EXHIBIT D-12
STATE OF NEW HAMPSHIRE
PUBLIC UTILITIES COMMISSION
8 Old Suncook Road
Concord, N.H. 03301-7318
June 6, 2000
Mr. Edward R. Hill, Jr.
Robin & Rudman LLP
50 Rowes Wharf
Boston, MA 02110-3319
RE: DOCKET DG 00-086, NORTHERN UTILITIES, INC.
PETITION FOR A DETERMINATION THAT THE COMMISSION'S APPROVAL IS NOT REQUIRED
WITH RESPECT TO, OR FOR APPROVAL OF A MERGER AND RELATED TRANSACTIONS
Dear Mr. Hill:
On February 28, 2000, NiSource Inc. (NiSource), the ultimate corporate
parent of Northern Utilities, Inc. (Northern)1 a New Hampshire jurisdictional
gas utility, and Columbia Energy Group (Columbia) announced the approval by
their respective boards of directors of a definitive merger agreement under
which NiSource will acquire all of the outstanding shares of Columbia. Upon
completion of the transaction, Columbia and NiSource will become wholly owned
subsidiaries of a new holding company and the transaction will be accounted for
as a purchase. If NiSource shareholder approval is not received, the transaction
will automatically be restructured as a purchase of Columbia.
On April 12, 2000, Northern filed a Petition for a Determination that
the Commission's Approval Is Not Required with Respect To, or for Approval of a
Merger and Related Transactions (Petition) regarding the proposed
acquisition/merger of Columbia by/with NiSource. The Petition included a copy of
the Agreement and Plan of Merger dated as of February 27, 2000, Amended and
Restated as of March 31, 2000, the Direct Testimony of Mark T. Maassel, Vice
President, Regulatory and Government for NiSource, and several exhibits
depicting the Pre-Merger, Planned and Alternative Organizational Structures.
Northern avers that the subject merger does not require approval under RSA
374:33 or, if it does, is consistent with RSA 369:8. For the reasons indicated
below, the Commission believes that the instant merger is subject to
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1 NiSource, known formerly as NIPSCO Industries, Inc., acquired
Northern indirectly through its acquisition of Bay State Gas Company (Bay State)
approved by the Commission in Northern Utilities, Inc. 83 NH PUC 401 (1998)
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Mr. Edward R. Hill, Jr.
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June 6, 2000
Commission jurisdiction pursuant to RSA 374:33, and, therefore, is subject to
review pursuant to RSA 369:8.
According to the Petition, pursuant to the Merger Agreement, New
NiSource Inc. (New NiSource) has been organized under the laws of Delaware, and
is interposed between NiSource and its existing shareholders. New NiSource will
effect the merger and acquisition of Columbia through two wholly-owned
subsidiaries. A wholly-owned subsidiary of New NiSource will merge with and into
Columbia, as a result of which Columbia will become a wholly-owned subsidiary of
New NiSource. Another wholly-owned subsidiary of New NiSource will merge with
and into NiSource. NiSource will become a wholly-owned subsidiary of New
NiSource. All of the prior subsidiaries of NiSource, including Bay State and,
therefore, Northern, will become subsidiaries of New NiSource. NiSource will
then merge into New NiSource and New NiSource will be renamed NiSource. Under
neither the Preferred Plan nor the Alternative Plan will any stock of any New
Hampshire public utility be acquired.
Both the Petition and the Testimony of Mr. Maassel represent that the
proposed merger will have no adverse or material effect on rates, terms,
service, or operation of Northern within New Hampshire. Mr. Maassel states that
1. The merger will in no manner affect the jurisdiction of the
Commission over Northern's current operations.
2. The merger will not result in a change in the management of
Northern or Bay State, and thus the merger will have no material
impact on the local operations of Northern.
3. The merger will not result in any change in the current ownership
or control of Northern.
4. The merger will not cause Northern's rates for service to
increase, nor will it require any "acquisition premium" to be
allocated to Northern.
According to the Petition, the merger is expected to provide a number
of affirmative ratepayer benefits, including the acquisition by Northern's
ultimate parent company of significant assets, and enable Northern to better
serve the needs of its customers. The Petitioners claim that the merger will
provide the opportunity for Northern's ratepayers to realize certain long-term
advantages through the efficient use of the combined pipeline and storage assets
of its ultimate parent company, plus the ability to best use natural gas
supplies across time, weather, and geography (which ability is expected to
increase over time as existing resource commitments expire). They also claim the
merger will facilitate the provision of new products and services to Northern's
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Mr. Edward R. Hill, Jr.
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June 6, 2000
customers and facilitate the development of new technological processes and
systems in the future. Further, the merger is expected to enhance Northern's
efforts to maintain operational excellence through technological improvements,
process enhancements, and effective cost management by allowing all the
subsidiaries to implement the best practices of each, for their mutual benefit.
Finally, the merger is expected to improve the marketing and delivery of
complementary energy products and services through assured energy supplies,
broad knowledge of a wide range of energy products, greater credibility with
customers, and opportunities to utilize the complementary business activities of
each company.
RSA 374:33. Acquiring Stocks, etc. provides:
No public utility or public utility holding company as
defined in section 2(a)(7)(A) of the Public Utility Holding Company
Act of 1935 shall directly or indirectly acquire more than 10 percent,
or more than the ownership level which triggers reporting requirements
under 15 U.S.C., section 78-P, whichever is less, of the stocks or
bonds of any other public utility or public utility bolding company
incorporated in or doing business in this state, unless the commission
finds that such acquisition is lawful, proper and in the public
interest. Nothing in this section shall prevent a public utility being
in fact the owner on June 1, 1911, of the majority of the capital
stock of any other public utility, or leasing or operating such other
public utility, from acquiring the balance or all of the outstanding
capital stock of such other public utility a majority of which stock
is so owned or which is so leased or operated.
Northern admits in its Petition that only under the Preferred Plan
would any stock of such a public utility holding company possibly be acquired,
and thus, only under the Preferred Plan could the Commission's approval of the
subject merger under RSA 374:33 possibly be required. However, Northern goes on
to state that the Commission should find that its approval of the subject merger
is not required because such approval would be required only if the transactions
thereunder would constitute the "acquisition" of an ownership interest in an
"other" public utility holding company. The proposed transactions, as noted
above, would merely serve to interpose a holding company (New NiSource) between
NiSource and its shareholders, and then only temporarily. According to Northern,
only under the most literal interpretation of such transactions would there be
any "acquisition" of NiSource stock, and then only by New NiSource, which is not
an "other" holding company but is merely a subsidiary of NiSource established to
effectuate the subject merger and acquisition of Columbia, a non-New Hampshire
entity.
The Commission, however, believes that the proposed transaction is
subject to Commission jurisdiction under RSA 374:33 and, therefore, RSA 369:8.
NiSource will be merged first into a subsidiary of New NiSource and then into
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Mr. Edward R. Hill, Jr.
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June 6, 2000
New NiSource and, as the Petitioners note, a literal interpretation of the
transaction makes RSA 374:33, and, therefore, RSA 369:8, applicable.
In Order, No. 23,470, in Docket DG 99-193 approving the proposed
merger of EnergyNorth, Eastern Enterprises and KeySpan Corporation, EnergyNorth
Natural Gas, Inc. (May 8, 2000), and Order No. 23,308, in Docket DE 99-035,
approving the proposed merger of New England Electric System and National Grid
Group plc, New England Electric System, (October 4, 1999), we discussed at some
length the statutory framework within which the Commission must act in
considering acquisitions of New Hampshire public utilities and/or their parent
companies. The Commission determined that mere representations are not
sufficient to satisfy the statutory requirement of RSA. 369:8, II; the
Commission must independently verify that no adverse effect on the rates, terms,
service, or operation of the utility to be acquired will occur.
Under the public interest standard of RSA 374:33 and the "no adverse
effect" standard of RSA 369:8 to be applied by the Commission where a utility or
public utility holding company seeks to acquire, directly or indirectly, a
jurisdictional utility, the Commission must determine that the proposed
transaction will not harm ratepayers. New NiSource is only a temporary shell.
Once the transaction is complete, the result would be no different from the
situation in which NiSource buys Columbia outright, a transaction over which the
Commission would have no jurisdiction. The use of the New NiSource Shell to
accomplish the Columbia purchase has no adverse impact on customers of Northern.
After careful review of the Petition, accompanying Direct Testimony of Mr.
Maassel and the representations of the Petitioner noted herein, the Commission
has determined that the transaction is reasonable, lawful, proper and in the
public interest and will not have an adverse effect on the rates, terms, service
or operation of Northern.
Subsequent to the merger, the Commission will continue to exercise
regulatory jurisdiction over the rates, services, and operations of Northern
following completion of the subject merger. However, Northern is hereby placed
on notice that the Commission expects Northern, pursuant to RSA 374:4, to
provide the Commission Staff thirty (30) days notice in advance of any changes
in any operating areas that may result from the adoption of any "best practices"
as a result of the merger or otherwise.
Very truly yours,
/s/ Thomas B. Getz
Thomas B. Getz
Executive Director & Secretary
cc: Service List
