NO. 70-9839
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 9
TO
APPLICATION/DECLARATION
ON
FORM U-1
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Northeast Utilities
Western Massachusetts Electric Company
174 Brush Hill Road
West Springfield, MA 01089
The Connecticut Light and Power Company
107 Selden Street
Berlin, CT 06037
(Names of companies filing this statement and addresses of
principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Gregory B. Butler
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to:
Jeffrey C. Miller, Esq. David R. McHale
Assistant General Counsel Vice President and Treasurer
Northeast Utilities Service Northeast Utilities Service
Company Company
107 Selden Street 107 Selden Street
Berlin, CT 06037 Berlin, CT 06037
The Application/Declaration in this file, as heretofore
amended, is hereby further amended and restated in its entirety to
read as follows:
"ITEM 1
DESCRIPTION OF PROPOSED TRANSACTIONS
Introduction
1. Northeast Utilities ("NU"), a public utility holding
company registered under the Public Utility Holding Company
Act of 1935, as amended ("the Act"), The Connecticut Light
and Power Company ("CL&P") and Western Massachusetts
Electric Company ("WMECO"), each an electric utility
subsidiary of NU, (collectively, the "Applicants"), hereby
submit this application/declaration (the "Application")
pursuant to Sections 6(a), 7, 9(a), 10 and 12(c) of the Act
and Rules 26(c)(3), 42, 43, 44 and 46(a) thereunder with
respect to (a) the payment of dividends to, and/or the
repurchase of stock from, NU out of capital or unearned
surplus by each of CL&P and WMECO from proceeds from the
sale of their respective interests in the Millstone Station
nuclear generating facility ("Millstone") and (b) the
payment of dividends and/or the repurchase of stock out of
capital or unearned surplus by CL&P out of proceeds from
the sale of Millstone in accordance with the provisions of
CL&P's dividend covenant under its First Mortgage Indenture
and Deed of Trust dated May 1, 1921 to the Bankers Trust
Company as trustee (the "Mortgage Indenture"), all through
December 31, 2003 (the "Authorization Period") and so long
as the senior debt securities of the respective company
remain rated investment grade by at least one rating
agency. As described in greater detail below, the
authorizations sought herein relate to the capital
restructuring of the NU system in connection with the
nuclear generating asset divestiture as required by the
electrical industry restructuring initiatives in the State
of Connecticut and the Commonwealth of Massachusetts. The
Applicants intend to use the proceeds of the Millstone
sale, among other things, to reduce and adjust their
capital structures by retiring outstanding debt, preferred
stock and common equity. As a result, CL&P and WMECO
(collectively, the "Utilities") will be able to lower the
rates charged to their customers, and the NU system will
gain greater financial flexibility. In addition, NU's
value to its shareholders will be enhanced. The senior debt
ratings of CL&P issued by Standard & Poor's was upgraded to
"A-" while the senior debt ratings of CL&P issued by
Moody's Investor Service, Inc. was upgraded to "A2". The
unsecured debt ratings of WMECO issued by Standard & Poor's
was upgraded to "BBB+" while the unsecured debt ratings of
WMECO issued by Moody's Investor Service, Inc. was
upgraded to "A3".
Background
2. In a previous proceeding under the Act - see Northeast
Utilities, et al., Application/Declaration on Form U-1, as
amended, File No. 70-9541 (the "Use of Proceeds Filing"),
granted and permitted to become effective in HCAR No. 27147
(March 7, 2000) (the "Use of Proceeds Order") - the
Utilities sought and were granted authorization, among
other things, to pay dividends to, and/or repurchase shares
of their respective stock from, NU out of capital or
unearned surplus using the proceeds from the sale of non-
nuclear generating assets and the issuance of rate
reduction bonds ("RRBs") but not from the sale of nuclear
assets. The sale of nuclear assets was not foreseen at the
time of such filing as resulting in any substantial net
cash to the Utilities. A dramatic positive change in the
market for nuclear plants created the need for this filing.
This Application deals with the use of proceeds from the
sale of Millstone. In another proceeding under the Act -
see Northeast Utilities, et al, Application/Declaration on
Form U-1, as amended, File No. 70-9697 (the "RRB Filing"),
the Utilities sought specific authorization to issue the
RRBs referenced in the Use of Proceeds Filing. As
described in the Use of Proceeds Filing and in the RRB
Filing, the Utilities have used the proceeds of
divestitures of generating assets and issuances of RRBs,
among other things, to reduce and adjust their capital
structures by retiring outstanding debt, preferred stock
and common equity, and to buy down existing power purchase
agreements with independent power producers.
State Restructuring
3. The states in which CL&P and WMECO operate -
Connecticut and Massachusetts, respectively - have enacted
legislation that restructures the electric industries in
such states by introducing retail competition in
electricity generation. The new laws allow customers
to choose their electric suppliers. Accordingly, energy
prices will be based on competitive market forces rather
than being set by the state regulatory commission. The
transmission and distribution of electricity will continue
to be provided by the local utilities at regulated rates.
The restructuring statutes also require electric utilities
to institute rate reductions and adopt rate caps in amounts
that vary from state to state. More detailed accounts of
the restructuring of the electric industries in Connecticut
and Massachusetts are contained in the Use of Proceeds
Filing.
4. The restructuring statutes in Connecticut and
Massachusetts also allow for the issuance of RRBs to
finance portions of a utility's stranded costs, as
determined to be appropriate by the respective commissions,
through securitization transactions . The savings
generated through the use of rate reduction bonds
ultimately result in a reduction of electric rates.
Connecticut law limits the use of securitization to non-
nuclear generation-related regulatory assets and costs
associated with the renegotiation of purchased-power
contracts. CL&P may not securitize any of its nuclear
stranded costs. Massachusetts law allows WMECO to
securitize such costs. A more detailed description of the
proposed RRB transactions is contained in the RRB Filing.
5. As vertically integrated utilities with both
generation assets and transmission and distribution assets,
CL&P and WMECO were required to restructure their companies
to comply with state statutory provisions. The
restructuring laws include, among other things, strong
incentives to divest generating assets. This divestiture,
combined with authorization for the issuance of RRBs as
part of the restructuring process, has left the Utilities
in a unique financial position in that they experienced a
significant decrease in the amount of tangible assets that
they own and received a substantial influx of cash almost
simultaneously.
6. Pursuant to Connecticut's statutory restructuring
requirements and order of the Department of Public Utility
Control (the "DPUC"), CL&P was allowed to recover the full
amount of its stranded costs through the divestiture of its
non-nuclear generating assets at auction by January 1, 2000
and its nuclear generating assets at auction by January 1,
2004 and taking steps to mitigate its stranded costs.
Massachusetts imposed similar conditions upon WMECO.
7. As of the date of this filing, virtually all of the
non-nuclear electric generating assets of CL&P and WMECO
have been sold. However, the applicable state deregulation
laws mandate that any gains on the sale of the electric
generating assets reduce stranded cost recovery, and so
neither CL&P nor WMECO recognized any earnings effect and
no accretion to their respective retained earnings account
when those gains were realized. Accordingly, CL&P and
WMECO were left with a large amount of cash and no ability
to pay dividends to NU or otherwise move cash upstream to
NU. To remedy this problem, CL&P, WMECO and certain of
their affiliates filed the Use of Proceeds Filing.
8. In the Use of Proceeds Filing, CL&P indicated that it
expected to receive net proceeds of approximately $1.191
billion from the sales of non-nuclear generating assets and
net proceeds of $1.489 billion from the issuance and sale
of rate reduction bonds, a total of approximately $2.680
billion. WMECO indicated that it expected to receive net
proceeds of approximately $233 million from the sales of
non-nuclear generating assets and net proceeds of
approximately $303 million from the issuance and sale of
rate reduction bonds, a total of approximately $536
million. The Use of Proceeds Order authorized CL&P to use
up to $310 million of such proceeds to reduce its common
equity, and WMECO to use up to $145 million of such
proceeds to reduce its common equity. In the RRB Filing,
CL&P updated its expectations concerning proceeds from the
issuance of RRBs and stated that it expected to receive
proceeds of approximately $1.551 billion from the issuance
of RRBs.
9. Both companies have issued RRBs and have sold their non-
nuclear generating assets. CL&P realized $1.187 billion from
the sale of its non-nuclear generating assets and WMECO realized
$231 million from the sale of its non-nuclear generating assets.
CL&P used approximately $300 million to reduce its common equity
and WMECO used approximately $90 million to reduce its common
equity.
Sale of Nuclear Assets
10. CL&P owned an 81% interest in the Millstone 1
nuclear generating facility ("Millstone 1") which was
permanently shut down, an 81% interest in the 870 Mw
Millstone 2 nuclear generating facility ("Millstone 2")
and approximately 53% of the 1,154 Mw Millstone 3
nuclear generating facility ("Millstone 3") located in
Waterford, Connecticut. WMECO owned a 19% interest in
Millstone 1 and in Millstone 2 and approximately a 13%
interest in Millstone 3. In accordance with Connecticut
and Massachusetts restructuring laws, CL&P and WMECO
(and most of the other joint owners of Millstone 3)
divested these assets, via public auction. Dominion
Resources, Inc. ("Dominion") was the successful bidder
with a bid of approximately $1.298 billion. On October
19, 2000, the DPUC's Utility Operations and Management
Analysis unit approved the sale of CL&P's interest in
Millstone to Dominion, and on January 9, 2001 the DPUC
released a draft decision approving the sale. The
Massachusetts Department of Telecommunications and
Energy approved the sale of WMECO's interest in
Millstone in December 2000. The sale was completed on
March 31, 2001. As a result of the sale, CL&P realized
approximately $843 million and WMECO realized
approximately $196 million. Similar to the treatment of
proceeds realized from the sale of the non-nuclear
generating assets, the proceeds from the sale of
Millstone to CL&P and WMECO did not increase their
respective retained earnings. The Utilities applied the
bulk of the proceeds to retire debt, lease obligations
and preferred stock under Rule 42.
Approval of the Payment of Dividends to or the Repurchase of
Stock from NU by CL&P and WMECO.
11. The Utilities plan to apply the remaining net proceeds
of the sale of Millstone during the Authorization Period to
retire common stock. CL&P presently expects to use
approximately $100 million from the proceeds from the sale of
Millstone to reduce its common equity capitalization, and
WMECO presently expects to use approximately $21 million from
the proceeds of the sale of Millstone to reduce its common
equity capitalization (individually, "CL&P Returned Equity"
and "WMECO Returned Equity" respectively).
12. In order to effectively reduce common equity, CL&P and
WMECO seek Commission authorization to use all or a portion
of, respectively, the CL&P Returned Equity and the WMECO
Returned Equity either (i) to pay dividends to NU out of
capital or unearned surplus, (ii) to buy back a portion of
their outstanding common stock owned by NU out of capital or
unearned surplus or (iii) a combination of (i) and (ii).
Since, as described earlier, the receipt of the proceeds from
the sale of Millstone does not result in net income giving
rise to earned surplus, Rules 42 and 46 require Commission
approval for the Utilities to repurchase their stock or to
pay dividends, respectively, to the desired extent.
13. The Commission has previously approved the payment of
dividends out of capital or unearned surplus by a utility
subsidiary of a registered holding company when the payment
would not impair the subsidiary's ability to meet its
obligations and the subsidiary's assets would be sufficient
to meet any anticipated expenses or liabilities (See, e.g.,
AEP Generating Co., H.C.A. Rel. No. 26754 (August 12, 1997))
and specifically allowed CL&P and WMECO to pay dividends or
repurchase stock out of capital or unearned surplus pursuant
to the Use of Proceeds Order. As described above, CL&P and
WMECO would not face adverse financial consequences as a
result of the payment to NU. Rather, CL&P and WMECO are
reacting to a unique situation, the sale of nuclear
generating assets, which resulted in a large influx of cash
without creating any additional earned surplus. Each of CL&P
and WMECO currently has, and following the consummation of
the transactions described herein, will continue to have,
through the Authorization Period, adequate cash and access to
working capital facilities to meet and support its normal
business operations. Payment of the dividends (or
repurchases of common stock, as the case may be) would not
impair the financial integrity of CL&P or WMECO because,
after the payment of such dividends or repurchase of stock,
each utility would still have adequate cash to operate its
business operations through the Authorization Period. The
Commission has recently approved the use of proceeds from the
sale of generating assets to repurchase the selling entity's
stock from its parent registered holding company in order to
keep its capital structure balanced, in the same manner as
the Utilities propose to do here. Northeast Utilities,
supra, New England Elec. System, H.C.A. Rel. No. 26918 (Sept.
25, 1998).
Approval of the Payment of Additional Amounts under the CL&P
Mortgage Indenture restriction, dated May 1, 1921.
14. In addition to the other transactions described herein,
the Applicants request that the Commission exercise its
reserved power as provided in the dividend covenant in CL&P's
Mortgage Indenture so as to permit CL&P, during the
Authorization Period, to effect dividend payments, the
repurchase of its shares or any combination thereof,
notwithstanding the fact that the CL&P Returned Equity does
not represent net earnings giving rise to earned surplus.
The full text of the dividend covenant, Section 6.13 of the
Mortgage Indenture, is attached hereto as Exhibit J.
15. The dividend covenant provides, among other things, that
cash dividends may not be paid on the capital stock of CL&P,
or distributions made, or capital stock purchased by CL&P, in
an aggregate amount which exceeds CL&P's earned surplus after
December 31, 1966, plus the earned surplus of CL&P
accumulated prior to January 1, 1967 in an amount not
exceeding $13,500,000, plus such additional amount as may be
authorized or approved by the Commission under the Act. CL&P
hereby is requesting that the Commission approve such an
additional amount to enable the payment of dividends and/or
the repurchase of stock, as described above. The actual
amount over such limit for which authorization is being
sought depends on the amount of CL&P's earned surplus at the
time of the dividend payment or stock repurchase. However,
the maximum aggregate amount of capital expected to be
transferred to NU through these means during the
Authorization Period will not exceed $100 million. The
Commission has previously approved the payment of additional
amounts under this and similar dividend restrictions upon a
finding that such approval was in the public interest. See,
e.g., Northeast Utilities, H.C.A. Rel. No 27147, (March 7,
2000); AEP Generating Co., H.C.A. Rel. No. 24989 (Nov. 21,
1989); Southern Elec. Gen. Co., H.C.A. Rel. No. 14417 (April
25, 1961). The requested dividend payments and/or repurchase
of CL&P stock from restructuring proceeds are in the public
interest as they will not impair CL&P's ability to meet its
obligations and will result in the benefits to the NU system,
NU's shareholders and the Utilities' customers described
above. Without such authorization, much of the extraordinary
funds received by CL&P through the sale of Millstone would
remain trapped at CL&P and cause its rates to be higher than
necessary. Thus, such payments will not negatively affect
the interests sought to be protected under the dividend
restriction and CL&P's request should be approved.
Inability to meet the Commission's 30% Common Equity Ratio
Test
16. In the Use of Proceeds Filing, the Utilities noted
that the addition of the then anticipated securitization debt to
the balance sheets of CL&P and WMECO on a pro forma basis with the
reduced capitalization of the Utilities as a result of the
authorization granted in such file, would cause the Utilities
(and NU on a consolidated basis) to fail the Commission's
benchmark of 30% common equity-to-capitalization test, with their
respective pro forma common equity ratios at 19.1% and 16.6% and
NU at 29.1%. As indicated in the Use of Proceeds Filing, however,
the ratings of the respective senior debt securities of CL&P and
WMECO will be unaffected or will be improved by the issuance of
the rate reduction bonds, as such bonds are not considered
obligations of the Utilities by the ratings agencies. As
indicated earlier herein, both CL&P and WMECO have used proceeds
from the sale of non-nuclear generating assets to reduce their
respective capitalization. After giving effect to the sale of
Millstone, the issuance of the RRBs and the paydown of debt and
equity with the proceeds, the pro forma common equity ratios of
CL&P and WMECO (and NU on a consolidated basis), as of September
30, 2001, debt of the companies) would remain above 30%, with CL&P
at 41%, WMECO at 44% and NU consolidated at 46%. Giving effect to
the Millstone transactions, the issuance of the RRBs and including
the issuance of the RRBs as debt of the respective companies, the
respective pro forma common equity ratios as of September 30,
2001 of CL&P, and WMECO would fall below the 30% benchmark
with CL&P at 21.7% and WMECO at 29.3%. The DPUC issued a decision
in December 2001 permitting CL&P to return approximately $188
million of common equity to NU, and found that a proposed equity
ratio of 45%, without considering RRBs, was appropriate. The DTE
has made no findings to date on WMECO's capital structure but is
expected to consider the use of Millstone proceeds in its regular
March 2002 annual transition charge reconciliation proceeding.
See Item 4 (paragraph 27) for further information. The transactions
described herein and the issuance of the RRBs would not cause NU
on a consolidated basis to fall below 30%. (See Exhibit K.2
hereto). CL&P and WMECO presently anticipate that the debt
associated with the RRBs will have been amortized by no later than
twelve years after the respective date when such company has
issued the maximum principal amount of RRBs which it intends to
issue. Thus CL&P's and WMECO's common equity ratios will exceed
30% by no later than the end of such period. In all likelihood,
a sufficient amount of securitization debt will be amortized prior
to the end of such twelve year period to restore both CL&P's and
WMECO's common equity ratio tom over 30% prior to that date.
Based on the terms and amortizations of the RRBs issued by CL&P
and WMECO, the Applicants believe that the common equity ratio of
CL&P will be bove 30% by December 31, 2007 and that of WMECO will
be above 30% by December 31, 2002 (See Exhibit L-1 hereto). If by
the end of the Authorization Period in the case of the Utilities,
the respective company is not above 30% common equity, further
authorization from the Commission will be required.
Summary of Requested Action
17. The Applicants request that the Commission issue an
order authorizing: (a) the Utilities to pay dividends to,
and/or repurchase common stock from, NU out of capital or
unearned surplus during the Authorization Period so long as
the senior debt securities of the respective company is rated
investment grade by at least one rating agency, in an amount
up to $100 million in the case of CL&P and up to $21 million
in the case of WMECO, all from proceeds received from the
sale of Millstone, and (b) CL&P to pay dividends to and/or
repurchase common stock out of capital or unearned surplus by
CL&P from NU in the same amount under its Mortgage Indenture
dividend covenant during the Authorization Period. The
amounts for which authorization is sought herein is distinct
from and does not affect the amounts for which authorization
was sought and granted by the Use of Proceeds Order.
ITEM 2
FEES, COMMISSIONS AND EXPENSES
18. The fees, commissions and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection
with the proposed transactions by the Applicants are not
expected to exceed $20,000 and are expected to be comprised
primarily of fees for ordinary legal, accounting and
investment banking services. None of such fees, commissions
or expenses will be paid to any associate company or
affiliate of the Applicants except for payments to Northeast
Utilities Service Company for financial and other services.
ITEM 3
APPLICABLE STATUTORY PROVISIONS
19. Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and
Rules 26(c)(3), 42, 43, 44 and 46(a) thereunder are or may be
applicable to the proposed transactions. To the extent any
other sections of the Act or Rules thereunder may be
applicable to the proposed transaction, the Applicants
request appropriate orders thereunder.
20. NU will file reports with the Commission within 60 days after
the end of each calendar quarter, providing, among other things,
i. A total capitalization calculation to include a
breakdown of the common stock equity account and by
percentage for each equity and debt category for the period
ending for each Applicant that indicates the amount of
dividends paid to NU and/or the amount of repurchase stock
from NU during the quarter; total capitalization is to
include all short-term debt and current maturities.
ii. The current senior debt ratings of CL&P and WMECO,
including a representation that such ratings are at or above
investment grade.
iii. The Utilities' cash-on-hand both during the quarter
and as of the end of each quarter and a representation as to
whether internal cash funds available during the quarter were
sufficient to fund each company's normal business operations
or had to be supplemented with borrowing from working capital
facilities.
Other Matters
21. Except in accordance with the Act, neither NU nor any
subsidiary thereof (a) has acquired an ownership interest in
an exempt wholesale generator ("EWG") or a foreign utility
company ("FUCO") as defined in Sections 32 and 33 of the Act,
or (b) now is or as a consequence of the transactions
proposed herein will become a party to, or has or will as a
consequence of the transactions proposed herein have a right
under, a service, sales, or construction contract with an EWG
or a FUCO. None of the proceeds from the transactions
proposed herein will be used by NU and its subsidiaries to
acquire any securities of, or any interest in, an EWG or a
FUCO.
22. NU currently meets all of the conditions of Rule 53(a),
except for clause (1). At September 30, 2001, NU's "aggregate
investment," as defined in Rule 53(a)(1), in EWGs and FUCOs
was approximately $469.5 million, or approximately 80% of
NU's average "consolidated retained earnings," also as
defined in Rule 53(a)(1), for the four quarters ended
September 30, 2001 ($586 million). With respect to Rule
53(a)(1), however, the Commission has determined that NU's
financing of its investment in Northeast Generation Company
("NGC"), NU's only current EWG or FUCO, in an amount not to
exceed $481 million or 83% of its "average consolidated
retained earnings" would not have either of the adverse
effects set forth in Rule 53(c). See Northeast Utilities,
Holding Company Act Release No. 27148, dated March 7, 2000
(the "Rule 53(c) Order"). NU continues to assert that its EWG
investment in NGC will not adversely affect the System.
23. In addition, NU and its subsidiaries are in compliance
and will continue to comply with the other provisions of Rule
53(a) and (b), as demonstrated by the following
determinations:
(i) NGC maintains books and records, and prepares financial
statements, in accordance with Rule 53(a)(2). Furthermore, NU
has undertaken to provide the Commission access to such books
and records and financial statements, as it may request;
(ii) No employees of NU's public utility subsidiaries have
rendered services to NGC;
(iii) NU has submitted (a) a copy of each Form U-1 and Rule
24 certificate that has been filed with the Commission under
Rule 53 and (b) a copy of Item 9 of the Form U5S and Exhibits
G and H thereof to each state regulator having jurisdiction
over the retail rates of NU's public utility subsidiaries;
(iv) Neither NU nor any subsidiary has been the subject of a
bankruptcy or similar proceeding unless a plan of
reorganization has been confirmed in such proceeding;
(v) NU's average CREs for the four most recent quarterly
periods have not decreased by 10% or more from the average
for the previous four quarterly periods; and
(vi) In the previous fiscal year, NU did not report operating
losses attributable to its investment in EWGs/FUCOs exceeding
3 percent of NU's consolidated retained earnings.
24. The proposed transactions, considered in conjunction
with the effect of the capitalization and earnings of NU's
EWGs and FUCOs, would not have a material adverse effect on
the financial integrity of the NU system, or an adverse
impact on NU's public-utility subsidiaries, their customers,
or the ability of State commissions to protect such public-
utility customers. The Rule 53(c) Order was predicated, in
part, upon an assessment of NU's overall financial condition
which took into account, among other factors, NU's
consolidated capitalization ratio and its retained earnings,
both of which have improved since the date of the order.
NU's EWG investment (it has no FUCO investment), has been
profitable for the quarterly periods ending June 30, 2000,
September 30, 2000, December 31, 2000, March 31, 2001, June
30, 2001 and September 30, 2001, respectively (NGC was
acquired in March 2000). As of December 31, 1999, the most
recent period for which financial statement information was
evaluated in the Rule 53(c) Order, NU's consolidated
capitalization consisted of 35.3% common equity and 64.7%
debt (including long and short-term debt, preferred stock,
capital leases and guarantees). As of June 30, 2000, the end
of the first quarter after the issuance of the Rule 53(c)
Order, the consolidated capitalization ratios of NU, with
consolidated debt including all short-term debt and non-
recourse debt of the EWG, were as follows:
As of June 30, 2000
(thousands
of dollars) %
Common shareholders' equity 2,365,854 36.9
Preferred stock 277,700 4.3
Long-term and short-term debt 3,768,353 58.8
6,411,907 100.0
25. The consolidated capitalization ratios of NU as of
September 30, 2001, with consolidated debt including all
short-term debt and non-recourse debt of the EWG, were as
follows:
As of September 30, 2001
(thousands
of dollars) %
Common shareholders' equity 2,133,851 31.6
Preferred stock 116,200 1.7
Long-term and short-term debt 2,391,557 35.4
Rate Reduction Bonds 2,118,400 31.3
6,760,008 100.0
26. NU's consolidated retained earnings decreased from
$581.8 million as of December 31, 1999 to $495.9 million as
of December 31, 2000, mainly as a result of an after-tax
write-off of $225 million by Public Service Company of New
Hampshire as part of a restructuring settlement and also
recognition of a loss due to a decision by the FERC lowering
the price for acquiring installed generating capacity in New
England but increased by $149 million through the three
quarters ended September 30, 2001. NGC (NU's only EWG or
FUCO) has made a positive contribution to earnings by
contributing $207 million in revenues from inception (March
2000) through September 30, 2001 and net income of $57.5
million for the same period. Accordingly, since the date of
the Rule 53(c) Order, the capitalization and earnings
attributable to NU's investments in EWGs and FUCOs has not
had an adverse impact on NU's financial integrity.
ITEM 4
REGULATORY APPROVALS
27. The Connecticut Department of Public Utility Control
(the "DPUC") has jurisdiction over CL&P's plan of divestiture
of Millstone, and in its order approving the divestiture plan,
the DPUC required that within 180 days following the closing,
CL&P file information regarding the disposition of the
proceeds, including an itemization of costs that will be
netted against the proceeds and detailed tax calculations.
CL&P advised the DPUC that it intended to rebalance its capital
account through the reacquisition of equity, including the
repurchase of approximately $188 million of common stock from NU.
On March 16, 2001, the DPUC issued a temporary order
requiring CL&P to use the proceeds in a way to result in a
common equity ratio (not including the RRBs as debt) for CL&P
between 45% and 50% ("Common Equity Ratio Requirement").
(See Exhibit D attached hereto). In December, 2001, the DPUC
issued its final decision in the filing in which it
discontinued the Common Equity Ratio Requirement (See Exhibit
D-1 attached hereto). NU now anticipates that CL&P
will repurchase $100 million of common stock from NU and pay
approximately $88 million to NU as a dividend.
28. The Massachusetts Department of Telecommunications and
Energy (DTE) has jurisdiction over WMECO's use of proceeds
from the Millstone sale. In approving the sale of WMECO's share
of Millstone, the DTE stated that it was not ruling on the use of
proceeds and would examine that issue in an annual transition
charge reconciliation proceeding after the sale is completed.
WMECO plans on making a filing in March 2002 in the next scheduled
reconciliation charge proceeding, but it is not known when the
results of this proceeding will be determined. No other state or
Federal regulatory approval, other than the approval of the
Commission pursuant to this Application, is required to consummate
the transactions described herein. The transactions described
herein will be effected in compliance with all applicable state
and federal laws and regulations.
ITEM 5
PROCEDURE
29. The Applicants respectfully request the Commission's
approval, pursuant to this Application, of all transactions
described herein, whether under the sections of the Act and
Rules thereunder enumerated in Item 3 or otherwise. It is
further requested that the Commission issue an order
authorizing the transactions proposed herein at the earliest
practicable date. The closing of the Millstone sale is
scheduled for April 1, 2001 and the Applicants intend to use
the proceeds immediately for the debt and capital reductions
described herein. Additionally, the Applicants (i) request
that there not be any recommended decision by a hearing
officer or by any responsible officer of the Commission, (ii)
consent to the Office of Public Utility Regulation within the
Division of Investment Management assisting in the
preparation of the Commission's decision, and (iii) waive the
30-day waiting period between the issuance of the
Commission's order and on the date on which it is to become
effective, since it is desired that the Commission's order,
when issued, become effective immediately.
ITEM 6
EXHIBITS AND FINANCIAL STATEMENTS
(asterisked (*) items have been previously filed)
30. (a) Exhibits
D. Temporary Order of the Connecticut Department of Public
Utility Control dated March 16, 2001*
D.1 Decision from the Connecticut Department of Public
Utility Control dated December 12, 2001.*
F. Opinion of Counsel*
H. Proposed Form of Notice*
J. CL&P Mortgage Indenture Dividend Covenant*
K. Common Equity Ratios*
K.1 Revised Common Equity Ratios*
K.2 Revised Common Equity Ratios*
L. Amortization Schedule for RRBs*
L.1 Revised Amortization Schedule for RRBs*
(b) Financial Statements*
1 Northeast Utilities and Subsidiaries (consolidated)
1.1 Balance Sheet, per books and pro forma, as of
September 30, 2000.
1.2 Statement of Income, per books and pro forma, for 12
months September 30, 2000 and capital structure, per books
and pro forma, as of September 30, 2000.
2 The Connecticut Light and Power Company
2.1 Balance Sheet, per books and pro forma, as of
September 30, 2000
2.2 Statement of Income and Surplus, per books and pro
forma, for 12 months ended September 30, 2000 and capital
structure, per books and pro forma, as of September 30, 2000.
3 Western Massachusetts Electric Company
3.1 Balance Sheet, per books and pro forma, as of
September 30, 2000.
3.2 Statement of Income and Surplus, per books and pro
forma, for 12 months ended September 30, 2000 and capital
structure, per books and pro forma, as of September 30, 2000.
ITEM 7
INFORMATION AS TO ENVIRONMENTAL EFFECTS
31. (a) The financial transactions described herein do not
involve a major Federal action significantly affecting the
quality of the human environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed
transaction.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies
have duly caused this statement to be signed on their behalf
by the undersigned thereunto duly authorized.
NORTHEAST UTILITIES
WESTERN MASSACHUSETTS ELECTRIC COMPANY
THE CONNECTICUT LIGHT AND POWER COMPANY
By: /s/ Randy A. Shoop
Name: Randy A. Shoop
Title: Assistant Treasurer - Finance - Northeast Utilities
Service Company,
as Agent for the above named companies.
Date: February 15, 2002
------------------------------------------------------------------
An Act Concerning Electric Restructuring, 1998 Conn. Acts.
98-28 (Reg. Sess.); The Massachusetts Electric Industry
Restructuring Act, 1997 Mass. Acts 164.
Securitization is the financing of a specific asset or pool
of assets, through the issuance of securities, frequently referred
to as "asset-backed securities" ("ABS"). These securities are paid
solely from the revenue stream arising from the pool of assets,
and as a result, their ratings are dependent upon the
predictability or volatility of that cash flow. The structure of
a typical ABS transaction is based on the underlying assets and
the expected cash flows to be generated by those assets. In
general, the original owner of the underlying asset sells the
asset to a special-purpose financing entity. That entity then
issues securities (directly or indirectly), for which the primary
source of payment of principal and interest is the cash flow
generated by the underlying asset that was sold. See, also, the
RRB Filing.
------------------------------------------------------------------