Investment U-1
As filed with the Securities and Exchange Commission on February 8, 2002
File No. 70-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
---------------------------------
Exelon Corporation
Exelon Ventures Company, LLC
Exelon Enterprises Company, LLC
Exelon Generation Company, LLC
Exelon Energy Delivery Company, LLC
c/o Exelon Corporation
10 South Dearborn Street, 37th Floor
Chicago, IL 60603
(Name of company or companies filing this statement and
address of principal executive offices)
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Exelon Corporation
(Name of top registered holding company parent of each applicant or declarant)
---------------------------------
Randall E. Mehrberg
Senior Vice President and General Counsel
Exelon Corporation
10 South Dearborn Street, 37th Floor
Chicago, IL 60603
(Name and address of agent for service)
---------------------------------
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application-Declaration to:
William J. Harmon
Jones, Day, Reavis & Pogue
77 West Wacker, Suite 3500
Chicago, IL 60601
(312) 782-3939 wjharmon@jonesday.com
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Table of Contents
Item 1. Description of the Proposed Transaction.......................................1
A. Introduction and General Request..........................................1
1. Introduction..........................................................1
2. Description of the Parties to the Transaction.........................2
3. Summary of Approvals Sought...........................................2
B. Detailed Description of Approvals Sought..................................4
1. Development and Administrative Activities.............................4
2. Incidental Acquisition of Non-Utility Assets..........................5
3. New Intermediate Subsidiaries for Internal Corporate Structuring......6
4. Internal Corporate Reorganization of Existing Investments.............7
5. Non-U.S. Energy Related Subsidiaries..................................8
C. Rule 54..................................................................10
D. Other Matters............................................................11
Item 2. Fees, Commissions and Expenses...............................................12
Item 3. Applicable Statutory Provisions..............................................12
Item 4. Regulatory Approvals.........................................................12
Item 5. Procedure....................................................................13
Item 6. Exhibits and Financial Statements............................................13
A. Exhibits.................................................................13
B. Financial Statements.....................................................14
Item 7. Information as to Environmental Effects......................................14
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Item 1. Description of the Proposed Transaction
A. Introduction and General Request
1. Introduction
Exelon Corporation, a Pennsylvania corporation ("Exelon"), on behalf of
itself and the Subsidiaries (as defined below) files this
Application/Declaration under the Public Utility Holding Company Act of 1935
(the "Act") seeking authority to undertake activities related to Exelon's
otherwise permitted investments including in exempt wholesale generators
("EWGs"), foreign utility companies ("FUCOs"), exempt telecommunications
companies ("ETCs"), investments permitted under Rule 58 ("Rule 58 Subsidiaries")
and investments in businesses engaged in energy related activities ("Non-U.S.
Energy Related Subsidiaries") that, but for being conducted outside the United
States, would constitute Rule 58 exempt activities./1/
Investments in EWGs, FUCOs, ETCs and Rule 58 Subsidiaries are permitted
pursuant to the terms of the Act and Rules 53 and 58. No authorization is sought
in this Application/Declaration for investments in these entities in excess of
what is authorized by statute or rule or existing Commission order applicable to
Exelon. As described below, this Application/ Declaration seeks limited approval
to make investments in Non-U.S. Energy Related Subsidiaries. These permitted
investments in EWGs, FUCOs, Rule 58 Subsidiaries and (assuming Commission
approval herein) Non-U.S. Energy Related Subsidiaries are collectively referred
to as "Permitted Non-Utility Investments."
Each of the directly or indirectly owned subsidiaries of Exelon as of the
date hereof is referred to herein individually as a "Subsidiary" and
collectively as "Subsidiaries."/2/ All of Exelon's direct and indirect
Subsidiaries, other than the Utility Subsidiaries (as defined below), are herein
called the "Non-Utility Subsidiaries."
For purposes of this Application-Declaration, the terms "Subsidiary" and
"Subsidiaries" shall also include other direct or indirect subsidiaries that
Exelon may form or acquire after the date hereof with the approval of the
Commission, pursuant to the Rule 58 exemption or pursuant to Sections 32, 33 or
34 of the Act or, to the extent approved herein, as Non-U.S. Energy Related
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/1/ Exelon was created through transactions referred to as the Merger
(described in the Application/Declaration on Form U-1 in docket 70-9645, the
"Merger U-1") that were completed October 20, 2000, subsequent to the Commission
issuing its order approving the Merger (the "Merger Order") (HCAR No. 35-27256,
October 19, 2000, modified in HCAR No. 35-27259, October 20, 2000). On April 4,
2001, December 14, 2001, and December 20, 2001 Exelon filed post-effective
amendments on Form U-1 in file No. 70-9645 seeking modification of the Merger
Order relating to certain Subsidiaries providing services to the Utility
Companies at other than cost. On October 1, 2001, Exelon filed a post-effective
amendment on Form U-1 in file No. 70-9645 seeking final approval of matters
relating to Exelon Business Services Company, Exelon's service company. The
Commission entered its order on November 2, 2000 (HCAR No. 35-27266; 70-9693) as
supplemented on December 8, 2000 (HCAR No. 35-27296) (the "Financing Order")
approving certain financing transactions for Exelon and its Subsidiaries. On
June 9, 2000, Exelon filed an Application/Declaration on Form U-1, as amended
January 4, 2001 in docket 70-9691 seeking approval for many of the matters
included in this Application/Declaration. Exelon expects to file an amendment in
docket 70-9691 to delete therein the requests contained in this
Application/Declaration and to restate its requests for the remaining matters
included in that filing.
/2/ Exelon's existing subsidiaries and investments are described on its
Form U5B filed January 23, 2001.
Subsidiaries. Exelon and the Subsidiaries are sometimes hereinafter collectively
referred to as the "Exelon System" or as the "Applicants."
2. Description of the Parties to the Transaction
Exelon has three principal operating public utility company subsidiaries
(the "Utility Subsidiaries")/3/:
o PECO Energy Company ("PECO"), a Pennsylvania corporation and a
public utility company engaged (i) in the transmission, distribution
and sale of electricity and (ii) in the purchase and sale of natural
gas in Pennsylvania;
o Commonwealth Edison Company ("ComEd"), an Illinois corporation
and a public utility company engaged in the transmission, distribution
and sale of electricity in Illinois; and
o Exelon Generation Company, LLC ("Genco"), a Pennsylvania limited
liability company and a public utility company engaged in the
generation and sale of electricity in Pennsylvania, Illinois and
elsewhere.
In addition, Exelon has the following other principal Subsidiaries:
o Exelon Energy Delivery Company, LLC ("Delivery"), the
intermediate holding company for ComEd and PECO;
o Exelon Business Services Company ("Exelon Services"), the service
company for the Exelon System;
o Exelon Ventures Company, LLC ("Ventures"), a non-utility company
and a first tier Subsidiary of Exelon which has as wholly-owned
subsidiaries, Genco and Exelon Enterprises Company, LLC
("Enterprises");/4/ and
o Enterprises, the principal Subsidiary through which Exelon will
conduct its non-utility businesses.
3. Summary of Approvals Sought.
Exelon and its Subsidiaries request authority for each of the
following activities or transactions for the period ending June 30, 2005 (the
"Authorization Period"):
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/3/ For purposes of this filing, "Utility Subsidiaries" also includes
Commonwealth Edison Company of Indiana, PECO Energy Power Company, Susquehanna
Power Company and Susquehanna Electric Company.
/4/ As described in the Merger U-1, formation of Ventures was necessary to
achieve the desired corporate reorganization of the Unicom Non-Utility
Subsidiaries and the PECO Non-Utility Subsidiaries without incurring substantial
income tax liability.
2
o Development and Administrative Activities. Exelon requests
authority, directly or through Subsidiaries, to engage in
preliminary development activities ("Development Activities") and
administrative and management activities ("Administrative
Activities") in each case relating to Permitted Non-Utility
Investments. Development Activities and Administrative Activities
will relate only to Permitted Non-Utility Investments and no
authority is sought to acquire any new business not otherwise
approved, authorized or exempted. The Commission has approved
such activities on several occasions./5/
o Incidental Acquisition of Non-Utility Assets. Exelon requests
authority to expend directly or through Subsidiaries up to $500
million to construct or acquire energy assets ("Energy Assets")
that are incidental and related to its business as an electricity
and energy commodities marketer and broker. Such business as an
electricity and energy commodities marketer and broker is
conducted through Genco or Permitted Non-Utility Investments.
Energy Assets will not include any "utility assets" within the
meaning of the Act. The Commission has approved such activities
on several occasions./6/
o New Intermediate Subsidiaries for Internal Corporate Structuring.
Exelon requests authority to acquire directly or through
Subsidiaries the securities of one or more corporations, trusts,
partnerships, limited liability companies or other entities
("Intermediate Subsidiaries") which would be created and
organized exclusively for the purpose of acquiring, holding
and/or financing or facilitating the acquisition of Permitted
Non-Utility Investments. These transactions will involve only
internal organization and no authority is sought to acquire any
new business not otherwise approved, authorized or exempted. The
Commission has approved such activities on several occasions./7/
o Internal Corporate Reorganization of Existing Investments. Exelon
and its Subsidiaries request authority to undertake internal
reorganizations of then existing and permitted Subsidiaries and
businesses, for example, by moving a Permitted Non-Utility
Subsidiary to be a subsidiary of a different parent company. Such
internal reorganizations will be accomplished through a
contribution, sale, distribution, assignment or other transfer
from one entity and the acquisition by another entity of the
securities, assets or interests in
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/5/ See cases cited in Item 1.B.1 below.
/6/ See Item 1.B.2 below.
/7/ See Item 1.B. 3. below. The Commission has recognized on several
occasions that the authority to acquire exempt subsidiaries such as EWGs, FUCOs,
ETCs or Rule 58 Subsidiaries includes the authority to acquire related
intermediate holding companies and/or subsidiaries of such exempt companies even
if those related companies do not themselves have the status of an exempt
company. See, e.g., Energy East Corp., Holding Co. Act Release No. 35-27228
(September 12, 2000) and Interstate Energy Corporation, Holding Co. Act Release
No. 35-27069 (August 26, 1999); Entergy Corporation, 1995 SEC No-Act LEXIS 901
(Oct. 24, 1995); Entergy Power Development, 1994 WL 731386 (S.E.C.) (Dec. 7,
1994).
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such entities. Such internal corporate reorganizations will not
include any transfer of utility assets or the securities of any
Utility Subsidiary. These transactions will involve only internal
reorganizations and no authority is sought to acquire any new
business not otherwise approved, authorized or exempted. The
Commission has approved such activities on several occasions./8/
o Non-U.S. Energy Related Subsidiaries. Exelon requests authority
to engage through Subsidiaries in energy related activities that,
but for being conducted outside the United States, would
constitute Rule 58 exempt activities. Non-U.S. Energy Related
Subsidiaries will engage in only those activities of the type the
Commission has heretofore approved. The Commission has approved
such activities on several occasions./9/
B. Detailed Description of Approvals Sought
1. Development and Administrative Activities.
In connection with existing and future Permitted Non-Utility Investments,
Exelon requests authority to engage directly and through Subsidiaries in
preliminary development activities ("Development Activities") and administrative
and management activities ("Administrative Activities") associated with such
investments./10/ Development Activities and Administrative Activities include
preliminary activities designed to result in a Permitted Non-Utility Investment
such as an EWG or FUCO; however, such preliminary activities may not qualify for
such status until the project is more fully developed. Accordingly, approval is
sought for Development and Administrative Activities.
Development Activities will be limited to due diligence and design review;
market studies; preliminary engineering; site inspection; preparation of bid
proposals, including, in connection therewith, posting of bid bonds; application
for required permits and/or regulatory approvals; acquisition of site options
and options on other necessary rights; negotiation and execution of contractual
commitments with owners of existing facilities, equipment vendors, construction
firms, power purchasers, thermal "hosts," fuel suppliers and other project
contractors; negotiation of financing commitments with lenders and other
third-party investors; and such other preliminary activities as may be required
in connection with the purchase, acquisition or construction of facilities or
the securities of other companies. Development Activities will be designed to
eventually result in a Permitted Non-Utility Investment.
Exelon proposes to expend directly or through Subsidiaries up to $500
million in the aggregate outstanding at any time during the Authorization Period
on all such Development
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/8/ See Item 1. B. 4. below.
/9/ See Item 1.B. 5. below. As described in that section, the requested
activities are identical or substantially identical to previously approved
activities.
/10/ Intermediate Subsidiaries may also engage in Development Activities
and Administrative Activities.
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Activities./11/ Exelon proposes a "revolving fund" concept for permitted
Development Activities. To the extent a Subsidiary for which such amounts were
expended for Development Activities becomes an EWG, FUCO, Rule 58 Subsidiary or
Non-U.S. Energy Related Subsidiary, the amount so expended will cease to be
Development Activities and then be considered as part of the "aggregate
investment" in such entity and will then count against the limitation on such
aggregate investment under Rule 53 or 58, as modified by Commission order
applicable to Exelon.
The approval sought herein will not increase the authorized amount of
aggregate investment in EWGs and FUCOs permitted in the Financing Order or
increase the permitted aggregate investment authorized under Rule 58.
This type of approval for a revolving fund of permitted investment in
Development Activities has been approved by the Commission in prior cases./12/
The Commission has approved the types of Development Activities and
Administrative Activities described above in several cases./13/
2. Incidental Acquisition of Non-Utility Assets
Exelon requests authority to expend directly or through its Subsidiaries up
to $500 million to construct or acquire Energy Assets that are incidental and
related to its business as an electricity and energy commodities marketer and
broker, or to acquire the securities of one or more existing or new companies
substantially all of whose physical properties consist or will consist of Energy
Assets; provided that the acquisition and ownership of such Energy Assets would
not cause any Subsidiary to be or become an "electric utility company" or "gas
utility company," as defined in Sections 2(a)(3) and 2(a)(4) of the Act. Energy
Assets will not constitute additional investments in EWGs or FUCOs.
The Commission has approved the acquisition of Energy Assets and similar
activities related to marketing and brokering in several cases./14/
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/11/ Expenditures in EWGs, FUCOs, Rule 58 Subsidiaries and Non-U.S. Energy
Related Subsidiaries which count against the "aggregate investment" limitation
of Rule 53 or Rule 58, as modified by Commission orders applicable to Exelon,
will not count against the $500 million limitation.
/12/ See FirstEnergy Corp., Holding Co. Act Release No. 35-27459 (Oct. 29,
2001); Ameren Corporation, Holding Co. Act Release No. 35-27053 (July 23, 1999).
/13/ E.g., FirstEnergy Corp, Holding Co. Act Release No. 35-27459 (Oct. 29,
2001); Southern Co., Holding Co. Act Release No. 35-27303 (Dec. 15, 2000);
Energy East, Inc., Holding Co. Act Release No. 35-27228 (Dec. 12, 2000);
PowerGen, plc., Holding Co. Act Release No. 35-27291 (Dec. 6, 2000).
/14/ See, e.g., Progress Energy, Inc., Holding Co. Act Release No. 35-27297
(Dec. 12, 2000) (invest in "energy related activities"); PowerGen, plc., Holding
Co. Act Release No. 35-27291 (Dec. 6, 2000); Interstate Energy Corp., Holding
Co. Act Release No. 35-27069 (Aug. 26, 1999); Ameren Corporation, Holding Co.
Act Release No. 35-27053 (July 23, 1999).
5
3. New Intermediate Subsidiaries for Internal Corporate Structuring
Exelon proposes to create and acquire directly or indirectly the securities
of one or more Intermediate Subsidiaries. Intermediate subsidiaries may be
corporations, trusts, partnerships, limited liability companies or other
entities. Intermediate Subsidiaries will be organized exclusively for the
purpose of acquiring and holding the securities of, or financing or facilitating
Exelon's investments in, other direct or indirect Permitted Non-Utility
Investments. Intermediate Subsidiaries may also engage in Development Activities
and Administrative Activities./15/
There are several legal and business reasons for the use of Intermediate
Subsidiaries in connection with making investments in Permitted Non-Utility
Investments. For example, the formation and acquisition of limited purpose
subsidiaries is often necessary or desirable to facilitate financing the
acquisition and ownership of a FUCO, an EWG or another non-utility enterprise.
Furthermore, the laws of some foreign countries may require that the bidder in a
privatization program be organized in that country. In such cases, it would be
necessary to form a foreign Subsidiary as the entity (or participant in the
entity) that submits the bid or other proposal. In addition, the interposition
of one or more Intermediate Subsidiaries may allow Exelon to defer the
repatriation of foreign source income, or to take full advantage of favorable
tax treaties among foreign countries, or otherwise to secure favorable U.S. and
foreign tax treatment that would not otherwise be available. In particular, use
of Intermediate Subsidiaries can achieve tax efficient corporate structures
which will result in minimizing state or federal taxes for Exelon or its
Subsidiaries./16/
Intermediate Subsidiaries also serve to isolate business risks, facilitate
subsequent adjustments to, or sales of, ownership interests by or among the
members of the ownership group, or to raise debt or equity capital in domestic
or foreign markets.
An Intermediate Subsidiary may be organized, among other things: (1) in
order to facilitate the making of bids or proposals to develop or acquire an
interest in any EWG, FUCO, ETC, or other non-utility company which, upon
acquisition, would qualify as a Rule 58 Subsidiary or Non-U.S. Energy Related
Subsidiary; (2) after the award of such a bid proposal, in order to facilitate
closing on the purchase or financing of such acquired company; (3) at any time
subsequent to the consummation of an acquisition of an interest in any such
company in order, among other things, to effect an adjustment in the respective
ownership interests in such business held by the Exelon System and
non-affiliated investors; (4) to facilitate the sale of ownership interests in
one or more acquired Permitted Non-Utility Investments; (5) to comply with
applicable laws of foreign jurisdictions limiting or otherwise relating to the
ownership of domestic companies by foreign nationals; (6) as a part of tax
planning in order to limit Exelon's exposure to U.S. and foreign taxes; (7) to
further insulate Exelon and the Utility Subsidiaries
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/15/ See Emera Incorporated, Holding Co. Act Release No. 35-27445 (Oct. 1,
2001) (approving certain development and administrative activities); Progress
Energy, Inc., Holding Co. Act Release No. 35-27297 (Dec. 12, 2000) (approving
certain development and administrative activities).
/16/ Any "tax sharing" aspects of such arrangements will comply with Rule
45(c) or any tax allocation agreement which has been approved by the Commission.
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from operational or other business risks that may be associated with investments
in non-utility companies; or (8) for other lawful business purposes./17/
Investments in Intermediate Subsidiaries may take the form of any
combination of the following: (1) purchases of capital shares, partnership
interests, member interests in limited liability companies, trust certificates
or other forms of voting or non-voting equity interests; (2) capital
contributions; (3) open account advances without interest; (4) loans; and (5)
guarantees issued, provided or arranged in respect of the securities or other
obligations of any Intermediate Subsidiaries./18/
Funds for any direct or indirect investment in any Intermediate Subsidiary
will be derived from Exelon's available funds. No authority is sought herein for
additional financing authority.
To the extent that Exelon provides funds directly or indirectly to an
Intermediate Subsidiary which are used for the purpose of making an investment
in any EWG or FUCO or a Rule 58 Subsidiary or Non-U.S. Energy Related
Subsidiary, the amount of such funds will be included in Exelon's "aggregate
investment" in such entities, as calculated in accordance with Rule 53 or Rule
58, as applicable and as modified by Commission order applicable to Exelon./19/
The authority requested for Intermediate Subsidiaries is intended to allow
for the corporate structuring alternatives outlined above and will not allow any
increase in aggregate investment in EWGs, FUCOs, Rule 58 Subsidiaries, Non-U.S.
Energy Related Subsidiaries or any other business subject to an investment
limitation under the Act.
Intermediate Subsidiaries have been approved by the Commission in a number
of instances./20/
4. Internal Corporate Reorganization of Existing Investments
Exelon currently engages directly or through Subsidiaries in certain
non-utility businesses. Exelon seeks authority to engage in internal corporate
reorganizations to better organize such Subsidiaries and investments. No
authority is sought under this heading to make new investments or to change the
organization for the Utility Subsidiaries.
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/17/ Interstate Energy Corporation, Holding Co. Act Release No. 35-27069
(Aug. 26, 1999) (approving a virtually identical list of activities).
/18/ See Powergen plc., Holding Co. Act Release No. 35-27291 (Dec. 6,
2000).
/19/ If the Intermediate Subsidiary is merely a conduit, the aggregate
investment will not "double count" both the conduit investment and the
investment in the operating company authorized as an EWG, FUCO, Rule 58
subsidiary or other approved investment.
/20/ See Emera Incorporated, Holding Co. Act Release No. 35-27445 (Oct. 1,
2001); Progress Energy, Holding Co. Act Release No. 35-27297 (Dec. 12, 2000);
Energy East, Inc., Holding Co. Act Release No. 35-27228 (Dec. 12, 2000);
PowerGen, plc, Holding Co. Act Release No. 35-27291 (Dec. 6, 2000); NiSource,
Inc., Holding Co. Act Release No. 35-27265 (Nov. 1, 2000); AGL Resources, Inc.,
Holding Co. Act Release No. 35-27243 (Oct. 5, 2000); Cinergy Corp., Holding Co.
Act Rel. No. 35-27124 (Jan. 11, 2000); Ameren Corporation, Holding Co. Act Rel.
No. 35-27053 (July 23, 1999); New Century Energies, Inc., Holding Co. Act Rel.
No. 35-27000 (April 7, 1999).
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Exelon and Subsidiaries request authority, to the extent needed,/21/ to
sell or to cause any Subsidiary to sell or otherwise transfer (i) such
businesses, (ii) the securities of current Subsidiaries engaged in some or all
of these businesses or (iii) investments which do not involve a Subsidiary (i.e.
less than 10% voting interest) to a different Subsidiary, and, to the extent
approval is required, Exelon requests, on behalf of the Subsidiaries, authority
to acquire the assets of such businesses, Subsidiaries or other then existing
investment interests. Alternatively, transfers of such securities or assets may
be effected by share exchanges, share distributions or dividends followed by
contribution of such securities or assets to the receiving entity. In the
future, following its direct or indirect acquisition of the securities of new
Non-Utility Subsidiaries, Exelon may determine to transfer such securities or
the assets of such Non-Utility Subsidiaries to other Subsidiaries as described
in the preceding sentence. Exelon may also liquidate or merge Non-Utility
Subsidiaries.
Such internal transactions would be undertaken in order to eliminate
corporate complexities, to combine related business segments for staffing and
management purposes, to eliminate administrative costs, to achieve tax savings,
or for other ordinary and necessary business purposes. Exelon requests authority
to engage in such transactions, to the extent that they are not exempt under the
Act and rules thereunder, through the Authorization Period.
The transactions proposed under this heading will not involve the sale or
other disposition of any utility assets of the Utility Subsidiaries and will not
involve any change in the corporate ownership of the Utility Subsidiaries./22/
The approval sought does not extend to the acquisitions of any new businesses or
activities.
The Commission has given approval for such general corporate
reorganizations in prior cases./23/
5. Non-U.S. Energy Related Subsidiaries.
Exelon requests authority to acquire directly or indirectly Non-U.S. Energy
Related Subsidiaries. Exelon believes the following list of energy related
activities are substantially
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/21/ The sale of securities, assets or an interest in other business to an
associate company may, in some cases, be exempt pursuant to Rule 43(b).
/22/ The generating utility assets of ComEd and PECO (or the securities of
interim subsidiaries holding such assets and used to facilitate the
Restructurings) were transferred to Genco pursuant to the Restructurings as
permitted by the Merger Order. See Merger Order at note 9. Likewise, the
transfer of the securities of ComEd and PECO to Exelon Energy Delivery Company
was approved in the Merger Order. See Merger Order at text accompanying note 11.
See HCAR No. 35-27259, October 20, 2000, which corrected the statement in note
11 of HCAR No. 35-27256.
/23/ Energy East, Inc., Holding Co. Act Release No. 35-27228 (Dec. 12,
2000); PowerGen, plc, Holding Co. Act Release No. 35-27291 (Dec. 6, 2000);
NiSource, Inc., Holding Co. Act Release No. 35-27265 (Nov. 1, 2000); Entergy
Corp., Holding Co. Act Release No. 35-27039 (June 22, 1999).
8
identical to activities that have been approved for other registered holding
companies outside the United States./24/
Approval is sought for Non-U.S. Energy Related Subsidiaries to engage in
sales of the following goods and services outside the United States:
"Energy Management Services." Energy management services, including the
marketing, sale, installation, operation and maintenance of various products and
services related to energy management and demand-side management, including
energy and efficiency audits; meter data management, facility design and process
control and enhancements; construction, installation, testing, sales and
maintenance of (and training client personnel to operate) energy conservation
equipment; design, implementation, monitoring and evaluation of energy
conservation programs; development and review of architectural, structural and
engineering drawings for energy efficiencies, design and specification of energy
consuming equipment and general advice on programs; the design, construction,
installation, testing, sales, operation and maintenance of new and retrofit
heating, ventilating, and air conditioning ("HVAC"), electrical and power
systems, alarm, security, access control and warning systems, motors, pumps,
lighting, water, water-purification and plumbing systems, building automation
and temperature controls, installation and maintenance of refrigeration systems,
building infrastructure wiring supporting voice, video, data and controls
networks, environmental monitoring and control, ventilation system calibration
and maintenance, piping and fire protection systems, and design, sale,
engineering, installation, operation and maintenance of emergency or distributed
power generation systems, and related structures, in connection with
energy-related needs; and the provision of services and products designed to
prevent, control, or mitigate adverse effects of power disturbances on a
customer's electrical systems./25/
"Consulting Services." Consulting services with respect to energy- and
gas-related matters for associate and nonassociate companies, as well as for
individuals. Such consulting services would include technical and consulting
services involving technology assessments, power factor correction and harmonics
mitigation analysis, meter reading and repair, rate
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/24/ The Commission has heretofore authorized non-utility subsidiaries of a
registered holding company to provide various services outside the United States
as more fully described in the following notes. Cinergy Corp., Holding Co. Act
Rel. No. 35-27124 (Jan. 11, 2000); National Fuel Gas Co., Holding Co. Act Rel.
No. 35-27114 (Dec. 16, 1999); American Elect. Power Co., Holding Co. Act Rel.
No. 35-27062 (Aug. 19, 1999); Southern Energy, Inc., Holding Co. Act Rel. No.
35-27020 (May 13, 1999); Interstate Energy Corp., Holding Co. Act Rel. No.
35-27069 (Aug. 26, 1999); Central and South West Corp., Holding Co. Act Rel. No.
35-26767 (Oct. 21, 1997). Exelon plans to pursue with the Commission
authorization to engage in additional activities outside the United States in
Docket 70-9691.
/25/ See FirstEnergy Corp., Holding Co. Act Release No. 35-27459 (Oct. 29,
2001) (approving energy management services virtually identical to the services
requested by Exelon anywhere outside the United States); Progress Energy,
Holding Co. Act Release No. 35-27297 (Dec. 12, 2000); Energy East, Inc., Holding
Co. Act Release No. 35-27228 (Dec. 12, 2000); NiSource, Inc., Holding Co. Act
Release No. 35-27265 (Nov. 1, 2000); Interstate Energy Corporation, Holding Co.
Act Release No. 35-27069 (Aug. 26, 1999); Columbia Energy Group, Holding Co. Act
Rel. No. 35-26868 (May 6, 1998) (approving energy management services anywhere
outside the United States); Cinergy Corp. HCAR 35-27124 (Jan. 11, 2000)
(approving energy management services in Canada and Mexico). See also GPU, Inc.,
Holding Co. Act Rel. No. 35-27165 (April 14, 2000) (approving such services by a
Rule 58 subsidiary).
9
schedule design and analysis, environmental services, engineering services,
billing services (including consolidation or centralized billing, bill
disaggregation tools and bill inserts), risk management services, communications
systems, information systems/data processing, system planning, strategic
planning, finance, general management consulting including training activities,
feasibility studies, and other similar related services./26/
"Energy Marketing." The brokering and marketing of electricity, natural gas
and other energy commodities, as well as providing incidental related services,
such as fuel management, storage and procurement./27/
Consistent with existing precedent, Exelon requests authority to conduct
Energy Management Services and Consulting Services anywhere outside the United
States. Also consistent with precedent, Exelon requests authority to conduct
Energy Marketing activities in Canada and Mexico.
To the extent that non-U.S. operations involve additional or different
risks than U.S. operations, Exelon will evaluate and seek to mitigate those
risks in a manner similar to the manner it evaluates EWG and FUCO investments as
described in Amendment No. 4 to the Form U-1 filed in File No. 70-9693 filed
December 5, 2000.
C. Rule 54.
The proposed transactions are subject to the requirements of Rule 54. Rule
54 provides that in determining whether to approve the issue or sale of a
security by a registered holding company for purposes other than the acquisition
of an EWG or FUCO, or other transactions by such registered holding company or
its subsidiaries other than with respect to EWGs or FUCOs, the Commission shall
not consider the effect of the capitalization or earnings of any subsidiary
which is an EWG or a FUCO upon the registered holding company if paragraphs (a),
(b) and (c) of Rule 53 are satisfied.
Exelon currently does not meet all of the conditions of Rule 53(a). As of
September 30, 2001, Exelon's "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $744 million which is in excess of
the 50% of Exelon's average consolidated
--------------
/26/ See FirstEnergy Corp., Holding Co. Act Release No. 35-27459 (Oct. 29,
2001) (approving consulting services virtually identical to the services
requested by Exelon anywhere outside the United States); Energy East, Inc.,
Holding Co. Act Release No. 35-27228 (Dec. 12, 2000); NiSource, Inc., Holding
Co. Act Release No. 35-27265 (Nov. 1, 2000); Interstate Energy Corporation,
Holding Co. Act Release No. 35-27069 (Aug. 26, 1999) Columbia Energy Group,
Holding Co. Act Release No. 35-26868 (May 6, 1998) (approving consulting
services anywhere outside the United States).
/27/ See FirstEnergy Corp., Holding Co. Act Release No. 35-27459 (Oct. 29,
2001); Energy East, Inc., Holding Co. Act Release No. 35-27228 (Dec. 12, 2000);
Cinergy Corp., Holding Co. Act Rel. No. 35-27124 (January 11, 2000) (approving
the consulting with respect to gas and electric commodity purchasing in Canada
and Mexico); American Elect. Power Co., Holding Co. Act Rel. No. 35-27062 (Aug.
19, 1999) (approving request to broker and market electric power, natural and
manufactured gas, emission allowances, coal, oil, refined petroleum products and
natural gas liquids at wholesale and retail in Canada); Southern Energy, Inc.,
Holding Co. Act Rel. No. 35-27020 (May 13, 1999) (approving the brokering and
marketing of electricity, natural gas and other energy commodities in Canada).
10
retained earnings of $1,022 million at September 30, 2001 which is the "safe
harbor" limitation contained in Rule 53(a). However, under the Financing Order
the Commission has authorized Exelon to increase its "aggregate investment" in
EWGs and FUCOs to an amount of up to $4 billion. Therefore, although Exelon's
"aggregate investment" in EWGs and FUCOs currently exceeds the 50% "safe harbor"
limitation, this investment level is permitted under the Financing Order.
In any event, even taking into account the capitalization of and earnings
from EWGs and FUCOs in which Exelon has an interest, there would be no basis for
withholding approval of the proposed transaction. With regard to capitalization,
since the issuance of the Financing Order, there has been no material adverse
impact on Exelon's consolidated capitalization resulting from Exelon's
investments in EWGs and FUCOs. At September 30, 2001, Exelon's consolidated
capitalization consists of 33 % equity, 3% preferred securities, 62 % long-term
debt (including current maturities of long-term debt), and 2 % short-term debt.
These ratios are within acceptable industry ranges. The proposed transactions
will not have any material impact on capitalization. Further, since the date of
the Financing Order, there has been no material change in Exelon's level of
earnings from EWGs and FUCOs.
Exelon satisfies all of the other conditions of paragraphs (a) and (b) of
Rule 53. With reference to Rule 53(a)(2), Exelon maintains books and records in
conformity with, and otherwise adheres to, the requirements thereof. With
reference to Rule 53(a)(3), no more than 2% of the employees of Exelon's
domestic public utility companies render services, at any one time, directly or
indirectly, to EWGs or FUCOs in which Exelon directly or indirectly holds an
interest. With reference to Rule 53(a)(4), Exelon will continue to provide a
copy of each application and certificate relating to EWGs and FUCOs and relevant
portions of its Form U5S to each regulator referred to therein, and will
otherwise comply with the requirements thereof concerning the furnishing of
information. With reference to Rule 53(b), none of the circumstances enumerated
in subparagraphs (1), (2) and (3) thereunder have occurred. Finally, Rule 53(c)
by its terms is inapplicable since the proposed transaction does not involve the
issue or sale of a security to finance the acquisition of an EWG or FUCO.
D. Other Matters.
Ventures (or Enterprises, as appropriate) proposes to file a single
consolidated quarterly report pursuant to Rule 24 of all investments in
Subsidiaries, commencing with the quarterly report for the first full calendar
quarter which ends at least 45 days following the date of the order herein.
Concurrently with the filing of such report, a copy thereof will be furnished to
each state utilities commission having jurisdiction over retail rates of ComEd
and PECO./28/ It is proposed that such combined report also be in lieu of any
separate notification on Form U-6B-2 that would otherwise be required with
respect to exempt securities issuances. The Rule 24 report shall include:
--------------
/28/ Subsidiaries that are Rule 58 Subsidiaries will also continue to file
quarterly reports on Form U-9C-3. In addition, Exelon will provide such
information as may be required by Form U5S with respect to any EWGs or FUCOs in
which it may acquire an interest.
11
o A copy of the balance sheet and income statement for
Ventures and its consolidated subsidiaries;
o A narrative description of Development Activities and
of any investments during the quarter just ended,
organized by category (EWG, FUCO, ETC, Rule 58
Subsidiary, Non-U.S. Energy Related Subsidiary); and
o A chart showing, as of the end of such quarterly
period, all associated companies of Exelon, in addition
to Ventures, that are Non-Utility Subsidiaries and
identifying each as an EWG, FUCO, ETC, Rule 58
Subsidiary, Non-U.S. Energy Related Subsidiary,
Intermediate Subsidiary or Financing Subsidiary, as
applicable, and indicating Exelon's percentage equity
ownership in each such entity.
Item 2. Fees, Commissions and Expenses
Estimated Legal Fees and Expenses $75,000
Estimated Miscellaneous Expenses 25,000
--------
Total $100,000
--------
Item 3. Applicable Statutory Provisions
Sections 9, 10, 11, 12, 32, 33 and 34 of the Act and Rules 42, 43, 53, 54,
and 58 are considered applicable to the proposed transactions as described
below:
TRANSACTION APPLICABLE SECTION OR RULE
Acquisition of initial securities of Intermediate Sections 9(a) and 10.
Subsidiaries, Non-U.S. Energy Related
Subsidiaries and Development Activities and
Administrative Activities.
Sale or other transfer by Exelon or a Sections 12(c) or Section 12(f), to the extent
Subsidiary of securities and interests in not exempt pursuant to Rules 42 and 43, as
businesses, and acquisition thereof by another applicable; Sections 9(a) and 10, to the extent
direct or indirect Subsidiary Exelon; not exempt pursuant to Rule 58 or Section 32,
reorganizations of Subsidiaries. 33 or 34.
Investment in Energy Assets. Sections 9(a) and 10.
Sale Of Certain Goods And Services Outside Sections 9(c)(3); 11(b)(1); 32; 33; 34 and
12
TRANSACTION APPLICABLE SECTION OR RULE
The United States. Rules 53, 54 and 58.
To the extent that the proposed transactions are considered by the
Commission to required authorization, exemption or approval under any section of
the Act or the rules and regulations other than those set forth above, request
for such authorization, exemption or approval is hereby made.
Item 4. Regulatory Approvals
No state or federal regulatory agency other than the Commission under the
Act has jurisdiction over the proposed transactions.
Item 5. Procedure
The Applicants hereby request that there be no hearing on this
Application-Declaration and that the Commission issue its order as soon as
practicable after the filing hereof. The Commission is requested to issue and
publish the requisite notice under Rule 23 with respect to this
Application-Declaration by _______; such notice specifying ________ as the date
by which comments may be entered and the date on which an order of the
Commission granting and permitting the Application/Declaration to become
effective may be entered by the Commission. The Applicants hereby (i) waive a
recommended decision by a hearing officer, (ii) waive a recommended decision by
any other responsible officer or the Commission, (iii) consent that the Division
of Investment Management may assist in the preparation of the Commission's
decision and (iv) waive a 30-day waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
A. Exhibits
------------------------------------------------------------------------------------------
Exhibit No. Description of Document Method of Filing
------------------------------------------------------------------------------------------
A Restated Articles of Incorporation of Incorporated by reference to
Exelon S-4 Registration Statement,
File No. 333-37082.
------------------------------------------------------------------------------------------
B Inapplicable NA
------------------------------------------------------------------------------------------
C Inapplicable NA
------------------------------------------------------------------------------------------
D Inapplicable NA
------------------------------------------------------------------------------------------
E Inapplicable NA
------------------------------------------------------------------------------------------
F-1 Preliminary opinion of counsel to Exelon Filed herewith
------------------------------------------------------------------------------------------
F-2 Past-tense opinion of counsel to Exelon Filed by amendment
------------------------------------------------------------------------------------------
G Form of Notice of filing Filed herewith
------------------------------------------------------------------------------------------
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B. Financial Statements
--------------------------------------------------------------- ---------------------
Statement Description Method of Filing
No.
-------------------------------------------------------------------------------------
FS-1 Historical consolidated financial Incorporated by reference to
statements of Exelon and subsidiaries Annual Report on Form 10-
K for the year ended
December 31, 2000 and
quarterly reports on Form
10-Q for the quarters ended
March 31, 2001, June 30,
2001 and September 30,
2001
-------------------------------------------------------------------------------------
Item 7. Information as to Environmental Effects
The proposed transaction involves neither a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. No federal agency is preparing an environmental impact
statement with respect to this matter.
14
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the Applicants have duly caused this Application/ Declaration to be signed
on their behalf by the undersigned thereunto duly authorized.
Date: February 8, 2002
--------------------------------------------------------------------------------
Exelon Corporation
By /s/ Ruth Ann M. Gillis
----------------------
Senior Vice President and Chief Financial
Officer
--------------------------------------------------------------------------------
Exelon Ventures Company, LLC
Exelon Enterprises Company, LLC
Exelon Generation Company, LLC
Exelon Energy Delivery Company, LLC
c/o Exelon Corporation
10 South Dearborn Street
37th Floor
Chicago, Illinois 60603
By Exelon Corporation
By /s/ Ruth Ann M. Gillis
----------------------
Senior Vice President and Chief Financial
Officer
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
15