end-use transportation
customers (but not as an offset to or a reduction
of such unrecovered amounts due) on such books;
(iv) The other fifty percent (50%) less
$1,948,500 of the remainder will be recorded with
reference to the unrecovered interest bearing
producer take-or-pay costs (the "Interest Bearing
PTOP Costs") due from system supply customers (but
not as an offset to or a reduction of such
unrecovered amount due) on such books; and
(v) The $1,948,500 referred to in Paragraph
10.B.iv. above will be recorded with reference to
the unrecovered Interest Bearing PTOP Costs due
from non-discounted end-use transportation
customers (but not as an offset to or a reduction
of such unrecovered amounts due) on such books.
11. The Rate Rider 9 credits described in Paragraph 13
below will be reflected on the bills of the appropriate customers
until $35,535,000 (as the same may be reduced pursuant to
Paragraph 10.B. above, to reflect a closing after the Effective
Date set forth in the Sale Agreement), plus interest in an amount
equal to (a) interest on Rate Rider 8 amounts, less (b) interest
on Rate Rider 8 amounts calculated as if such amounts had been
reduced by the book entries described in Paragraph 10.B. above,
has been credited.
12. The recording of the payable described in Paragraph
10.B. above will not affect or in any way modify the amounts that
would otherwise be due pursuant to Rate Rider 8. The amount of
the Rate Rider 9 credit on the bills of customers will be
calculated by reference to Rate Rider 8, but will not be an
offset against or in any way reduce amounts due pursuant to Rate
Rider 8, and will not in any manner affect or modify the
obligation of any customer to pay amounts due pursuant to Rate
Rider 8. The provisions of this document shall not constitute an
amendment or modification of Rate Rider 8 or the Order issued by
the NMPUC in Case No. 2183.
13. The amount of the Rate Rider 9 credit on each bill
shall be equal to the sum of:
A. For system supply customers: i) an amount equal to the
MDL-403 amount; ii) plus an amount equal to the Non-
Interest Bearing PTOP Costs; iii) less the amount the
Non-Interest Bearing PTOP Costs would have been if the
Non-Interest Bearing PTOP Costs had been calculated
giving effect to the book entry referred to in
Paragraph 10.B.ii., above; iv) plus an amount the
Interest Bearing PTOP Costs; and v) less the amount the
Interest Bearing PTOP Costs would have been if the
Interest Bearing PTOP Costs had been calculated giving
effect to the book entry referred to in Paragraph
10.B.iv.;
B. For non-discounted end-use transportation customers: i)
an amount equal to the MDL-403 amount; ii) plus an
amount equal to the Non-Interest Bearing PTOP Costs;
iii) less the amount the Non-Interest Bearing PTOP
Costs would have been if the Non-Interest Bearing PTOP
Costs had been calculated giving effect to the book
entry referred to in Paragraph 10.B.iii.; iv) plus an
amount equal to the Interest Bearing PTOP Costs; and v)
less the amount the Interest Bearing PTOP Costs would
have been if the Interest Bearing PTOP Costs had been
calculated giving effect to the book entry referred to
in Paragraph 10.B.v.; and
C. Discounted end-use transportation customers shall have
the option of foregoing their discount in order to
receive Rate Rider 9 credits.
14. The parties understand that the gain calculations used
to arrive at the figures above utilized an estimate of expenses
associated with the sale of $22,243,880 (exclusive of the
actually calculated current income taxes and deferred income
taxes) and an estimate of book and tax basis on the date of
closing. At the sixth anniversary of the date of closing, the
net gain will be recalculated in accordance with Generally
Accepted Accounting Principles ("GAAP") in effect at the date of
closing and using a combined federal and state tax rate of
39.59%. For the purpose of computing the Recalculated Net Gain,:
i) First, the "Sales Price" used will be the actual
Purchase Price paid, as defined in the Sale Agreement
and as adjusted pursuant to the Sale Agreement
(including the Interim Period Compensation);
ii) Second, an amount equal to all expenses of the sale, as
described in Paragraph 15 below, will be subtracted
from the Sales Price;
iii) Third, an amount equal to the actual book basis at the
date of closing, will be subtracted from the Sales
Price; and
iv) Fourth, an amount equal to the book income tax expense.
The Parties agree that using a combined federal and
state income tax rate of 39.59% is appropriate and
consistent with GAAP.
The Recalculated Net Gain will be compared to $35,535,000 as
adjusted pursuant to Paragraph 10.B. above. If the Recalculated
Net Gain is greater than $35,535,000, as adjusted pursuant to
Paragraph 10.B., the difference will be refunded to customers
through Rate Rider 9 over a 1-year period. The amount of the
difference refunded will not be grossed up for taxes. If the
Recalculated Net Gain is less than $35,535,000, as adjusted
pursuant to Paragraph 10.B., the difference will be recovered
from customers through the Rate Rider 9 surcharge over a one-year
period. The Parties agree that there shall be no adjustments
made in the computation or allocation of the Recalculated Net
Gain for tax benefits or book or current tax expense other than
as specifically provided in this Stipulation. The Parties
recognize that the gain calculation presented here is the result
of estimates of book and tax bases at the date of closing. The
gain will be recalculated at the sixth anniversary using actual
historical book and tax bases at the date of closing. The
recalculation will result in the creation of a regulatory asset
or liability which will be recovered or charged after the true-up
is made on the sixth anniversary after closing. Any refund or
surcharge made pursuant to this Paragraph 14 will be allocated
between system supply customers and non-discounted end-use
transportation customers in the same proportion as the payable
under Paragraph 10.B. was allocated to such customers. The
refund or recovery will be made on a volummetric basis.
15. The actual expenses deducted from the Purchase Price
under Paragraph 14 above in computing the Recalculated Net Gain
shall include all expenses incurred by the Companies, whether
paid directly by SGGC, SGPC or GCNM or pursuant to the PNM
Guaranty, under the categories shown in Attachment A to this
Stipulation up to a total cap of $40,530,000. No cap shall apply
to any individual category except as described in subparagraph
10.A. below. The Parties agree that a further description of
these categories shall be filed in GCNM's Direct Testimony in
Support of this Stipulation. The Parties further agree that:
A. The categories of "Asset Sales Incentive Plan (ASIP),
Gas Assets Retention Plan (GARP) & Union Employee Severance
Benefits" on Attachment A to this Stipulation shall include
actual expenses incurred, including legal expenses,
associated with the ASIP, GARP and SGPC Union Employee
Severance Benefits or any substitute severance plan
applicable to SGPC union employees ("Union Severance") in
the event of decertification of the SGPC employee union, up
to a cap of $3,500,000.
B. The category on Attachment A to this Stipulation of
"Suspended Avalon Costs" shall include Suspended Avalon
Amounts defined in Paragraph 18 below, but shall not include
$1,494,683 associated with suspended VSP benefits paid to
SGGC and SGPC employees.
16. The expenses described in Paragraph 15 above shall be
audited by Staff for the sole purpose of assuring that the costs
appropriately and legitimately fit within the categories
described in Paragraph 15 above. GCNM will submit annual reports
to the Staff on the actual expenses incurred and serve the
reports on the AG. All such expenses appropriately and
legitimately associated with the transaction up to the total cap
of $40,530,000, including the ASIP, GARP and Union Severance
expenses up to a cap of $3,500,000, shall be deemed appropriately
and reasonably incurred. Such expenses shall be further deemed
fair, just and reasonable and properly deducted from the Purchase
Price in computing the Recalculated Net Gain as well as fair,
just and reasonable for purposes of recovery through the Rate
Rider 9 surcharge as described in Paragraph 14 above.
17. Amounts exceeding the cap of $3,500,000 for ASIP, GARP,
and Union Severance or amounts exceeding the $40,530,000 may be
recovered through Rate Rider 9 over a 1-year period as an
additional net gain deduction upon application to and approval by
the NMPUC.
III. PGAC and Rate Impact
18. In NMPUC Case No. 2508, the Commission is reviewing
GCNM's Application to continue the use of its purchased gas
adjustment clause ("PGAC"). Part of that review addresses the
Avalon ratemaking methodology and its continued use. In Case No.
2508, Staff and GCNM executed a Stipulation (the "Avalon
Stipulation") that (i) continued use of the Avalon methodology,
(ii) allowed GCNM to collect amounts equal to the amounts
collected in the 1991 PGAC year, (iii) suspended amounts in
excess of the 1991 levels ("Suspended Avalon Amounts") and (iv)
provided a mechanism for the review of the Suspended Avalon
Amounts and amounts that SGGC and SGPC charged for third-party
services. As set forth in Paragraph 15, the Suspended Avalon
Amounts shall be treated as expenses associated with the sale for
purposes of recalculating the net gain, except for $1,494,683 of
the Suspended Avalon Amounts associated with VSP benefits paid by
SGGC and SGPC. All expenses and revenues accruing under the
Avalon methodology for the 1994 and 1995 PGAC Audit
Reconciliation Periods up to the close of the sale to Williams
will be recoverable through GCNM's PGAC subject to NMPUC Rule 640
and will not be included as part of the expenses of the sale to
Williams. The Avalon methodology will cease to apply to expenses
incurred and revenues received by SGGC and SGPC after the closing
of the sale to Williams. All issues addressed in the Avalon
Stipulation in Case No. 2508 as amended become moot if this
Stipulation is approved.
19. GCNM will institute a $0.0070 per therm reduction in
the cost of service component of bills for customers receiving
service under the following rate schedules, which include a
bundled gathering component: GCNM Rates 10, 30, 31, 35, 54, 56,
58 and 61. The cost of service reduction described in this
Paragraph 19 and the Rate Rider 9 Credit described in Paragraph
13 above will be effective with GCNM's Billing Cycle Number 1 no
less than 15 days nor more than 35 days following closing. This
cost of service reduction shall not apply to Rate Schedule 70,
which reflects unbundled gathering charges which will be
eliminated after closing of the sale to Williams. The cost of
service reduction shall not apply to GCNM Rate Schedules 37, 39,
or 60, which do not include a bundled gathering component. This
reduction shall not be binding on the Parties in GCNM's next rate
case in determining cost of service levels.
20. Effective on the first day of the calendar month
following closing, GCNM will reduce the factor for gas consumed
or lost under GCNM's Rate 70 to 1 percent for unbundled or
negotiated transportation contracts for transmission and
distribution services provided by GCNM, but excluding
transportation contracts that include Trex (Redondo and Espejo
compressors) services and bundled gathering and transportation
contracts that will be assigned to Williams under the Sale
Agreement. Any costs resulting from this reduction will not be
flowed through to sales customers.
21. The rates, terms and conditions of the Service
Agreements between Williams and GCNM attached to the Sale
Agreement are reasonable and provide adequate gas procurement
reliability and flexibility.
V. Approvals and Authorizations
22. As implemented under this Stipulation:
(A) The proposed transaction provides net benefits to
all GCNM customers and is in the best interests of
GCNM's customers and the shareholders of PNM;
(B) Continued ownership by GCNM, SGGC, and SGPC of the
assets and continued gathering and processing service
by GCNM, SGGC and SGPC is unwarranted and is not
required by the present and future public convenience
and necessity;
(C) The proposed transaction is in the public
interest, the level of investment is reasonable and
PNM's and GCNM's ability to provide reasonable and
proper utility service at fair, just and reasonable
rates will not be adversely and materially affected by
the transaction, including each of its constituent
parts, or their resulting effect;
(D) The rates resulting through implementation of this
Stipulation are fair, just and reasonable.
23. GCNM should be granted the following:
(A) To the full extent required under the Final Orders
of the Commission in Case Nos. 2305 and 2183 and the
New Mexico Public Utility Act, NMSA 1978, Sections 62-
6-12, 62-6-13 and 62-9-5, approval of and authorization
to consummate the sale of the gathering and processing
assets of GCNM, SGGC and SGPC to Williams pursuant to
the Sale Agreement and to abandon and discontinue use
of the assets and the processing and gathering services
provided thereby;
(B) Approval of and authorization to consummate the
sale of the gathering and processing assets of SGGC and
SGPC as a Class II transaction, including: (i) the PNM
Guaranty, (ii) the making of future payments pursuant
to the PNM Guaranty without further NMPUC approval,
(iii) all other constituent or subordinate agreements,
transactions and activities set forth in the Revised
Rule 450 Supplement and (iv) all other transactions and
activities necessary to implement this Stipulation, to
the full extent required under NMSA 1978, 62-6-19(E),
all applicable NMPUC Orders and NMPUC Rule 450;
(C) Approval and authorization to file revised rates,
rules and forms upon closing of the sale to Williams in
order to implement this Stipulation, subject to NMPUC
Staff review for compliance with applicable NMPUC
Rules;
(D) Such other authorizations, approvals and variances
that may be required under the New Mexico Public
Utility Act or the Commission's Rules necessary to the
adoption and implementation of this Stipulation and
consummation and implementation of the sale
transaction, including approval of the Revised Rule 450
Supplement.
24. No conditions are placed on the Companies or Williams,
except as specifically set forth in this Stipulation. No NMPUC
approval of the sale by Williams to GPM is required by the New
Mexico Public Utility Act. The NMPUC shall have no further
jurisdiction over the assets sold to Williams upon closing of the
sale nor any jurisdiction over Williams or GPM, which are not
public utilities under the New Mexico Public Utility Act.
25. The Parties respectfully request that the Commission
approve the proposed sale by February 22, 1995 in time to close
the transaction by March 24, 1995.
26. Except as specifically stated in the language of this
Stipulation, the provisions of this Stipulation are effective
only for this Case 2587 and shall have no precedential effect.
Except as specifically stated in this Stipulation, the Parties do
not waive any rights they may have in any other pending or future
proceedings and will not be deemed to have approved, accepted,
agreed to or consented to any concept, principle, theory or
method. GCNM's entry into this Stipulation shall not be
construed as a waiver or abandonment of its position concerning
applicability of any particular statute, NMPUC Rule or Order or
any legal standard to any particular aspect of this transaction
as set forth in GCNM's Pre-Hearing Memorandum and Pre-Hearing
Reply Memorandum filed in this proceeding on August 1, 1994 and
October 26, 1994, respectively. Issues raised in the pleadings
and testimony or any issues that may have been raised or any
other matters not specifically addressed by this Stipulation have
not been fully litigated nor necessarily determined by the
execution of this Stipulation and its approval by the Commission
and will not be binding on the Parties nor be relied upon by the
Parties as a basis for any claim of estoppel or res judicata in
any future proceeding.
A final order issued by the Commission approving this
Stipulation shall not constitute a bar to any future litigation
of issues raised in the pleadings and testimony or any issues
which could have been raised or any other matters which have not
been addressed specifically by this Stipulation. By approving
this Stipulation, the Commission, in accordance with NMPUC Rule
110.87, is not granting any approval or precedent regarding any
principle or issue in these proceedings.
27. This Stipulation reflects settlement discussions, and
if the Stipulation is not executed or is not adopted in its
entirety by the Commission, this Stipulation shall be void and
the statements made or the positions taken by the Parties shall
not be admissible in any proceeding before any regulatory agency
or court. This Stipulation contains the full intent,
understanding and entire agreement of the Parties and no
implication should be drawn on any matter not addressed in the
Stipulation. There are not and have not been any
representations, warranties or agreements other than those
specifically set forth above.
28. This Stipulation may be executed in any number of
counterparts, each of which shall be deemed to be an original and
all of which shall constitute one and the same agreement.
EXECUTED this 13th day of January, 1995.
GAS COMPANY OF NEW MEXICO,
a division of Public Service
Company of New Mexico
By
NEW MEXICO PUBLIC UTILITY
COMMISSION STAFF
By
NEW MEXICO ATTORNEY GENERAL
By
WILLIAMS GAS PROCESSING-
BLANCO, INC.
By
GPM GAS CORPORATION
By
<PAGE>
<TABLE>
CASE NO. 2587 STIPULATION
ATTACHMENT A
<CAPTION>
COST CATEGORY DESCRIPTION GCNM
WITNESS
REFERENCE
<S> <C> <C>
1. Morgan Stanley fees All fees, reimbursements, and other payments Mayer
made to Morgan Stanley for professional Direct
services associated with the sale of the
Assets, including pre-closing services, Bourque
services at or to effect the closing, and Direct
post-closing services.
2. Bidding, negotiating, All expenses associated with: the preparation Mayer
drafting Purchase and of the bid documents and bidding process; the Direct
Sale Agreements and drafting and negotiation of the Purchase and
Service Agreements negotiation of the Purchase and Sale Agreements Bourque
and miscellaneous and Service Agreements and amendments and Direct
expenses required ancillary agreements (such as
assignments of software licenses, etc); the
preparation, submittal, and receipt of
regulatory and property transfers and approvals
(such as Hart-Scott-Rodino, other governmental
licenses, water rights, land transfers, etc);
the preparation of the pre-closing, closing,
and post-closing certificates, statements,
due diligence analyses or reports, lender and
general releases, and other requirements to
effect the sale not otherwise specifically
identified in other categories; preparation of
new or modified intercompany agreements (such
as the administrative service agreements between
SGGC, SGPC and GCNM), termination of intercompany
agreements (such as the reciprocal loan
agreements); and miscellaneous other expenses
(such as document and data separation and
copying, miscellaneous equipment replacement,
transfer of employee records, etc).
<PAGE>
<PAGE>
3. Asset Sale Incentive All expenses associated with employee matters Bourque
Plan, Gas Assets Retention regarding and payments made under or claims Direct
Plan, and Union Employee against: the Asset Sale Incentive Plan; the
Severance Benefits Gas Assets Retention Plan; and the Union Mayer
Benefits Employee Severance (or benefits under any Direct
successor plan in case of Union decertifica-
tion); and successor plans if the successor
plans are required by law or by court order
or regulatory requirement.
4. Right-of-way cure All expenses associated with: resolving and Mayer
finalizing property rights and descriptions; Direct
applying for and obtaining rights-of-way or
other equivalent property rights including Bourque
permit fees, private right-of-way purchases, Direct
past due amounts or penalties; creating and/or
transferring such real property rights; and
obtaining or creating consents, waivers, or
other authorization to the transfers or for
the operation of the assets.
5. Vehicle replacement All expenses associated with: upgrading the Mayer
fleet of vehicles to comply with the require- Direct
ments of the Purchase and Sale Agreement; and
terminating leases or other encumbrances on any Bourque
vehicle that is a transferred vehicle. Direct
6. Governmental approvals All expenses associated with: NMPUC approvals; Mayer
and other governmental approvals required to Direct
consummate the Sale and allow transfer of the
operation of the Assets. Bourque
Direct
<PAGE>
<PAGE>
7. Miscellaneous All expenses associated with: replacement of Mayer
pre-closing expenses certain flow measurement and communication Direct
equipment; post-signing due diligence to con-
firm or modify representation and warranties and Bourque
exhibits, drawings, and other documents; fee Direct
property updates, confirmations, consents and
waivers necessary to consummate the Sale;
Christopher
preparation, negotiation and execution or Direct
completion of easement and joint easement
agreements and exhibits; preparation, negotiation,
and execution of lender consents and lien and
encumbrance releases; identification, con-
firmation, and release of encumbrances, if any,
of property in Colorado and payment of taxes,
if any; review, identification, and resolution
of any UCC liens or alleged claims against
personal property conveyed including telephone
system; drafting and negotiating and associated
costs for the joint use cathodic protection
system agreement; modification and conveyance of
third party contracts to Williams and GPM and of
purchase contracts to GCNM; termination, if any,
of existing sales contracts; and modification of
existing intercompany gas purchase, exchange,
gathering, and processing agreements.
8. Suspended Avalon Costs All expenses, except the VSP costs, suspended Keene
for 1992 and 1993 for SGGC and SGPC Avalon Direct
cost-of-service in Case No. 2508. Bourque
Keene
Rebuttal
Bourque
Rebuttal
9. Coating disbondment GCNM's and SGGC'S share of expenses incurred Mayer
in litigating Pipe Coating Disbondment claim, Direct
in proportion to pipe being sold to Williams.
Bourque
Direct
<PAGE>
<PAGE>
10. Miscellaneous All expenses associated with liabilities Mayer
liabilities retained under the Sale Agreement in connection Direct
with conveyance of water rights and use permits;
monitoring and representation in San Juan Basin Bourque
Adjudication; and Cordova Quiet Title resolution. Direct
11. Arbitration All expenses associated with the arbitration Mayer
of claims and disputes which may arise under Direct
the Purchase and Sale Agreement.
Bourque
Direct
Bourque
Rebuttal
12. General Indemnities All expenses associated with pre-closing Mayer
liabilities for which the Companies must Direct
indemnify Williams under Section 12.03 of
the Sale Agreement and third-party claims Bourque
brought against the Companies for which Williams Direct
is not required to indemnify the Companies
under Section 12.04 of the Sale Agreement. Bourque
Rebuttal
13. SGGC and SGPC on-going All direct expenses associated with continuing Bourque
business needs operation of SGGC and SGPC at a minimal level Direct
until indemnity requirements in the Purchase
and Sale Agreement are satisfied. Mayer
Direct
Bourque
Rebuttal
14. General Insurance and All expenses associated with obtaining Bourque
tail coverage self-insurance and tail coverage during the Direct
period of indemnity as required by the Purchase
and Sale Agreement. Mayer
Direct
Bourque
Rebuttal
<PAGE>
<PAGE>
15. Retained environmental All expenses associated with: investigation, Ristau
liabilities monitoring, remediation, permitting, response, Direct
reporting, and penalty defense and payments
(including legal costs), and other efforts Mayer
associated with the retained environmental Direct
liabilities (including Lee Acres) specified
in the Purchase and Sale Agreement. Bourque
Direct
Ristau
Rebuttal
Bourque
Rebuttal
16. Pre-closing All expenses associated with: investigation, Ristau
environmental efforts monitoring, remediation, permitting, response, Direct
reporting, and penalty defense and payments
(including legal costs), and other efforts Mayer
associated with actions taken before the Direct
closing to address or cure any potential
breach of the environmental representations Bourque
and warranties or any third party claims, or Direct
to mitigate future potential liability or to
make the Assets ready for conveyance. Ristau
Rebuttal
Bourque
Rebuttal
17. Pre-closing All expenses associated with a pre-closing Ristau
environmental audits environmental audit to be performed to Direct
follow-up on the environmental condition of
the Assets with regard to items identified Mayer
in the ESI audits and to identify any other Direct
significant environmental conditions for
purposes of closing. Bourque
Direct
Ristau
Rebuttal
Bourque
Rebuttal<PAGE>
<PAGE>
18. Environmental indemnity All claims, liabilities, losses, costs, Ristau
expenses, damages, and clean-up costs Direct
(including penalties) incurred post-closing
associated with any inaccuracy or breach of Mayer
any seller's environmental representations Direct
or warranties, or any claims or actions
asserted by third parties (including Bourque
governmental authorities) with respect to Direct
noncompliance or violation of any environmental
law or requirement or with respect to Ristau
remediation. This category includes all the Rebuttal
above environmental matters for which the
Companies must indemnify Williams or for which Bourque
Williams is not required to indemnify the Rebuttal
Companies under the Sale Agreement.
The expenses on this ATTACHMENT A shall include in-house labor expense, attorneys' fees,
judgments, arbitration awards and other related expenses associated with the categories
above.
</TABLE>
