Filed November 27, 2001
File No. 70-09569
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION/DECLARATION
POST-EFFECTIVE AMENDMENT NO. 4
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Energy East Corporation
P.O. Box 12904
Albany, New York 12212-2904
(Name of company filing this statement and address of principle executive
offices)
Energy East Corporation
(Name of top registered holding company parent)
Robert D. Kump
Vice President and Treasurer
Energy East Corporation
P.O. Box 3287
Ithaca, New York 14852
(Name and address of agent for service)
The Commission is requested to send copies of all orders, notices, and
communications to:
Adam Wenner Frank Lee
Vinson & Elkins L.L.P. Huber Lawrence & Abell
The Willard Office Building 605 Third Avenue
1455 Pennsylvania Avenue, NW New York, New York 10158
Washington, DC 20004-1008 Telephone: (212) 455-5515
Telephone: (202) 639-6533 Facsimile: (212) 661-5759
Facsimile: (202) 639-6604 Email: flee@huberlaw.com
Email: awenner@velaw.com
INFORMATION REQUIRED
ITEM 1. DESCRIPTION OF REQUEST
A. Introduction
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This post-effective amendment seeks authorization by the Securities and
Exchange Commission ("Commission") of the retention of certain real estate owned
by Union Water-Power Company ("UWP").(1)
B. Description of the Request for Authorization
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On August 31, 2000, the Commission issued an "Order Authorizing Acquisition
of Public-Utility Holding Companies,"(2) in which it authorized Energy East
Corporation ("Energy East") to acquire all of the issued and outstanding common
stock of CMP Group, Inc. ("CMP Group"), CTG Resources, Inc., and Berkshire
Energy Resources (the "Energy East Order"). Following the issuance of the Energy
East Order, on September 1, 2000, Energy East registered as a public utility
holding company under Section 5 of the Public Utility Holding Company Act, as
amended ("Act").
Exhibit H-5 to Energy East's Amendment No. 5 to Form U-1 (the
"Application") describes the business activities of non-utility subsidiaries of
Energy East. Section E.2 of Exhibit H-5 describes the activities of UWP, a
wholly owned subsidiary of CMP Group.(3) Among other activities, UWP owns
unimproved land acquired from surplus land owned by Central Maine Power Company
("Central Maine Power"). In addition, UWP owns improved real estate, which is
leased to commercial tenants within Central Maine Power's service area, as well
as office space that is leased to the State of Maine Department of Human
Services and to commercial tenants. Applicants requested that the Commission
reserve jurisdiction for nine months, pending completion of the record, over the
retainability of UWP's ownership of this real estate. The Commission granted
this request in the Energy East Order.(4)
Subsequent to the Energy East Order, Energy East personnel have been
substantially involved in the proposed acquisition of RGS Energy Group, Inc.,
which involves, among other things, requests for regulatory approvals from this
Commission, the New York Public Service Commission, the Federal Energy
Regulatory Commission, and the Nuclear Regulatory Commission. On July 10, 2001,
Energy East requested that the Commission (1) extend from May 31, 2001, until
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(1) On July 10, 2001, Energy East filed Post-Effective Amendment No. 3,
requesting that the Commission extend its retention of jurisdiction over this
issue until November 30, 2001.
(2) Energy East Corp., et al., Holding Co. Act Release No. 35-27224 (August
31, 2000) (the "Energy East Order").
(3) As noted therein, UnionLand Services is the utility-related real estate
development business division of UWP. As clarified in Applicants'
Post-Effective Amendment No. 3, UWP owns the real estate in question.
(4) Energy East Order, slip op. at 34.
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November 30, 2001, the deadline to comply with its commitment to complete the
record and (2) continue to reserve jurisdiction. On July 12, 2001, the
Commission granted Energy East's request.(5)
C. Description of Energy East
-----------------------------
Energy East currently is a registered public utility holding company, and
neither owns nor operates any physical properties. Through its subsidiaries,
Energy East is an energy services and delivery company with operations in New
York, Connecticut, Massachusetts, Maine, New Hampshire, and Pennsylvania,
serving approximately 1,410,000 electricity customers and 616,000 natural gas
customers in a service territory covering approximately 33,000 square miles. In
2000, approximately 68% of Energy East's operating revenue was derived from
electricity deliveries, while approximately 26% of its operating revenue was
derived from natural gas deliveries.
On May 1, 1998, Energy East became the parent of New York State Electric &
Gas Corporation ("NYSEG"). On February 8, 2000, Energy East became the parent of
Connecticut Energy Corporation ("Connecticut Energy"), and on September 1, 2000,
Energy East became the parent of CMP Group, Inc., CTG Resources, Inc. ("CTG
Resources") and Berkshire Energy Resources ("Berkshire Energy").
On June 20, 2001, Energy East and RGS Energy Group, Inc. ("RGS") filed an
Application/Declaration with the Commission seeking approvals relating to the
proposed combination of Energy East with RGS, pursuant to which RGS will become
a direct subsidiary of Energy East.
Energy East holds direct or indirect interests in eight public utility
companies, each of which is wholly owned by companies within the Energy East
system unless otherwise noted: (1) NYSEG; (2) Central Maine Power; (3) Maine
Electric Power Company, Inc. ("MEPCo") (78.3% voting interest held by Central
Maine Power); (4) NORVARCO (50% partnership interest in Chester SVC Partnership,
an electric utility company under the Act); (5) Maine Natural Gas Company; (6)
Connecticut Natural Gas Corporation; (7) The Berkshire Gas Company; and (8) The
Southern Connecticut Gas Company.
Energy East has corporate offices in New York and Maine, and its principal
executive offices are located at P.O. Box 12904, Albany, New York.
ITEM 2. FEES, COMMISSIONS, AND EXPENSES
The estimated fees and expenses to be paid or incurred by Energy East
directly or indirectly, in connection with the requested relief are:
Legal Costs $ 10,000
Miscellaneous Costs $ 2,000
Total $ 12,000
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5 Energy East Corporation, Holding Co. Act Release No. 35-27425 (July 12,
2001).
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ITEM 3. APPLICABLE STATUTORY PROVISIONS
The following section of the Act and the Commission's rules thereunder are
or may be directly or indirectly applicable to the requested relief:
Section 11(b): Retention by Energy East of non-utility businesses of UWP.
To the extent that other sections of the Act are deemed applicable to this
application, such sections should be considered to be set forth in this Item 3.
Rules 53 and 54:(6) Under Rule 53(a), the Commission shall not make certain
specified findings under Sections 7 and 12 in connection with a proposal by a
holding company to issue securities for the purpose of financing the acquisition
of an "exempt wholesale generator" ("EWG"), or to guaranty the securities of an
EWG, if each of the conditions in paragraphs (a)(1) through (a)(4) thereof are
met, provided that none of the conditions specified in paragraphs (b)(1) through
(b)(3) of Rule 53 exists. Rule 54 provides that the Commission shall not
consider the effect of the capitalization or earnings of subsidiaries of a
registered holding company that are EWGs or "foreign utility companies"
("FUCOs") in determining whether to approve other transactions if Rule 53(a),
(b), and (c) are satisfied. These standards are met.
Rule 53(a)(1): Rule 53(a)(1) limits a registered holding company's
financing of investments in EWGs if that holding company's "aggregate
investment" in EWGs and FUCOs exceeds 50% of its "consolidated retained
earnings." As of September 30, 2001, Energy East's "aggregate investment" in
EWGs and FUCOs was approximately $25 million, or approximately 0.03 percent of
Energy East's "consolidated retained earnings" at September 30, 2001
(approximately $959 million).
Rule 53(a)(2): Energy East has complied and will continue to comply with
the record keeping requirements of Rule 53(a)(2) concerning affiliated EWGs and
FUCOs. Specifically, Energy East will maintain books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it directly
or indirectly acquires and holds an interest. Energy East will cause each
domestic EWG in which it acquires and holds an interest, and each foreign EWG
and FUCO that is a majority-owned subsidiary, to maintain its books and records
and prepare its financial statements in conformity with U.S. generally accepted
accounting principles ("GAAP"). All of such books and records and financial
statements will be made available to the Commission, in English, upon request.
Rule 53(a)(3): As required by Rule 53(a)(3), no more than 2 percent of the
employees of NYSEG, The Southern Connecticut Gas Company, Maine Natural Gas
Company, Central Maine Power Company, MEPCo, NORVARCO, Connecticut Natural Gas
Corporation and The Berkshire Gas Company will, at any one time, directly or
indirectly, render services to EWGs and FUCOs.
In addition, Energy East states that the provisions of Rule 53(a) are not
made inapplicable to the authorization herein requested by reason of the
occurrence or continuance of any of the circumstances specified in Rule 53(b).
Rule 53(c) is inapplicable by its terms.
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(6) 17 C.F.R. Sec. 250.53 and 250.54 (2001).
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If the Commission considers Energy East's request to require any
authorization approval or exemption under any section of the Act or any rule or
resolution other than cited above, such authorization, approval, or exemption is
hereby requested.
A. Legal Analysis
---------------
Section 11(b)(1) of the Act limits the non-utility interests of a
registered public utility holding company. Specifically,
The Commission may permit as reasonably incidental, or economically
necessary or appropriate to the operations of one or more integrated
public-utility systems the retention of an interest in any business
(other than the business of a public-utility company as such) which
the Commission shall find necessary or appropriate in the public
interest or for the protection of investors or consumers and not
detrimental to the proper functioning of such system or systems.(7)
The Commission has historically interpreted Section 11(b)(1) to require an
operating or "functional" relationship between the utility operations of the
holding company and its non-utility operations.(8)
As discussed below, Energy East seeks to retain certain of UWP's real
estate interests pursuant to Commission precedent that has found similar
non-utility real estate interests functionally-related to the holding company's
utility operations. Additionally, Energy East plans to divest certain of UWP's
real estate assets and seeks Commission authorization of a reasonable time
period in which to sell those assets as described below.
1. Retention of Certain UWP Real Estate Interests
Energy East seeks to retain the following real estate interests, each of
which is wholly owned by UWP. As described below, UWP has purchased the first
six of the seven properties over the past 123 years to support the generation of
hydroelectric power at hydroelectric properties that have since been sold to
Florida Power & Light Company ("FPL") as part of the state-mandated divestiture
of electric generation assets by CMP Group.
(a) Errol, New Hampshire
UWP owns a 600 acre parcel of land in Errol, New Hampshire. UWP currently
leases portions of the land to cottage owners for approximately $15,595 in
annual income. Other portions of the land are leased for commercial and
recreational uses, including the lease of boat slips on the waterfront property.
Most of the land is undeveloped woodland.
(b) Upper Dam
UWP owns a 129 acre parcel of land, which includes 27 camp lot leases and
one camp compound. The land generates $53,250 in annual income.
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(7) 15 U.S.C. Sec. 79k(b)(1).
(8) See North American Co. v. SEC, 133 F.2d 148, 152-153 (2nd Cir. 1943),
aff'd on constitutional grounds, 327 U.S. 686, 66 S.Ct. 785 (1946). See also
Michigan Consolidated Gas Co. v. SEC, 444 F.2d 913, 917 (D.C. Cir. 1971).
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(c) Middle Dam
UWP owns a 360 acre parcel of land, which it leases for recreational
purposes with an annual income of $11,770.
(d) Rangeley (Oquossoc)
UWP owns a 35 acre parcel of land located on a stream, which is subject to
9 leases, one of which is to a salmon hatchery. The annual income is about
$51,180.
(e) Kennebago, Maine
UWP owns a 395 acre parcel of land, which is subject to ten recreational
leases, with an annual income of $26,425.
(f) Auburn, Maine
UWP owns an isolated, approximately 12,000 square feet parcel of land
associated with a previously owned hydroelectric dam and which currently has no
value.
(g) Canco Road, Portland
UWP owns a 13 acre parcel of land on Canco Road in Portland, Maine, which
currently is a vacant lot. Energy East intends to use the land to expand a
Central Maine Power service facility.
Each of the aforementioned interests is retainable pursuant to Commission
precedent. The Commission has previously authorized the retention of non-utility
subsidiaries engaging in real estate activities or the formation of non-utility
subsidiaries to manage real estate portfolios, market excess or unwanted real
estate, and facilitate the exploitation of resources on or in such real estate
interests.(9) Moreover, with respect to properties (a) through (f) above, the
Commission has authorized subsidiaries of registered holding companies to retain
and lease property originally acquired in connection with electric facilities
for activities such as public recreation, agricultural uses, and extraction of
resources.(10) Similarly, property (g) listed above is retainable, as the
Commission has allowed subsidiaries of holding companies to hold real property
for use in public utility operations.(11) As each of the real estate interests
that Energy East proposes to retain is consistent with Commission precedent, the
Commission should approve retention of such interests.
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(9) See, e.g., Dominion Resources, Inc., Holding Co. Act Release No. 35-27406
(May 24, 2001); New Century Energies, Inc., Holding Co. Act Release No. 35-27212
(August 16, 2000); WPL Holdings, Inc., et al., Holding Co. Act Release No.
35-26856 (April 14, 1998); Allegheny Power System, Inc., Holding Co. Act Release
No. 35-26401 (October 27, 1995).
(10) See Pennsylvania Electric Company, Holding Co. Act Release No. 35-24716
(September 15, 1998) (approving lease of unused tracts of land and buildings to
third parties for agricultural uses, recreational purposes, extraction of
resources, and alternative uses of buildings); New Century Energies, Inc.,
Holding Co. Act Release No. 35-27212 (August 16, 2000); Conectiv, Inc., Holding
Co. Act Release No. 35-26832 (February 25, 1998) (authorizing retention of real
estate acquired for an intended utility purpose that has ceased to exist).
(11) See, e.g., WPL Holdings, Inc., Holding Co. Act Release No. 35-26856
(April 14, 1998) (citing UNITIL Corp., Holding Co. Act Release No. 35-25524
(April 24, 1992)).
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2. Divestiture of Certain UWP Real Estate Interests
Energy East seeks to divest the following real estate interests that are
currently wholly owned by UWP.
(a) Downtown Lewiston
UWP owns two buildings in downtown Lewiston, Maine, the "Sign Shop" and the
"Dorler Building," that were associated with a previously divested dam.
(b) Portland Road, Saco
UWP owns a 2.3 acre parcel of land on Portland Road, in Saco, Maine, which
is currently leased to Maine Homecrafters. Annual lease income is $25,000.
(c) Department of Human Services, Ellsworth
UWP owns a building located in Ellsworth, Maine, currently leased to the
State of Maine, Department of Human Services for $215,000 annually.
(d) Anthony Avenue, Augusta
UWP owns a 4.9 acre parcel of land on Anthony Avenue in Augusta, Maine,
which is currently leased to Adelphia Cable for $186,000 annually.
(e) Foden Road, South Portland
UWP owns a 1.5 acre parcel of land on Foden Road in South Portland, Maine,
including an office and warehouse, all leased to Fairchild Instruments for
$56,000 annually.
(f) Rand Road, Portland
UWP owns a 27.38 acre parcel of surplus land purchased from Central Maine
Power in a like-kind transaction. Central Maine Power initially purchased the
land for use in its utility operations. The land is currently vacant.
Energy East proposes a reasonable time period of two (2) years from the
date of the Commission's order concerning this application during which it will
divest each of the above real estate interests. Such time period is consistent
with Commission precedent.(12) Thus, Energy East seeks Commission approval of
its plan to divest such interests.
ITEM 4. REGULATORY APPROVAL
No other regulatory approvals are required with respect to the requested
relief.
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(12) See, e.g., PowerGen plc, et al., Holding Co. Act Release No. 35-27291
(December 6, 2000); Keyspan Corporation, et al., Holding Co. Act Release No.
35-27271 (November 7, 2000); Exelon Corporation, Holding Co. Act Release No.
35-27256 (October 19, 2000).
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ITEM 5. PROCEDURE
Energy East requests that the Commission promptly issue an order
authorizing Energy East's retention of certain real estate interests owned by
UWP, as specified above, and approving a two-year time period during which
Energy East will divest certain enumerated real estate interests.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
A. Exhibits
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Not applicable.
B. Financial Statements
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Not applicable.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
Not applicable.
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Pursuant to the requirements of the Public Utility Holding Company Act of
1935, as amended, the undersigned company has duly caused this Post-Effective
Amendment to be signed on its behalf by the undersigned thereunto duly
authorized.
Energy East Corporation
November 27, 2001
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By: /s/ Robert D. Kump
Vice President and Treasurer
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