ML20198E263
| ML20198E263 | |
| Person / Time | |
|---|---|
| Site: | Nine Mile Point  |
| Issue date: | 01/06/1998 |
| From: | Borkowsky T AFFILIATION NOT ASSIGNED, NEW YORK STATE ELECTRIC & GAS CORP. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| NUDOCS 9801090052 | |
| Download: ML20198E263 (9) | |
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Docket No. 50-410 Facility Ooerating License No. NPF-69 Gentlemen and Ladies:
On September 18, 1997, New York State Electric & Gas Corporation ("NYSEG") filed an application with the Commission
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seeking the Commission's approval to transfer control over NYSEG's interest in the above-referenced license to a holding company to be formed over NYSEG (" Application").
Such Application was supplemented by letters dated October 20, 1997 and October 27, 1997.
Attached to the Application was a copy of the filing made with the Federal Energy Regulatory Commission ("FERC") requesting regulatory approval tor the proposed reorganization.
Th:
Application noted that the implications of the proposed reorganization were pro-competitive in their antitrust effects and that FERC would analyze the potential effect of the proposed reorganization on competition in thair review of the proposed reorganization.
On December 16, 1997, FERC issued an order authorizing the corpovate reorganization
(" Order"), a copy of which is attached hereto.
As further discussed on page 4 of the Order, FERC found that the proposed reorganization will not adversely affect competition or have an anti-competitive effect.
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9801090 b2 06 PDR ADOCK 05000410 P
H'UCEO LAWRENCE O ACELL Janudry 6,-1998 Page 2 NYSEG respectfully requests that the Commission act on the Application as promptly as possible.
NYSEG believes that the information contained in the Application and its exhibits, together with the FERC Order, is sufficient for the Commission to grant.its consent to-the proposed reorganization in a timely manner.
The settlement Agreement filed with the Commission on October 20, 1997, as amended-by the October 27, 1997 filing, is currentlf pending before the New York Public Service Commission
("NYPSC").
Deferral of Commission action on the Application until completion of the state proceeding is unnecessary since the Commission can condition the effectiveness of its order approving the Application on the NYPSC's approval of-the Settlement Agreement without changes that are material to the issues raised in the Application.
If you have any questions regarding this matter, please contact either myself at (212)455-5504 or NYSEG's Special Counsel, Samuel Behrends, IV, at (202)986-8018.
Respectfully submitte ShkI/
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Taras.G. Borkowsky i Attorney for New York State Electric &
Gas Corporation cc:
Hubert J. Miller Regional Administrator U.S.
Nuclear Regulatory Commission i
Region I 475 Allendale Road King of Prussia, PA 19405-1415 See attached list
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_ FEDERAL ENERGY REGULATORY COMMISSION ggp
'New ork State Electric and Gas. )
Docket No. EC97-52-000 Corporation
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ORDER AUTHORIZING DISPOSITION OF JURISDICTIONAL FACILITIES AND CORPORATE REORGAICZATION (Issued December 16, 1997)
On August 29, 1997, as amended on November 7, 1997,. New York State Electric and Gas Corporation (NYSEG) filed an application pursuant to'section 203 of the-Federal Power Act 1/ for Commission.
authorization to implement a corporate restructuring which will result in the formation of a holding company.
As a result of the proposed restructuring, NYSEG will become a wholly-owned subsidiary
- of a -new holding company to be named later (HoldCo for purposes of this ' erder).
As part of the corporate restructuring, NYSEG also
- proposes to transfer certain of its jurisdictional power sales contracts and a power sales tariff to a subsidiary or t.ubsidiaries of HoldCo.
Descrittien of NYSEG's Cerrerate Structure NYSEG is a public utility within the meaning of the Federal Power Act (FPA). 2/
NYSEG provides electric and gas services to customers in parts of central, eastern and western New York.
NYSEG has _ two wholly-owned subsidiarier., NGE Enterprises, Inc. (NGE) and Somerset Railroad Corporation. 1/
NYSEG's power marketing affiliate, XENERGY, is a wholly-owned subsidiary of NGE.
NYSEG and XENRRGY have received Commission authorization to sell wholesale power at market-based rates. 1/
According to the application, NYSEG is proposing to establish a holding company structure in response to directives of the Public Service Commission of the State of New York (New York Commissien) as a means to increase competition in New York. 5/
1/ -
16 U.S.C. 5 524b '1994).
_2/
121 16 U.S.C.
5 824 (e:
(1994).
1/
_Applicaticn,- Exhibit S.
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XENERGY, Inc. and New York State Electric and Gas Corporatien, 79 FERC ' E *,3 03 (1997).
1/
Applicacion at 14-15.
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.t 2
865018 r
NYSEG -- Docket No. EC97-52-000 Proposed cornorate Recrennization NYSEG proposes to reorganize its corporate operations through the creation of a holding company parent. S/
The corporate reorganization will be accomplished pursuant to the terms of an Agreement and Plan of Share Exchange to be entered into between NYSEG and HoldCo.
Formation of the holding company will be achieved through a share exchange under which each outstanding share of NYSEG common stock will be exchanged for one share of HoldCo common stock.
None of NYSEG's other equity securities, including cumulative preferred shares, would be altered by the transaction. 2/
As cart of the reorganization plan, NYSEG's coal-fired generaticn' assets'are to be transferred to a subsidiary or subsidiaries of HoldCo (collectively referred to as GenSub) and subsequently sold through an auction, a/
Consequently, NYSEG seeks Commission authorization to transfer certain of its wholesale power sales contracts and a power sales tariff (collectively power Sales Agreements) to GenSub. 2/
NYSEG seeks an effective date for the transfer of the Power Sales Agreements concurrent with the effective date of the transfer of the generation assets. la/
In addition, NYSEG seeks Commission authorization to transfer any new power sales tariff service agreements and umbrella agreements that 1/
According to the application, HoldCo will qualify for an exemption from registration as a holding company under the Public Utility Holding Company Act of 1935 (PURCA), pursuant to section 3 (a) (1) of PUHCA.
(Application at 26).
2/
Application at 6.
1/
The Application states that Gensub may initially be a subsidia:7 of NYSEG and, as part of the proposed reorganization, be transferred by NYSEG to HoldCo.
(Application at 2 n.5).
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NYSEG scates tha: the power sales. ariff does not provide for power sales to Offiliates and that, prior to any sale of power by GenSub to NYSEG, GenSub will make a separate filing under section 205 of the FPA requesting Commission acceptance of such sale.
(Application at 12) 12/
NYSEG proposes to file all necessary no:L as of succession under section 35.16 of the Commission's Rules and Regulations, 18 C.F.R. 3 35.16 (1997) in response to any Commission order authori:Ing the holding company formation. (Application at 2)
a 865019
.NYSEG. -- Docket No. EC97-52 -000 it enters into up to and until the time-NYSEG transfers its generation assets to GenSub.
Notice of the Aeplication Notice of the application was published in the Federal Register trith comtaents due on or before September 29, 1997.
On September 11, 1997, the Public Service Electric and Gas Company (PSE&G) filed a motion to intervene raising no issues.
On 5
September 26, 1997, the New York Commission filed a notice of intervention requesting that the Commission defer action on NYSEG's proposed reorganitation until after the effective date of the New York Commission's decision.
The New York Commission also states that, due to continuing settlement negotiations in the state restructuring proceeding, NYSEG should modify its application with the Commission after such negotiattons are concluded.
Discussion Pursuant to Rule 214 of the Commit 7 ion's Rules of Practice and Frocedure, PSE&G's motion to intervene and the New York Commission's notice of intervention serve to make them parties to the proceeding. 11/
As noted above, NYSEG is a public utility under the FPA.
In Central Vermont o blic Service Correration (Central Verment), 12f u
the Commission concluded that the transfe: of ownership and control of jurisdictional facilities, through a transfer of a public utility's common stock from ex sting shareholders to a newly created holding company, constitutes a dispositic.n o.-
jurisdictional f acilities recuiring prior Commission approval under section 203.
Consistent with the Commission's holding in Central Verment, because NYSEG's proposed restructuring involves the transfer of ownership cf its common stock from existing sharenolders-to HoldCo, the restructuring is subject to the
. requirements of section 203.
Additionally, in Enron Power Marketine.
Inc., the Commission found that power sales contracts filed with the Commission constitute jurisdictional f acilities.11/
Consequen:1y, the 11/
15 C.F.R.
S 3 5 5. 214 (a) (2 )
nd :c) (1) (1997) 11/
39 7ERC $ 61,295 (1987).
11/
65 FERC T 61,305 at 62,405 (1993).
Sea also Ocean 5: ate Power, 43 FERC T 61,466 (1988) (as a result of a change in (centinued...)
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1NYSEQ -- Docket-No. EC97-52-000-
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transfer or assignment of power sales contracts requires section 203-authorization.
Consistent with this finding. the transfer of NYSEG's Power Sales _ Agreements requires approval pursuant to sectien 203.
The proposed restructuring will not adversely affect compctition.
While the proposed reorganization results in a change of ownership or control of jurisdictional facilities, it involves only NYSEG and its af filiates and does not itself result in any
- change in the operation of.NYSEG's facilities, or other inputs that could be used as barriers to entry, that would have an anti-competitive effect.
The proposed reorganization will not-adversely e ffect rates or regulatien.
According to the application, it is contemplated that
' HoldCo will be an exempt holding company under PUHCA. 11/
After the reorganization, NYSEG will continue to be subject to retail rate regulation by the New York C:'. mission.
This Commission will raaintain its regulatory authority over both NYSEG :md XENERGY, and will have regula.cory authority over any wholesale sales made by GenSub, to consider any and all wholesale rate-related issues arising after the reorgani:stion.
Finally, neither PSE&G nor the New York Commission raf.se
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substantive issues related to the proposed reorganization.
The New York Commission, however, har asked that the Commission defer action on NYSEG's application pending continuing negotiations ir.
the state proceeding.
Further deferral is unnecessary since NYSEG would need to file a further application with the commission unde:
section 203 of the FPA in the event that subsequent negotiations in NYSEG's restructuring proceeding in the State of New York resclt in agreements that present material changes affecting the instant disposition of faci?ities.
While HoldCo is not proposing to merge with another holding company at this time, it is possible that in the future such a merger may take place.
In an order approving a similar holding company formation by Illinois Powcr Company, the Commission clarified its jurisdiction under section 203 recardina the effect that mergers of public utilicy holding _ companies have en their
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(... continued) ownership structure, the transfer of assets in the form of power sales centracts constitutes a transaction within the scope of section 203).
11/ -Application a: 15.
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s 865021 NYSEG -- Docket No. EC97-12-000 public. utility subsidiaries. li/
While noting that it.does not have. jurisdiction over public holding company mergers or
-consolidations, the Commission concluded that, ordinarily,-when public utility holding companies merge, an indirect merger involving their public utility subsidiaries also takes place, and that Commission approval under section 203 would be requi.ed.
Consequently, the Commission stated:
-We therefore will presume, subject :o rebuttal, that mergers between public utility holding companies -also accomplish an indirnet merger of-their public utility cubsidiaries.
If the public utilities can rebut the presumption, we will find that jurisdiction will not attach until such time as the public utility subsidiaries formally merge or consolidate their facilities.
If the public utilities cannot rebut the. presumption, section 203
-approval of the indirect srger of the public utilit,ies will be required.
(footnote omitted)
[11/3
's Accord!ngly,-NYSEG is advised that, in the event HoldCo should
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seek to merge with another public utility holding company, NYSEG and any other affected public utility are required to file under eection 203 evidence to rebut the presumption that such a merger would not also result in an indirect merger of the public utility subsidiaries, or, alternttively, for approval-of an indirect merger 5
of the public utilities.
Based on the foregoing analysis, it is conclud6d that the disposition of jurisdictional facilities by NYSEG in the above described corporate restructuring is consistent with the public interest and is hereby authcrized effective concurrent with the effective date of NYSEG's generation assets transfer to GenSub,-
-subject to the following conditions.
(1)
The proposed-transaction is authorized upon the terms and conditions and for the purposes set forth in the application; (2) -The Commission retains authority under section 203 (b) of the Federal Power Act to issue supplemental orders as appr.:priate ;
4 11/--Illinois Power Company, 67 FERC i 61,136 (1994).
11/' 67 FERC at 61,354-55.
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17YSEG -- Docket No. EC97-52-000 (3)
The foregoing authorization is without prejudice to the authority of the Commission or any otF*r regulatory body with respect to ratea, service, accounts, valuation, estimates or deterainations of cost or any other matter whatsoever now pending or which may come before the Commission; (4)
Nothing in this order.shall be construed to imply acquiescence in any estimate or determination of cost or any valuation of property claimed or asserted; (5)
NYSEG shall record all costs related to the formation of JoldCo or restructuring, and not p::. sed on to HoldCo, in Account 426.5, Other Deductions, of the Commission's Uniform' System of Accounts Prescribed for Public Utilities and Licensees; (6)
In the event HoldCo should seek to merge with another public utility holding company, the public utilities of those. companies are required to make appropriate filings i
under section 203 of the Federal Puwer Act; and (7)
NYSEG shall promptly notify the Commission of the date on
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which the disposition of the jurisdictional facilities is consummated.
Authority to act on this matter is delegated to the Director, Division of Opinions and Corporate Applications, pursuant to 18 C.F.R.
S 375.713.
This order constitutes final agency action.
Requests for rehearing by the Commission may be filed within thirty (30) days of the date of issuance of this order, pursuant to 18 C.F.R.
S 385.713.
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Robert E. Cackowski Director, Division of Opinions and Corporate Applications J
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