ML20087H388

Announces Wisconsin Energy Corp & NSP Co Plans to Merge & Form Primergy Corp.Forwards News Release Re Filings Which Consist of Three Separate Applications

ML20087H388
Person / Time
Site:	Monticello, Point Beach, Prairie Island
Issue date:	07/14/1995
From:	Abdoo R AFFILIATION NOT ASSIGNED
To:	Shirley Ann Jackson, The Chairman NRC COMMISSION (OCM)
References
NUDOCS 9508180059
Download: ML20087H388 (4)

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July 14,1995 Dr. Shirley A. Jackson, Chair Nuclear Regulatory Commission Washington, DC 20555 Dear Dr. Jackson As you know, Wisconsin Energy Corporation (WEC) and Northern States Power Company (NSP) earlier this year announced plans to merge and form Primergy Corp.

This week we made three filings with the Federal Energy Regulatory Commission. The filings consist of three separate applications - the merger application, a proposed joint transmission tariff, and an amendment to the NSP Interchange Agreement which will include Wisconsin Electric - along with supporting testimony and edubits Because the filings are quite voluminous (approximately 2,000 pages),

I have not enclosed a copy. Instead, I'm enclosing the news release regardmg the filings. If after resiewing the news release you determine that you would like a copy of the complete blings, simply call Paula Marcee at 414/221-2119 and we will ship them to you. We likely will file with the respective -tate public senice commissions in about two weeks.

Among the many benefits of the proposed merger are: maintenance of competitive rates; integration of corporate and administrative functions, mtegration of nuclear operations; lower gas supply costs. and a more diverse senice territory. Estimated costs savings provide a unique opportunity to benefit both customers and shareholders through the combmation, and will result in a stronger, more competitise company. Another key element of the merger is an electric rate reduction to the retail electric customers of WEC's subsidiary. Wisconsin Electnc, and NSP of about 1.5 percent, coupled with a rate freeze through the year 2000.

The energy mdustry is evoking rapidly to competition This strategically sound merger of equals reficcts and enhances the future of the energy marketplace.

Ifyou have any questions about the merger, please do not hesitate to contact me.

Sincerely, s

Chairman of the Board, President & Chief Executive Officer Enclosure

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Rick James 414-221-4444 i

WISCONSIN ENERGY CORP., NOR11112N STATES POWER CO.

FILE APPLICATION WITH FERC FOR MERGER APPROVAL i

MILWAUKEE, Wis -(July 11,1995) Wisconsin Energy Corporation (WEC) and Northern States Power Company (NSP) have filed an app!! cation and supportmg testimony with the Federal Energy Regulatory Comenission (FERC) seeking approval of a proposed merger of the two companies to form Primergy Corp.

l'he filing consists of three separate applications -- the merger application, a proposed joint transmission tanff, and an amendment to the NSP Interchange Agreement which will include Wisconsin Electric -- along with supporting testimony and exhibits.

The merger application is supported by the tenimony of several witnesses, mostly from NSP and WEC who indude the following-David K, Porter, senior sice president of Wisconsin Electric Power Company, who di;, cusses commitments WEC and NSP are makmg to their wholesale and retail customers. He says NSP and WEC will offer customers three things: 1) an "open seuon" to wholesale electric customers whose rates could be atTected by the merger.

2) an open access transmission tanfiprovidmg access to the Primergy transmission system under a single-system rate, and 3) an electric rate reduction to Primergy reta!!

electne customers of about 1.5 percent, coupled with a rate freeze through the year 20m His testimony ai;o indicates that the merger should have little or no affect on the nature of current regulation The companies wi'l continue to be regulated by the Secunties and Exchange Commission (SEC), Nuclear Regulatory Conmtission (hTsC) and the comnssions in Minnesota. Wisconsin Michigan, North Dakota and South Dakota.

Edward J. McIntyre, sice president and chief financial officer ofNorthern States I'ower Company, who summanzes the ger.eral benefits of the proposed merger:

maintenance of competitive rates, integration of corporate and administrative

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functions, integration of nuclear operations, lower gas supply costs, and a more dwerse sersice tenitory. He says the merger will have a positive impact on the companies' service scrritories and with its key constituems.

Thomas J. Flaherty, a partner in the management consulting firm of Deloitte &

Touche LLP, who discusses synergies created by the merger and quantifies specific areas of cost sasings His testimony, which documents net savings of about S2 billion over 10 years, summarhes the pre-merger analysis of merger-related savines conducted by Deloitte & Touche at the request of NSP and WEC; '

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y A transition team comprised of SSP and WEC employees will use the cost savings estimates in its transition planning. According to Porter, who also is a member of the transition team, Flaherty's analysis contains ." rules-of-thumb' estimates based on what was achieved in other mergers in the industry. *We consider the savings figures to be reasonable estimates of what we can gain from the merger," says Porter "The level of expected savings may change somewhat as decisions are made regarding post-merger operations, but we believe the savings actually achieved should be in line with the

- projections that have been developed."

The projected cost savings are based on consolidating separate, stand-alone operations.

This consolidation and imegration will enable duplicate functions and positions to be climinated; geographically proximate locations to be merged; similar corporate activities to be combined, avoided or reduced in scope; external purchases of commodities and services to be aggregated; tecludcal skills and capabilities to be optimized and shared; capital expenditures to be avoided; and generation resources to be more effectively coordinated and dispatched The estimated cost savings provide a unique oppurtunity to benefit both customers and shareholders through the combina: inn, and wi!! result in a stronger, more competitive company.

About 50 percem of the net savings can be reahzed by e:immating redundant functions within Corporate and Operations labor. Another 30 percent would come from combining corpcrate and administrative programs, and achieving combination savings in the purchasing area Savings in the nuclear area and other operations and fuel procurement would amoum to abeut 20 percem of the total ar.ticipated savings.

Iotal Savmps 1997 200(,

Swirgs Cttectos in F milifens Curporate & Operations Labor 51.205 Facilities Consolidation 46 Corporate & Administrative Programs 313 Purchasing Economies (nonfuel) 263 Nuclear 113 Fuel Procurement 100 Production Disp 4a.h 42 Gas Supply 102 TOTAL Savings S2,184 Afinus Transaction & other costs (248)

NET SAVINGS S t,936 2

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.I LThe prelirninary analysis suggests that the labor savinEs could be achieved 'by reducing i about 10 percent of the positions across the two companies. Together, NSP and WEC '

have about 11,900 employees -- 7,300 at NSP and 4,600 at WEC. Within the FERC filing, the reductions are identified in two primary functional areas: ,

. .. Colporate and administrative functions r- As of the first quaner of1995, NSP and ,

WEC had a total of1,760 employees performing these functions. The merger saving's -

analysis identifies an estimated 465 overlapping positions, or about 26 percent of the s

' combined staffs. #

.i Field, production and technical support functions -- ToEether, NSP and WEC have about 10,200 employees performing these functions. About 760 positions, or 7 percent of the combined work force, have been identified as potentially in excess.

How the reductions will be achieved has not been determined at this time.

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• The work of the Transition Team and subteams will be to detennine together the best l

way to handle the reductionssays NSP's McIntyre, co-chair of the Transition Team -

"We are conuTutted to making a thoughtful and strategically sound combination of '

retnarces and talents. The team will use every available means to handle work force redactions in the most rcasonab!c, fair and equitable manner."

Ihe merger analysis also identified facill:!es consolidation as an opponunity for savmys.  :

As previously announced, NSP-Wisconsin's headquancrs in Eau Claire, Wis., will be  :

censolida:ed with WEC's headquaners in Milwaukee. This combination keeps an

. operating headquan'e:s in Wis:onsin and maxinuzes the ediciencies in prosiding service and c; era: ions in the state. l i

IQmgs will be made later this summer with regulatory agencies in vmious states, including i h&.nesota, Wisennsin, Michigan and Nonh Dakota. I Wisconsin Ene gy Com is a holding company with subsidiaries in uti!ity and non-utility' l budnesses. Its principal subsidiaries rirc Wisconsin Electric Power Co., which serves  !

938,0,00 customers, and Wisconsin Natural Gas Co., which serves 350,000 customers .l l

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