-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MZ7YLLT2ihAZ4b0c/KJH9ekLK/7ZhWIi5lR5HIvI3xyVcfNdtQIE+5kfiVHeqnau aZvblNq65J+jVr8YwWN7Pw== 0000893220-00-000396.txt : 20000403 0000893220-00-000396.hdr.sgml : 20000403 ACCESSION NUMBER: 0000893220-00-000396 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20000331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONECTIV CENTRAL INDEX KEY: 0001029590 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 510377417 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: SEC FILE NUMBER: 070-09655 FILM NUMBER: 591111 BUSINESS ADDRESS: STREET 1: 800 KING STREET P O BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19899 BUSINESS PHONE: 3024293114 MAIL ADDRESS: STREET 1: 800 KING ST STREET 2: P O BOX 231 CITY: WILMINGTON STATE: DE ZIP: 19899 U-1 1 FORM U-1 CONECTIV 1 File No. 70-XXXX UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------------ FORM U-1 DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 -------------------------------------------- Conectiv Conectiv Energy Holding Company Atlantic City Electric Company ACE REIT, Inc. Conectiv Atlantic Generation, LLC Delmarva Power & Light Company Conectiv Delmarva Generation, Inc. 800 King Street Wilmington, DE 19899 --------------------------------------------- (Name of company filing this statement and address of principal executive offices) Conectiv ------------------------------------------------ (Name of top registered holding company parent) Philip S. Reese Vice President and Treasurer Conectiv (address above) ------------------------------------------------ (Name and address of agent of service) The Commission is requested to send copies of all notices, orders and communications in connection with this Application to: Peter F. Clark Joyce Koria Hayes, Esquire General Counsel 7 Graham Court Conectiv Newark, DE 19711 (address above) 2 Table of Contents Item 1. DESCRIPTION OF PROPOSED TRANSACTIONS A. Introduction. B. Background and Regulatory Environment C. Transactions related to the capitalization of Conectiv Delmarva Generation, Inc. ("CDG") and Conectiv Atlantic Generation, LLC ("CAG") through the contribution of generating assets. Capitalization of ACE REIT, Inc. ("ACE-REIT") through the contribution of CAG ownership interests to ACE-REIT. D. Dividend of Common Stock of CDG and ACE-REIT to Conectiv. E. Approval of acquisition of CDG and ACE-REIT by CEH. Creation of Conectiv Energy Holding Company ("CEH") and contribution of CDG and ACE-REIT Common Stock to CEH. Determination that ACE-REIT is not a utility holding company. Possible future activities of CEH. F. Request for Reservation of jurisdiction pending completion of the Record with respect to status of CDG and CAG as EWGs. G. CEH Authority to acquire EWGs as an intermediary company. H. Financing of CEH and financing of ACE-REIT, CAG, and CDG by CEH or Conectiv. 1. CEH financing by Conectiv. 2. CDG, CAG, and ACE-REIT financing by CEH or Conectiv. I. Authority for the acquisition of utility assets pursuant to a like-kind exchange if at that time CDG is not an EWG. J. Affiliate Transactions. K. Authorization Period and Reporting. L. Statement Pursuant to Rule 54. Item 2. FEES, COMMISSION AND EXPENSES Item 3. APPLICABLE STATUTORY PROVISIONS Item 4. REGULATORY APPROVAL Item 5. PROCEDURE Item 6. EXHIBITS AND FINANCIAL STATEMENTS 2 3 A. Exhibits B. Financial Statements as of December 31, 1999. Item 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS 3 4 1(a) Description of Proposed Transactions [ ] (a) Furnish a reasonably detailed and precise description of the proposed transaction, including a statement of the reason why it is desired to consummate the transaction and the anticipated effect thereof. If the transaction is part of a general program, describe the program and its relation to the proposed transaction. ------------------------------------------------------- A. Introduction Conectiv, a registered holding company and a Delaware corporation, owns all of the outstanding common stock of Delmarva Power & Light Company, a Delaware and Virginia corporation and an operating public utility company ("Delmarva"), and of Atlantic City Electric Company, a New Jersey corporation and an operating public utility company ("ACE"), and of certain direct and indirect nonutility subsidiaries. (See HCAR No. 26832 dated February 25, 1998 (the "Merger Order") in File No. 70-9069.) Delmarva provides electric service in Delaware, Maryland and Virginia and natural gas service in northern Delaware and ACE provides electric service in New Jersey. Among the nonutility businesses that Conectiv was permitted to retain under the Merger Order is Conectiv Energy Supply, Inc. ("CESI")(named Delmarva Energy Company at the time of the Merger Order and later renamed), which is currently operating as an energy marketing company. (See order authorizing the restructuring of the Conectiv nonutility operations and the merger into CESI of Petron Oil Company and the acquisition of stock of Delmarva Operating Services Company during phase 1 of the restructuring and of Atlantic Generating Inc. during phase 2 of the restructuring (HCAR No. 26953 dated December 16, 1998(1) (the "Restructuring Order"))) Conectiv also owns Conectiv Energy, Inc., ("CEI") a previously inactive company that has recently begun investing in two projects that will qualify as eligible facilities. The Federal Energy Regulatory Commission ("FERC") has determined that CEI qualifies as an exempt wholesale generator ("EWG").(2) This filing seeks authorizations required under the Public Utility Holding Company Act of 1935 as amended (the "Act") for the transfer of certain generating facilities of Delmarva and ACE to affiliates that initially will be utilities for purposes of the Act. Other generating assets will be sold to third parties and, to the extent authorizations under the Act are required in connection with the sales to third parties, a separate filing has been made.(3) Conectiv's intent is to transfer the retained generating assets to affiliates that are not engaged in the transmission and distribution - -------- (1) The restructuring U-1 envisioned that certain assets and contracts held by a division of Delmarva (doing business as Conectiv Energy) would be transferred to Conectiv Services, Inc. rather than CESI. It is now contemplated that CESI will be engaged in energy marketing at not only the industrial and commercial level, but also at the retail level. The Company now proposes that the assets and contracts referred to will be transferred to CESI or a subsidiary of CESI. The assets and contracts are not utility assets and the transfer does not require the approval of this Commission under the Act. The assets and contracts are utilized in an energy-related business as specified in Rule 58(b)(1)(v). (2) The implementation of a like-kind exchange may require that CEI be sold to a third party intermediary. Under the like-kind exchange, at a later time, CEI's assets would be exchanged by the third party for certain generating facilities previously transferred from Delmarva to CDG. The like-kind exchange is discussed in more detail in Section I below. (3) See File No. 70-9609. As discussed in more detail later, there are three categories of generating facilities to be transferred by ACE and four categories to be transferred by Delmarva: 1) those sold to a non-EWG third party purchaser by Delmarva and ACE for which approval under the Act is required and requested in File No. 70-9609; 2) those being sold to EWG third party purchasers by Delmarva and ACE for which no approval under the Act is required; 3) those being transferred to CDG or CAG by Delmarva or ACE and retained by the transferee and 4) those being transferred by Delmarva to CDG subject to an obligation to transfer the facilities to an EWG third party purchaser under the terms of a like-kind exchange agreement. The latter two types of facilities are identified on Exhibit H-1. 4 5 business and to convert Delmarva and ACE to "wires and pipes companies" that provide only regulated electric transmission and distribution services and, in the case of Delmarva, regulated gas distribution services. The transaction to accomplish the transfer of the facilities has been structured to maximize financing flexibility and to minimize state and federal tax consequences. The Delmarva facilities will be transferred to Conectiv Delmarva Generation, Inc. ("CDG"), which is a wholly-owned subsidiary of Delmarva that was originally incorporated as a real estate investment trust(4). In exchange for the facilities, CDG will issue new shares of common stock to Delmarva. After the transfer of the facilities from Delmarva to CDG in exchange for additional common equity issued by CDG, Delmarva will declare a capital dividend to Conectiv in the form of CDG common stock. Conectiv will then fund a new subsidiary holding company proposed to be created for this purpose to be named Conectiv Energy Holding Company ("CEH") by contributing the CDG common stock to CEH making CDG a direct subsidiary of CEH. CEH will become an intermediate holding company in the Conectiv corporate family. The ACE generating facilities to be retained will be contributed to Conectiv Atlantic Generation, LLC ("CAG"), a new wholly-owned subsidiary of ACE in exchange for the ownership interest in CAG. CAG will temporarily become a wholly-owned subsidiary of ACE. ACE will then contribute the CAG ownership interest to ACE REIT, Inc. ("ACE-REIT"), an ACE subsidiary that was also formed to be a real-estate investment trust but was never funded and was never active. ACE will then issue a dividend to Conectiv of ACE-REIT's common stock. Conectiv will then contribute the ACE-REIT common stock to CEH, making ACE-REIT a direct subsidiary of CEH and CAG an indirect subsidiary of CEH. The following two tables illustrate the intra-corporate transfers of the facilities and the corresponding transfers of the common equity shares related to the Facilities: DELMARVA FACILITIES Step 1: Step 2: ------------ Delmarva -------------- ---------- ---- ------------ Delmarva Conectiv CEH -------------- ---------- ---- CDG CDG Common Stock Facilities Common Common Stock Stock ------------ CDG ------------ - -------------------- (4) The company was never funded and never became operational. The company's name was changed from DPL-REIT, Inc. to CDG in anticipation of the proposed transfer. DPL REIT Holding Company, Inc., a shell intermediary company that existed for a time, was merged into Delmarva so that CDG is now a wholly-owned subsidiary of Delmarva. 5 6 ATLANTIC FACILITIES Step 1: Step 2: ----- ----- ----------- ACE ACE ACE-REIT ----- ----- ----------- CAG Ownership Interest CAG Ownership Facilities Step 3: Interest ----- CAG ----- ACE-REIT -------- ACE-REIT ------- ----- ACE Common Stock Conectiv Common Stock CEH ----- -------- ------- The net effect of those transactions is that Delmarva's generating facilities will be transferred to CDG and ACE's generating facilities to CAG and the common equity ownership related to the Delmarva and ACE generating facilities will be transferred to CEH. CDG and CAG will own no assets other than generation facilities and appurtenant transmission facilities and will sell power exclusively at wholesale. Both CDG and CAG will become subsidiaries of CEH, which will be a directly-owned subsidiary of Conectiv. In addition to the common stock of CDG and CAG, Conectiv proposes to contribute to CEH the common stock of CESI, a Rule 58 company and may at a future date contribute to CEH the common stock of Atlantic Cogeneration, Inc., which is also a Rule 58 company. The following tables show the placement of the relevant companies in the Conectiv corporate family on a pre-reorganization and post-reorganization basis. PRE-REORGANIZATION -------- Conectiv ----------- -------- ------ Delmarva ACE CESI ----------- ------ ------ ----------- ------ ------------ CDG CAG ACE-REIT ----------- ------ ------------ POST-REORGANIZATION ---------- Conectiv ---------- ---------- ----- ----- Delmarva ACE CEH ---------- ----- ----- ------ -------- ------ CDG ACE-REIT CESI ------ -------- ------ ------- CAG ------- 6 7 Thus, Delmarva and ACE will be solely in the transmission and distribution business in those states in which they now operate. CEH will be an intermediate holding company and indirectly will be in the power production and sales and energy marketing businesses through its ownership of CDG, CAG and CESI. The retention of these facilities in a nonregulated environment in the system made up of Conectiv and its subsidiaries (the "System") has no financial impact and does not subject the System to any unusual risk as would proposed investments in foreign utilities or foreign EWGs. The operation of these facilities is part of the business in which the System has been engaged historically. The arena has merely changed from one of regulation to a deregulated environment. Following its formation, CEH will issue securities to Conectiv to fund its business and the CEH subsidiaries each will issue securities to either Conectiv or CEH to fund its business. The authorizations requested under the Act related to the foregoing transactions are as follows: 1. Transactions Related to the Capitalization of CDG and CAG (referred to collectively as the "Energy Subsidiaries"). a) A capital contribution of certain generating utility assets by Delmarva to CDG; b) A capital contribution of certain generating utility assets by ACE to CAG; and the contribution of the ownership interest in CAG to ACE-REIT establishing ACE-REIT as a Delaware holding company; and c) the acquisition by each of the Energy Subsidiaries of its portion of the generating assets. 2. Dividend out of capital or unearned surplus by ACE to Conectiv of the common stock of ACE-REIT and by Delmarva to Conectiv of the common stock of CDG. 3. Creation of Conectiv Energy Holding Company ("CEH") and contribution of CDG and ACE-REIT Stock to CEH. Approval of acquisition of CDG and ACE-REIT by CEH. Determination that ACE-REIT is not a utility holding company. 4. Request for reservation of jurisdiction pending completion of the record with respect to status of CDG and CAG as EWGs. 5. CEH authority to acquire EWGs as an Intermediary Company. 6. Financing of CEH by Conectiv and financing of CDG, CAG and ACE-REIT by CEH or Conectiv. 7. Authority for the acquisition of utility assets pursuant to a like-kind exchange if, at that time, CDG is not an EWG. B. Background and Regulatory Environment Each of the states in which Delmarva and ACE operate has enacted legislation restructuring the electric utility industry in that state to provide retail choice of electricity suppliers. Generally, with restructuring, the supply component of the price charged to a customer for electricity would be 7 8 deregulated, and electricity suppliers would compete to supply electricity to customers. Customers would continue to pay the local utility a regulated price for the delivery of the electricity over the transmission and distribution system. On August 31, 1999, the Delaware Public Service Commission ("DPSC") issued an order with respect to Delmarva's plan for complying with the Electric Utility Restructuring Act of 1999 (the "Delaware Act"). Retained customers with peak monthly load of 1,000 kilowatts ("KW") or more were able to choose electric suppliers as of October 1, 1999, customers with loads of 300KW or more were able choose as of January 15, 2000 and all others may choose as of October 1, 2000. The Delaware Act permits Delmarva to sell, transfer, or otherwise divest its electric generating plants without DPSC approval after October 1, 1999. Electric rates are unaffected by such sales. Delmarva remains the provider of default service to customers who do not choose an alternative electricity supplier for a period of three or four years for non-residential and residential customers, respectively. Electric rates for these customers are fixed throughout this transition period. Following this transition period, the DPSC may request that Delmarva remain the provider of default service, but the service would be provided at market-based rates. In Maryland, as in Delaware, Delmarva's Plan for implementing Electric Customer Choice and Competition Act of 1999, which was approved by the Maryland Public Utility Commission on October 8, 1999, provides that rates are unaffected by the sale or transfer of any generating assets. Delmarva will provide default service to customers who do not choose an alternative electricity supplier from July 1, 2000 to July 1, 2004 for residential customers and July 1, 2000 to July 1, 2003 for others. The Virginia Electric Utility Restructuring Act phases-in retail electric competition beginning January 1, 2002. As part of a restructuring application filed with the Virginia State Corporation Commission ("VaSCC"), Delmarva is seeking approval to transfer the facilities. Approval also will be obtained for the transfer of the facilities from Delmarva to CDG under the Virginia Affiliates Act. The New Jersey Board of Public Utilities ("NJBPU") issued a Summary Order on July 15, 1999 concerning restructuring of ACE's electric supply business. Among other matters, the Summary Order provided ACE's customers with a choice of electricity suppliers effective August 1, 1999. However, ACE is obligated to supply electricity to customers who do not choose an alternative electricity supplier through July 31, 2002 under the Basic Generation Service(5). Gains or losses on the sale of ACE's generating plants (other than certain "mid-merit" plants) will affect the amount of stranded costs to be recovered from customers and would not affect ACE future earnings. In the event of a sale within four years of certain "mid-merit" plants to third parties, 50% of any gain would reduce stranded costs and 50% would affect earnings. The transfer to an affiliate is preapproved and does not affect stranded costs nor future earnings. ACE is only required to file proposed accounting entries with the NJBPU. Under the Delaware and New Jersey electric industry restructuring legislation, Delmarva and ACE are in the process of exiting the business of generating electricity. Conectiv is implementing a "mid-merit" strategy through the sale of baseload facilities and the retention of "mid-merit" facilities. Nuclear and non-strategic baseload fossil electric generating plants that run almost continuously to supply the base of minimum demand level for electricity are to be sold to third parties. The mid-merit facilities to be retained and transferred to an affiliate are comprised of - ------------------- (5) Under the terms of the Summary Order, ACE is outsourcing the Basic Generation Service. CESI may bid to supply all or a portion of the capacity and energy need of the Basic Generation Service. 8 9 electric generating plants that can quickly increase or decrease their KW per hour output level on an economic basis. These plants are generally operated during times when demand for electricity rises and prices are higher. Approximately 1,412 MW of net generating capacity owned by Delmarva and 1,123 of net generating capacity owned by ACE will be transferred or sold to non-affiliates(6). Pursuant to this application, it is proposed that approximately 1,364 MW of net generating capacity owned by Delmarva (exclusive of the net generating capacity subject to the like-kind exchange) and 502 MW of net generating capacity owned by ACE will be transferred to CDG and CAG respectively. In addition, CEI has begun making investments in the construction of two projects involving combustion turbine generating facilities that are compatible with Conectiv's mid-merit strategy. C. Transactions related to the capitalization of CDG and CAG through the contribution of generating assets. Capitalization of ACE-REIT through the contribution of CAG's ownership interests to ACE-REIT CDG is currently an inactive wholly-owned subsidiary of Delmarva. Delmarva proposes to capitalize CDG through the contribution by Delmarva to CDG of generating assets listed in Exhibit H-1 hereto. In consideration for the capital contribution, CDG will issue common stock to Delmarva. ACE will make a capital contribution consisting of the generating assets listed in Exhibit H-1 (together with the generating assets transferred by Delmarva to CDG, the "Generating Assets") to CAG, a newly established Delaware limited liability company. ACE will then contribute the ownership interest in CAG to another wholly-owned subsidiary, ACE-REIT, establishing CAG as an indirect subsidiary of ACE and a direct subsidiary of ACE-REIT, which will be a Delaware holding company. The assets so transferred will continue to be accounted for as part of the Atlantic Utility Group (as defined in the Conectiv Restated Certificate of Incorporation) for purposes of determining the dividend on Conectiv Class A Common Stock so that the transfer has no impact on the dividend for Class A Common Stock. CDG and CAG will acquire their respective portion of the Generating Assets so transferred and will operate the assets, selling 100% of the output to CESI, the marketing company in the System as described below. Delmarva's Generating Assets are encumbered by a Mortgage and Deed of Trust, dated October 1, 1943 as supplemented by 94 indentures supplemental thereto (the "Delmarva Mortgage"), in favor of Delmarva's bondholders. ACE's Generating Assets are encumbered by a Mortgage, dated January 15, 1937 as supplemented by 40 indentures supplemental thereto (the "ACE Mortgage"), in favor of ACE's bondholders. The Chase Manhattan Bank is the Successor Trustee under the Delmarva Mortgage and Bank of New York is the Successor Trustee under the ACE Mortgage. Delmarva and ACE are working with the Trustees to release the Generating Assets from the liens of the mortgages, in accordance with the provisions of the terms of the mortgages. - -------------------- (6) It is currently anticipated that approximately 127 MW of net generating capacity owned by Delmarva will be transferred to CDG subject to an obligation to transfer the assets to a third party in consideration for certain like-kind assets. (The specific assets are identified on Exhibit H-1). See Item 1.I below. 9 10 Pursuant to orders of the state commissions in which they operate and subject to the submission of certain accounting entries to the NJBPU in the case of ACE and approval of the VaSCC in the case of Delmarva, ACE and Delmarva each has been authorized and pre-approved to transfer the Generating Assets at book value to a new affiliate in the Conectiv System. Such a transfer will permit the new affiliate to operate the assets efficiently in a competitive environment. Ultimately CDG and CAG will need the flexibility shared by competitors in the deregulated generating industry and can only achieve that flexibility with EWG status as discussed below. D. Dividend of Stock of CDG and ACE-REIT to Conectiv. As of December 31, 1999, as a result of write-downs occurring due to state electric industry restructuring, Delmarva has approximately $147.3 million of retained earnings. The capital or unearned surplus account, titled "Additional Paid in Capital" totaled approximately $528.9 million. The book value net of deferred taxes of the CDG common stock to be transferred to Conectiv by dividend is approximately $301.4 million (of which $26.4 million is associated with the assets transferred and subject to the like-kind exchange) and will be paid out of the capital or unearned surplus account, leaving all retained earnings for the payment of dividends to preferred stockholders and to Conectiv as the holder of all outstanding common stock. The capital dividend by Delmarva will cause the common equity to total capitalization ratio for Delmarva to fall below 30% until the sale of other generating facilities to third parties is completed. The closing is scheduled for September 1, 2000 but is contingent on the prior receipt of state regulation approvals. As of December 31, 1999, also as a result of write-downs occurring due to state electric industry restructuring, ACE has approximately $130.0 million of retained earnings. The book value net of deferred taxes of the ACE-REIT stock to be transferred to Conectiv by dividend is approximately $77.2 million and thus, could be paid by ACE out of retained earnings. However, generally accepted accounting principles require that the dividend be accounted for as a dividend out of capital surplus. Conectiv may make a capital contribution to Delmarva or ACE, if necessary, to return the capital structure of the utility company to an appropriate debt-equity ratio. If, however, the equity portion of the proceeds from the sale of assets to third parties, if retained by Delmarva or ACE, is sufficient to achieve a proper capital structure for Delmarva or ACE, as the case may be, no capital contribution will be made by Conectiv to either ACE or Delmarva, as the case may be. E. Approval of Acquisition of CDG and ACE-REIT by CEH. Creation of CEH and Contribution of CDG and ACE-REIT common stock to CEH. Determination that ACE-REIT is not a utility holding company. Possible future activities of CEH. Conectiv proposes to create CEH as a new subsidiary holding company for the purpose of holding ownership and directing the activities of various companies engaged in the generation and marketing of electricity and other forms of energy. Conectiv proposes to transfer to CEH, through a capital contribution, Conectiv's ownership interest in CDG and ACE-REIT. Approval of the Commission is requested for the creation of CEH, the contribution of the Common Stock of CDG and ACE-REIT to CEH and the acquisition of the stock by CEH. CEH will not be an operating company, will have no employees and will function as an intermediary holding company that will be a utility holding company until such time as CDG and CAG are qualified as EWGs. Until such time as CDG and CAG are declared to be EWGs, Conectiv requests that the Commission deem ACE-REIT not to be a utility holding company solely for the purpose of section 11(b)(2) which provides that this Commission shall take such action as it finds necessary in order that the holding company shall cease to be a holding company with respect to each of its subsidiary companies which itself has a subsidiary company which is a holding company. ACE-REIT, as a Delaware holding company, is 10 11 a company that derives its revenues solely from the ownership of the common stock in companies doing business in other jurisdictions.(7) Conectiv also proposes to contribute to CEH the common stock and other securities held in CESI and at some point in the future, may contribute to CEH common stock and other securities held in Atlantic Cogeneration, Inc. ("AGI"). Since CESI and AGI are Rule 58 companies the acquisition of the securities by CEH is exempt from approval under Rule 58. The capital contribution of the securities by Conectiv also requires no approval pursuant to Rule 45(b)(4). In the Merger Order, Conectiv was authorized to retain ownership of CESI (formerly named Delmarva Energy Company) as a Rule 58 energy marketing company (See HCAR No. 35-26832 dated February 25, 1998). Under the subsequent Restructuring Order, Petron Oil Corporation was merged into CESI and CESI acquired ownership of Delmarva Operating Services Company ("DOSC"), a company providing management services to independent production companies or EWGs. CESI will also become the company providing energy management services to customers. Services may include: - Energy services to large commercial and industrial customers including power system consulting, end-use efficiency services, customized on-site systems services and other energy services. - Energy management services including demand-side management and energy audits. - Conditioned power services that prevent, control or mitigate adverse effects of power disturbances. - Asset management services related to energy-related systems, facilities and equipment including distribution systems and substations, transmission facilities, generation facilities, boilers, chillers, and HVAC and lighting systems and to qualifying and non-qualifying cogeneration and small power production facilities under the Public Utility Regulatory Policies Act of 1978. - Consulting services involving technology assessments, power factor correction and harmonics mitigation analysis, meter reading and repair, rate schedule design and analysis, environmental services, engineering services, billing services, risk management services, communications systems, information systems, data processing, system planning, strategic planning, finance, feasibility studies, and similar services. - Other services related to the consumption of energy and the maintenance of property by end-users. Currently Conectiv Solutions, CCC ("Solutions") is authorized to engage in the business of providing these services. This Application proposes that Solutions will withdraw from these activities and will confine its services to those other services previously authorized. CESI will continue to be a Rule 58 company. Substantially all revenues will be derived from (in order of anticipated relative contribution): 1) brokering, marketing (at wholesale and retail) and - ----------------------- (7) In the National Grid Group Acquisition of New England Electric System order (HCAR No. 35-27154 dated March 15, 2000), the Commission concluded that it could "look through" the Intermediate Holding Companies. . . for the purposes of the analysis under section 11(b)(2) of the Act." (Text accompanying Footnote 70). As with National Grid, ACE-REIT "will not serve as means . . . to diffuse control of the [Conectiv System] Rather, th[is] compan[y] will be created a special-purpose entit[y] for the sole purpose of helping the parties capture economic efficiencies that might otherwise be lost in a cross-[state] transaction." 11 12 trading transactions involving electricity and other types of energy commodities (Rule 58(b)(1)(v)); 2) energy management or demand-side management services (Rule 58(b)(1)(i)); and 3) the sale of technical, operational, management, and other similar services and expertise developed in the course of utility operations in such areas as power plant and transmission system engineering, development and design and rehabilitation; construction; maintenance and operation; fuel procurement, delivery and management; and environmental licensing, testing and remediation. (Rule 58(b)(1)(vii)). To minimize risks associated with dealing in energy commodities, CESI also will engage in hedging and/or financial transactions associated with energy marketing, including derivatives, future contracts, options and swaps, including, without limitation, electric power, oil, natural and manufactured gas, emission allowances, coal, refined petroleum products and natural gas liquids and to provide incidental related services to customers, such as fuel management, storage and procurement services. CESI would engage in such activities without regard to the location or identity of customers or source of revenues; provided, however, that only with approval of the FERC under the Federal Power Act, will CESI sell electricity to either of Conectiv's electric utility subsidiaries, Delmarva or ACE. CESI will have the right to sell at retail in Delmarva's and ACE's service territories and will be assuming any unregulated retail transactions and programs already underway at Delmarva. As discussed below, the Energy Subsidiaries will have contracts with CESI providing for the sale of each Energy Subsidiary's output to CESI. Delmarva and ACE also may have contracts providing for the purchase of power from CESI. The Delmarva purchases would constitute a portion of the power needed to meet its default service requirements. AGI was a nonutility subsidiary holding company that was an indirect subsidiary of Atlantic Energy, Inc. prior to the merger that created Conectiv. AGI and its subsidiaries develop, own and operate independent power production, which is also a permissible energy-related activity under Rule 58(b)(1)(viii). As noted above, under the Restructuring Order, it was contemplated that AGI would become a subsidiary of CESI during phase 2 of the restructuring. It is now proposed that ownership of AGI would be transferred to CEH. F. Request for Reservation of Jurisdiction pending Completion of the Record with Respect to Status of CDG and CAG as EWGs. Conectiv intends for the Energy Subsidiaries (CDG and CAG) to be qualified as EWGs for purposes of Section 32 and Rules 52 through 54 promulgated thereunder. . If the book value of the investment in the Generating Assets at the time of transfer is included in the "Aggregate Investment" for purposes of Rule 53, the limit on Aggregate Investments contained in the Rule would be exceeded even if the ACE retained earnings denied to Conectiv under merger accounting ($225 million) is added back. Conectiv requests that the book value of the investment in the Generating Assets at the time of transfer to the Energy Subsidiaries be excluded for purposes of determining the Aggregate Investment in EWGs.(8) However, Conectiv does not believe that the requisite order of the state commissions under Section 32 (c) of the Statute will be received in a timely manner. Therefore, Conectiv requests that the Commission reserve jurisdiction over the requested exclusion pending completion of the record by the filing of the requisite state orders. - --------------------- (8) In the order related to the acquisition of New England Electric System by National Grid, plc, this Commission found that the Aggregate Investment in foreign utility companies in that case was acceptable even though it equaled more than 200% of retained earnings (footnote 45). 12 13 G. CEH Authority to Acquire EWGs as Intermediary Company Conectiv requests authorization for CEH to invest in one or more EWGs and to consolidate or dispose of the ownership interests in any such EWG so acquired so long as the aggregate limitation as established from time to time is not exceeded. H. Financing of CEH and Financing of ACE-REIT, CAG and CDG by CEH or Conectiv Authorization is requested for CEH, ACE-REIT, CAG and CDG to engage in certain financing until such time as CAG and CDG qualify as EWGs and the financing of the companies can be accomplished through Rule 52 or until March 31, 2002 whichever first occurs. 1. CEH Financing by Conectiv CEH requests authority to issue common stock or long or short-term debt to Conectiv as necessary to fund the operations of its businesses through March 31, 2002. Since CEH is a utility holding company under the Act, Rule 52 is unavailable to permit financing without Commission approval. After CDG and CAG become EWGs, Rule 52 will apply to permit future financing without further order of the Commission. Any debt issued by CEH to Conectiv will bear interest at a rate designed to approximate Conectiv's cost of money. Also, authorization is requested for CEH to participate in the Conectiv System Money Pool. 2. CAG, CDG and ACE-REIT financing by CEH or Conectiv Under the terms of the Financing Order, Conectiv has authority to guarantee the obligations of direct and indirect subsidiaries aggregating up to $350 million at any time outstanding. Under this authority, Conectiv may guarantee obligations of CAG, ACE-REIT, CDG, CESI and other subsidiaries of CEH subject to any limitations on Aggregate Investments in EWGs or Rule 58 companies. ACE-REIT, CAG and CDG request authority to issue common stock or long or short-term debt to CEH or Conectiv as necessary to fund the operations of their businesses through March 31, 2002. Since CAG and CDG are utility companies under the Act, but are not subject to regulation in a state, Rule 52 is unavailable to permit financing without Commission approval. Similarly ACE-REIT is a utility holding company making Rule 52 unavailable. After CDG and CAG become EWGs, Rule 52 will apply to permit future financing without further order of the Commission. Any debt issued by CAG, CDG or ACE-REIT will bear interest at a rate designed to approximate the lenders cost of money. Also, authorization is requested for CAG, CDG, and ACE-REIT to participate in the Conectiv System Money Pool until such time as CAG and CDG qualify as EWGs. I. Authority for the acquisition of utility assets pursuant to a like-kind exchange if at that time CDG is not an EWG As noted in Footnotes 2 and 6 above, it is currently anticipated that approximately 127 MW of net generating capacity owned by Delmarva will be transferred to CDG subject to an obligation to transfer the assets to a third party in consideration for receipt of certain like-kind assets. The like-kind exchange agreement will enhance cash flow and utilize certain tax efficiencies for the System. If the like-kind exchange agreements are executed, ownership of CEI may be transferred to a third party intermediary to facilitate the exchange and as a result, a portion of the investment to be made by CEI in certain eligible facilities aggregating up to $350 million, for which authorization is currently sought in File No. 70-9095 (the "New Hay Road Facilities"), will 13 14 be made by a nonaffiliated third party. The generating facilities transferred to CDG subject to the like-kind exchange agreements will ultimately be sold to the third party in exchange for the acquisition by CDG of either the New Hay Road Facilities at the time when the investment in the New Hay Road Facilities equals or approximates the value of the CDG facilities or other suitable generating assets. If the New Hay Road Facilities are reacquired, CDG then would complete the construction of the New Hay Road Facilities. Thus, Conectiv will ultimately invest up to $350 million in the New Hay Road Facilities. The third party will be an EWG so the transfer by CDG of generating assets to the third party will not require further approvals. If CDG is an EWG at the time of the acquisition, the investment in the New Hay Road Facilities will have been approved by the order in File No. 70-9095. If CDG is not an EWG at the time of the reacquisition of the New Hay Road Facilities, authorization is requested for the acquisition of the facilities as utility assets. J. Affiliate Transactions All ongoing relationships between the Energy Subsidiaries or CEH and affiliates involve the sale of electricity or natural gas or of another commodity or service, the sale of which is normally subject to public regulation so that under Rules 80 and 81, approval of this Commission is not required. The sole exceptions are the form of the service agreement with Conectiv Resource Partners, Inc. ("CRPI") and the intrasystem tax allocation agreement. The service agreement will be executed in the form previously approved by this Commission. The tax allocation agreement complies with Rule 45(c) and has previously been filed with this Commission as an exhibit to the Annual Report on Form U5-S. Approvals from the utility commissions in the states of Virginia and New Jersey will be required for the interconnection and other agreements between CDG and Delmarva and CAG and ACE and Virginia approval will be required for the power purchase agreement between Delmarva and CESI. K. Authorization Period and Reporting Rule 24 (c)(1) under the Act provides, in pertinent part, that unless otherwise designated in an application or declaration, every order is subject to a requirement that the transaction proposed be carried out within 60 days of the date of such order. To avoid the situation in which the Applicants fail to designate an alternative period, Applicants hereby designate the period from the date of the order in this matter to the expiration of the authority under this order as the period in which they will carry out the transactions authorized in this order, or previously authorized by Commission order, in accordance with the terms and conditions of, and for the purposes as authorized by, the relevant orders. Applicants request that Energy Subsidiaries and CEH be authorized to report, annually in an Annual Report on Form U- 13-60 under the Act, the following information: (a) each investment made by Conectiv or Delmarva or ACE in CEH, CDG, CAG or ACE-REIT during the immediately prior year; (b) a general description of the activities of each company in the immediately prior year; and (c) the revenues and expenses of each company during the immediately prior year. The foregoing shall be in lieu of any certificates of completion or partial completion otherwise required by Rule 24 under the Act. If any report contains confidential or proprietary business or commercial information, confidential treatment under Rule 104 under the Act may be sought at such time. L. Statement Pursuant to Rule 54 Rule 54 promulgated under the Act states 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 14 15 EWG or a Foreign Utility Company ("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 system, if Rules 53(a), (b), or (c) are satisfied. Conectiv is in compliance with Rules 53(a), (b) and (c). Rule 53(a) permits the Commission to authorize the issuance of securities to fund the acquisition of EWGs or FUCOs if the aggregate investment does not exceed 50% of the average consolidated retained earnings as reported for the four most recent quarterly periods on the holding company's Form 10-K or 10-Q. Conectiv's current investment in EWGs is less than 50% of average consolidated retained earnings as reported for the most recent quarterly periods. Conectiv has insignificant indirect interests in EWGs. DCTC-Burney, Inc., an indirect subsidiary of Conectiv, holds a 45% direct and indirect interest in Burney Forest Products, a joint venture, which is an EWG. There has been no additional post-merger investment in this EWG by Conectiv or a subsidiary. CEI is in the process of developing two new combustion turbine generation facilities as discussed above. As of March 22, 2000, Conectiv's investment in EWGs totaled $22 million. Conectiv and its subsidiaries will maintain books and records to identify the investments in earnings from EWGs and FUCOs in which they directly or indirectly hold an interest, thereby satisfying Rule 53(a)(2). In addition, the books and records of each such entity will be kept in conformity with United States generally accepted accounting principles ("GAAP"), the financial statements will be prepared according to GAAP, and Conectiv undertakes to provide the Commission access to such books and records and financial statements as it may request. Employees of Conectiv's domestic public-utility companies will not render services, directly or indirectly, to any EWGs or FUCOs in the Conectiv System, thereby satisfying Rule 53(a)(3). Conectiv, in connection with any Form U-1 seeking approval of EWG and FUCO financing, will submit copies of such Form U-1 and every certificate filed pursuant to Rule 24 with every federal, state or local regulator having jurisdiction over the retail rates of the public utility companies in the Conectiv System. Rule 53(a)(4) will be correspondingly satisfied. (b) Describe briefly, and where practicable state the approximate amount of, any material interest in the proposed transaction, direct or indirect, of any associate company or affiliate of the applicant or any affiliate of any such associate company. Not applicable. (c) If the proposed transaction involves the acquisition of securities not issued by a registered holding company or a subsidiary thereof, describe briefly the business and property, present or proposed, of the issuer of such securities. Not applicable. (d) If the proposed transaction involves the acquisition or disposition of assets, describe briefly such assets, setting forth 15 16 original cost, vendor's book cost (including the basis of determination) and applicable valuation and qualifying reserves. Not applicable. Item 2. FEES, COMMISSIONS AND EXPENSES Estimated fees and expenses are expected to be incurred by Applicants in connection with the transactions described above will be filed by amendment. Item 3. APPLICABLE STATUTORY PROVISIONS Applicants are informed by counsel that the proposed transactions are or may be directly or indirectly subject to Sections 6, 7, 9, 10, 11, 12, 13 and 32 of the Act and Rules 43, 45, 46, 53, and 54, under the Act. To the extent that other sections of the Act or the Commission's rules thereunder are deemed to be applicable to the transactions described herein, such sections and rules should be considered to be set forth in this Item 3. Section 9(a)(1) provides that unless the acquisition has been approved by the Commission under Section 10, it shall be unlawful for any registered holding company or any subsidiary company thereof "to acquire, directly or indirectly, any securities or utility assets or any other interest in any business." Applicants believe that the proposed transactions described herein which are subject to Section 9(a) of the Act satisfy the standards of Section 10 of the Act. The transactions described herein comply with all applicable state laws and, as described above, are in response to state laws, in particular the acts, mandating deregulation and the introduction of competition in the retail electrical generation market, and do not tend toward interlocking relations or the concentration of public utility companies. Moreover, the deregulation of, and the introduction of competition in, the retail electrical generation market has been enacted specifically to benefit the public interest and the interests of investors and consumers; as the transactions described herein are being effected to comply with and to further such legislative initiatives, they likewise should be of benefit to the public interest and the interests of investors and consumers. Applicants believe that the transactions described in Item 1 do not unduly complicate the capital structure of the System and are in the public interest and in the interest of investors and consumers. Applicants also believe that the transactions described in Item 1 will tend toward the proper functioning of the System in a partly deregulated, partly regulated operating environment and, as a consequence, toward the economical and efficient development of an integrated public utility system. The transactions described in Item 1 are, in the context of deregulation and competition in the retail electrical generation market, "reasonably incidental, or economically necessary and appropriate to" the operations of a registered electric utility holding company system such as 16 17 Conectiv. These transactions will enable the System to offer competitive generation in the deregulated retail market; thus they tend toward the economical and efficient development of an integrated public utility system. The various transfers of assets and equity securities and the formation of the Energy Subsidiaries and CEH described in Item 1 would not result in the existence of any company in the holding company system that would unduly or unnecessarily complicate the structure, or unfairly or inequitably distribute voting power among security holders, of the System. The creation of the new subsidiaries is necessary to adapt to competition in the deregulated retail generation industry and to minimize the costs of the transition to competition. As noted in Item 1, the transfers and the formation of new subsidiaries (a) will allow Delmarva and ACE to continue to serve the needs of its regulated customers while gearing Conectiv for competition in the deregulated retail generation market, (b) will remove the Generating Assets from rate-regulated Delmarva or ACE, (c) will allow the Energy Subsidiaries to manage and operate the Generating Assets with due regard to market considerations, and (d) will increase the flexibility for financing activities on cost-effective terms that reflect the costs of capital for each area of business activity. After all transfers and actions described in Item 1 are completed, redundant organizational structures will not remain. See National Grid Plc, HCAR No. 27, 154 (March 15, 2000); Allegheny Energy, HCAR No. 27, 101 (November 12, 1999) and Entergy Corp., HCAR No. 25, 952 (December 17, 1993). For all of the foregoing reasons, Applicants believe that the transactions described in Item 1 meet the requirements of and are entirely consistent with the principles behind Sections 9, 10 and 11 of the Act. Conectiv expects that the distribution of the interests of CDG and ACE-REIT to Conectiv will be a dividend out of "capital or unearned surplus" within the meaning of Rule 46 under the Act. Applicants believe that, in the overall context of the transactions described in Item 1, the interests of each security holder at the time of such distributions and of the public will not be adversely affected by such distributions. While the distributions are being structured as such in order to minimize the tax burden on the Applicants (which also benefits the sole common equity holder of Delmarva, ACE or CEH as the case may be, and indirectly, the public), the distributions are fundamentally meant to effect the transfer by Delmarva or ACE of the Generating Assets to an affiliate in the System in accordance with the orders described herein. The distributions will be the final step in the reduction of the capitalization of Delmarva or ACE and the reorganization of the System, in accordance with, and fulfillment of, the regulations and legislative policies and objectives that culminated in deregulation of and competition in electrical generation, as described herein. The distributions are clearly not intended to harm the interests of Delmarva or ACE or, ultimately, Conectiv, who will continue to own the assets transferred by such distributions. Moreover, in that the regulated parts of Delmarva or ACE's business (transmission and distribution) which are not subject to deregulation and competition will continue to be owned directly by Delmarva or ACE, Delmarva or ACE and the public which each serves will not be subject to the impact of deregulation and competition on Delmarva or ACE's former generation business and will, to a large degree, be protected from the uncertainties and possible losses affecting generation in a competitive and deregulated environment. For these reasons, Applicants believe that the proposed distributions are entirely consistent with the policies and principles behind Section 12 of the Act 17 18 and request that the proposed distributions by Delmarva and ACE to Conectiv described in Item 1 be approved. Item 4. Regulatory Approval. State the nature and extent of the jurisdiction of any State commission or any Federal commission (other than the Securities and Exchange Commission) over the proposed transaction. The Federal Energy Regulatory Commission has jurisdiction over the proposed transfer of the transmission facilities associated with the generating assets. In addition authorization is required from the VaSCC for the transfer of the Generating Assets under the Affiliates Laws. In New Jersey, certain ACE accounting entries must be submitted to the NJBPU. Copies of the FERC and Virginia applications and orders will be filed herewith or by amendment. Describe the action taken or proposed to be taken before any commission named in answer to paragraph (a) of this item in connection with the proposed transaction. Applications will be filed with the FERC and VaSCC. Item 5. Procedure. (a) State the date when Commission action is requested. If the date is less than 40 days from the date of the original filing, set forth the reasons for acceleration. Conectiv requests that the Commission issue and publish not later than April 14, 2000 the requisite notice under Rule 23 with respect to the filing of this Declaration. Conectiv further requests that such notice specify a date not later than May 16, 2000 as the date after which the Commission may issue an order granting this Application. (b) State (i) whether there should be a recommended decision by a hearing officer, (ii) whether there should be a recommended decision by any other responsible officer of the Commission, (iii) whether the Division of Corporate Regulation may assist in the preparation of the Commission's decision, and (iv) whether there should be a 30-day waiting period between the issuance of the Commission's order and the date on which it is to become effective. Conectiv waives a recommended decision by a hearing officer or other responsible officer of the Commission; consents that the Staff of the Division of Investment Management may assist in the preparation of the Commission's order; and requests that there be no waiting period between the issuance of the Commission's order and its effectiveness. Item 6. Exhibits and Financial Statements. (a) Exhibits: A - 1 Certificate of Organization of CDG A - 2 Certificate of Organization of ACE-REIT A - 3 Certificate of Organization of CAG 18 19 B - 1 Form of Asset Transfer Agreement between Delmarva and CDG (to be filed by amendment) B - 2 Form of Asset Transfer Agreement between ACE and CAG (to be filed by amendment) D - 1 Summary Order dated July 15, 1999 issued by the NJBPU removing generating assets from regulatory oversight. D - 2 Application to VaSCC for Authority to Transfer Delmarva Generating Assets (to be filed by amendment). D - 3 Order of VaSCC authorizing implementation of restructuring (to be filed by amendment) D - 4 Order of the VaSCC under the Virginia Affiliates Act authorizing asset transfer (to be filed by amendment). D - 5 Application to FERC for approval of Transfer to an Affiliate D - 6 FERC Order Authorizing Transfer (to be filed by amendment) D - 7 Application to FERC for Approval of Dividend out of Capital and Affiliate Transactions. D - 8 FERC Order authorizing Dividends out of Capital. (to be filed by amendment) F Preliminary opinion of counsel (to be filed by amendment) G Form of Federal Register notice H-1 List of Generating Assets to be transferred (b) Financial Statements FS-1 Conectiv Consolidated Financial Statements, dated December 31, 1999. FS-2 Conectiv Consolidated Financial Data Schedule (filed with Conectiv's Form 10-K for the year ended December 31, 1999) (included in electronic submission only) FS-3 Delmarva Pro Forma Consolidated Balance Sheets, dated December 31, 1999. FS-4 Delmarva Financial Data Schedule (included in electronic submission only) FS-5 ACE Pro Forma Consolidated Balance Sheets, dated December 31, 1999. FS-6 ACE Financial Data Schedule (included in electronic submission only) Item 7. Information as to Environmental Effects. (a) Describe briefly the environmental effects of the proposed transaction in terms of the standards set forth in Section 102(2)(C) of the National Environmental Policy Act (42 U.S.C. 4312(2)(C)). If the response to this item is a negative statement as to the applicability of Section 102(2)(C) in connection with the proposed transaction, also briefly state the reasons for that response. The Commission's action in this matter will not constitute major federal action significantly affecting the quality of the human environment. (b) State whether any other federal agency has prepared or is preparing an environmental impact statement ("EIS") with respect to the proposed transaction. If any other Federal agency has 19 20 prepared or is preparing an EIS, state which agency or agencies and indicate the status of that EIS preparation. No other federal agency has prepared or is preparing an environmental impact statement with regard to the proposed transactions. 20 21 SIGNATURE Pursuant to the requirements of the Act, the undersigned companies have duly caused this amended Application to be signed on its behalf by the undersigned thereunto duly authorized. Dated: March 31, 2000 Conectiv Atlantic City Electric Company Delmarva Power & Light Company ACE REIT, Inc. Conectiv Atlantic Generation, LLC Conectiv Delmarva Generation, Inc. Conectiv Energy Holding Company By: /s/ Philip S. Reese ------------------- Philip S. Reese Vice President and Treasurer 21 EX-27.1 2 FINANCIAL DATA SCHEDULE - DELMARVA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1999 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR DELMARVA POWER & LIGHT COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000027879 DELMARVA POWER & LIGHT COMPANY 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 PRO-FORMA 1,393,391 73,114 442,051 280,270 160,189 2,349,015 2 227,483 147,288 374,773 70,000 89,703 917,207 0 0 0 1,545 0 14,175 12,495 869,117 2,349,015 2,235,523 95,321 1,921,262 2,016,583 218,940 6,118 225,058 82,879 (111,443) 4,440 (115,883) 59,428 78,754 246,830 0 0 Includes extraordinary loss of $253,622.
EX-27.2 3 FINANCIAL DATA SCHEDULE - ACE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1999 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME FOR ATLANTIC CITY ELECTRIC COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000008192 ATLANTIC CITY ELECTRIC COMPANY 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 PRO-FORMA 895,193 110,332 340,774 1,142,475 76,416 2,565,190 54,963 415,795 129,981 600,739 118,950 6,231 954,752 30,000 0 0 46,075 0 14,911 15,480 778,052 2,565,190 1,076,585 49,326 904,654 953,980 122,605 8,712 131,317 67,387 5,835 2,132 3,703 55,845 60,562 (33,329) 0 0 Includes extraordinary loss of $58,095. Includes $228,500 payment for termination of purchased power contract.
EX-99.A.1 4 CERTIFICATE OF ORGANIZATION OF CDG 1 Exhibit A-1 CERTIFICATE OF INCORPORATION OF DPL REIT, INC. FIRST: The name of the Corporation is DPL REIT, Inc. SECOND: The registered office of DPL REIT, Inc. in the State of Delaware is located at 800 King Street, Wilmington, County of New Castle, 19801, and its registered agent shall be the Corporation itself. THIRD: The purpose of the Corporation and the nature and objects of the business to be transacted, promoted, conducted or carried out are: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware and maintain its status as a real estate investment trust ("REIT") within the meaning of Section 856(a) of the Internal Revenue Code of 1986, as amended, or any successor statute (the "Code"). FOURTH: The total number of shares of stock that the Corporation shall be authorized to issue is One Thousand (1,000) shares of Common Stock having a par value of One Dollar ($1.00) per share. FIFTH: The name and mailing address of the Incorporator of the Corporation is: Name Address ---- ------- Steven L. Biener P.O. Box 6066 Newark, DE 19714-6066 SIXTH: The names and mailing addresses of the sole director who shall serve until the first annual meeting of stockholders or until his successor is elected and qualify is: Name Address ---- ------- Charles A. Mannix P.O. Box 231 Wilmington, DE 19899 1 2 SEVENTH: The Board of Directors may make, add to, delete from, alter and repeal any By-law of the Corporation. EIGHTH: No director of the Corporation shall be personally liable to the Corporation for monetary damages for breach of fiduciary duty by such director; provided, however, that this Article EIGHTH shall not eliminate or limit the liability of a director to the extent provided by law (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. The Corporation shall indemnify its directors, officers, employees and agents against expenses, judgment, fines and amounts paid in settlement actually and reasonably incurred by them by reason of their serving in such capacity to the fullest extent permitted by the Delaware General Corporation Law. NINTH: The provisions of this Certificate of Incorporation are severable, and if the Board of Directors shall determine that any one or more of such provisions are in conflict with Part II, of Subchapter M, of Chapter 1 of Subtitle A of the Code or any other provision of the Code applicable to REITs, or other applicable federal or state laws, the conflicting provisions shall be deemed never to have constituted a part of this Certificate of Incorporation, even without any amendment to this Certificate of Incorporation; provided, that such determination by the Board of Directors shall not affect or impair the remaining provisions of this Certificate of Incorporation or render invalid or improper any action taken or omitted prior to such determination. No director shall be liable for making or failing to make such a determination. I, the undersigned, being the Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate of Incorporation, hereby declaring and certifying that this is my act and deed and that the facts herein stated are true and accordingly have hereunto set my hand and seal this 12th day of March, 1998. /s/ Steven L. Biener Steven L. Biener 2 3 CERTIFICATE OF OWNERSHIP AND MERGER MERGING DPL REIT HOLDING, INC. (a Delaware Corporation) WITH AND INTO DPL REIT, INC. (a Delaware Corporation) ---------- Pursuant to Section 253 of the General Corporation Law of Delaware ---------- DPL REIT Holding, Inc., organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Company"), DOES HEREBY CERTIFY AS FOLLOWS: FIRST: That the Company was incorporated on the 12th day of March, 1998, pursuant to the General Corporation Law of the State of Delaware, the provisions of which permit the merger of a parent corporation organized and existing under the laws of said State into a subsidiary corporation organized and existing under the laws of said State. SECOND: That the Company owns 100% of the stock of DPL REIT, Inc., a corporation incorporated on 12th day of March, 1998, pursuant to the General Corporation Law of the State of Delaware, and having no class of stock outstanding other than said Capital Stock. THIRD: That the following resolutions have been adopted by the Board of Directors of the Company by unanimous written consent on December 31, 1999: RESOLVED, that effective upon the filing of an appropriate Certificate of Ownership and Merger embodying these resolutions with the Secretary of State of the State of Delaware (but subject to the approval of the sole stockholder of the Company), the Company merge and it hereby does merge itself into DPL REIT, Inc., which will assume all obligations of the Company; and FURTHER RESOLVED, that the terms and conditions of the merger are as follows: Upon the proposed merger becoming effective, each outstanding share of DPL REIT, Inc. capital stock (DPL REIT Stock"), held of record by the Company shall cease to be outstanding, without any payment being made in respect thereof; and each share of Common Stock of the Company shall be converted into one (1) share of Capital Stock, $1.00 per share of DPL REIT, Inc., certificates for which shall be issued to the sole stockholder of the Company upon surrender to DPL REIT, Inc. of such stockholder's certificates formerly representing such shares of Common Stock of the Company; and FURTHER RESOLVED, that the proposed merger be submitted to the sole stockholder of the Company and that upon receiving unanimous written consent of such stockholder the proposed merger shall be approved; and FURTHER RESOLVED, that DPL REIT, Inc., as the surviving corporation in the merger, shall notify each stockholder of record of said DPL 4 4 REIT, Inc. within ten days after the effective date of the merger that the merger has become effective; and FURTHER RESOLVED, that DPL REIT, Inc., as the surviving corporation in the merger, shall change its name to "Conectiv Delmarva Generation, Inc."; and FURTHER RESOLVED, that any one or more of the President, Vice President, General Manager or other proper officers of the Company be, and each of them is authorized and directed on behalf of the Company to take all such other action, including the preparation, execution, acknowledgment, delivery and filing of applications, certificates, undertakings, notices and other agreements and documents, with appropriate persons, including governmental authorities, as they may deem necessary or advisable in order to carry out and effectuate the intent and purposes of the foregoing resolutions; and FOURTH That the merger evidenced by this certificate shall become effective as of the date it is filed. FIFTH: That the Certificate of Incorporation of DPL REIT, Inc. shall be the Certificate of Incorporation of the surviving corporation. SIXTH: That this merger has been adopted and approved in accordance with Section 253 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, DPL REIT Holding, Inc., Inc., a Delaware corporation has caused this certificate to be signed by its Vice President this 31 day of December, 1999. DPL REIT HOLDING, INC. By: /s/ Barbara S. Graham --------------------------- Barbara S. Graham Senior Vice President ATTEST: By: Diana C. DeAngelis ------------------------ Diana C. DeAngelis Assistant Secretary 5 EX-99.A.2 5 CERTIFICATE OF ORGANIZATION OF ACE-REIT 1 Exhibit A-2 CERTIFICATE OF INCORPORATION OF ACE REIT, INC. FIRST: The name of the Corporation is ACE REIT, Inc. SECOND: The registered office of ACE REIT, Inc. in the State of Delaware is located at 800 King Street, Wilmington, County of New Castle, 19801, and its registered agent shall be the Corporation itself. THIRD: The purpose of the Corporation and the nature and objects of the business to be transacted, promoted, conducted or carried out are: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware and maintain its status as a real estate investment trust ("REIT") within the meaning of Section 856(a) of the Internal Revenue Code of 1986, as amended, or any successor statute (the "Code"). FOURTH: The total number of shares of stock that the Corporation shall be authorized to issue is One Thousand (1,000) shares of Common Stock having a par value of One Dollar ($1.00) per share. FIFTH: The name and mailing address of the Incorporator of the Corporation is: Name Address ---- ------- Steven L. Biener P.O. Box 6066 Newark, DE 19714-6066 SIXTH: The names and mailing addresses of the sole director who shall serve until the first annual meeting of stockholders or until his successor is elected and qualify is: Name Address ---- ------- Charles A. Mannix P.O. Box 231 Wilmington, DE 19899 SEVENTH: The Board of Directors may make, add to, delete from, alter and repeal any By-law of the Corporation. 1 2 EIGHTH: No director of the Corporation shall be personally liable to the Corporation for monetary damages for breach of fiduciary duty by such director; provided, however, that this Article EIGHTH shall not eliminate or limit the liability of a director to the extent provided by law (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. The Corporation shall indemnify its directors, officers, employees and agents against expenses, judgment, fines and amounts paid in settlement actually and reasonably incurred by them by reason of their serving in such capacity to the fullest extent permitted by the Delaware General Corporation Law. NINTH: The provisions of this Certificate of Incorporation are severable, and if the Board of Directors shall determine that any one or more of such provisions are in conflict with Part II, of Subchapter M, of Chapter 1 of Subtitle A of the Code or any other provision of the Code applicable to REITs, or other applicable federal or state laws, the conflicting provisions shall be deemed never to have constituted a part of this Certificate of Incorporation, even without any amendment to this Certificate of Incorporation; provided, that such determination by the Board of Directors shall not affect or impair the remaining provisions of this Certificate of Incorporation or render invalid or improper any action taken or omitted prior to such determination. No director shall be liable for making or failing to make such a determination. I, the undersigned, being the Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate of Incorporation, hereby declaring and certifying that this is my act and deed and that the facts herein stated are true and accordingly have hereunto set my hand and seal this 12th day of March, 1998. /s/ Steven L.Biener ------------------------- Steven L. Biener 2 3 CERTIFICATE OF OWNERSHIP AND MERGER OF ACE REIT HOLDING, INC. (a Delaware Corporation) WITH AND INTO ACE REIT, INC. (a Delaware Corporation) ---------- Pursuant to Section 253 of the General Corporation Law of Delaware ---------- ACE REIT Holding, Inc., organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Company"), DOES HEREBY CERTIFY AS FOLLOWS: FIRST: That the Company was incorporated on the 12th day of March, 1998, pursuant to the General Corporation Law of the State of Delaware (the "GCL"), the provisions of which permit the merger of a parent corporation organized and existing under the laws of said State into a subsidiary corporation organized and existing under the laws of said State. SECOND: That the Company owns 100% of the common stock of ACE REIT, Inc., a corporation incorporated on 12th day of March, 1998 ("ACE REIT, Inc."), pursuant to the GCL, and having no class of stock outstanding other than said common stock. THIRD: That the following resolutions have been adopted by the Board of Directors of the Company by unanimous written consent on December 31, 1999: RESOLVED, that effective upon the filing of an appropriate Certificate of Ownership and Merger embodying these resolutions with the Secretary of State of the State of Delaware (but subject to the approval of the sole stockholder of the Company), the Company merge and it hereby does merge itself into ACE REIT, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (the "Surviving Corporation"), which will assume all obligations of the Company; and FURTHER RESOLVED, that the Surviving Corporation shall issue shares of its common stock pro rata to the holder of the outstanding common stock of the Company, upon surrender to the Surviving Corporation of the stock certificate formerly representing such shares of common stock of the Company; and FURTHER RESOLVED, that the proposed merger be submitted to the sole stockholder of the Company and that upon receiving written consent of such stockholder the proposed merger shall be approved; and FURTHER RESOLVED, that the Surviving Corporation shall change its name to "Conectiv Atlantic Generation, Inc."; and FURTHER RESOLVED, that any one or more of the President, Vice President, or other proper officers of the Company be, and each of them is authorized and directed on behalf of the Company to take all such other action, 3 4 including the preparation, execution, acknowledgment, delivery and filing of applications, certificates, undertakings, notices and other agreements and documents, with appropriate persons, including governmental authorities, as they may deem necessary or advisable in order to carry out and effectuate the intent and purposes of the foregoing resolutions; and FOURTH: That the sole stockholder of the Company approved the merger by written consent on December 31, 1999. FIFTH: That the merger evidenced by this certificate shall become effective as of the date this certificate is filed. SIXTH: That the Certificate of Incorporation and by-laws of ACE REIT, Inc. shall be the Certificate of Incorporation and by-laws, respectively, of the surviving corporation. SEVENTH: That this merger has been adopted and approved in accordance with Section 253 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, ACE REIT Holding, Inc., a Delaware corporation has caused this certificate to be signed by its Vice President this 31 day of December, 1999. ACE REIT HOLDING, INC. By: /s/ John C. van Roden, Jr. -------------------------------- John C. van Roden, Jr. Senior Vice President ATTEST: By: /s/ Diana C. DeAngelis -------------------------- Diana C. DeAngelis Assistant Secretary 4 EX-99.A.3 6 CERTIFICATE OF ORGANIZATION OF CAG 1 Exhibit A-3 CERTIFICATE OF FORMATION OF CONECTIV ATLANTIC GENERATION, L.L.C The undersigned, in order to form a limited liability company under the Delaware Limited Liability Company Act, hereby certifies as follows: Section 1. NAME. The name of the limited liability company is Conectiv Atlantic Generation, L.L.C. (the "Company"). Section 2. REGISTERED OFFICE AND REGISTERED AGENT. The address of the Company's registered office in the State of Delaware is 800 King Street, Wilmington, in the County of New Castle, 19801; and its registered agent at such office shall be Conectiv Resource Partners, Inc. c/o Legal Department. Section 3. LIMITATION ON PERSONAL LIABILITY OF MEMBERS AND MANAGERS. The debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no member or manager of the Company shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member or acting as a manager of the Company. IN WITNESS WHEREOF, the undersigned certifies that the facts stated herein are true as of December 29, 1999. /s/ Nina J. Hertz ----------------------- Nina J. Hertz Authorized Representative EX-99.D.1 7 SUMMARY ORDER DATED 7-15-1999 1 Exhibit D-1 AGENDA DATE: 07/15/99 STATE OF NEW JERSEY Board of Public Utilities Two Gateway Center Newark NJ 07102 ENERGY IN THE MATTER OF ATLANTIC CITY ) SUMMARY ORDER ------------- ELECTRIC COMPANY'S RATE ) UNBUNDLING, STRANDED COSTS AND ) BPU DOCKET NOS. E097070455, RESTRUCTURING FILINGS ) EO97070456, AND EO97070457 (SERVICE LIST ATTACHED) BY THE BOARD: This Summary Order memorializes in summary fashion the action taken by the Board of Public Utilities ("Board") in these matters at its specially-scheduled July 15, 1999 public agenda meeting with respect to the rate unbundling, stranded costs and restructuring filings of Atlantic City Electric Company ("ACE", "Atlantic" or "Company"). The Board will issue a more detailed Decision and Order in these matters, which will provide a full discussion of the issues as well as the reasoning for the Board's determinations. These matters come before the Board on a record developed by Administrative Law Judge ("ALJ") William Gural, who issued an Initial Decision on August 17, 1998, and hearings conducted before Commissioner Carmen J. Armenti from April 27, 1998 through May 28, 1998. Subsequent to the ALJ's Initial Decision and the hearings before Commissioner Armenti, the Legislature passed and Governor Whitman signed into law on February 9, 1999, the Electric Discount and Energy Competition Act, P.L. 1999, c. 23 ("the Act"). Settlement negotiations were conducted among the parties during the latter part of April, through the early part of June 1999. A comprehensive settlement was not reached, but on June 9, 1999, a Stipulation was filed by ACE on behalf of a number of parties to the proceedings ("ACE Stipulation"). The Board determined to solicit and consider comments on the ACE Stipulation, and established a comment deadline of June 16, 1999 for comments addressing the ACE Stipulation, including any alternative settlement proposal(s), and a deadline of June 18, 1999 for comments addressing any alternative settlement proposal(s). On June 16, 1999 an alternative joint proposal was submitted by the Division of the Ratepayer Advocate on behalf of a number of other parties to these proceedings ("RPA Stipulation"). 2 Based on our review of the extensive record in these proceedings, as well as the comments submitted, the Board is not fully satisfied that either proposal in its entirety represents an appropriate resolution of these proceedings. The Board finds the ACE Stipulation to be overall more financially prudent and consistent with the Act's requirements and, with the modifications and clarifications set forth hereinbelow, provides the framework for a reasonable resolution of these matters based upon the record before us. However, the proponents of the RPA Stipulation and others have raised a number of legitimate concerns regarding the ACE Stipulation which merit serious consideration and which, where appropriate, are addressed by the modifications and clarifications set forth below. Accordingly, except as specifically noted below, and as will be further explained in a detailed order which shall be issued, we hereby incorporate by reference as if completely set forth herein as a fair resolution of the issues in these proceedings, the elements of the ACE Stipulation and, to the extent the Initial Decision is inconsistent herewith, it is modified to conform herewith. The modifications and clarifications to the ACE Stipulation which we HEREBY ORDER are summarized as follows: Paragraph 1: The initial aggregate rate reduction, inclusive of all unbundled rate components, to be implemented effective August 1, 1999 shall be 5% from current rates. The average distribution rate for the Company effective on August 1, 1999 shall be 2.1384 cents per kwh. The MTC shall be set as the residual amount necessary to achieve the rate reduction, after accounting for other unbundled rate components established pursuant to this Order, including the distribution rate, regulatory asset charge, state energy taxes including sales and use tax, corporate business tax and TEFA, societal benefits charge, NNC, and BGS charge. The DSM and LEAC overrecovery balances, including accrued interest, shall not be utilized to offset regulatory asset charges but shall instead be credited to, and become the starting balance of, the deferred balance established pursuant to DOCKET NOS. EO97070455, EO97070456, EO97070457 3 paragraph 27. Effective no later than January 1, 2001 the Company shall implement a further aggregate rate reduction of at least 2% relative to current rates (bringing the total rate reduction to at least 7%). However, to the extent that the Company completes the divestiture of generating assets and securitization of net owned generation stranded costs, or successfully completes a NUG contract(s) restructuring, buyout or buydown and securitization of net NUG stranded costs prior to January 1, 2001, it shall implement a rate reduction reflecting the full resultant savings no later than the date of the establishment of the resultant TBC. To the extent that such savings result in the implementation of a further rate reduction of less than 2%, Atlantic shall in any event reduce rates effective January 1, 2001 to achieve the 7% total rate reduction as of that date. To the extent that the savings resulting from divestiture and securitization of net owned generation stranded costs, and/or NUG restructuring buyout or buydown and securitization exceeds 2%, Atlantic shall implement a rate reduction beyond 7% to fully pass such savings on to customers, upon the date of the establishment of the resultant TBC. To the extent that the sum of the unbundled rate components as of July 31, 2002 exceeds the price cap resulting from the implementation of a 10% aggregate rate reduction relative to April 30, 1997 rates, which unbundled rate components are to reflect any savings which have resulted from the buyout, buydown, or restructuring and securitization of NUG contracts implemented pursuant to paragraph 1(c) of the Stipulation, the Company shall, consistent with the provisions of the Stipulation, achieve effective August 1, 2002 the mandated 10% aggregate rate reduction relative to April 30, 1997 rates. Paragraph 2: The initial 5% (August 1, 1999) and final 10% (August 1, 2002) rate reductions are required by the Act, and shall not be contingent upon divestiture and securitization of generation assets. Paragraphs 5 and 6: The floor residential service ("RS") shopping credits shall be increased by 0.50 cents per kwh for 1999 and 2000, and by 0.55 cents per kwh in 2001, 2002 and 2003. The floor shopping credits for commercial and industrial Secondary and Primary voltage tariff customers (MGS-Sec, MGS-Pri, AGS-Sec, AGS-Pri, AGT-Sec, AGT-Pri) shall be decreased in all years by 0.1 cents per kwh. Paragraph 7: Atlantic shall apply both NUG contract power and to-be-divested owned generation power (prior to the closure of the sale of the generation assets) towards the BGS supply requirement, which power shall be credited at the net BGS price (the floor shopping credit less DOCKET NOS. EO97070455, 3 EO97070456, EO97070457 4 transmission cost, sales and use tax, line losses, ancillary services and capacity reserve margin). Such credited prices shall be employed for purposes of establishing the level of the NNC and establishing the level of owned generation revenue requirement recovery (prior to the completion of divestiture), in accordance with this Order. Atlantic shall utilize and open competitive bidding process for BGS supply requirements net of NUG Power and Owned Generation (Pre-Divesture). Paragraph 8: The 12 month minimum BGS commitments requirement for customers returning to BGS supply shall not apply to residential customers who return to BGS for any reason. However, the Board will monitor this issue and request related reports from the Company, and may revisit this issue if gaming occurs, or if it is otherwise determined by the Board to be appropriate. Paragraph 9: Modified in accordance with modifications to paragraph 7. Paragraph 11: We hereby clarify the language to indicate that the Board is not pre-judging the reasonableness and prudence of the actual parting contracts or financial instruments that the Company may procure in accordance with this paragraph, and that any such costs are subject to Board review and approval. Paragraph 12: We hereby modify the language as necessary to conform with the modifications to paragraph 7, and further clarify that Atlantic shall reserve the right to bid out the BGS obligation net of NUG power or to sell NUG power to the selected BGS supplier at the net BGS price. Paragraph 16: The Board concurs that the Company shall be permitted the opportunity to recover 100% of its net owned generation stranded costs (established definitively upon completion of the divsetiture) and NUG contract costs, however we modify the language only so far as is necessary to conform with the differing standards for recovery of net generation stranded costs and 100% recovery of NUG stranded costs provided in section 13 of the Act. Paragraph 17: We hereby clarify the language to indicate that the net book value shall reflect the net investment in each facility, reflective of the gross investment less depreciation reserve less accumulated deferred income tax, and investment tax credits if appropriate, as of the closing date(s), and to clarify that the tax impacts with respect to taxable gains and/or losses will be DOCKET NOS. EO97070455, 4 EO97070456, EO97070457 5 considered in calculating net stranded cost, Paragraph 18: We hereby modify the language to indicate that while the Board supports the Company's decision to auction its generation assets, we are not pre-judging the prudence of Atlantic in implementing the RFP and selecting a winner bidder(s), and that such final judgement will come at the conclusion of the separate divestiture proceeding. Paragraph 19: The Board recognizes the benefit of expediting its review and approval of divestiture standards, and will endeavor to accomplish same, but modifies the language to indicate that we cannot be bound at this time by a specific timetable. Paragraph 20: The Board recognizes that parting contracts that make possible or enhance the sale of generating assets can be in the public interest, but clarify the language as necessary to indicate that the Board is not pre-judging prudence of actual parting contracts which may be entered into by Atlantic; such judgement will be rendered after Board review in the context of the separate divestiture proceeding. Paragraph 21: The transfer of Deepwater and the combustion turbines shall occur at a transfer value equal to the net book value of the assets at the time of the transfer. This amount is approximately $9 million higher than that provided in the Stipulation, is intended to reflect full and fair compensation for the assets, and will avert the need for Atlantic to take a write-off prior to the transfer. We further modify this paragraph such that if within the four year Transition Period any transferred asset is sold to an unaffiliated company, the net after tax gain over the adjusted book value will be shared equally between the Company and customers. Further, as a condition of the transfer during the transition period, Atlantic's affiliate shall offer capacity from the transferred units for sale within the PJM control area at market prices, and if the capacity is sold outside the PJM control area, the Company's affiliate shall make the capacity subject to recall by PJM during system emergencies. Paragraph 22: During the period between August 1, 1999 and completion of the divestiture of generation assets, MTC revenues shall be applied to owned generation revenue requirements, including continued depreciation of assets, and return on investment, operating and maintenance expenses and fuel expenses, and, between the time of divestiture closing and time of securitization closing, MTC revenues shall be applied to provide a return on DOCKET NOS. EO97070455, 5 EO97070456, EO97070457 6 the net owned generation stranded cost at 13.0% pre-tax. At time of the termination of the MTC (upon the establishment of the TBC), total MTC revenues and market revenues received from the crediting of owned generation power to BGS in accordance with paragraph 7 (as modified) will be reconciled to the amounts indicated, including a review of the prudence and reasonableness of the Company's operation of the units, and the deferred balance will be reconciled accordingly to reflect a resulting shortfall or excess. Paragraph 23: We modify the language to provide that, during the Transition Period, Atlantic will only retain a portion of savings from NUG contract buyouts, buydowns or restructurings once the 10% aggregate rate reduction relative to April 30, 1997 rates is achieved without the use of cost deferrals. We further clarify the language to indicate that NUG securitization approval is contingent upon such NUG contract buyout, buydown or restructuring being approved by the Board and found to be consistent with the standards in sections 13 and 14 of the Act. Paragraph 24: The Board renders no determination at this time with respect to the securitization of restructuring-related costs of capital. The recovery of restructuring-related costs of a capital nature via the MTC shall be subject to a reasonableness and verification review by the Board, and shall be net of other sources of recovery towards such costs, including Third Party Supplier Agreement fees. The rate of return on unamortized restructuring-related costs collected via the MTC shall be 13.0% pre-tax. Paragraph 25: The recovery of restructuring-related costs of an operating nature other than consumer education costs, as listed in Schedule D, via the MTC shall be subject to reasonableness and verification review by the Board, and shall be net of other sources of recovery towards such costs, including Third Party Supplier Agreement fees. Paragraph 26: This is not appropriate language for a Board Order. AE may reserve all its legal rights, however the Board rejects this paragraph. Paragraphs 27, 28 and 29: The Board hereby modifies this paragraph to change references from "Deferred Revenues" to "Deferred Costs," and to provide, with respect to the rate of return on the Deferred Costs balance, that on any accrued underrecovery balance up to $50 million, interest will be accrued at a rate equal to the then-current cost of medium term debt. On any accrued deferred underrecovery balance amounts in excess of $50 million, DOCKET NOS. EO97070455, EO97070456, EO97070457 7 such excess amounts shall accrue interest at a rate equal to the then-current cost of mid-term debt plus 350 basis points. The Board further modifies the language to indicate that, while the Company shall be provided the opportunity to fully recover Deferred Costs and related interest in accordance with the provisions of the Stipulation, as modified herein and consistent with the Act, the Board will not bestow on Atlantic an "absolute right" to such recovery. Finally, we hereby clarify the language to indicate that final approval of recoverability of the Deferred Cost balance is subject to Board review of the prudence and reasonableness of such costs. Paragraph 30: The Board hereby clarifies the language to indicate that the Company shall be provided with full and timely recovery of transition bond charges in conformance with the standards set forth in sections 14 through 27 of the Act, and that the Company shall be provided the opportunity for full recovery of related and applicable taxes via a separate MTC charge with a term identical to the securitization financing pursuant to the standards set forth in sections 13 and 14 of the Act. Paragraph 31: With respect to the securitization of net NUG stranded costs related to a contract restructuring, buyout or buydown, we hereby clarify the language to conform with the clarifications rendered in paragraph 23. Paragraph 32: The Board will render no determination at this time with respect to the securitization of restructuring-related costs of capital. Paragraph 36: We hereby clarify the language to indicate that imputation of tax expenses or tax benefits on a utility stand-alone basis is for ratemaking purposes as it applies to the computation of divestiture proceeds, MTC revenues, divestiture and NUG buyouts as a result of these matters only, and that such treatment has no precedential value with regard to future rate cases pertaining to the regulated rates of Atlantic. Paragraph 38: While we recognize the desire for and potential benefit of expeditious review and approval of NUG contract restructuring, buyout or buydown proposals, and will make every effort to accomplish same, the Board cannot be bound at this time to a specific timetable. Paragraph 43: We clarify the language to indicate that recovery via the MTC of expenses to redeem or retire outstanding capital in connection with the DOCKET NOS. EO97070455, 7 EO97070456, EO97070457 8 recovery of stranded costs is subject to Board review that such costs have been reasonably and prudently incurred. We also note that reasonably and prudently incurred capital retirement and redemption expenses associated with a securitization financing are included within the definition of bondable stranded costs in the Act and may therefore be securitized and recovered via the TBC. Paragraph 44: The Board supports the need for an annual review of the indicated charges and related deferred costs accruals, and further notes that periodic true-ups of the TBC are required by the Act. We clarify, however, that to satisfy the rate reduction provisions of the Act, the Board may or may not actually adjust the indicated charges (other than the TBC, and the BGS price as provided in elsewhere in the Stipulation and in this Order) during the transition period. Paragraph 47: The Board acknowledges that the Company may reserve its rights, however we shall not adopt this paragraph. In summary, subject to the conditions embodied herein, the rate discounts provided by Atlantic, all stated relative to current rates, shall be at a minimum as follows: August 1, 1999 5% January 1, 2001 7% August 1, 2002 10.2% The average shopping credits during the Transition Period shall be, at a minimum, as follows: Rate Class 1999 2000 2001 2002 2003 ---------- ---- ---- ---- ---- ---- RS 5.65 5.70 5.75 5.80 5.85 RS-TOU 5.10 5.15 5.20 5.25 5.30 MGS-Sec 5.35 5.40 5.50 5.60 5.70 MGS-Pri 5.18 5.23 5.33 5.43 5.53 AGS-Sec 5.30 5.35 5.45 5.55 5.65 AGS-P ri 5.07 5.12 5.17 5.22 5.27 AGT-Sec 5.05 5.10 5.15 5.20 5.25 AGT-Pri 4.95 5.00 5.00 5.00 5.00 AGT-SubT 4.30 4.30 4.30 4.30 4.30 DOCKET NOS. EO97070455, 8 E097070456, EO97070457 9 AGT-Trans 4.25 4.25 4.25 4.25 4.25 TGS 4.30 4.30 4.30 4.30 4.30 SPL/CSL 2.97 3.05 3.07 3.10 3.12 DDC 3.58 3.68 3.71 3.75 3.78 System Average 5.27 5.31 5.37 5.42 5.48 Within five (5) business days of the date of this Order, the Company is HEREBY DIRECTED to submit to the Board a tariff compliance filing addressing the provisions of this Summary Order, and to submit to the Board schedules that show all accounting entries that will be required with respect to the transfer of the combustion turbine and Deepwater generating facilities as a result of this Order, for both Atlantic and the unregulated affiliate. The Company shall consult with Staff to assure the adequacy of the required submissions DATED: 7/15/99 BOARD OF PUBLIC UTILITIES BY: /s/ HERBERT H. TATE ---------------------------------- HERBERT H. TATE PRESIDENT /s/ CARMEN J. ARMENTI ---------------------------------- CARMEN J. ARMENTI COMMISSIONER /s/ FREDERICK F. BUTLER ---------------------------------- FREDERICK F. BUTLER COMMISSIONER ATTEST: /s/ MARK W. MUSSER --------------------------------- MARK W. MUSSER SECRETARY DOCKET NOS. EO97070455, 9 EO97070456, EO97070457 EX-99.D.5 8 APPLICATION TO FERC 1 EXHIBIT D-5 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ================================================================================ DELMARVA POWER & LIGHT COMPANY; ATLANTIC CITY ELECTRIC COMPANY; DPL REIT, INC.; AND DOCKET NO. EC00-______-000 CONECTIV ATLANTIC GENERATION, LLC ================================================================================ JOINT APPLICATION FOR APPROVAL OF THE TRANSFER OF JURISDICTIONAL TRANSMISSION FACILITIES FROM DELMARVA POWER & LIGHT COMPANY AND ATLANTIC CITY ELECTRIC COMPANY TO DPL REIT, INC., AND CONECTIV ATLANTIC GENERATION, LLC I. INTRODUCTION Delmarva Power & Light Company ("Delmarva"), Atlantic City Electric Company ("Atlantic"), DPL REIT, Inc. ("CDG"),(1) and Conectiv Atlantic Generation, LLC ("CAG")(2) (collectively, "the Applicants") submit this Joint Application under Section 203 of the Federal Power Act ("the FPA") and Part 33 of the Commission's Regulations requesting authorization and approval for Delmarva and Atlantic to transfer certain jurisdictional - -------- (1) The name DPL REIT, Inc. will likely be changed either immediately before or at the close of the contemplated transaction to Conectiv Delmarva Generation, Inc. Hence, "CDG" is used to denote the name of that company both before and after the name change. 2 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 2 - -------------------------------------------------------------------------------- transmission facilities to CDG and CAG. The Delmarva and Atlantic facilities to be transferred are referred to herein as the "Delmarva Facilities" and the "Atlantic Facilities, respectively. The transfer of the Facilities in the aggregate is referred to herein as "the Facility Transfer." The Facility Transfer is in furtherance of the plan by Conectiv, the parent of Atlantic and Delmarva, to sell most of the Delmarva and Atlantic generating resources to independent third parties and to transfer the remainder of those resources to affiliates who are not engaged in the transmission and distribution business. Conectiv's overall intent is to convert Delmarva into a wires and pipes company which provides only regulated electric transmission and distribution services and regulated gas distribution services. Atlantic would be a wires company which would provide only regulated electric transmission and distribution service. Approvals for the sale of the Delmarva and Atlantic generating resources and appurtenant transmission facilities to unaffiliated parties are already pending or are to be requested in separate Section 203 applications.(3) This Application addresses only those generating units and the appurtenant transmission facilities that are to be transferred from Delmarva and Atlantic to CDG and CAG. - ---------- (2) CAG will be formed within the next several weeks. The Commission will be given prompt notice of the formation of that entity. (3) A filing has already been made on December 9, 1999 in Docket No. EC00-35-000 regarding the sale of the Delmarva and Atlantic ownership interests in the Peach Bottom and Salem nuclear units. The sale of the Delmarva and Atlantic fossil resources to unaffiliated parties is still under negotiation. 3 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 3 - -------------------------------------------------------------------------------- The Facility Transfer is an element of the ongoing reorganization and restructuring of the electric utility industry in the states of Delaware, New Jersey, Maryland and Virginia in which Delmarva and Atlantic have provided regulated retail electric service for many years. By redefining the role of Delmarva and Atlantic as wires companies and by transferring Delmarva and Atlantic generating resources to affiliates that will participate in the generation market but not in the wires business, the Facility Transfer represents a major step in the restructuring of the electricity industry in those states. The Facility Transfer promotes state restructuring policy, does not impair the effectiveness of regulation, and does not have an adverse impact on any customer. The proposed closing date for the Facility Transfer is on or about May 1, 2000. Accordingly, the Applicants request approval of the Facility Transfer, without hearing, by April 1, 2000. II. THE APPLICANTS DELMARVA: Delmarva is incorporated under the laws of the State of Delaware and the Commonwealth of Virginia, and is a regulated "public utility" or "public service company" in Delaware, Maryland and Virginia. Delmarva is also a public utility under Section 201 of the FPA. Delmarva provides wholesale and retail electric services in Delaware, Maryland and Virginia. Delmarva is also a Delaware-regulated natural gas utility, providing retail services within New Castle County, Delaware. 4 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 4 - -------------------------------------------------------------------------------- ATLANTIC: Atlantic is incorporated under the laws of the State of New Jersey, is subject to retail rate regulation by the New Jersey Board of Public Utilities, and provides retail electric services throughout the southern third of New Jersey. CDG: CDG is currently a Delmarva subsidiary incorporated in Delaware. CDG presently holds no assets and has no current business. CDG will acquire the Delmarva Facilities. Upon its acquisition of jurisdictional facilities and its sales of electricity at wholesale, CGD will become a public utility under Section 201 of the FPA. CAG: CAG will be an Atlantic subsidiary incorporated in Delaware. CAG will acquire the Atlantic Facilities. Upon its acquisition of jurisdictional facilities and its sales of electricity at wholesale, CAG will become a public utility under Section 201 of the FPA. OTHER AFFILIATES: Other Delmarva and Atlantic affiliates involved in the Facility Transfer are ACE REIT, Inc. ("ACE REIT"), which will temporarily hold CAG's common stock and Conectiv Energy Holding Company ("CEH"), a soon-to-be-incorporated intermediate holding company within the Conectiv corporate family.(4) CEH will ultimately own the common stock of CDG, CAG and Conectiv Energy Supply, Inc. ("CESI"), a power marketer. The foregoing companies are or will be direct or indirect subsidiaries of Conectiv, which is incorporated in Delaware and is a registered public utility holding company under the Public Utility Holding Company Act of 1935 ("PUHCA"). Conectiv's - ---------- (4) The Applicants will notify the Commission of CEH's formation, which is expected to occur within the next several weeks. 5 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 5 - -------------------------------------------------------------------------------- electric utility and other subsidiaries are described at pages 3-5 of Exhibit B to this Application. III. ASSET OWNERSHIP AND DIVESTITURES Delmarva now owns 2,728 MW of generating capacity. Conectiv plans the sale to unaffiliated third parties of about 1,312 MW of that capacity, consisting chiefly of base load generators, which Delmarva owns in whole or in part. The remaining 1,416 MW is to be transferred to CDG pursuant to this Application. Atlantic owns 1,679 MW of generating capacity. Atlantic plans the sale to unaffiliated third parties of about 1,135 MW of that capacity, consisting chiefly of base load generators, which it owns in whole or in part. The remaining 544 MW is being transferred to CAG pursuant to this Application. Delmarva and Atlantic own 1,506 miles and 948 miles of transmission lines, respectively, operating at voltages of 69 kV or above. None of those transmission lines is proposed to be transferred under this Application. The jurisdictional transmission facilities that are proposed to be transferred hereunder consist of step-up transformers and associated equipment. The following additional information regarding gas facility ownership is provided, although it is immaterial to the authorizations requested through this Application. Delmarva currently owns one FERC-jurisdictional gas asset, a 4.04 mile pipeline extending from the Delaware border into Pennsylvania where it interconnects with Texas Eastern Transmission Corporation. See Delmarva Power & Light Company, 6 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 6 - -------------------------------------------------------------------------------- Docket No. CP92-153-000, 59 FERC paragraph 61,396 (1992). This Application does not affect that pipeline. Delmarva also owns a non-jurisdictional gas line which lies solely within Delaware and which is used primarily to supply natural gas as a fuel to the Hay Road and Edgemoor generation stations. Those generating stations are being transferred to CDG, which is also acquiring a 90% interest in the non-jurisdictional gas line. The 10% interest in the line retained by Delmarva will be used for Delmarva's local gas distribution business, including transportation of third-party gas under its Delaware-approved retail gas transportation tariffs. IV. THE FACILITY TRANSFER 1. THE TRANSFER MECHANISM: The transaction to accomplish the Facility Transfer has been structured to maximize financing flexibility and to minimize tax consequences. The form of transaction will be in accordance with the following description for the Delmarva Facilities and Atlantic Facilities, respectively. The Delmarva Facilities will be transferred to CDG, which is a wholly-owned subsidiary of Delmarva, and was originally incorporated as a real estate investment trust. After the Facility Transfer from Delmarva to CDG, Delmarva will declare a capital dividend in the form of CDG common stock, which will be transferred to Conectiv. Conectiv will transfer the CDG common stock to CEH, which will become an intermediate holding company in the Conectiv corporate family. The Atlantic Facilities will be transferred to CAG, which will temporarily become a wholly-owned subsidiary of Atlantic. Atlantic will then transfer its common stock in CAG 7 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 7 - -------------------------------------------------------------------------------- to ACE REIT, which is now a wholly-owned subsidiary of Atlantic. Atlantic will then cause the transfer of ACE REIT's common stock to Conectiv, which will then transfer that common stock to CEH. The following two tables illustrate the intra-corporate transfers of the Delmarva Facilities and the Atlantic Facilities and the corresponding transfers of the common equity shares related to the Facilities: 8 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 8 - -------------------------------------------------------------------------------- [DELMARVA FACILITIES FLOWCHART] [ATLANTIC FACILITIES FLOWCHART] The net effect of those transactions is that Delmarva's generating facilities will be transferred to CDG and Atlantic's to CAG and the common equity ownership related to the Delmarva and Atlantic Facilities will be transferred to CEH. CDG and CAG will own no assets other than generation facilities and appurtenant transmission facilities and will sell power exclusively at wholesale. Both CDG and CAG will become subsidiaries of CEH, which will be a directly-owned subsidiary of Conectiv.(5) The following tables show for the relevant companies the Conectiv corporate family on a pre-reorganization and post-reorganization basis. - ---------- (5) If these transfers require Section 203 authorization for Conectiv affiliates other than Atlantic, Delmarva, CDG and CAG, that request is hereby made. 9 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 9 - -------------------------------------------------------------------------------- [PRE-REORGANIZATION FLOWCHART] [POST-REORGANIZATION FLOWCHART] Thus, Delmarva and Atlantic will be in the transmission and distribution business in those states in which they now operate. CEH will be an intermediate holding company and indirectly will be in the power production and sales business through its ownership of CDG, CAG and CESI. 10 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 10 - -------------------------------------------------------------------------------- 2. THE FACILITIES: The following generating units are proposed to be transferred:
- ------------------------------- ----------------------------- --------------------------------- ---------------------------- Generating Station Type of Unit MW Nameplate Capacity Current Owner(6) - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Edgemoor Units 3, 4 and 5 and Coal/Oil Steam (3) Units 3-4 252 MW Delmarva peaking unit Coal/Oil Steam (4) (combined) Gas/Oil Steam (5) Unit 5 446.4 MW Gas Turbine peak Peak Unit 15 MW - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Christiana Gas Turbine 56 MW Delmarva - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Madison St. Gas Turbine 14 MW Delmarva - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Tasley Gas Turbine 27 MW Delmarva - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Crisfield Oil Internal Comb. 11.4 MW Delmarva - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Bayview Oil Internal Comb. 12 MW Delmarva - ------------------------------- ----------------------------- --------------------------------- ---------------------------- West Sub Gas Turbine 20 MW Delmarva - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Del. City Peaking Gas Turbine 21 MW Delmarva - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Hay Road Units 1-4 Gas Turbine (1-3) 541 MW (1-4) Delmarva Comb. Cycle (4) - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Carlls Corner Oil/Gas Turbine 83.8 MW Atlantic - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Cedar Oil Turbine 63.1 MW Atlantic - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Cumberland Oil/Gas Turbine 106.6 MW Atlantic - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Mickelton Gas Turbine 71.2 MW Atlantic - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Middle Oil Turbine 79.7 MW Atlantic - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Missouri Ave. Oil Turbine 55.8 MW Atlantic - ------------------------------- ----------------------------- --------------------------------- ---------------------------- Sherman Ave. Oil/Gas Turbine 84.0 MW Atlantic - ------------------------------- ----------------------------- --------------------------------- ----------------------------
The transmission assets to be transferred to CDG and CAG consist of step-up transformers, radial lines, and associated equipment of the with those generation assets. The specific jurisdictional assets that are to be transferred are listed by generating station in Appendix A-3 hereto. - ---------- (6) All the Atlantic Facilities are located in New Jersey. All the Delmarva Facilities are located in Delaware except the Crisfield unit which is located in Maryland, and the Tasley and Bayview units which are located in Virginia. 11 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 11 - -------------------------------------------------------------------------------- V. OTHER FILINGS In addition to this filing, the Applicants over the next several weeks will make the following additional filings with the Commission related to the Facility Transfer. Delmarva and Atlantic will each file Interconnection and Operation Agreements under the provisions of Section 205 of the FPA. Pursuant to those Agreements, Delmarva and Atlantic will interconnect the transferred generation units to their transmission systems. Separate Agreements will be filed for each generation station. As of yet, CDG and CAG do not have tariffs for the wholesale sale of power. CDG and CAG will file proposed market-based rate tariffs with the Commission to become effective on or before the date the Facility Transfer actually takes place. In compliance with the order granting it market-based rate authority, CESI will file a change of status notice to the Commission regarding the sale of the Delmarva and Atlantic generating resources to non-affiliated parties and the Facility Transfer to CAG and CDG. It is contemplated that a form of power sales agreement may be created in which CAG and CDG would sell power to CESI and that another agreement may be created for the sale of power by CESI to Delmarva to help meet Delmarva's default retail load obligations during the period of transition to full retail choice in the three state jurisdictions in which Delmarva operates. The Commission's authorization would be requested in the event an affiliate purchase by Delmarva were to be made. 12 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 12 - -------------------------------------------------------------------------------- At some point in the future, it is likely that CDG and CAG will file to become Exempt Wholesale Generators (EWGs) under PUHCA. However, the Applicants do not seek a ruling on EWG status at this time. VI. THE FACILITY TRANSFER IS CONSISTENT WITH THE PUBLIC INTEREST (18 C.F.R. SECTION 33.2(j)) 1. INTRODUCTION The Commission's approval of a proposed transaction requires a finding that it "will be consistent with the public interest." 16 U.S.C. Section 824(b). As stated in IES Industries, Inc., et al., 65 FERC paragraph 62,191 at 64,416 (1993) (footnote omitted): An applicant need not show that a positive benefit will result from a proposed merger or acquisition of facilities in order to support a public interest finding. Rather, an applicant is required to make a full disclosure of all material facts and to show that the disposition is consistent with the public interest. This public interest finding thus requires a showing of consistency or compatibility with the public interest, not that the transaction furthers or is the only means of achieving the public interest.(7) In its December 1996 Merger Policy Statement ("Policy Statement"),(8) the Commission said that it would consider three elements in evaluating merger - ---------- (7) Pacific Power & Light Co. v. FPC, 111 F.2d 1014, 1016 (9th Cir. 1940); Northeast Utilities Service Co. v. FERC, 993 F.2d 937, 951 (1st Cir. 1993), quoted in Entergy Services, Inc. and Gulf States Utilities Co., 65 FERC paragraph 61,332 at 62,471 (1993). There is no requirement that applicants make a showing of a "positive benefit of the merger." Utah Power & Light Co., 47 FERC paragraph 61,209 at 61,750 (1989), remanded on other grounds, Environmental Action v. FERC, 939 F.2d 1057, 1061 (D.C. Cir. 1991); Entergy Services, Inc., 62 FERC paragraph 61,073 at 61,370 (1993) (footnotes and citations omitted). (8) Inquiry Concerning The Commission's Merger Policy Under The Federal Power Act: Policy Statement, Order No. 592, Docket No. RM96-6-000, Regulations Preambles, paragraph 31,044 at 30,109 (December 30, 1996). 13 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 13 - -------------------------------------------------------------------------------- applications: the effects of the merger on competition, on regulation, and on rates. Assuming those criteria apply to the Facility Transfer, the Facility Transfer is clearly consistent with the public interest. 2. EFFECT ON COMPETITION: (i) NO INCREASE IN MARKET CONCENTRATION: The test of whether a transaction adversely affects competition is whether the transaction increases market concentration above safe harbor levels in relevant markets. The planned Facility Transfer can have no impact on market concentration since Conectiv, through its ownership of Delmarva and Atlantic, already controls all of the assets being transferred to other subsidiaries of Conectiv, and will continue to control those assets through its ownership of those subsidiaries. Thus, a threshold determination can be made that the Facility Transfer is one of those Section 203 transactions which cannot have any effect on market concentration and for which a market concentration analysis of the kind described in Appendix A of the Merger Policy Statement is not required. See Appendix A of the Policy Statement (paragraph 31,044 at 30,128, et seq.).(9) (ii) THE FACILITY TRANSFER WILL PROMOTE COMPETITION: While the Facility Transfer will not affect market concentration, it will enhance the competitive process - ---------- (9) See also the Commission's Notice of Proposed Rulemaking ("Filing Requirements NOPR") in Docket No. RM98-4-000 to establish specific filing requirements that are consistent with the Policy Statement (April 16, 1998). Revised Filing Requirements Under Part 33 of the Commission's Regulations, Notice of Proposed Rulemaking, Docket No. RM98-4-000, 63 Fed. Reg. 20340 (April 24, 1998), Regulations Preambles, paragraph 32,528 at 33,360 (April 16, 1998). 14 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 14 - -------------------------------------------------------------------------------- and benefit consumers. For decades, Delmarva and Atlantic have been vertically integrated utilities providing retail customers with bundled generation, transmission and distribution services and providing wholesale customers with bundled generation and transmission services. Through restructuring, Delmarva's and Atlantic's intent is to eventually withdraw from the business of selling power and to concentrate their electric public utility activities on the transmission and distribution businesses. CDG and CAG, the affiliates acquiring the Delmarva and Atlantic Facilities, will participate in the wholesale sales and generation businesses, but not the transmission and distribution businesses. This restructuring by the Conectiv companies is consistent with the restructuring plans of the four states - New Jersey, Delaware, Maryland and Virginia - in which the companies will operate. Those state policies favor deregulated, competitive generation markets. The new Conectiv arrangements will accommodate to those policies because Delmarva and Atlantic, functioning as wires companies, will facilitate direct customer choice through the provision of retail wheeling services. These new arrangements will also promote the policies of this Commission, which has taken steps to encourage the establishment of competitive power supply markets. (III) COMPETITION WITHIN PJM: The PJM market area with which this Facility Transfer will take place is workably competitive. See the Commission's March 10, 1999 order approving the request of the PJM Supporting Companies, including Delmarva and Atlantic, for market-based pricing authority based on a finding 15 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 15 - -------------------------------------------------------------------------------- that in a majority of relevant markets studied the Commission's analysis showed results near or below the "traditional thresholds used by the Commission in market-based pricing cases." Atlantic City Electric Company, et al., 86 FERC paragraph 61,248 at 61,902 (1999) (ftn. omitted). That determination supports the conclusion that the Applicants cannot exercise market power in PJM either separately or together either before or after the Facility Transfer. (IV) VERTICAL CONSIDERATIONS AFFECTING COMPETITION: The Applicants have no vertical market power. The Delmarva and Atlantic transmission systems are committed to operation and control by the PJM Interconnection, L.L.C. ("PJM-ISO"). CDG and CAG do not have a transmission tariff because, as previously noted, their transmission facilities will be limited to step-up transformers and related equipment and will be used and useful only to the associated generation stations. The Applicants also lack market power regarding generating sites, fuel, fuel transportation facilities, or any other factors that could create entry barriers to market participation. The Facility Transfer cannot enhance the Applicants' vertical market power for the additional reason that the Facility Transfer is internal to the Conectiv corporate family. 3. EFFECT ON REGULATION: The Facility Transfer does not result in impairment of Federal regulation. In the application to merge Delmarva and Atlantic, the so-called "Ohio Power" waiver was made concerning pre-emptive effects of SEC jurisdiction; i.e., the commitment was made to follow in wholesale ratemaking the 16 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 16 - -------------------------------------------------------------------------------- Commission's policy regarding the treatment of the costs and revenues of inter-affiliate transactions.(10) The Applicants hereto reaffirm that commitment. The Facility Transfer will also not diminish the regulatory authority of the states of New Jersey, Delaware, Maryland and Virginia, whose regulation over Delmarva and Atlantic will not be affected by the Facility Transfer. In addition, the Facility Transfer is consistent with the restructuring policies of those States or pre-existing state law. 4. EFFECT ON RATES: The Facility Transfer will have no material effect on rates to wholesale customers. Since this is an internal restructuring rather than a merger of formerly independent companies, the costs to effectuate the transfer will not be significant and should be more than offset by the achievement of efficiencies resulting from the dedication of Delmarva and Atlantic to the transmission and distribution businesses and the dedication of CDG and CAG to the production business. The Facility Transfer should have no adverse effect on operating costs because the costs associated with the Delmarva and Atlantic Facilities transferred to CDG and CAG will no longer be recorded as costs of Delmarva and Atlantic. Delmarva serves seven wholesale requirements customers under a requirements form of contract with fixed or fixed escalator demand and energy charges without fuel clauses. An eighth contract, with Old Dominion Electric Cooperative - ---------- (10) Policy Statement at paragraph 30,112, 30,124-125. See also Ohio Power Co. v. FERC, 954 F.2d 779, 782-786 (D.C. Cir. 1992), cert. denied, 498 U.S. 73 (1992). 17 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 17 - -------------------------------------------------------------------------------- ("ODEC"), was filed on November 30, 1999, and, if accepted by the Commission, will result in all power sales services from Delmarva to ODEC being provided at fixed prices without a fuel clause. The Facility Transfer can have no effect on those eight customers. Delmarva serves two additional wholesale customers, the Town of Seaford, Delaware and City of Berlin, Maryland under partial requirements contracts which contain fuel adjustment clauses and which are scheduled to expire in 2003 and 2001 respectively. Because these customers account for a very small percentage, less than 1% in 1998, of Delmarva's total energy sales, Delmarva has neither the incentive nor the ability to undertake a power purchase strategy based on the design of the two customers' FACs. Moreover, in order to serve retail customers, the eight wholesale customers, and Seaford and Berlin, Delmarva will replace the energy from the Delmarva Facilities either through purchases of power in the PJM market or through a power purchase from CESI as described above. In either case, any effect of transferring these Facilities on fuel rates for these two customers would be miniscule. Atlantic has no wholesale customers. Thus, the Facility Transfer should not affect any Atlantic rate. VII. TRANSMISSION TARIFFS Delmarva and Atlantic have committed their facilities to the operation and control of the PJM ISO, and thus provide open-access transmission service through the PJM ISO transmission tariffs. CDG's and CAG's principal "transmission" facilities will consist 18 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 18 - -------------------------------------------------------------------------------- of step-up transformers, which are classified as "transmission" for Section 203 purposes and "production" for Section 205 purposes. CDG's and CAG's "transmission" facilities are not needed by PJM to render service within PJM and would not be needed by any market participant other than CDG and CAG. Accordingly, CDG and CAG do not have transmission facilities to commit to the PJM ISO or that would justify the filing of its own Order No. 888 open access tariff. VIII. REQUEST FOR WAIVERS As noted above, after the Facility Transfer and upon engaging in wholesale sales, CDG and CAG will be FPA public utilities who will sell power under market-based rates, will not have any wholesale or retail requirements customers, and will not make inter-affiliate power sales to Delmarva or Atlantic unless the Commission first approves them. CEH will be a non-operating company that owns CDG and CAG. Thus, CEH, CDG, and CAG will not own any transmission lines nor have any franchised retail service territory, or wholesale customers served under cost of service rates. Applicants therefore request that the Commission grant CEH, CDG and CAG waivers of certain of its filing requirements and grant such blanket authorizations as have been authorized in previous orders involving sellers of power at market-based rates. Specifically, they request (1) waiver of the accounting and other requirements of Parts 41, 101, and 141 of the Commission's regulations; (2) permission to file an abbreviated statement with respect to Part 45 of the Commission's regulations relating to interlocking directorships; and (3) a blanket authorization under Part 34 of all future issuances of securities and 19 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 19 - -------------------------------------------------------------------------------- assumption of liability. See, e.g., Kincaid, 78 FERC paragraph 61,082 at 61,300 (1997); USGen Power Services, L.P., 73 FERC paragraph 61,302 at 61,847 (1995); Harbor Generation Co., 86 FERC paragraph 61,255 at 61,920 (1999); Mobile Energy Services Co., 86 FERC paragraph 61,196 at 61,185 (1999); and Koch Power Louisiana, LLC, 86 FERC paragraph 61,029 at 61,128 (1999). CDG and CAG will request a waiver of the reporting requirements of subparts B and C of Part 35 of the Commission's regulations (except sections 35.12(a), 35.13(b), and 35.16) when they file their applications for market-based rates. IX. INFORMATION SUBMITTED UNDER THE ACQUISITION AND MERGER FILING REQUIREMENTS OF 18 C.F.R. SECTION 33.2(a) THROUGH (L) a. NAMES AND ADDRESSES OF PRINCIPAL BUSINESS OFFICES (18 C.F.R. SECTION 33.2(a)) Delmarva Power & Light Company 800 King Street P.O. Box 231 Wilmington, DE 19899-0231 Atlantic City Electric Company 800 King Street P.O. Box 231 Wilmington, DE 19899-0231 DPL REIT, Inc. 800 King Street P.O. Box 231 Wilmington, DE 19899-0231 Conectiv Atlantic Generation, LLC 800 King Street P.O. Box 231 Wilmington, DE 19899-0231 20 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 20 - -------------------------------------------------------------------------------- b. NAMES AND ADDRESSES OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS (18 C.F.R. SECTION 33.2(b)) For All Applicants: Randall V. Griffin, Esquire Senior Counsel CONECTIV Legal Department 800 King Street P.O. Box 231 Wilmington, DE 19899-0231 Telephone: (302) 429-3016 Facsimile: (302) 429-3801 E-mail: randall.griffin@conectiv.com Carmen L. Gentile, Esquire BRUDER, GENTILE & MARCOUX, L.L.P. 1100 New York Avenue, N.W. Suite 510 East Washington, D.C. 20005-3934 Telephone: (202) 783-1350 Facsimile: (202) 347-2644 E-mail: clgentile@brugen.com Mr. J. Mack Wathen Director of Regulatory Affairs CONECTIV 800 King Street P.O. Box 231 Wilmington, DE 19899-0231 Telephone: (302) 429-3285 Facsimile: (302) 429-3230 c. DESCRIPTION OF TERRITORIES SERVED BY COUNTY AND STATE 18 C.F.R. SECTION 33.2(c)) Delmarva provides and/or delivers electricity at retail in Delaware, Maryland and Virginia. The Delaware counties in which this service is provided are New Castle, Kent and Sussex. The Maryland counties are Caroline, Cecil, Dorchester, Harford, Kent, 21 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 21 - -------------------------------------------------------------------------------- Queen Anne's, Somerset, Talbot, Wicomico and Worcester. The Virginia counties are limited to Accomack and Northhampton. Atlantic's service area is the southern third of New Jersey. CDG, CAG and Conectiv do not have service areas. None of these entities, including Delmarva and Atlantic, holds hydroelectric licenses. d. BRIEF DESCRIPTION OF THE FACILITIES OWNED OR OPERATED FOR TRANSMISSION OF ELECTRIC ENERGY IN INTERSTATE COMMERCE OR THE SALE OF ELECTRIC ENERGY AT WHOLESALE (18 C.F.R.SECTION 33.2(d)) 1. DELMARVA TRANSMISSION FACILITIES See FERC Form 1 for Delmarva for year ended December 31, 1998, pages 422-427.7 for Delmarva owned transmission facilities. See Appendix A-1 hereto. 2. ATLANTIC TRANSMISSION FACILITIES See FERC Form 1 for Atlantic for year ended December 31, 1998, pages 422-427.2 for Atlantic owned transmission facilities. See Appendix A-2 hereto. 3. CDG AND CAG TRANSMISSION FACILITIES CDG and CAG do not currently own any transmission facilities or other facilities for the wholesale sale of electric energy. e. DESCRIPTION OF TRANSACTION AND CONSIDERATION (18 C.F.R. SECTION 33.2(e)) The Application is for the internal transfer of assets among affiliates for the purpose of and in the manner heretofore described as part of an overall divestiture plan. 22 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 22 - -------------------------------------------------------------------------------- f. STATEMENT OF JURISDICTION FACILITIES TO BE TRANSFERRED (18 C.F.R. SECTION 33.2(f)) The Facilities include transmission facilities appurtenant to the generating units being transferred that are included with the cost information provided in paragraph (g) below. 23 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 23 - -------------------------------------------------------------------------------- g. COST OF FACILITIES INVOLVED IN THE TRANSFER (18 C.F.R. SECTION 33.2(g)) The attached tables show the original cost less accumulated depreciation of the transmission plant to be transferred as part of the Facility Transfer. The tables are compiled by unit of property. See Appendix A-3 hereto. h. STATEMENT OF EFFECTS ON ANY CONTRACT FOR THE PURCHASE, SALE OR INTERCHANGE OF ELECTRIC ENERGY (18 C.F.R. SECTION 33.2(h)) The transaction will not have any effect upon Delmarva's or Atlantic's ability to meet its contractual obligations. Delmarva's and Atlantic's access to transmission facilities in order to meet their contractual obligations will be the same after the transaction as it was before the transaction. The transfer of the transmission facilities is ancillary to the generating units transfers, which are outside this Commission's jurisdiction; nevertheless, the transfer of the generating facilities will not diminish Delmarva's and Atlantic's ability to meet their contractual obligations. Following the Facility Transfer, Delmarva will continue to meet its contractual obligations through power purchases. i. STATEMENT REGARDING OTHER REQUIRED FILINGS (18 C.F.R. SECTION 33.2(i)) The other required regulatory filings are: 1. The transfer of Delmarva Facilities to an affiliate will require approval from the Virginia State Corporation Commission ("VSCC"). 2. The transfer of Atlantic Facilities to an affiliate will require approval from the New Jersey Board of Public Utilities ("NJBPU"). 3. The transfer of Delmarva and Atlantic Facilities and stock to affiliates within the Conectiv holding company group will require approval by the Securities and Exchange Commission. 24 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 24 - -------------------------------------------------------------------------------- 4. Although not required to effectuate the transfer of the Delmarva and Atlantic Facilities, filings will be made before the Maryland Public Service Commission and the Delaware Public Service Commission to obtain certain specific findings required under section 32(c) of PUCHA, which are necessary in order to treat existing generation facilities as "eligible facilities" that can be held by an Exempt Wholesale Generator. The VSCC and NJBPU will be asked to make the same findings as part of the approvals sought in the filings referenced above. j. PUBLIC INTEREST CONSIDERATIONS (18 C.F.R. SECTION 33.2(j)) See Part V of this Application. k. STATEMENT OF FRANCHISES HELD (18 C.F.R. SECTION 33.2(k)) Delmarva and Atlantic franchises are attached as Appendix A-4. No other applicant holds franchises. l. FORM OF NOTICE FOR THE FEDERAL REGISTER (18 C.F.R. SECTION 33.2(l)) The required form of notice is attached to the filing letter. X. REQUIRED EXHIBITS UNDER 18 C.F.R. SECTION 33.3 Board of Directors' resolutions regarding the Facility Transfer (Exhibit A) will be furnished when issued. Exhibit B concerning control or ownership is attached. Exhibit C journal entries are enclosed, but the Applicants request waiver of the other requirements of Exhibit C and the requirements of Exhibits D through F. In accordance with Exhibit G, all regulatory filings will be provided shortly after they are made. Since this is a transfer among affiliates, the Applicants do not have contracts with unaffiliated parties as would be required by Exhibit H. The map required by Exhibit I is attached. 25 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 25 - -------------------------------------------------------------------------------- XI. PROCEDURAL MATTERS 1. REQUEST FOR APPROVAL WITHOUT HEARING The Applicants request that the Commission approve the Facility Transfer without hearing on the basis of the considerations and circumstances set forth above and because, as shown above, the Facility Transfer will promote competition and not adversely effect rates or regulation. 2. SERVICE The Applicants, by overnight mail, have served a copy of this Application, including all attached materials, on the Delaware Public Service Commission, Maryland Public Service Commission, Virginia State Corporation Commission, the New Jersey Board of Public Utilities, the ten Delmarva wholesale requirement customers identified above, and the PJM-ISO. 3. CLOSING DATE The Applicants intend to close on the transactions required to effect the transfer as soon as practicable after receiving the last of the required regulatory approvals. The Applicants propose to close the transfer on or about May 1, 2000 and will advise the Commission of the closing date promptly upon its occurrence. XII. CONCLUSION The Applicants jointly request the following: 26 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 26 - -------------------------------------------------------------------------------- 1. FINDINGS The Facility Transfer will not have an adverse effect on competition, regulation or rates, and fulfills all applicable requirements for authorization under Section 203 of the Federal Power Act and Part 33 of its Regulations; and that good cause has been shown to grant the waivers requested in Part VIII hereof. 2. REQUESTED COMMISSION ACTIONS The Applicants request the following actions: 1. Approval of the Facility Transfer to the full extent required by the Federal Power Act, and any other authorizations or approvals incidental thereto that may be required; 2. Approval of the Facility Transfer on the Application and pleadings, without hearing; 3. Grant of the waivers requested in Part VIII hereof; and 27 Delmarva Power & Light Company, et al. Docket No. EC00-____-000 Page 27 - -------------------------------------------------------------------------------- 4. Waivers of any filing requirements or other regulations as the Commission may find necessary or appropriate to allow this Application to be accepted for filing and granted. Respectfully submitted, BRUDER, GENTILE & MARCOUX, L.L.P. Of Counsel: By__________________________________ Randall V. Griffin Carmen L. Gentile Senior Counsel CONECTIV 1100 New York Avenue, N.W. Legal Department Suite 510 East 800 King Street Washington, D.C. 20005-3934 Post Office Box 231 Telephone: 202/783-1350 Wilmington, DE 19899-0231 Facsimile: 202/737-9117 Telephone: 302/429-3016 E-mail: clgentile@brugen.com -------------------- Facsimile: 302/429-3801 E-mail: randall.griffin@conectiv.com Attorneys for Delmarva Power & Light ---------------------------- Company, Atlantic City Electric Company, DPL REIT, Inc. and Conectiv Atlantic Generation, LLC DATED: December 17, 1999 EX-99.D.7 9 APPLICATION TO FERC FOR APPROVAL OF DIVIDEND 1 Exhibit D-7 [BRUDER, GENTILE & MARCOUX, L.L.P. LETTERHEAD] March 1, 2000 The Honorable David P. Boergers Secretary Route ES-1, Room 11G-1 Federal Energy Regulatory Commission 888 First Street, N.E. Washington, DC 20426 Re: Delmarva Power & Light Company and Atlantic City Electric Company Request for Approval of Journal Entries to Reflect Dividend Payments out of Paid-In Capital ---------------------------------------- Dear Mr. Boergers: This letter concerns proposed dividend payments out of paid-in capital by Delmarva Power & Light Company ("Delmarva") and Atlantic City Electric Company ("Atlantic") in connection with their transfer of certain facilities to their affiliates Conectiv Delmarva Generation ("CDG") and Conectiv Atlantic Generation ("CAG"), respectively. Proposed journal entries reflecting then available data were included in and the facility transfer to CDG and CAG are described in the December 17, 1999 application which Delmarva and Atlantic submitted to the Commission under Section 203 of the Federal Power Act ("FPA") in Docket No. EC00-40-000 ("Section 203 Application"). The purpose of this letter is to request the Commission's approval of the accounting for such dividend payments as reflected in the journal entries (Appendix A) submitted with the Section 203 application and a finding as part of that approval that such payments are not prohibited by Section 305(a) of the FPA.(1) Conversion of Delmarva and Atlantic Wires Companies: As explained in the Section 203 application, Conectiv proposes to sell most of the Delmarva and Atlantic generating resources (nuclear and chiefly base load fossil) to independent third parties and to transfer the remaining resources (chiefly intermediate and peaking) to CDG and - -------- (1) The data for the actual journal entries would be developed when the facility transfers are completed. 2 The Honorable David P. Boergers March 1, 2000 Page 2 - -------------------------------------------------------------------------------- CAG who are not engaged in the transmission and distribution business. The total Delmarva and Atlantic electric generating capacity to be sold to independent third parties is 2,447 MW. The resources to be transferred to CDG and CAG represent 1,960 MW. The sale of the Delmarva and Atlantic nuclear generating facilities is the subject of pending Section 203 applications in Docket Nos. EC00-34-000 and EC00-35-000. Delmarva and Atlantic have recently entered into purchase and sale agreements for the sale of their non-CDG and non-CAG fossil facilities, and the pertinent Section 203 applications for those transactions will be submitted to the Commission within the next several weeks. Conectiv's overall intent is to convert Delmarva and Atlantic into wires companies that provide only regulated electric transmission and distribution services.(2) After the sale of the 2,447 MW to third parties and the transfer of 1,960 MW to CDG and CAG, the two utilities will own no generating assets. They will also gradually exit from the power sales business. For an interim period, they will continue to serve retail customers on a default basis until those customers find new suppliers. Delmarva will also continue to procure the power supply for existing wholesale customers, but only until those customers' current wholesale contracts expire.(3) The Capital Dividends: As noted, the transactions giving rise to the capital dividends are the Delmarva and Atlantic transfer of facilities to CDG and CAG which are described in detail on pages 6-8 of the Section 203 application.(4) Those pages include charts illustrating the common stock and facility transfers as well as the pre-reorganization and post-reorganization structure of the Conectiv companies. The three pages are attached as Appendix B to this letter. The capital dividend payments consist of (i) Delmarva's capital dividend in the form of CDG common stock to be paid to Conectiv(5) and (ii) Atlantic's capital dividend in the form of ACE REIT common stock to be paid to Conectiv.(6) The Appendix A journal entries submitted with the Section 203 application do indicate that these dividends will - ---------- (2) Delmarva will also continue to provide regulated gas distribution services. (3) Conectiv hopes that the sale of the nuclear facilities and the transfer of the facilities to CDG and CAG will both be accomplished by May 1, 2000. Conectiv expects the fossil sale to third parties to be accomplished by the fall of this year. (4) The payment of dividends out of paid-in capital has no relationship to the sale of the nuclear and fossil plant to independent third parties. (5) Conectiv will then transfer the CDG common stock to Conectiv Energy Holding Company ("CEH"), an intermediate holding company within the Conectiv corporate family. Thus, CDG will own the former Delmarva facilities and CEH will own CDG. (6) Atlantic transfers facilities to CAG and then contributes the ownership of CAG to ACE-REIT, a wholly-owned subsidiary of Atlantic. The effect of the dividend to Conectiv of ACE-REIT stock is to transfer indirect ownership of the facilities to Conectiv, which then contributes the stock to CEH. 3 The Honorable David P. Boergers March 1, 2000 Page 3 - -------------------------------------------------------------------------------- be paid out of paid-in capital. However, the use of paid-in capital as the source for the dividends is not stated explicitly in the Section 203 application. Therefore, Conectiv deemed it appropriate to make this filing with the Commission to ensure that the Commission is apprised of all facets of the transaction. Like-Kind Transaction: Conectiv foresees the possibility of a "like-kind" transaction with an unaffiliated purchaser of its fossil facilities. Pursuant to this transaction, if it takes place, Conectiv through CDG would retain its ownership interests in the Keystone and Conemaugh generating units for approximately three months. Within an additional three months thereafter, CDG would obtain replacement property in the form of a new generating unit in exchange for its interest in Keystone and Conemaugh. If the "like-kind" transaction takes place, the payment of dividends out of paid-in capital would be increased as described hereinafter. Capital Payments: The following table is based on unaudited data as of December 31, 1999, and assumes that the above described like-kind transaction does and does not take place. Based on those assumptions, the table shows the effect of the accounting for the asset transfer and stock dividend as paid out of paid-in capital as opposed to retained earnings:
Capitalization as of December 31, 1999 ($000) As reported: DELMARVA ATLANTIC -------- -------- Like-Kind No Like-Kind Common Stock Par Value 2 2 54,963 Additional paid-in-capital 528,893 528,893 493,007 Retained earnings 147,288* 147,288* 129,981 Total Common equity 676,183 676,183 677,951 Book Equity Transfer (amounts as of 7/31/99) 301,410 275,057 77,212 FERC Section 203 filing: Pro forma: Common Stock Par Value 2 2 54,963 Additional paid-in-capital 227,483 253,836 415,795 Retained earnings 147,288* 147,288* 129,981 Total Common equity 374,733 401,126 600,739
* Reflects an extraordinary charge, net of income taxes, of $253.6MM recorded in third quarter 1999. Delmarva lacks sufficient retained earnings to support the asset transfer whether or not the like-kind transaction takes place and must make the payment out of paid-in capital. 4 The Honorable David P. Boergers March 1, 2000 Page 4 - -------------------------------------------------------------------------------- While Atlantic does have a sufficient level of retained earnings to support the asset transfer, Conectiv desires to account for both transfers as a dividend out of paid-in capital. This is a temporary situation. The sale of fossil facilities to unaffiliated third parties will permit an increase in Delmarva and Atlantic retained earnings (above the post-dividend level) and a reduction in debt. The Statute: Section 305(a) of the Federal Power Act provides: It shall be unlawful for any officer or director of any public utility to receive for his own benefit, directly or indirectly, any money or thing of value in respect of the negotiation, hypothecation, or sale by such public utility of any security issued or to be issued by such public utility or to share in any proceeds thereof, or to participate in the making or payment of any dividends of such public utility from any funds properly included in capital account. 16 U.S.C. ' 825d (a)(1994) (emphasis added). Conectiv submits that Section 305(a) should not be construed as prohibiting the payment of dividends under the circumstances presented here. As the Commission recently noted, this statute had not previously been interpreted by the Commission or the courts, and there are no explicit statements in the legislative history of Section 305 which discuss the concern Congress was seeking to address in enacting the provision. See Citizens Utilities Co., 84 FERC paragraph 61,158 at 61,864 (1998). In Citizens, the Commission examined the practices which led to passage of the legislation, and concluded that Congress's concern was abuses such as the failure to identify the funds from which dividends were being paid, and the payment to holding companies of excessive dividends by their operating companies. The Commission also commented that a "key [Congressional] concern...was corporate officials raiding corporate coffers for their personal financial benefit." Id. Finding no abuses, the Commission in Citizens concluded that Section 305(a) was not applicable and approved the dividend payments. The Commission reached a similar result in New England Power Company and Montaup Electric Company ("NEPCO and Montaup"), 89 FERC paragraph 61,266 (1999) concerning the need to make future dividend payments out of paid-in capital because retained earnings had been restated as paid-in capital as a consequence of the accounting methods used by two utilities in completing two mergers. A second concern also implicating the utilities' capital accounts was that the amortization of the merger acquisition premium could also affect the ability to pay future dividends out of earnings. The two utilities asked for permission to pay dividends out of paid-in capital up to the pre-merger level of retained earnings and for authorization to determine earnings available to pay dividends without regard to the amortization of the acquisition premium. Finding that Section 305(a) did not apply because the abuses at which that statute were directed were not present and subject to certain conditions, the Commission authorized 5 The Honorable David P. Boergers March 1, 2000 Page 5 - -------------------------------------------------------------------------------- the payment of dividends out of capital to the extent of the pre-merger levels of retained earnings. No abusive condition is present here. The facility transfer does not result in the personal financial benefit of utility company officials. Nor does it represent a defrauding of the general public or an undermining of the financial health of Delmarva and Atlantic. The source of funds is clearly identified, and the reduction in each utility's capital resulting from the dividend payment corresponds to the reduction in each utility's assets through the transfer of facilities to CDG and CAG. Also, the sale of fossil facilities to unaffiliated third parties will result in an increase in retained earnings as described above. In other words, the situation at Delmarva and Atlantic is the antithesis of the situation contemplated by Congress in adopting Section 305. As in Citizens Utilities and NEPCO and Montaup, the use of capital or unearned surplus by Delmarva and Atlantic to pay dividends is not the kind of practice Section 305(a) was intended to prevent and does not raise public interest concerns. In fact, the transfer of facilities to CDG and CAG, inclusive of the dividend payments, promotes the public interest. The transfer constitutes an element of the ongoing reorganization and restructuring of the electric utility industry in the states of Delaware, New Jersey, Maryland and Virginia in which Delmarva and Atlantic have provided regulated retail electric service for many years. By redefining the role of Delmarva and Atlantic as wires companies and by transferring Delmarva and Atlantic generating resources to affiliates that will participate in the generation market but not in the wires business, the transfer complements the sale of Conectiv generation to third parties and represents a major step in the restructuring of the electricity industry in those states. This restructuring is consistent with state and federal policy favoring structural unbundling of formerly vertically integrated utilities, promoting retail choice, and fostering competition in electric generation. In addition, as noted above, the source of funds for payment of the dividends is clearly identified and the stock transfers are not intended for the disbursal of profits to investors but merely to reflect the changed ownership of the generating assets. Thus, the transfer of the facilities and the related capital dividends affirmatively promotes public policy. 6 The Honorable David P. Boergers March 1, 2000 Page 6 - -------------------------------------------------------------------------------- Request for Commission Action: The Commission is respectfully asked to approve such journal entries and dividend payments as set out herein, and the Commission is asked to take that action on or before May 1, 2000. Conectiv desires to accomplish the transfer of facilities from Delmarva and Atlantic to CDG and CAG and to undertake the new supply arrangements from CDG and CAG on May 1, 2000. The Commission's consideration of this request is appreciated. Very truly yours, Carmen L. Gentile ------------------------- Carmen L. Gentile Counsel for Conectiv CLG:mkm Attachments cc: See List of Recipients 7 UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION DELMARVA POWER & LIGHT COMPANY ) ) DOCKET NO. EC00-___-000 ATLANTIC CITY ELECTRIC COMPANY ) NOTICE OF FILING Take notice that Delmarva Power & Light Company ("Delmarva") and Atlantic City Electric Company ("Atlantic") (collectively, "Applicants"), on March 1, 2000, tendered for filing a request for approval regarding journal entries reflecting dividend payments out of paid-in capital related to the transfer of certain facilities from Delmarva and Atlantic to Conectiv Delmarva Generating, LLC ("CDG") and Conectiv Atlantic Generating, LLC ("CAG"), respectively ("Facility Transfer"). Journal entries based on then available data reflecting such dividend payments were included in a December 17, 1999 application which Delmarva and Atlantic submitted to the Commission under Section 203 of the Federal Power Act in Docket No. EC00-40-000 to accomplish the Facility Transfer. Delmarva and Atlantic request that the Commission approve the use of journal entries and the related accounting reflecting the payment of dividends out of paid-in capital in connection with the Facility Transfer. They have asked that the Commission take this action by May 1, 2000, which is the date that the Applicants hope to accomplish the Facility Transfer and undertake new power supply arrangements related to the Facility Transfer. Copies of the filing were served upon Delmarva's wholesale requirements customers, and the Maryland People's Counsel, Maryland Public Service Commission, Delaware Public Service Commission, New Jersey Public Service Commission and the Virginia State Corporation Commission. Any person desiring to be heard or to protest said filing should file a motion to intervene or protest with the Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 C.F.R. Sections 385.211 and 385.214). All such motions or protests should be filed in accordance with Section 35.8 of the Commission's regulations. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a motion to intervene. Copies of this filing are on file with the Commission and are available for public inspection in the Public Reference Room. This filing may also be viewed on the Internet at http://www.ferc.fed.us/online/rims.htm (call 202/208-2222 for assistance). David P. Boergers Secretary EX-99.G 10 FORM OF FEDERAL REGISTER NOTICE 1 Exhibit G Conectiv, Delmarva Power & Light Company and Atlantic City Electric Company, et al. ( 70- ) Notice of Proposal to Establish New Direct and Indirect Subsidiary Holding Companies and Generation Companies, Transfer Utility Assets as Capital Contributions to Generation Companies, Acquire Utility Assets, Finance Direct Subsidiary Holding Company by Conectiv and Generating Companies and Indirect Subsidiary Holding Company by Direct Subsidiary Holding Company, Authorization for Direct Subsidiary Holding Company to Acquire Exempt Wholesale Generators and Finding that Indirect Subsidiary Holding Company is Not Deemed a Holding Company for Purposes of Section 11(b)(2) of the Public Utility Holding Company Act. Conectiv, a Delaware corporation and a registered public utility holding company; its two wholly-owned public utility companies, Delmarva Power & Light Company ("Delmarva"), a Delaware and Virginia Corporation, and Atlantic City Electric Company ("ACE"), a New Jersey corporation; and certain nonutility subsidiaries (Conectiv Energy Holding Company ("CEH"); ACE REIT, Inc. ("ACE-REIT"); Conectiv Atlantic Generation, LLC ("CAG"); and Conectiv Delmarva Generation, Inc. ("CDG"); all of 800 King Street, Wilmington, DE 19899 have filed a declaration under Sections 6, 7, 9, 10, 11(b)(2), 12(c), 12(d) and 32 and Rules 43, 45, 46, 53 and 54 of the Public Utility Holding Company Act of 1935, as amended (the "Act"). Each of the states in which Delmarva and ACE operate has enacted legislation restructuring the electric utility industry in that state to provide retail choice for the generation of electricity. Generally, with restructuring, the supply component of the price charged to a customer for electricity would be deregulated, and electricity suppliers would compete to supply electricity to customers. Customers would continue to pay the local utility a regulated price for the delivery of the electricity over the transmission and distribution system. To implement the state electric industry restructuring, Delmarva and ACE each plan to exit the electric generation business and to be only a distributor of electrical energy and, in the case of Delmarva, natural gas. Certain facilities have been sold to third parties and one third-party sale is the subject of a filing pending before the Commission. Conectiv proposes to retain certain mid-merit facilities and seeks authority for Delmarva and ACE to transfer the facilities to an affiliate. Approximately 1,412 MW of net generating capacity owned by Delmarva and 1,123 of net generating capacity owned by ACE will be transferred or sold to non-affiliates. Pursuant to this application, it is proposed that approximately 1,364 MW of net generating capacity owned by Delmarva with an approximate value of $275 million net of deferred taxes and 502 MW of net generating capacity owned by ACE valued at approximately $77 million net of deferred taxes (collectively the "Retained Assets") will be transferred to CDG(1) and CAG respectively. To accomplish this transfer, Delmarva and ACE will effectively spin-off the retained generation facilities to Conectiv, by utilizing special purpose subsidiaries to which the assets will be contributed as capital contributions. Delmarva will contribute its share of the Retained Assets to CDG, a Delaware corporation, and ACE will contribute its portion of the Retained Assets to CAG, - -------------------------- (1) Approximately 127 MW of net generating capacity (with a book value of $26 million net of deferred taxes) to be transferred by Delmarva to CDG may be subject to an obligation to transfer the facilities to a third party purchaser in exchange for like-kind assets under a like-kind exchange agreement. The third-party purchaser will be an EWG so further approvals will not be required for the transfer of facilities to the third party by CDG. The assets to be received in exchange by CDG may be the new build EWG facilities, construction of which was initiated by CEI or other similar generating facilities (the "Like-Kind Facilities"). Conectiv has requested authorization to invest up to $350 million in the EWG facilities through March 31, 2002 in File No. 70-9095. CEI will be transferred to a third party intermediary and construction will be completed by the third party until such time as the value equals the value of the assets to be sold by CDG. If CDG is not an EWG at the time of the acquisition of the Like-Kind Facilities, authorization is requested for the acquisition of the Like-Kind Facilities as utility assets. 22 2 a Delaware limited liability company. ACE will then contribute the ownership of CAG to an existing inactive, unfunded subsidiary named ACE-REIT establishing CAG as an indirect subsidiary of ACE. The common stock in CDG held by Delmarva and the common stock in ACE-REIT held by ACE will be transferred to Conectiv through a dividend out of capital or unearned surplus. Generally Accepted Accounting Principals require that the dividend be accounted for as a dividend out of capital even if there are sufficient retained earnings to cover the dividend. In this instance, ACE would have sufficient retained earnings to cover the value of the ACE portion of the Retained Assets, but Delmarva would not. Also, the capital dividend by Delmarva will cause the common equity to total capitalization ratio for Delmarva to fall below 30% until the sale of other generating assets to third parties is completed. The closing of this sale is scheduled for September 1, 2000 but is contingent on the prior receipt of certain state regulatory approvals. Following receipt of the common stock of CDG and ACE-REIT, Conectiv will fund a new wholly-owned subsidiary holding company (CEH) by contributing to the subsidiary the stock of CDG and ACE-REIT. Conectiv also notes that it intends to contribute to CEH the common stock of Conectiv Energy Supply, Inc. ("CESI"), an energy marketing company, and Atlantic Generation, Inc., another Rule 58 company engaged in cogeneration activities. Conectiv states that in addition to energy marketing under Rule 58(b(v), CESI will engage in energy management and demand-side management services under Rule 58(b)(1)(i) and technical, operational, management and other kinds of services developed in the utility operation under Rule 58(b)(1)(vii). Upon transfer of the retained assets to CDG and CAG, CDG and CAG will be utilities under the Act. ACE-REIT and CEH will be utility holding companies under the Act. Conectiv requests that this Commission find that ACE-REIT is not a utility holding company for purposes of Section 11(b)(1) of the Act only. Conectiv also requests that CEH be authorized to acquire exempt wholesale generators as defined in Section 32 of the Act (EWGs) so long as the aggregate investment in EWGs does not exceed the limitation established by Rule or Order. Conectiv will guarantee obligations of the newly-formed companies under the $350 million level of credit support that Conectiv is authorized to offer subsidiaries through March 31, 2002 under Release No. 35 - 26833 dated February 26, 1998 as supplemented by Release No. 35- 27111 dated December 14, 1999. CEH requests authority to issue common stock or long or short term debt to Conectiv to finance its ongoing business needs until such time as CDG and CAG are qualified as EWGs. Any debt will bear interest at a rate designed to approximate Conectiv's cost of money. Conectiv also requests authorization for CEH to participate in the Conectiv System Money Pool. ACE-REIT, CAG and CDG request authority to issue common stock or long or short-term debt to CEH or Conectiv as necessary to fund the operations of their businesses through March 31, 2002 or until such time as CAG and CDG are declared to be EWGs. Any debt will bear interest at a rate designed to approximate the lenders cost of money. Authorization is requested for participation by CEH, CAG, CDG, and ACE-REIT in the Conectiv System Money Pool until such time as CAG and CDG are declared to be EWGs. Conectiv notes that it is the company's preference to seek EWG status for CDG and CAG. Conectiv requests that the value of the Generating Assets at the time of transfer to CAG and CDG be excluded from the calculation of Aggregate Investment for purposes of Rule 53. However, since Conectiv does not envision the timely receipt of requisite orders of state utility commission under 23 3 Section 32(c) of the Act, Conectiv requests that the Commission reserve jurisdiction over this issue pending completion of the record. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jonathan G. Katz Secretary 24 EX-99.H.1 11 ASSETS TO BE TRANSFEDDED 1 EXHIBIT H-1 ASSETS TO BE TRANSFERRED
STATION LOCATION NET INSTALLED ------- -------- CAPACITY ----------- (KILOWATTS) ----------- COAL-FIRED Edge Moor........................... Wilmington, DE................ 260,000 Keystone*........................... Shelocta, PA.................. 63,000 Conemaugh*.......................... New Florence, PA.............. 63,000 OIL-FIRED Edge Moor........................... Wilmington, DE................ 445,000 COMBUSTION TURBINES/COMBINES CYCLE Hay Road............................ Wilmington, DE................ 511,000 Cumberland.......................... Millville, NJ................. 84,000 Sherman Avenue...................... Vineland, NJ.................. 81,000 Middle.............................. Rio Grande, NJ................ 77,000 Carll's Corner...................... Upper Deerfield Twp, NJ....... 73,000 Cedar............................... Cedar Run, NJ................. 68,000 Missouri Avenue..................... Atlantic City, NJ............. 60,000 Mickleton........................... Mickleton, NJ................. 59,000 Christiana.......................... Wilmington, DE................ 45,000 Edge Moor........................... Wilmington, DE................ 13,000 Madison Street...................... Wilmington, DE................ 11,000 West................................ Marshallton, DE............... 15,000 Delaware City....................... Delaware City, DE............. 16,000 Tasley.............................. Tasley, VA.................... 26,000 DIESEL UNITS Crisfield............................ Crisfield, MD................. 10,000 Bayview.............................. Bayview, VA................... 12,000 Keystone*............................ Shelocta, PA.................. 400 Conemaugh*........................... New Florence, PA.............. 400
*Assets being transferred o CDG subject to an obligation to transfer the facilities to an EWG third party purchaser under the terms of a like-kind exchange agreement. EX-99.FS.1 12 CONECTIV CONSOLIDATED FINANCIAL STATEMENTS 1 EXHIBIT FS-1 ------------ CONECTIV PRO FORMA CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) ------------------------------------------------- Actual Balances Proforma per the Proforma Balances Unaudited Debt after F/S Financing Financing --------------- --------- ---------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 56,239 $ 56,239 Accounts receivable, net of allowances of $11,564 and $4,743, respectively 544,463 544,463 Inventories, at average cost Fuel (coal, oil and gas) 65,360 65,360 Materials and supplies 58,177 58,177 Prepaid New Jersey sales and excise taxes -- -- Deferred energy supply costs 8,612 8,612 Other prepayments 20,295 20,295 Taxes receivable 15,674 15,674 Deferred income taxes, net 25,175 25,175 ---------- --------- ---------- 793,995 -- 793,995 ---------- --------- ---------- INVESTMENTS Investment in leveraged leases 72,161 72,161 Funds held by trustee 173,247 173,247 Other investments 100,764 100,764 ---------- --------- ---------- 346,172 -- 346,172 ---------- --------- ---------- PROPERTY, PLANT AND EQUIPMENT Electric generation 1,571,556 1,571,556 Electric transmission and distribution 2,633,375 2,633,375 Gas transmission and distribution 265,708 265,708 Other electric and gas facilities 405,303 405,303 Telecommunications, thermal systems, and other property, plant, and equipment 238,229 238,229 ---------- --------- ---------- 5,114,171 -- 5,114,171 Less: Accumulated depreciation 2,097,529 2,097,529 ---------- --------- ---------- Net plant in service 3,016,642 -- 3,016,642 Construction work-in-progress 199,390 199,390 Leased nuclear fuel, at amortized cost 55,983 55,983 Goodwill, net 369,468 369,468 ---------- --------- ---------- 3,641,483 -- 3,641,483 ---------- --------- ---------- DEFERRED CHARGES AND OTHER ASSETS Recoverable stranded costs 1,030,049 1,030,049 Deferred recoverable income taxes 93,853 93,853 Unrecovered purchased power costs 28,923 28,923 Unrecovered New Jersey state excise tax 22,567 22,567 Deferred debt refinancing costs 21,113 21,113 Deferred other postretirement benefit costs 32,479 32,479 Prepaid pension costs 35,005 35,005 Unamortized debt expense 28,045 28,045 License fees 23,331 23,331 Other 41,447 41,447 ---------- --------- ---------- 1,356,812 -- 1,356,812 ---------- --------- ---------- TOTAL ASSETS $6,138,462 $ 0 $6,138,462 ========== ========= ==========
2 CONECTIV PRO FORMA CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) ------------------------------------------------- Actual Balances Proforma per the Proforma Balances Unaudited Debt after F/S Financing Financing --------------- --------- ---------- CAPITALIZATION AND LIABILITIES CURRENT LIABILITIES Short-term debt $ 579,688 $ 579,688 Long-term debt due within one year 48,937 48,937 Variable rate demand bonds 158,430 158,430 Accounts payable 307,764 307,764 Taxes accrued -- -- Interest accrued 41,137 41,137 Dividends payable 27,545 27,545 Deferred energy supply costs 46,375 46,375 Current capital lease obligation 28,715 28,715 Above-market purchased energy contracts and other electric restructuring liabilities 41,101 41,101 Other 91,353 91,353 ---------- --------- ---------- 1,371,045 -- 1,371,045 ---------- --------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Other postretirement benefits obligation 96,388 96,388 Deferred income taxes, net 730,987 730,987 Deferred investment tax credits 74,431 74,431 Regulatory liability for New Jersey income tax benefit 49,262 49,262 Above-market purchased energy contracts and other electric restructuring liabilities 119,704 119,704 Deferred gain on termination of purchased energy contract 70,849 70,849 Long-term capital lease obligation 30,395 30,395 Other 47,447 47,447 ---------- --------- ---------- 1,219,463 -- 1,219,463 ---------- --------- ---------- CAPITALIZATION Common stock: $0.01 per share par value 150,000,000 shares authorized; shares outstanding -- 86,173,169 in 1999, and 100,516,768 in 1998 863 863 Class A common stock, $0.01 par value; 10,000,000 shares authorized; shares outstanding -- 5,742,315 in 1999, 6,560,612 in 1998 57 57 Additional paid-in capital - - common stock 1,085,060 1,085,060 Additional paid-in capital - - Class A common stock 93,738 93,738 Retained earnings (Accumulated deficit) (36,472) (36,472) ---------- --------- ---------- 1,143,246 -- 1,143,246 Treasury shares, at cost: 167,514 shares in 1999; 185,030 shares in 1998 (3,446) (3,446) Unearned compensation (1,627) (1,627) ---------- ---------- ---------- Total common stockholders' equity 1,138,173 -- 1,138,173 Preferred stock of subsidiaries: Not subject to mandatory redemption 95,933 95,933 Subject to mandatory redemption 188,950 188,950 Long-term debt 2,124,898 2,124,898 ---------- ---------- ---------- 3,547,954 -- 3,547,954 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL CAPITALIZATION AND LIABILITIES $6,138,462 $0 $6,138,462 ========== ========== ==========
3 NOTES TO EXHIBIT FS-1 Exhibit FS-1 includes the following: I. Pro Forma Consolidated Balance Sheets for Conectiv (Exhibit FS-1). The three (3) columns on each proforma balance sheet represent the following: Column 1: The actual consolidated balance sheet as of December 31, 1999. Column 2: The pro forma effects of the transfer of certain generating assets to affiliates as described in Item 1.A. "Introduction" of this filing. Column 3: The Consolidated Balance Sheets as of December 31, 1999 on a pro forma basis to include the expected effects of the transfer of certain generating assets. For purposes of the consolidated Conectiv pro forma Financial Statements (Exhibit FS-1), there is no impact as all transactions are between subsidiaries. EX-99.FS.3 13 DELMARVA PRO FORMA CONSOLIDATED BALANCE SHEET 1 EXHIBIT FS-3 ------------ DELMARVA POWER & LIGHT COMPANY PRO FORMA CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1999 --------------------------------------------------------- Proforma Actual Balances Proforma Balances per the Transfer of after Transfer F/S Assets of Assets --------------- ----------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 648 $ 648 Accounts receivable, net of allowances of $6,479 and $648, respectively 308,690 308,690 Intercompany loan receivable 13,473 13,473 Inventories, at average costs Fuel (coal, oil and gas) 45,686 45,686 Materials and supplies 31,855 31,855 Prepayments 14,152 14,152 Deferred energy costs 8,612 8,612 Deferred income taxes, net 18,935 18,935 ---------- --------- ---------- 442,051 442,051 ---------- --------- ---------- INVESTMENTS Funds held by trustee 67,896 67,896 Other investments 1,615 1,615 ---------- --------- ---------- 69,511 69,511 ---------- --------- ---------- PROPERTY, PLANT AND EQUIPMENT Electric generation 1,314,657 (697,871) 616,786 Electric transmission and distribution 1,398,574 1,398,574 Gas transmission and distribution 265,708 265,708 Other electric and gas facilities 202,953 202,953 Other property, plant and equipment 5,469 5,469 ---------- --------- ---------- 3,187,361 (697,871) 2,489,490 Less : Accumulated depreciation 1,434,597 (342,101) 1,092,496 ---------- --------- ---------- Net plant in service 1,752,764 (355,770) 1,396,994 Construction work-in-progress 64,747 64,747 Leased nuclear fuel, at amortized cost 25,592 25,592 Goodwill, net 69,850 69,850 ---------- --------- ---------- 1,912,953 (355,770) 1,557,183 ---------- --------- ---------- DEFERRED CHARGES AND OTHER ASSETS Recoverable stranded costs 41,775 41,775 Deferred recoverable income taxes 71,986 71,986 Prepaid employee benefits costs 129,962 129,962 Unamortized debt expense 11,106 11,106 Deferred debt refinancing costs 7,538 7,538 Other 17,903 17,903 ---------- --------- ---------- 280,270 0 280,270 ---------- --------- ---------- TOTAL ASSETS $2,704,785 $(355,770) $2,349,015 ========== ========== ==========
2 DELMARVA POWER & LIGHT COMPANY PRO FORMA CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AS OF DECEMBER 31, 1999 ----------------------------------------------------------- Proforma Actual Balances Proforma Balances per the Transfer of after Transfer F/S Assets of Assets --------------- ----------- -------------- CAPITALIZATION AND LIABILITIES CURRENT LIABILITIES Short-term debt $ -- -- $ -- Long-term debt due within one year 1,545 1,545 Variable rate demand bonds 104,830 104,830 Accounts payable 207,073 207,073 Taxes accrued 31,621 31,621 Interest accrued 20,160 20,160 Dividends payable 7,027 7,027 Current capital lease obligation 12,495 12,495 Above-market purchased energy contracts and other electric restructuring liabilities 33,109 33,109 Other 26,226 26,226 ---------- ----------- ---------- 444,086 444,086 ---------- ----------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Deferred income taxes, net 341,748 (46,668) 295,080 Deferred investment tax credits 34,823 (7,692) 27,131 Long term capital lease obligation 14,175 14,175 Above-market purchased energy contracts 0 and other electric restructuring liabilities 102,781 102,781 Other 14,079 14,079 ---------- ----------- ---------- 507,606 (54,360) 453,246 ---------- ----------- ---------- CAPITALIZATION Common stock, $2.25 par value; 1,000,000 shares authorized; 1,000 shares outstanding 2 2 Additional paid-in-capital 528,893 (301,410) 227,483 Retained earnings 147,288 147,288 ---------- ----------- ---------- Total common stockholders' equity 676,183 (301,410) 374,773 Preferred stock not subject to mandatory redemption 89,703 89,703 Preferred securities of subsidiary trust subject to mandatory redemption 70,000 70,000 Long-term debt 917,207 917,207 ---------- ----------- ---------- 1,753,093 (301,410) 1,451,683 ---------- ----------- ---------- TOTAL CAPITALIZATION AND LIABILITIES $2,704,785 $ (355,770) $2,349,015 ========== =========== ==========
3 NOTES TO EXHIBIT FS-3 Exhibit FS-3 includes the following: I. Pro Forma Consolidated Balance Sheets for Delmarva Power & Light Company (Exhibit FS-3). The three (3) columns on each proforma balance sheet represent the following: Column 1: The actual consolidated balance sheet as of December 31, 1999. Column 2: The pro forma effects of the transfer of certain generating assets to affiliates as described in Item 1.A. "Introduction" of this filing. Column 3: The Consolidated Balance Sheets as of December 31, 1999 on a pro forma basis to include the expected effects of the transfer of certain generating assets. EX-99.FS.5 14 ACE PRO FORMA CONSOLIDATED BALANCE SHEETS 1 EXHIBIT FS-5 ------------ ATLANTIC CITY ELECTRIC COMPANY PRO FORMA CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
As of December 31, 1999 ---------------------------------------------------------- Proforma Actual Balances Proforma Balances per the Transfer of after Transfer F/S Assets of Assets --------------- ----------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 7,924 $ 7,924 Accounts receivable net of allowances of $3,500 and $3,500, respectively 133,879 133,879 Intercompany loan receivable 73,532 73,532 Inventories, at average cost -- Fuel (coal and oil) 19,598 19,598 Materials and supplies 8,890 8,890 Deferred income taxes, net 6,245 6,245 Prepaid income taxes 88,483 88,483 Prepaid New Jersey sales and excise taxes -- -- Other prepayments 2,223 2,223 ---------- ---------- ---------- 340,774 340,774 ---------- ---------- ---------- INVESTMENTS Funds held by trustee 105,268 105,268 Other investments 103 103 ---------- ---------- ---------- 105,371 105,371 ---------- ---------- ---------- PROPERTY, PLANT AND EQUIPMENT Electric generation 256,899 (123,981) 132,918 Electric transmission and distribution 1,224,644 1,224,644 Other electric facilities 128,388 128,388 Other property, plant, and equipment 5,772 5,772 ---------- ---------- ---------- 1,615,703 (123,981) 1,491,722 Less: Accumulated depreciation 626,080 (34,512) 591,568 ---------- ---------- ---------- Net plant in service 989,623 (89,469) 900,154 Construction work-in-progress 46,025 46,025 Leased nuclear fuel, at amortized cost 30,391 30,391 ---------- ---------- ---------- 1,066,039 (89,469) 976,570 ---------- ---------- ---------- DEFERRED CHARGES AND OTHER ASSETS Recoverable stranded costs 988,273 988,273 Unrecovered purchased power costs 28,923 28,923 Deferred recoverable income taxes 21,867 21,867 Unrecovered New Jersey state excise taxes 22,567 22,567 Deferred debt refinancing costs 13,574 13,574 Deferred other postretirement benefit costs 32,479 32,479 Unamortized debt expense 14,197 14,197 Other 20,595 20,595 ---------- ---------- ---------- 1,142,475 1,142,475 ---------- ---------- ---------- TOTAL ASSETS $2,654,659 $ (89,469) $2,565,190 ========== ========== ==========
2 ATLANTIC CITY ELECTRIC COMPANY PRO FORMA CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
As of December 31, 1999 -------------------------------------------------------- Proforma Actual Balances Proforma Balances per the Transfer of after Transfer F/S Assets of Assets --------------- ----------- -------------- CAPITALIZATION AND LIABILITIES CURRENT LIABILITIES Short-term debt $ 30,000 $ 30,000 Long-term debt due within one year 46,075 46,075 Variable rate demand bonds 22,600 22,600 Accounts payable 62,169 62,169 Taxes accrued -- -- Interest accrued 20,182 20,182 Dividends payable 18,071 18,071 Current capital lease obligation 15,480 15,480 Deferred energy supply costs 46,375 46,375 Above-market purchased energy contracts -- and other electric restructuring liabilities 7,992 7,992 Other 31,893 31,893 ---------- ---------- ---------- 300,837 300,837 ---------- ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Deferred income taxes, net 389,594 (11,658) 377,936 Regulatory liability for New Jersey income tax benefit 49,262 49,262 Above-market purchased energy contracts other electric restructuring liabilities 16,921 16,921 Deferred investment tax credits 39,608 (599) 39,009 Long-term capital lease obligation 14,911 14,911 Pension benefit obligation 20,309 20,309 Other postretirement benefit obligation 42,952 42,952 Other 22,381 22,381 ---------- ---------- ---------- 595,938 (12,257) 583,681 ---------- ---------- ---------- CAPITALIZATION Common stock, $3 par value; shares authorized: 25,000,000 ; shares outstanding: 18,320,937 54,963 54,963 Additional paid-in capital 493,007 (77,212) 415,795 Retained earnings 129,981 129,981 ---------- ---------- ---------- Total common stockholder's equity 677,951 (77,212) 600,739 Preferred stock subject to mandatory redemption 23,950 23,950 Preferred stock not subject to mandatory redemption 6,231 6,231 Preferred stock of subsidiary trusts subject to mandatory redemption 95,000 95,000 Long-term debt 954,752 954,752 ---------- ---------- ---------- 1,757,884 (77,212) 1,680,672 ---------- ---------- ---------- TOTAL CAPITALIZATION AND LIABILITIES $2,654,659 $ (89,469) $2,565,190 ========== ========== ==========
3 NOTES TO EXHIBIT FS-5 Exhibit FS-5 includes the following: I. Pro Forma Consolidated Balance Sheets for Atlantic City Electric Company (Exhibit FS-5). The three (3) columns on each proforma balance sheet represent the following: Column 1: The actual consolidated balance sheet as of December 31, 1999. Column 2: The pro forma effects of the transfer of certain generating assets to affiliates as described in Item 1.A. "Introduction" of this filing. Column 3: The Consolidated Balance Sheets as of December 31, 1999 on a pro forma basis to include the expected effects of the transfer of certain generating assets. -----END PRIVACY-ENHANCED MESSAGE-----