File No. 70-8731
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM U-1
APPLICATION AND DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
MCN CORPORATION
500 Griswold Street
Detroit, Michigan 48226
(Name of companies filing this statement and
address of principal executive offices)
None
(Name of top registered holding company
parent of each applicant or declarant)
Daniel L. Schiffer, Esq.
Vice President, General Counsel
and Secretary
MCN Corporation
500 Griswold Street
Detroit, Michigan 48226
(Name and address of agent for service)
The Commission is requested to mail copies of
all orders, notices and communications to:
William S. Lamb, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-4513
Pursuant to Section 9(a)(2) and 10 of the Public
Utility Holding Company Act of 1935 (the "Act"), MCN Corporation,
a Michigan corporation ("MCN") hereby requests that the
Securities and Exchange Commission (the "Commission") authorize
the acquisition (the "Acquisition"), as described herein, of a 1%
general partnership interest in Southern Missouri Gas Company,
L.P., a Missouri limited partnership (the "Partnership"), which
will construct, own and operate a gas pipeline and distribution
system (the "System") in southern Missouri that is currently
under construction and owned by Tartan Energy Company of
Missouri, L.C., a Missouri limited liability company ("TEC").
Prior to the consummation of the Acquisition, ownership of the
System will be transferred to the Partnership, as described
below.
MCN is currently a public utility holding company
exempt from all provisions of the Act except Section 9(a)(2)
under Section 3(a)(1) pursuant to Rule 2. MCN owns all of the
issued and outstanding common stock of two public utility
companies as defined under the Act: Michigan Consolidated Gas
Company ("MichCon") and Citizens Gas Fuel Company ("Citizens"),
both of which are organized and operate virtually exclusively in
the state of Michigan. MCN believes that following the
consummation of the Acquisition and the commercial operation of
the Partnership, it will continue to be a public utility holding
company entitled to an exemption under Section 3(a)(1) of the Act
because the Partnership, which when it begins commercial
operation will be a public utility subsidiary of MCN organized
and operating exclusively in Missouri, will not account for a
material part of MCN's income<F1> and thus, MCN and each
public utility subsidiary from which it derives a material part
of its income will continue to be organized and operating
predominantly in the state of Michigan.
____________________
<F1> Specifically, under current plans, in its first full year of
commercial operation (1997), MCN's share of Partnership
revenue will account for 0.18% of MCN's consolidated
revenues, which according to current projections, will be
the highest such percentage reached, and it is projected
that in 1998, that percentage will decrease to approximately
0.17%. Although the term "material part of its income" is
not defined in the Act, in many instances, holding companies
with out-of-state utility subsidiaries accounting for an
equivalent amount of revenues have been permitted to claim
an exemption under Section 3(a)(1). For example, in In re
Yankee Atomic Electric Co., 36 S.E.C. 552 (1948), the
Commission granted an exemption under Section 3(a)(1) in a
case where 2% of the holding company's revenues were derived
from an out-of-state utility subsidiary. Indeed, the amount
of income generated by the Partnership and contributed to
MCN will be well within the traditional parameters of the
term materiality as discussed in Commission precedent. See
e.g., Commonwealth Edison, 28 S.E.C. 172 (1948) (holding
that utility subsidiary accounting for between 2.7% and 3.3%
of system revenues is not providing a material part of
income); Wisconsin Electric Power Company, 28 S.E.C. 909
(1948) (holding utility subsidiary accounting for 10.31% of
income and doing substantial business out-of-state is
material and not predominantly intra-state).
Item 1 DESCRIPTION OF PROPOSED TRANSACTION
A. Description of MCN
MCN was organized in 1988 and is the holding
company for (i) MichCon, a gas utility company as defined under
the Act engaged in the distribution, transmission and storage of
natural gas to approximately 1.1 million customers in Michigan;
(ii) Citizens, a gas utility as defined under the Act and was
acquired by MCN in 1990, is engaged in the distribution of
natural gas in the city of Adrian, Michigan, and (iii) MCN
Investment Corporation, a subsidiary holding company for
nonutility businesses. As mentioned above, MCN is exempt from
all provisions of the Act except Section 9(a)(2) under Rule
3(a)(1) because both MCN and its material public utility
subsidiaries are organized and conduct virtually all of their
operations in the same state (Michigan). See, Form U-3A-2,
"Statement by a Holding Company Claiming Exemption under Rule 2
from the Provisions of the Public Utility Holding Company Act of
1935," dated February 24, 1995, filed by MCN and incorporated
herein by reference. MCN's common stock is publicly traded on
the New York Stock Exchange. MCN's principal executive office of
located at 500 Griswold Street, Detroit, Michigan 58226.
B. Existing Utility Operations
As mentioned above, MichCon is engaged in the
distribution, transmission and storage of natural gas to
approximately 1.1 million customers in Michigan and Citizens is
engaged in the distribution of natural gas in to the City of
Adrian, Michigan. MichCon and Citizens provide retail gas
distribution services primarily to residential and small volume
commercial customers and MichCon provides transportation services
to large volume commercial and industrial customers. MichCon
also provides intrastate transportation services to other gas
utilities, gas marketers and producers. In the fiscal year ended
December 31, 1994, MCN reported consolidated revenues of
approximately $1,545.8 million, of which amount MichCon's
revenues accounted for $1,111.7 million or 71.9% and Citizens
revenues were $14.4 million or 0.9%.
Approximately 46% of MichCon's gas supply originates in
the Midcontinent and Southern basins, 40% in Michigan, 10% in
Canada and 4% from other sources. Similarly, approximately 55%
of Citizen's gas supply originates in the Midcontinent and
Southern basins, 35% in Michigan and 10% in Canada. MichCon and
Citizens take gas from the Midcontinent and Southern basins
through the ANR and Panhandle pipelines pursuant to firm and
interruptible contracts with these pipelines.
MichCon is subject to regulation by the Michigan Public
Service Commission (the "Michigan PSC") with regard to rates and
other corporate matters and Citizens is subject to regulation by
the City of Adrian, Michigan with respect to its rates and by the
Michigan PSC with regard to other corporate matters.
C. Description of the Proposed Transaction
MCN has entered into an agreement (the "Formation
Agreement") containing the terms on which MCN intends to acquire
a 1% general partnership interest and a 46.5% limited partnership
interest in the Partnership. The remaining interests in the
Partnership will be owned as follows: 1% general partnership and
4% limited partnership interest owned by Tartan Management
Company of Missouri, L.C. or its successor ("Tartan") and 47.5%
limited partnership interest owned by Torch Energy Marketing,
Inc. or its successor ("Torch"). Torch, a Delaware corporation,
is a wholly owned subsidiary of Torch Energy Advisors
Incorporated ("TEAI"), which in turn is a wholly owned subsidiary
of United Investors Management, Inc. which is owned by Torchmark
Corporation. Torchmark Corporation has publicly announced its
intended disposition of TEAI to a newly formed investor group
that includes TEAI management and United Investors Management,
Inc. The limited liability company interests in Tartan will be
held by three individuals (the "Individuals"). Tartan will also
serve as operator of the System in accordance with the terms and
conditions set forth in the Construction and Management Agreement
attached hereto as Exhibit B-3.
The terms of the Partnership Agreement among MCN,
Tartan and Torch will provide that the limited partners will take
no part in the management or control of the Partnership's
business and the general partners will have exclusive management
and control of the business of the Partnership in accordance with
the provisions of the Missouri Uniform Limited Partnership Act.
The Partnership Agreement will also provide that the general
partners will have the exclusive right, without any requirement
of prior consultation with the limited partners, to do all things
that, in their sole and reasonable judgment, are necessary,
proper or desirable to carry out their duties and
responsibilities as general partners. The prior approval of a
majority in interest of the limited partners will be required
only for certain major events materially affecting the business
of the Partnership. These events will include, but will not
necessarily be limited to, (i) the sale, exchange, lease,
mortgage, or other disposition of 25% or more of the fair market
value of the business or assets of the Partnership, or the merger
or consolidation with another entity; (ii) incurring or prepaying
indebtedness (or providing guaranties of another entity's
indebtedness) other than in the ordinary course of business or,
if in the ordinary course of business, in an amount in excess of
$1,000,000; (iii) admitting any additional limited or general
partner or adjustment in a partners percentage ownership;
(iv) dissolving or liquidating the Partnership or appointing a
liquidating partner other than the general partners;
(v) commencing a voluntary, or admitting a material allegation in
an involuntary, proceeding in bankruptcy in the name of the
Partnership; (vi) entering into or effecting a material amendment
of any gas purchase agreement, any firm gas transportation
contract, any negotiated third-party gas sales contract in excess
of $10,000 or certain contracts with third parties in excess of
$100,000 per year; (vii) making any capital expenditure in excess
of $500,000; (viii) materially amending any material government
permit or materially amending any material filing with any
governmental body, or seeking any governmental action other than
is ordinarily required in the ordinary conduct of business; (ix)
making a determination with respect to the disposition of
insurance proceeds in excess of $500,000 or the repair or
rebuilding of the facilities in the event of substantial damage
or destruction; (x) settling a dispute or litigation involving
the Partnership that would materially adversely affect the
Partnership or require payment by the Partnership of more than
$1,000,000; (xi) engaging in any transaction with the general
partner or partners or an affiliate of either general partner
except where such transaction is effectuated on terms no less
favorable to the Partnership in a modified arm's-length
transaction with an unaffiliated entity; (xii) adopting and
operating under an annual budget that includes an increase of 10%
for any category of expenses over the amount included in the
prior year's budget, or an aggregate increase of 5% or
(xiii) modifying the annual budget to result in an increase of
10% for any category of expenses or an aggregate of 5%. In
addition, the Partnership Agreement will require the limited
partners to vote for the removal of either Tartan or MCN as a
general partner for cause and that Tartan or MCN may be removed
upon the affirmative vote of 66 rds of the interests of the
limited partners.<F2> On September 25, 1995, Torch
submitted a no-action request letter to the Division request that
the Division state it will not recommend enforcement action under
the Act upon Torch's acquisition of a 47.5% limited partner
interest in the Partnership.
____________________
<F2> "Cause" will be defined in the Partnership Agreement to
include, but will not be limited to, (i) the failure of a
general partner to timely make a required capital
contribution; (ii) the failure of a general partner to
obtain the approval of a majority in interest of the limited
partners before undertaking those actions which require the
approval of the limited partners; (iii) the commencement of
bankruptcy or insolvency proceedings by or against a general
partner or certain of its affiliates; (iv) a general
partner's breach of any provision of the Partnership
Agreement which has a material adverse effect on the
construction, operation or maintenance of the operations of
the Partnership or on the limited partners' equity
investment in the Partnership; (v) a general partner's gross
negligence, fraud or breach of its fiduciary duties pursuant
to the Partnership Agreement; or (vi) in the case of Tartan,
a 45% or greater change in its stock ownership.
The Partnership will initially distribute gas to the
residents of approximately fifteen communities in Greene,
Webster, Wright, Howell, Douglas and Texas counties, Missouri,
all of which are located in south-central Missouri. Currently,
the System is being constructed by TEC which also holds fifteen
local franchises for providing service issued by the Missouri
Public Service Commission (the "MPSC"). These licenses were
initially held by a predecessor of TEC, Tartan Energy Company
L.C., an Oklahoma limited liability company, which was merged
with and into TEC in accordance with the order of the MPSC dated
September 29, 1995 and attached hereto as Exhibit D-2. When
fully developed and serving the fifteen franchised communities,
the System will have over 300 miles of trunk pipeline and
distribution piping, serving over 10,000 customers. The
Partnership will operate exclusively in the state of Missouri and
once the System is operational, will be subject to MPSC
regulation with regard to rates and other corporate matters.
The MPSC has already approved TEC's application for the
first three years of expenditures for developing the system
(estimated to be $39 million at the time of the application) to
serve approximately 9,000 customers in ten of the franchised
communities and construction for the first seven communities
began in March 1995 (the "Phase One Construction"). Attached as
Exhibit D-4 is a copy of this order, which was initially issued
to TEC's predecessor (the "MPSC April Order"). The MPSC has
recently approved construction of the system for an additional
five communities and the Partnership intends to begin
construction to these five additional communities plus one of the
original ten communities, which should be completed in late 1996
("Phase Two Construction"). As the result of planned highway
construction, the Partnership is unable to predict when
construction to the final two communities will take place ("Final
Construction"). Attached as Exhibit D-5 is a copy of this recent
order (the "MPSC September Order"). The Phase One Construction,
the Phase Two Construction and the Final Construction are
referred to here in collectively as the "Construction Phase".
The cost of the Phase One Construction is currently estimated to
be $35 million and it is estimated that the cost of the Phase Two
Construction will be approximately $8 million, which additional
amount has been taken into account by the MPSC in the MPSC
September Order. Effective upon the consummation of the
transactions described below, the terms of the MPSC April Order
and the MPSC September Order will be applicable to the
Partnership.
Pursuant to the MPSC April Order, the maximum financing
for the construction of the project to the original ten
communities will be $24 million (plus interest during
construction). The financing may be with recourse to the System
only. The MPSC April Order and the MPSC September Order both
require that the Partnership maintain a 40% equity level and thus
approximately $17.2 million of project funding ($16 million
pursuant to the MPSC April Order and $1.2 million pursuant to the
MPSC September Order) must be in the form of equity contributions
from the project partners. In accordance with the MPSC April
Order, the project partners must make an equity contribution for
at least the initial $8 million in project funding, which may be
followed by the expenditure of up to $24 million in debt
financing, with construction finally being completed with at
least $7 million in equity funds. The MPSC September Order
permits additional debt financing for the additional
construction.
Currently, Torch has $1.4 million outstanding in loans
to TEC for project development costs and MCN has $6.6 million
outstanding in loans to TEC for construction equity. These loans
were secured by a pledge of 98.5% of Tartan's and certain of the
Individuals' interests in TEC. Tartan and such Individuals have
subsequently transferred the 98.5% interest in TEC subject to the
pledge to Tartan Limited Partnership of Missouri (the "Interim
Entity"). Tartan is the general partner of the Interim Entity
and certain of the Individuals are the limited partners. The
Interim Entity has assumed TEC's debt to Torch and MCN.
In order to transfer the assets of the System as well
as the franchises held by TEC to the Partnership to establish the
initial ownership structure for the Partnership and pursuant to
the terms of the Formation Agreement, the following transactions
will take place: MCN and Torch will contribute $8 million to the
Interim Entity in consideration of the subsequent distribution of
the general and limited partnership interests of the Partnership.
The $8 million will be used by Interim Entity to repay the loans
from Torch and MCN. The Interim Entity will cause the
Partnership to be formed. The Partnership will issue 98.5% of
its limited and general partnership interests to the Interim
Entity and 1.5% of its limited partnership interest to certain of
the Individuals. The Individuals will contribute their interest
in the Interim Entity to Tartan. The Interim Entity will
distribute the Partnership's limited partnership interest and
general partnership interests to Tartan (1% general and 4%
limited), MCN (1% general and 46.5% limited) and Torch (46%
limited) and the Individuals will sell their 1.5% limited
partnership interest in the Partnership to Torch. The Interim
Entity subsequently will be dissolved, leaving the Partnership as
the surviving entity owning the System and whose interests are
owned by MCN, Torch and Tartan.
Torch and MCN will equalize their equity contributions
to the Partnership to $8 million each in apportioning equity by
the end of 1996. As a result, the Partnership will have received
$16 million in equity contributions from Torch and MCN. In order
to maintain the 40% equity level of the Partnership, MCN and
Torch may contribute an additional $600,000 each toward the Phase
Two Construction costs. No determination has been made as to the
source of any additional equity required for Final Construction,
if it occurs. In order to facilitate the initial debt financing
of the Partnership, MCN has agreed to provide credit support to
the Partnership during the Construction Phase. Specifically, MCN
has agreed to cause the Partnership to maintain a positive net
worth and has agreed to provide the Partnership with funds
(either as equity or a loan) if the Partnership is unable to make
timely payments under its credit facility. Finally, Tartan has
contributed its interest in the Missouri franchises to the
Partnership as consideration for its general partnership
interest.
The merger of TEC into the Partnership is subject to
the approval of the MPSC. Although formal approval of the
Acquisition by the Michigan PSC is not required under Michigan
law, the staff of the Michigan PSC has stated that it does not
object to the Acquisition by MCN as set forth in the letter from
the staff of Michigan PSC attached as Exhibit D-1.
The timetable for the construction of the System is
currently estimated as follows: Phase One Construction from May
1995 to June 1996 and Phase Two Construction from March 1996 to
December 1996. The System began commercial operation in six
communities in December 1995. No current plans to expand the
System beyond the fifteen franchised communities exist and any
such expansion, and the financing therefore, would require the
approval of the MPSC.
The natural gas supply for the System will be sourced
via the Williams Natural Gas Company ("Williams") pipeline, with
whom a ten year Transportation Service Agreement for firm
transportation has been negotiated. Williams has agreed to
construct, at its sole cost and expense, a pipeline lateral, tap
and measurement/regulation facilities in order to deliver gas to
the System.
MCN's current budget and projections for the next ten
years indicate that MCN's aggregate 47.5% share of the capital
expenditures of the Partnership will amount to approximately $6
million in 1996 (from the initial equity contribution of MCN),
less than $400,000 in 1997 and around $120,000 per year for the
following eight years (which amounts the parties intend to be
taken from the profits of the Partnership and not additional
equity contributions). Moreover, MCN's share of the assets of
the Partnership are not projected to exceed $20 million at any
time in this period. For purposes of their internal analysis,
MCN and Torch have estimated the projected revenues and net
income for the Partnership as follows:
($ million) 1996 1997 1998
Revenue $3.9 $6.9 $6.8
Net Operating Income 2.0 2.0 2.8
MCN currently has approximately $2 billion in assets on a
consolidated basis and in excess of $1 billion in utility assets.
It should be noted that Tartan has filed a Form U-3A-2
with the Commission to claim an exemption from all provisions of
the Act (except section 9(a)(2)) under Section 3(a)(1).
Item 2 FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of MCN expected to
be paid or incurred, directly or indirectly, in connection with
the transactions described above are estimated as follows:
Commission filing fee
relating to Application
on Form U-1 . . . . . . . . . . . . . . . . . . . . $2,000
Legal Fees . . . . . . . . . . . . . . . . . . . . . 50,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . 5,000
Total . . . . . . . . . . . . . . . . . . 57,000
Item 3 APPLICABLE STATUTORY PROVISIONS
The following sections of the Act are directly or
indirectly applicable to the proposed transaction: Sections
9(a)(2) and 10.
Section 9(a)(2) makes it unlawful, without approval of
the Commission under Section 10, "for any person ... to acquire,
directly or indirectly, any security of any public utility
company, if such person is an affiliate ... of such company and
of any other public utility or holding company, or will by virtue
of such acquisition become such an affiliate." Because MCN
presently is an affiliate of two public utility companies,
MichCon and Citizens, and by virtue of the proposed transaction
will also become an affiliate of the Partnership, Section 9(a)(2)
requires approval by the Commission of the proposed transaction
under Section 10. MCN believes that the proposed transaction
meets the requirements of Sections 9(a)(2) and 10.
A. Section 10(b)(1)
Section 10(b)(1) provides that, if the requirements of
Section 10(f) are satisfied, the Commission shall approve an
acquisition unless:
(1) such acquisition will tend towards
interlocking relations or the concentration
of control of public utility companies, of a
kind or to an extent detrimental to the
public interest or the interest of investors
or consumers.
Section 10(b)(1) requires a finding that control is "of a kind or
to an extent detrimental to the public interest or the interest
of investors or consumers." The framers of the Act sought
through Section 10(b)(1) to avoid "an excess of concentration and
bigness" while preserving the "opportunities for economies of
scale, the elimination of duplicative facilities and activities,
the sharing of production capacity and reserves and generally
more efficient operations" afforded by certain combinations.
American Electric Power Co., Inc., 46 S.E.C. 1299, 1309 (1978).
The acquisition of a 1% general partner interest, even coupled
with a 46.5% limited partner interest the latter of which does
not convey control for purposes of the Act, in the small
distribution system of the Partnership by MCN will not create an
"excess of concentration and bigness," but, as discussed in more
detail below, will afford the Partnership the opportunity to
achieve the economies of scale and efficiencies, particularly in
the areas of management expertise and gas supply, that the Act's
framers intended to preserve for the benefit of investors and
consumers.
B. Section 10(b)(2)
Section 10(b)(2) provides that the Acquisition should
be approved unless the price paid:
is not reasonable or does not bear a fair
relation to the sums invested in or the
coming capacity of the utility assets to be
acquired or the utility assets underlying the
securities to be acquired.
MCN will make a capital contribution of up to $8.4 million for
its 47.5% aggregate interest in the Partnership. The other
partners will make capital contributions of various intangible
property (i.e., the franchises) as well as a total of $8.4
million for an aggregate 52.5% in interests. As previously
noted, these financing arrangements have been essentially
mandated by the MPSC and any permanent financing will require
additional approval. The staff of the Michigan PSC does not
object to the arrangement. The MPSC can continue to monitor the
Partnership's expenditures through its ratemaking proceedings and
the Michigan PSC, as well as the City of Adrian in the case of
Citizens, can monitor MCN through ratemaking and other
proceedings designed to protect MichCon's and Citizen's
customers. In addition, each partner's contribution is to be
used to finance the construction and start up of the system and
effectively amounts to a purchase made at cost. Overall, the
fact that the amount of the equity contributions to be made have
been either approved or not objected to by these state
commissions, these arrangements were negotiated among the
partners on an arm's length basis and, as discussed below, the
investment constitutes a small portion of MCN's overall capital
expenditures, all lead to the conclusion that the price to be
paid by MCN is fair and does not warrant any of the negative
findings that call for disapproval under Section 10(b)(2).
C. Section 10(b)(3)
Section 10(b)(3) directs approval of the acquisition
unless the Commission finds that:
(3) such acquisition will unduly complicate
the capital structure of the holding-company
system of the applicant ... or will be
detrimental to ... the proper functioning of
such holding-company system.
Section 10(c)(1) provides that the Commission not approve an
acquisition that "is detrimental to the carrying out of the
provisions of section 11." Together they relate to the corporate
simplification standards of Section 11(b)(2), which require that
each registered holding company take the necessary steps
to ensure that the corporate or continued
existence of any company in the holding-
company system does not unduly or
unnecessarily complicate the structure ... of
such holding-company system.
The intent of these requirements is to assure the financial
soundness of the holding-company system, with a proper balance of
debt and equity. No such complexities will result from the
acquisition.
The following table shows the capitalization of MCN at
December 31, 1994:
Capitalization of MCN - as of December 31, 1994
(in thousands of dollars, except percentages)
Amount Percentage
Long term debt, including capital
lease obligations . . . . . . . $685,519 53%
Redeemable Cumulative Preferred
Securities of Subsidiaries . . 102,618 8
Common shareholders equity . . . 511,495 39
Total: $1,299,632 100%
MCN's investment in the Partnership will take the form of a
straightforward capital contribution which will not complicate or
indeed, involve MCN's capital structure.
D. Section 10(c)(1) and 10(c)(2)
Section 10(c) provides for two distinct findings with
respect to a proposed acquisition, and both are related to the
standards prescribed in Section 11(b). Section 10(c)(1) requires
that the proposed acquisition not be "detrimental to the carrying
out of the provisions of Section 11." As discussed below,
Section 11 of the Act relates to the simplification of holding
company systems, which was one of the major purposes behind the
passage of the Act. Section 11(b)(1) discusses two main elements
to this simplification: reform of the corporate structure of
utility holding companies and confining the properties and
business of the companies within holding company systems to an
"integrated public utility system."
Section 10(c)(2) is a more specialized provision. It
requires that an acquisition not be approved unless the
Commission finds that:
[S]uch acquisition will serve the public
interest by tending towards the economical
and efficient development of an integrated
public-utility system.
Section 2(a)(29)(B) defines an "integrated public utility system"
as applied to gas utility companies as:
[A] system consisting of one or more gas
utility companies which are so located and
related that substantial economies may be
effectuated by being operated as a single
coordinated system confined in its operation
to a single area or region, in one or more
States, not so large as to impair
(considering the state of the art and the
area or region affected) the advantages of
localized management, efficient operation,
and the effectiveness of regulation:
Provided, that gas utility companies deriving
natural gas from a common source of supply
may be deemed to be included in a single area
or region.
The acquisition of an interest in the Partnership by MCN will
meet the standard set forth in Section 2(a)(29)(B) and,
therefore, will satisfy the requirements of Sections 10(c)(1) and
(2) and should be approved by the Commission. First, both the
Commission's limited precedent and current technological
realities point to the conclusion that, with the Partnership
included, MCN's gas utility system will operate as a coordinated
system confined in its operation to a single area or region
because they will derive natural gas from a common source of
supply. None of the Act, the Commission's orders and rulings or
the Commission's staff's no-action letters provide a definition
as to what constitutes a "common source of supply."
Nevertheless, the Commission has not traditionally required that
the pipeline facilities of an integrated system be
interconnected,<F3> has looked to such issues as from whom
the distribution companies within the system receive much,
although not all, of their gas supply,<F4> and has considered
both purchases of gas from a common pipeline<F5> as well as
from different pipeline's when the gas originates from the same
gas field.<F6> Since the time of most of these decisions, the
state of the art in the industry has developed to allow efficient
operation of systems whose gas supplies derive from many sources.
____________________
<F3> See In the Matter of Pennzoil Company, HCAR No. 15963 (1968)
(finding an integrated system where facilities both
connected with an unaffiliated transmission company but not
each other). See also, American Natural Gas Company, HCAR
15620 (1966) ("it is clear the integrated or coordinated
operations of a gas system under the Act may exist in the
absence of such interconnection").
<F4> See e.g., In the Matter of Philadelphia Company and Standard
Power and Light Company, HCAR No. 8242 (1948) ("most of the
gas used by these companies in their operations is obtained
from common sources of supply"); Consolidated Natural Gas
Company, HCAR No. 25040 (1990) (finding integrated system
where each company derived natural gas from two transmission
companies, although one such company also received gas from
other sources).
<F5> In the Matter of the North American Company, HCAR No. 10320
(1950) (finding Panhandle Eastern pipeline to be a common
source of supply).
<F6> See In the Matter of Central Power Company and Northwestern
Public Service Company, HCAR 2471 (1941), in which the
Commission declared an integrated system to exist where two
entities purchase from different pipeline companies since
"both pipelines rule out of the Otis field, side by side,
and are interconnected at various points in their
transmission system; and that they are within two miles of
each other at Kearney."
Following the Acquisition, MCN's gas utility company
subsidiaries will derive some of their gas from a common source
of supply as defined in Section 2(a)(29)(B). As previously
mentioned, MichCon receives approximately 46% of its gas supply
from the Midcontinent and Southern basins through the ANR and
Panhandle pipelines. The Partnership will take gas from the
Williams pipeline, which is interconnected with the ANR and
Panhandle pipelines. It is currently anticipated that the
Partnership's gas purchasing needs may be met in part by the same
MCN subsidiary that provides gas to Citizens.<F7> In the
past two years, MichCon and Citizens have obtained their gas
supply from the same gas field in numerous instances and both
companies transport substantial portions of their gas supply
through the Panhandle and ANR pipelines. Although gas purchases
for the Partnership will be made on an economic basis and not
with the main goal of ensuring a common source of supply, given
economies of scale and the past practice by the same purchasers,
it can be expected that the Partnership, Citizens and MichCon
will purchase gas from the same fields and that much of their gas
will travel thorough the same pipelines even if it is not from
the same field. As noted above, both purchases from a common
pipeline as well as from a common gas field have been found to
satisfy to "common source of supply" requirement of Section
2(a)(29)(B) of the Act.
____________________
<F7> Although MichCon and Citizens do exchange information on the
subject, MichCon's and Citizens' gas purchasing operations
are basically separate from each other.
In addition, MCN's ownership of an interest in the
Partnership will be beneficial to the management and operations
of the Partnership's system. MCN's management, through MichCon
and Citizens, is highly trained and experienced in providing gas
distribution services and will bring its technological, customer
service and regulatory expertise to the Partnership, and can pass
on that expertise to Tartan, the local operator of the
Partnership project. In addition, MCN's access to gas supplies
could prove useful to the Partnership, and complements the
financial strength MCN brings to the Partnership's operations.
While final arrangements are not yet in place, it is
anticipated that MCN will provide the Partnership with assistance
and expertise relating to the efficient operation of gas utility
companies. At the moment, MCN has agreed to provide engineering,
consulting (gas purchasing, planning and coordination) as well as
billing services to the Partnership at cost. At this point, no
specific estimate of the magnitude of the savings for the
Partnership that will result from this arrangement is possible,
but we believe the tangible benefits to the Partnership will be
substantial and additional intangible benefits will result from
access to MCN's management's expertise. Similarly, by increasing
the purchasing power of MCN, who will provide such services to
the System, the addition of the system to MCN's existing system
will create a stronger combined system able to capture economies
of sale in purchasing activities.
Item 4 REGULATORY APPROVALS
No federal commission, other than this Commission has
jurisdiction over the Acquisition as described herein. As
discussed above, the MPSC has approved the financing arrangements
for the System and the merger of TEC's predecessor with and into
TEC. Application to the MPSC for approval of the merger which
will result in ownership of the System and the related franchises
and certificates being transferred to the Partnership will be
made. In addition, the Partnership will hold a number of
franchises issued by local authorities allowing it to provide
service in those areas. No other state regulatory commission has
jurisdiction over the transactions for which approval is sought
herein, although the staff of the only other state commission
where any public utility companies involved in the transaction
are located has indicated that it does not object to the
transaction.
Item 5 PROCEDURE
MCN hereby requests that there be no hearing on this
Application and that the Commission issue its order as soon as
practicable after the filing hereof. The Commission is
respectfully requested to issue and publish the requisite notice
under Rule 23 with respect to the filing of this Application not
later than February 16, 1996, such notice to specify a date not
later than March 12, 1996, by which comments may be entered and a
date not later than March 15, 1996, as the date after which an
order of the Commission granting and permitting the Application
to become effective may be entered by the Commission. A form of
Notice if filed herewith as Exhibit G-1.
Without prejudice to its right to modify the same if a
hearing should be ordered on this Application, MCN hereby makes
the following specifications required by paragraph (b) of Item 5
of Form U-1:
1. There should not be a recommended decision by a
hearing officer or any other responsible officer
of the Commission.
2. The Division of Investment Management may assist
in the preparation of the Commission's decision
and/or order.
3. There should not be a 30-day waiting period
between issuance of the Commission's order and the
date on which the order is to become effective.
It is requested that the Commission send copies of all
communications to MCN as follows:
Daniel L. Schiffer, Esq.
Vice President, General Counsel
and Secretary
MCN Corporation
500 Griswold Street
Detroit, MI 48226
with concurrent copies to:
William S. Lamb, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019-4513
Item 6 EXHIBITS AND FINANCIAL STATEMENTS
a) Exhibits
B-1 Form of Partnership Agreement (previously filed).
B-2 Formation Agreement (previously filed).
B-3 Construction and Operation Agreement (previously
filed).
C-1 Form U-3A-2 of MCN (Incorporated herein by
reference to Form U-3A-2 filed by MCN on February
24, 1995 (File No. 69-352).
D-1 Letter from the staff of the State of Michigan
Public Service Commission dated September 18, 1995
(previously filed).
D-2 Order of the Missouri Public Service Commission,
dated September 29, 1995 (previously filed).
D-3 Order of the Missouri Public Service Commission,
dated September 16, 1995 (previously filed).
D-4 Order of the Missouri Public Service Commission,
dated April 15, 1995 (previously filed).
D-5 Order of the Missouri Public Service Commission,
dated September 13, 1995.
F-1 Opinion of Counsel.
F-2 "Past Tense" Opinion of Counsel (to be filed by
amendment).
G-1 Proposed Form of Public Notice (previously filed).
b) Financial Statements
1.1 Balance Sheet MCN (consolidated), as of
September 30, 1995 (Incorporated herein by
reference to Form 10-Q filed by MCN on November 7,
1995).
1.2 Statement of Income and Retained Earnings MCN
(consolidated), for the six months ended September
30, 1995 (Incorporated herein by reference to Form
10-Q filed by MCN on November 7, 1995).
Item 7 INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this
application and declaration 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. The transaction that is the
subject of this application will not result in changes in the
operation of the company that will have an impact on the
environment. MCN is not aware of any federal agency that has
prepared or is preparing an environmental impact statement with
respect to the transactions that are the subject of this
application.
SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned company has duly
caused this application and declaration to be signed on its
behalf by the undersigned thereunto duly authorized.
MCN CORPORATION
By:
Daniel L. Schiffer
Vice President, General
Counsel and Secretary
Date: February 8, 1996
February 8, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
This opinion is furnished to the Securities and
Exchange Commission (the "Commission") in connection with the
filing with the Commission of the Application/Declaration on
Form U-1 (File 70-8731) of MCN Corporation (the "Company") under
the Public Utility Holding Company Act of 1935 (the
"Application"). The Application requests that the Commission
issue an order authorizing the acquisition (the "Acquisition") by
the Company of a 1% general partnership interest in Southern
Missouri Gas Company, L.P., which will be a gas utility company
organized and operating in the state of Missouri.
I have acted as counsel for the Company and in
connection with this opinion I have examined originals or copies
certified or otherwise identified to my satisfaction of:
(1) the charter documents and by-laws of the Company,
as amended to date;
(2) minutes of meetings of the Company's shareholders
and directors, as kept in its minute books;
(3) the Agreement of Limited Partnership of Southern
Missouri Gas Company, L.P.; and
(3) the documents and agreements pertaining to the
Acquisition and such other certificates, documents and
papers as I deemed necessary or appropriate for the purpose
of rendering this opinion.
In such examination, I have assumed the genuineness of
all signatures, the authenticity of all documents submitted to me
as originals and the conformity to the original documents of all
documents submitted to me as copies. As to any facts material to
my opinion, I have, when relevant facts were not independently
established, relied upon the aforesaid agreements, instruments,
certificates and documents. In addition, I have examined such
questions of law as I have considered necessary or appropriate
for the purpose of rendering this opinion.
Based on the foregoing, and subject to the final
paragraph hereof, I am of the opinion that when the Commission
has taken the action requested in the Application:
(1) All state laws applicable to the Acquisition have been
complied with;
(2) The Company is a corporation validly organized, duly
existing and in good standing in the State of Michigan;
(3) The Company may legally acquire the partnership
interests of Southern Missouri Gas Company, L.P.; and
(4) The consummation of the Acquisition will not violate
the legal rights of the holders of any securities
issued by the Company.
I hereby consent to the use of this opinion as an
exhibit to the Application.
I am not, in this opinion, opining on laws other than
the laws of the State of Michigan and the federal laws of the
United States.
Very truly yours,
/s/
Daniel L. Schiffer
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 16,825
<SECURITIES> 0
<RECEIVABLES> 170,700
<ALLOWANCES> 13,325
<INVENTORY> 154,987
<CURRENT-ASSETS> 407,884
<PP&E> 2,928,136
<DEPRECIATION> 1,196,535
<TOTAL-ASSETS> 2,364,525
<CURRENT-LIABILITIES> 439,308
<BONDS> 811,546
<COMMON> 662
100,000
0
<OTHER-SE> 634,357
<TOTAL-LIABILITY-AND-EQUITY> 2,364,525
<SALES> 0
<TOTAL-REVENUES> 1,044,287
<CGS> 0
<TOTAL-COSTS> 925,950
<OTHER-EXPENSES> 1,605
<LOSS-PROVISION> 8,727
<INTEREST-EXPENSE> 40,724
<INCOME-PRETAX> 75,389
<INCOME-TAX> 20,114
<INCOME-CONTINUING> 55,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,275
<EPS-PRIMARY> .86
<EPS-DILUTED> 0
</TABLE>
STATE OF MISSOURI
PUBLIC SERVICE COMMISSION
JEFFERSON CITY
September 13, 1995
CASE NO: GA-95-349
James M. Fischer, Attorney at Law,
101 West McCarty Street
Suite 215
Jefferson City, MO 65101
Enclosed find certified copy of ORDER in the above-
numbered case(s).
Sincerely,
David L. Rauch
Executive Secretary
Uncertified Copy:
Office of the Public Counsel, P.O. Box 7800, Jefferson City, MO
65102
Tom M. Taylor, President, Missouri Southern Gas Company, 8801
South
Yale, Suite 385, Tulsa, OK 74137
Pat Odom, 223 West Center, Rogersville, MO 65742
Mary Jane Burr, P.O. Box 65, Fordland, MO 65652
Rhonda Coatney, P.O. Box 100, Norwood, MO 65717
Greg Fox, 516 South Division, Seymour, MO 65746
Jimmy Crisp, P.O. Box 301, Seymour, MO 65746
Linda Wrinkles, 106 North Mill, Rogersville, MO 65742
Bill Elgie, Rt. 1 Carpenter Street, Fordland, MO 65652
Regina Harper, 526 N. Eagle, Norwood, MO 65717
Roger McCormack, P.O. Box 261, Seymour, MO 65746
Dennis Cody, Rt. 3, Box 3102, Seymour, MO 65646
To the county commission of Greene, Wright and Webster County.
To the mayor of Rogersville, Fordland, *Diggins, Norwood and
Seymour.
* not incorporated
STATE OF MISSOURI
PUBLIC SERVICE COMMISSION
At a Session of the Public Service
Commission held at its office
in Jefferson City on the 13th
day of September, 1995.
In the matter of the application of Tartan )
Energy Company, L.C., d/b/a Southern )
Missouri Gas Company, L.C., for )
certificate of convenience and necessity )
authorizing it to construct, install, own, )
operate, control, manage and maintain gas )
facilities and to render gas service in ) CASE NO. GA-95-349
and to residents of certain areas of )
Greene, Wright and Webster Counties, )
including the incorporated municipalities )
of Rogersville, Fordland, Diggins, Norwood )
and Seymour, Missouri. )
)
ORDER GRANTING CERTIFICATE OF CONVENIENCE AND NECESSITY
On May 9, 1995, Tartan Energy Company, L.C., d/b/a
Southern Missouri Gas Company, L.C. (Tartan), filed an
application pursuant to Section 393.170, RSMo 1986 and 4 CSR 240-
2.060 for a certificate of convenience and necessity authorizing
it to construct, install, own, operate, control, manage, and
maintain gas facilities, and to render gas service in and to
residents of certain areas of Greene, Wright and Webster
Counties, including the incorporated municipalities of
Rogersville, Fordland, Diggins, Norwood and Seymour, Missouri.
The application included a number of exhibits designed to comply
with 4 CSR 240-2.060, and indicated that other exhibits would be
late-filed when they became available. On May 31, 1995, the
Commission issued an Order and Notice, giving notice of Tartan's
application and setting an intervention deadline of June 15,
1995. No applications for intervention were received by the
Commission.
Tartan explains in its application that the
incorporated cities of Rogersville, Fordland, Diggins, Norwood
and Seymour, Missouri would be served by city gate facilities and
distribution systems connected to Tartan's trunkline, while the
unincorporated portions of the proposed certificated areas would
be served via farm taps and short segments of distribution
pipeline connected to Tartan's trunkline. Tartan notes that the
five municipalities for which a certificate of convenience and
necessity is now sought were considered "probable additional
cities" in the feasibility study previously submitted by Tartan
in Case No. GA-95-127.<F1> A new feasibility study was filed
in this case as late-filed Exhibit 3. In addition, Tartan filed
as Exhibit 4 the franchises and certified election results for
the municipalities of Rogersville, Fordland, Norwood and Seymour,
Missouri. The ratification election for the municipality of
Diggins was late-filed as a supplement to Exhibit 4 on August 23,
1995.
____________________
<F1> Tartan was previously granted a conditional certificate of
convenience and necessity to construct a trunkline and
provide service in various municipalities and unincorporated
areas in the vicinity of the areas for which a new
certificate of convenience and necessity is sought. See
Tartan, Case No. GA-94-127, Report and Order, issued
September 16, 1994. This conditional certificate was made
effective as a certificate of convenience and necessity in
an Order Approving Tariffs And Authorizing The Commencement
Of Construction Of Gas Facilities, issued April 14, 1995.
The Commission later issued an Order Granting Certificate of
Convenience And Necessity For Mountain View, Missouri, And
Authorizing Construction And Distribution Facilities In
Mountain View, Missouri, And In Texas And Wright Counties,
issued May 19, 1995, which extended the certificate to
include a municipality which had not yet ratified its
franchise at the time of the original Report and Order.
Tartan states that no other public utility is currently
providing natural gas service in the proposed service area, but
similar unregulated utility service is available in the area
through propane gas distributors. Tartan asserts that the
granting of its application is required by the public convenience
and necessity because it will make available to the residents of
the proposed service area a new, efficient and economical form of
energy, which will enhance the economic development of the area
and thus aid in attracting new businesses to the area. Tartan
maintains that the regulatory issues related to this project were
thoroughly reviewed by the Commission in Case No. GA-94-127,
including the public interest considerations, rate issues,
financial and management issues, safety issues, and gas supply
issues. The additional projected load for the five
municipalities for which a certificate is currently sought is
approximately 144,000 Mcfs per year, which represents
approximately 8 percent of the projected load in the service area
approved in Case No. GA-94-127. In addition, at least one
industrial customer, with facilities in multiple locations
through Tartan's existing service area, seeks to convert all of
its facilities at or near the same time, including some
facilities in a municipality which is the subject of this
application. Furthermore, Tartan notes its construction activity
for the facilities approved in Case No. GA-94-127 will span the
1995 and 1996 construction seasons, and that the proposed
facilities which would be built to service the areas for which a
certificate is sought in the present case can be built most cost
effectively by being integrated completely into the on-going
construction activity that presently is surrounding and alongside
the proposed additional service areas.
No party to this proceeding has requested a hearing,
therefore pursuant to State ex rel. Rex Deffendorfer Enterprises,
Inc. v. Public Service Commission, 776 S.W.2d 494, (Mo. App.
1989), the Commission determines that no hearing is necessary in
this case. The Commission will base its decision on the verified
application filed by Tartan, and the attachments thereto,
including late-filed exhibits, and the recommendation of the
Staff of the Commission (Staff).
Tartan is a limited liability company duly organized
and existing under the laws of the State of Oklahoma, with its
principal place of business located at 8801 South Yale, Suite
385, Tulsa, Oklahoma 74137, and does business in the State of
Missouri as Southern Missouri Gas Company, L.C. It also is a gas
corporation and public utility as defined in Section 386.020,
RSMo 1994, and is subject to the jurisdiction of the Commission
pursuant to Chapters 286 and 393 of the Missouri Revised
Statutes.
On August 2, 1995, Staff filed a memorandum containing
its recommendation regarding Tartan's application. Staff states
that each of the five cities involved in Tartan's application are
adjacent to the planned route of the Company's trunkline, and are
surrounded by the Company's currently approved service area.
Overall voter approval in four of the five cities has been
approximately 81 percent, with voter ratification pending in
Diggins.<F2> In addition, Staff states that in response to
local interest, Tartan is seeking Commission approval to service
customers via farm taps in unincorporated areas located along
approximately seven miles of its trunkline located in Greene
County. Staff indicates that according to Tartan, no franchise
is required from Greene County, but right-of-way petitions will
____________________
<F2> As previously indicated, the result of the ratification
election for the municipality of Diggins was late-filed as a
supplement to Exhibit 4 on August 23, 1995.
be filed as needed for access to county right-of-ways.
Additionally, Staff notes that the distribution systems for each
of the five cities are to be designed, constructed, operated and
maintained to the same specifications and criteria as the systems
in the other cities for which service has already been approved.
Likewise, Tartan is proposing to serve customers in the requested
service area at the same rates, terms and conditions as were
approved in Case No. GA-94-127, including the provision of up to
$200 per customer for conversion costs, one-half of which is to
be included in rate base.
Staff states that it recommends Commission approval of
Tartan's application, even though it has some concerns regarding
the financial feasibility of the natural gas certificate request.
Staff's support is made in view of the current competition from
propane and a local desire for natural gas service. However,
Staff's support is contingent upon several factors specifically
related to the Company's last certificate case in Case No. GA-94-
127. Essentially Staff's recommendation is contingent upon the
conditions previously contained in the Stipulation and Agreement
approved in Case No. GA 94-127 being applied to the certificate
in this case as well. These conditions include the continued use
of the stipulated volumes and tariffed rate amounts, compliance
with the equity financing and capital ratio provisions as
originally approved, and the continued commitment of the Company
to file a rate case within two year of commencement of service in
West Plains, Missouri. Staff adds that the Company has requested
expedited approval of the application so that the new
construction projects can be efficiently integrated into the on-
going construction activity presently surrounding the five
cities, and that Staff has no objection to this. Staff therefore
recommends the following:
1) That the Commission grant the requested
certificate of convenience and necessity for the
proposed service area, including, upon receipt of
evidence of voter ratification, the municipality
of Diggins, Missouri;
2) That the Commission order Tartan to comply with
all the conditions previously outlined in the
Stipulation and Agreement approved in Case No. GA-
94-127;
3) That the Commission order Tartan to file tariff
sheets to reflect the inclusion of the above
incorporated and unincorporated service areas in
its service area descriptions; and
4) That the Commission order that the certificate of
convenience and necessity become effective
simultaneously with the effective date of the
tariffs to be filed and approved.
The Commission has reviewed Tartan's application and
the attachments thereto, as well as Staff's recommendations, and
finds that Tartan's application to provide natural gas service in
the proposed service area is necessary and convenient for the
public service, and is in the public interest. Tartan has
provided sufficient indication of the need for natural gas
service in the proposed service area. In addition, Tartan's
qualification to provide the proposed service were adequately
reviewed in Case No. GA-94-127. There are no new facts or
unusual circumstances which would indicate a need for further
review of Tartan's qualifications. Likewise, Tartan's financial
ability to provide the proposed service and the economic
feasibility of its original proposal were also addressed in
Case No. GA-94-127. There the Commission found that Tartan's
original proposal, as modified by the Nonunanimous Stipulation
and Agreement entered into between Tartan, Staff, and the Office
of the Public Counsel, represented a viable project. Similarly,
the Commission finds that Tartan's current proposal represents a
logical and an anticipated extension of its original proposal in
Case No. GA-94-127. The Commission is of the opinion that the
additional sales volume which may be anticipated from the
provision of service to the five municipalities, the one
industrial customer specifically referred to, and the anticipated
farm taps will assist in the economic viability of the overall
project. The Commission also finds that the introduction of
natural gas into the proposed service area may assist in the
economic expansion of the area. Furthermore the issuance of a
certificate at this time which extends Tartan's current service
area to contiguous areas will allow the gas facilities needed to
provide service to the newly certificated area to be included in
Tartan's overall construction plans, thus helping to minimize the
construction cost for the new gas facilities.
Just as the Commission views Tartan's current proposed
service area as an extension of its proposal in Case No. GA-94-
127, so the Commission shares Staff's concern about the financial
feasibility of this segment of the overall project. Under
Section 393.170, RSMo 1994, the Commission has authority to
impose such condition or conditions as it may deem reasonable and
necessary in granting permission and approval for the
construction of gas plant and the exercise of a franchise
relating thereto. The Commission finds that the conditions
suggested by Staff are reasonable and should be adopted in this
case. Thus the Commission will grant the requested certificate
of convenience and necessity subject to the conditions contained
in the Nonunanimous Stipulation and Agreement entered into and
approved in Case No. GA-94-127, including, but not limited to,
the booking of one-half of the cost of Tartan's conversion
incentive program below-the-line for ratemaking purposes,
Tartan's continued use of the stipulated volumes and tariffed
rate amounts, its continued compliance with the equity financing
and capital ratio provisions, and its continued commitment to
file a rate case within two years of the commencement of service
in West Plains, Missouri.
IT IS THEREFORE ORDERED:
1. That Tartan Energy Company, L.C. d/b/a Southern
Missouri Gas Company, L.C., by and is hereby granted a
certificate of convenience and necessity authorizing it to
construct, install, own, operate, control, manage, and maintain
gas facilities and to render gas service in and to the residents
of certain areas of Greene, Wright, and Webster Counties,
including the incorporated municipalities of Rogersville,
Fordland, Diggins, Norwood and Seymour, Missouri. Said
certificate shall be in conformity with Attachment 1 attached
hereto and incorporated herein by reference, which describes the
service area by county, range, township and section, and
Attachment 2, attached hereto and incorporated herein by
reference, which is a map which generally depicts the service
area.
2. That the variance from Commission's promotional
practices rule previously granted to Tartan Energy Company, L.C.
d/b/a Southern Missouri Gas Company, L.C., in the Commission's
Report and Order issued on September 16, 1994 in Case No. GA-94-
127, be and is hereby extended to the service area referenced in
Ordered Paragraph 1 above.
3. That Tartan Energy Company, L.C., d/b/a Southern
Missouri Gas Company, L.C., be and is hereby authorized to
account for one-half of the allowed $200 maximum per customer
conversion incentive program costs above-the-line, and include
those costs in rate base, as set forth in the Commission's Report
and Order issued on September 16, 1994 in Case No. GA-94-127.
4. That the conditions contained in the Non-unanimous
Stipulation and Agreement approved in the Commission's Report and
Order issued on September 16, 1994 in Case No. GA-94-127 shall be
applied to the certificate of convenience and necessity issued in
this Order, including, but not limited to, the continued use by
Tartan Energy Company, L.C., d/b/a Southern Missouri Gas Company,
L.C., of the stipulated volumes and tariffed rate amounts,
continued compliance with the equity financing and capital ratio
provisions, and continued commitment to file a rate case within
two (2) years of the commencement of service in West Plains,
Missouri.
5. That Tartan Energy Company, L.C., d/b/a Southern
Missouri Gas Company, L.C. be and is hereby authorized to file
tariff sheets to reflect the inclusion of the above incorporated
and unincorporated certificated service areas in its service area
description.
6. That the certificate of convenience and necessity
referenced in Ordered Paragraph 1 above shall become effective
simultaneously with the effective date of the tariffs required to
be filed and approved pursuant to Ordered Paragraph 5 above.
7. That the Commission makes no finding as to the
prudence or ratemaking treatment to be given any costs or
expenses incurred as the result of the granting of this
certificate of convenience and necessity, except those costs and
expenses dealt with specifically in the Nonunanimous Stipulation
and Agreement approved in the Report and Order issued on
September 16, 1994 in Case No. GA-94-127, and reserves the right
to make any disposition of the remainder of those costs and
expenses which it deems reasonable, in any future ratemaking
proceeding.
8. That this Order shall become effective on
September 26, 1995.
BY THE COMMISSION
David L. Rauch
Executive Secretary
(S E A L)
McClure, Kincheloe, Crumpton,
and Drainer, CC., Concur.
Mueller, Chm., Absent.
