-----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, RboYf6b/HEevzkQyhipJ8cASdUbDJh6bbXv/2IydlfBns11fzKxCfWcrOX3/1Sl9 1zdXiufg7vndLER/Crt29g== 0000023426-01-500005.txt : 20010702 0000023426-01-500005.hdr.sgml : 20010702 ACCESSION NUMBER: 0000023426-01-500005 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT LIGHT & POWER CO CENTRAL INDEX KEY: 0000023426 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 060303850 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: SEC FILE NUMBER: 070-09905 FILM NUMBER: 1672186 BUSINESS ADDRESS: STREET 1: SELDEN STREET CITY: BERLIN STATE: CT ZIP: 06037-1616 BUSINESS PHONE: 8606655000 U-1 1 formu1050101.txt File No. _________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM U-1 APPLICATION/DECLARATION WITH RESPECT TO CERTAIN TRANSACTIONS RELATING TO THE EXTENSION OF AN ACCOUNTS RECEIVABLE PURCHASE AND SALE PROGRAM Under THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 THE CONNECTICUT LIGHT AND POWER COMPANY CL&P RECEIVABLES CORPORATION 107 Selden Street Berlin, Connecticut 06037-5457 (Name of companies filing this statement and address of principal executive offices) NORTHEAST UTILITIES (Name of top registered holding company parent of declarant) Gregory B. Butler, Esq. Vice President, Secretary and General Counsel Northeast Utilities Service Company P.O. Box 270 Hartford, Connecticut 06141-0270 (Name of address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to: Randy A. Shoop Jeffrey C. Miller Treasurer Assistant General Counsel The Connecticut Light and Power Company Northeast Utilities Service Company P.O. Box 270 P.O. Box 270 Hartford, Connecticut 06141-0270 Hartford, Connecticut 06141-0270 ITEM 1 DESCRIPTION OF PROPOSED TRANSACTIONS 1. The Connecticut Light and Power Company ("CL&P" or the "Company"), a wholly owned electric utility subsidiary of Northeast Utilities ("NU"), a registered holding company, and CL&P Receivables Corporation, a wholly-owned special purpose subsidiary of CL&P ("CRC"), hereby submit this Application/Declaration pursuant to the Public Utility Holding Company Act of 1935, as amended (the "Act"), with respect to certain transactions related to the extension of CL&P's accounts receivable purchase and sale program and related transactions. As set forth in paragraph 6 below, the Company intends to extend the term of the facility to July 8, 2004 to enable it to continue to accelerate its receipt of anticipated cash collections from the sale of fractional, undivided ownership interests in customer indebtedness and related assets. 2. CL&P previously sought, and received, approval from the Commission for five transactions in connection with its receivables program ("Program"). See The Connecticut Light and Power Company, Holding Company Act Release No. 35-26761, dated September 29, 1997 in File No. 70-9045 (the "Order"). Under the Order, authority was granted for (i) CL&P to organize CRC, (ii) CRC to issue shares of common stock, (iii) CL&P to acquire shares of CRC common stock, (iv) CL&P to make, directly and indirectly, initial and general equity contributions to CRC and (v) CRC to pay dividends to CL&P from time to time out of capital to achieve the optimum balance of capital to achieve economic efficiency. Transactions (i) through (iv) (with respect to initial equity contributions) have been undertaken and by their nature are permanent, while (v) by its nature is an ongoing process as the Program moves forward. In the Application in File 70-9045, the Company stated that the Program would expire on July 11, 2001. In order to extend the Program, CL&P is now seeking authority to continue the actions set forth in (v) above through July 8, 2004, the proposed date of expiration of the extended Program. 3. The Program consists of two agreements . As extended to July 8, 2004, the Program will continue in place with the same provisions as present. The principal features of the Program are as follows: Under the first agreement, between CL&P and CRC (the "Company Agreement"), the Company sells or transfers as equity contributions from time to time all eligible categories of its billed and unbilled accounts received ("Receivables") and related assets ("Related Assets") to CRC. The purchase price paid by CRC for any Receivables and the Related Assets with respect thereto takes into account historical loss statistics on the Company's receivables pool and the purchaser's cost of funds. Under the second agreement, among Citicorp North America, Inc. (the "Agent"), Citibank, N.A. (the "Bank"), Corporate Asset Funding Company ("CAFCO," a Citibank affiliate, as "Purchaser") and CL&P (the "Agent" and "Originator") (the "CRC Agreement"), CRC sells its fractional undivided interests ("Receivable Interests") in the Receivables to the Purchaser from time to time. Such Receivable Interests may be funded and repaid on a revolving basis. The size of such Receivable Interests is calculated according to a formula, which includes reserves based on a multiple of historical losses, maximum customer concentrations and carrying and other costs associated with the agreements. Such formula also takes into account the cost of servicing, but this portion of the price is returned to CL&P in the form of a collection agent fee. 4. The availability of Receivables and Related Assets varies from time to time in accordance with electric energy use by CL&P's customers. As a result of this and certain other factors, the funds CRC has available to make a purchase at any time may not match the cost of Receivables and Related Assets available. The program includes certain mechanisms to accommodate this mismatch. When the amount of Receivables and Related Assets originated by CL&P exceeds the amount of cash CRC has available, either CRC will make the purchase and owe the balance of the purchase price to CL&P on a deferred basis (the unpaid portion will accrue interest or the purchase price will involve a discount to reflect the deferral), or CL&P will make a capital contribution to CRC in the form of the Receivables and Related Assets for which CRC lacks purchase price funds at that time. Conversely, if CRC develops a substantial cash balance (due to collections of previously transferred Receivables exceeding the balance of newly created Receivables available for purchase), CRC will likely dividend the excess cash to CL&P. Such dividends may represent a return of previous capital contributions by CL&P to CRC and are the jurisdictional reason for this filing. See Rule 46(a). Through these mechanisms, CRC does not itself retain substantial cash balances at any time and substantially all cash realized from the collection of the Receivables (net of the costs of the program and any reductions in the outstanding balance of Receivable Interests) is made available to CL&P. All fees, commissions and expenses expected to be paid or incurred by CL&P and CRC in connection with the extension of the receivables program are provided in Exhibit H. 5. The Company and CRC will continue to be obligated to reimburse the Purchaser and the Agent for various costs and expenses associated with the Company Agreement and the CRC Agreement upon extension of the program. CRC will also continue to be required to pay to the Agent certain fees for services in connection with such agreements. See Exhibit H. 6. The arrangements under the Company Agreement and the CRC Agreement are scheduled to terminate on July 11, 2001, and the Company is working with the Agent, the Bank and the Purchaser to extend the program through July 8, 2004. CRC may, following written notice to the Agent, terminate in whole or reduce in part the unused portion of its purchase limit in accordance with the terms and conditions of the CRC Agreement. The CRC Agreement allows the Purchaser to assign all of its rights and obligations under the CRC Agreement (including its Receivable Interests and the obligation to fund Receivable Interests) to other persons. However, any such assignment will not change the nature of the obligations of CL&P or CRC under the Company Agreement and the CRC Agreement. All references herein to the Purchaser include reference to its assignees. 7. CL&P intends that the extension of the arrangements described above will continue to permit it to accelerate its receipt of cash collections from accounts receivable, thus affording the company continuing flexibility in meeting its financing needs on a cost-effective basis. Other Matters 8. Except in accordance with the Act, neither NU nor any subsidiary thereof (a) has acquired an ownership interest in an exempt wholesale generator ("EWG") or a foreign utility company ("FUCO") as defined in Sections 32 and 33 of the Act, or (b) now is or as a consequence of the transactions proposed herein will become a party to, or has or will as a consequence of the transactions proposed herein have a right under, a service, sales, or construction contract with an EWG or a FUCO. None of the proceeds from the transactions proposed herein will be used by NU and its subsidiaries to acquire any securities of, or any interest in, an EWG or a FUCO. 9. NU currently meets all of the conditions of Rule 53(a), except for clause (1). At March 31, 2001, NU's "aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $469.5 million, or approximately 78% of NU's average "consolidated retained earnings" ("CREs"), also as defined in Rule 53(a)(1), for the four quarters ended March 31, 2001 ($605.2 million). With respect to Rule 53(a)(1), however, the Commission has determined that NU's financing of its investment in Northeast Generation Company ("NGC"), NU's only current EWG or FUCO, in an amount not to exceed $481 million or 83% of its "average consolidated retained earnings" would not have either of the adverse effects set forth in Rule 53(c). See Northeast Utilities, Holding Company Act Release No. 27148, dated March 7, 2000 (the "Rule 53(c) Order"). NU continues to assert that its EWG investment in NGC will not adversely affect the System. 10. In addition, NU and its subsidiaries are in compliance and will continue to comply with the other provisions of Rule 53(a) and (b), as demonstrated by the following determinations: (i) NGC maintains books and records, and prepares financial statements, in accordance with Rule 53(a)(2). Furthermore, NU has undertaken to provide the Commission access to such books and records and financial statements, as it may request; (ii) No employees of NU's public utility subsidiaries have rendered services to NGC; (iii) NU has submitted (a) a copy of each Form U-1 and Rule 24 certificate that has been filed with the Commission under Rule 53 and (b) a copy of Item 9 of the Form U5S and Exhibits G and H thereof to each state regulator having jurisdiction over the retail rates of NU's public utility subsidiaries; (iv) Neither NU nor any subsidiary has been the subject of a bankruptcy or similar proceeding unless a plan of reorganization has been confirmed in such proceeding; (v) NU's average CREs for the four most recent quarterly periods have not decreased by 10% or more from the average for the previous four quarterly periods; and (vi) In the previous fiscal year, NU did not report operating losses attributable to its investment in EWGs/FUCOs exceeding 3% of NU's consolidated retained earnings. 11. The proposed transactions, considered in conjunction with the effect of the capitalization and earnings of NU's EWGs and FUCOs, would not have a material adverse effect on the financial integrity of the NU system, or an adverse impact on NU's public utility subsidiaries, their customers, or the ability of State commissions to protect such public utility customers. The Rule 53(c) Order was predicated, in part, upon an assessment of NU's overall financial condition which took into account, among other factors, NU's consolidated capitalization ratio and its retained earnings, both of which have improved since the date of the order. NGC, NU's only EWG investment (it has no FUCO investment), has been profitable for the quarterly periods ending June 30, 2000, September 30, 2000, December 31, 2000, and March 31, 2001, respectively (NGC was acquired in March 2000). As of December 31, 1999, the most recent period for which financial statement information was evaluated in the Rule 53(c) Order, NU's consolidated capitalization consisted of 35.3% common equity and 64.7% debt (including long and short-term debt, preferred stock, capital leases and guarantees). As of June 30, 2000, the end of the first quarter after the issuance of the Rule 53(c) Order, the consolidated capitalization ratios of NU, with consolidated debt including all short-term debt and non-recourse debt of the EWG, were as follows: As of June 30, 2000 (Thousands of Dollars) % Common shareholders' equity 2,365,854 36.9 Preferred stock 277,700 4.3 Long-term and short-term debt 3,768,353 58.8 6,411,907 100.0 The consolidated capitalization ratios of NU as of September 30, 2000, with consolidated debt including all short-term debt and non-recourse debt of the EWG, were as follows: As of September 30, 2000 (Thousands of Dollars) % Common shareholders' equity 2,413,785 37.9 Preferred stock 277,700 4.3 Long-term and short-term debt 3,683,667 57.8 6,375,152 100.0 The consolidated capitalization ratios of NU as of December 31, 2000, with consolidated debt including all short-term debt and non-recourse debt of the EWG, were as follows: As of December 31, 2000 (Thousands of Dollars) % Common shareholders' equity 2,218,583 36.1 Preferred stock 276,968 4.5 Long-term and short-term debt 3,653,843 59.4 6,149,394 100.0 The consolidated capitalization ratios of NU as of March 31, 2001, with consolidated debt including all short-term debt and non-recourse debt of the EWG, were as follows: As of March 31, 2001 (Thousands of Dollars) % Common shareholders' equity 2,319,082 31.0 Preferred stock 240,468 3.2 Long-term and short-term debt 3,479,304 46.6 Rate Reduction Bonds 1,438,400 19.2 7,477,254 100.0 NU's consolidated retained earnings have decreased from $642.1 million as of March 31, 2000 to $593.6 million as of March 31, 2001, mainly as a result of an after-tax write-off of $225 million by Public Service Company of New Hampshire as part of a restructuring settlement and also recognition of a loss due to a decision by the Federal Energy Regulatory Commission lowering the price for acquiring installed generating capacity in New England, but increased by $112 million in the quarter ended March 31, 2001. NGC (NU's only EWG or FUCO) has made a positive contribution to earnings since March 31, 2000 by contributing $33.9 million to NU's retained earnings with revenues of $135.6 million and net income of $34.5 million. Accordingly, since the date of the Rule 53(c) Order, the capitalization and earnings attributable to NU's investments in EWGs and FUCOs has not had an adverse impact on NU's financial integrity. ITEM II FEES, COMMISSIONS, AND EXPENDITURES 12. The estimated fees, commissions, and expenses paid or incurred, or to be paid or incurred, directly or indirectly, in connection with the proposed transactions by the Company or any associate company thereof are specified in Exhibit H. 13. None of such fees, commissions, or expenses are to be paid to any associate company or affiliate of the Companies or any affiliate of any such associate company except for financial, legal, and other services to be performed at cost by NUSCO, an affiliated service company. ITEM III APPLICABLE STATUTORY PROVISIONS 14. The payment of dividends by CRC to CL&P, to the extent such dividends may be considered to be paid out of capital or unearned surplus, is subject to Section 12(c) of the Act and Rule 46 (a) thereunder. 15. The Company believes that no other aspects of the transactions described herein are subject to the Commission's jurisdiction. The Company believes that its sales of Receivables to CRC are not sales of a "security" as defined in Section 2(a)(16) of the Act or "utility assets" as defined Section 2(a)(18). Furthermore, the Company believes that any additional capital contributions to CRC in the form of Receivables and Related Assets will be exempt from regulation under Rule 45(b)(4) and that CRC's sales of Receivable Interests, to the extent such may be considered the issuance of a debt security, are exempt from regulation under Rule 52(b). ITEM IV REGULATORY APPROVAL 16. In an application to be filed with the Connecticut Department of Public Utility Control ("DPUC"), the Company will seek approval for certain aspects of the extension of the receivables arrangement described herein. A copy of this filing is being filed as Exhibit D.1 hereto. A copy of the order of the DPUC will be filed by amendment as Exhibit D.2 hereto upon issuance. The DPUC previously approved proposed sales by CL&P under the earlier agreements. See File No. 70-9045, Exhibit D.2. 17. No other state commission has jurisdiction with respect to any aspect of the proposed transaction, and no Federal commission other than the Securities and Exchange Commission has jurisdiction with respect to any aspect thereof. ITEM V PROCEDURE 18. The Company respectfully requests the Commission's approval, pursuant to this Application/Declaration, of CRC's payment of dividends to CL&P as described herein, whether under the sections of the Act and rules thereunder enumerated in Item III or otherwise. The Company also requests the Commission's approval as may be necessary of any other aspect of the transactions described in this Application/Declaration under the appropriate provisions of the Act or rules thereunder. 19. The Company hereby waives any recommended decision by a hearing officer or by any other responsible officer of the Commission and waives the 30-day waiting period between the issuance of the Commission's order and the date on which it is to become effective, since it is desired that the Commission's order, when issued, become effective forthwith. The Company consents that the Office of Public Utility Regulation within the Division of Investment Management may assist in the preparation of the Commission's decision and/or order unless the Office opposes the transactions covered by this Application. It is requested that the Commission issue an order authorizing the jurisdictional transactions proposed herein at the earliest practicable date but in any event not later than [40] days from filing date. It is further requested that (i) there not be a recommended decision by an Administrative Law Judge or other responsible officer of the Commission, (ii) the Office of Public Utility Regulation be permitted to assist in the preparation of the Commission's decision, and (iii) the Commission's order become effective forthwith upon issuance. ITEM VI EXHIBITS AND FINANCIAL STATEMENTS (a) Exhibits A. Not applicable. B. Not applicable. C. Not applicable D.1 Application to the DPUC for approval of the extension of the transactions described herein. D.2 Copy of the Order of the DPUC with respect to the extension of CL&P's proposed transactions. (To be filed by amendment.) E. Not applicable. F. Opinion of Counsel to CL&P. (To be filed by amendment.) G. Not Applicable. H. Estimated Expenses--CL&P and CRC. I. Proposed notice of the proceeding initiated by the filing of this Application/Declaration. VII INFORMATION AS TO ENVIRONMENTAL EFFECTS (a) The issuance of an order with respect to this Application/Declaration is not a major federal action significantly affecting the quality of the human environment. (b) No Federal agency has prepared or is preparing an environmental impact statement with respect to the subject transactions. SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned have duly caused this statement to be signed on their behalf by the undersigned thereunto duly authorized. Dated: June 29, 2001 THE CONNECTICUT LIGHT AND POWER COMPANY CL&P RECEIVABLES CORPORATION By /s/ Randy A. Shoop Randy A. Shoop Treasurer [FN] General equity contributions by CL&P to CRC subsequent to its initial capitalization are exempt from regulation under Rule 45(b)(4) and thus authority is not being sought for such actions contemplated by transaction (iv). The only funds available to CRC will continue to be those resulting from its participation in the program and CL&P's capital contributions to it. EX-99 2 exhschofestfeesetc.txt Exhibit H Page 1 of 1 SCHEDULE OF ESTIMATED FEES, COMMISSIONS AND EXPENSES MARCH 31, 2001 THE CONNECTICUT LIGHT AND POWER COMPANY Legal Fees Counsel to the Purchaser and Agent $ 20,000 Counsel to the Applicants 50,000 Northeast Utilities Service Company 15,000 (Financial, Accounting, Legal and Other Fees and Services) Total Estimate of Fees, Commissions and Expenses $ 85,000 CL&P RECEIVABLE CORPORATION Independent Director Fees $ 10,000 Audit Fees 15,000 Total Estimate of Fees, Commissions and Expenses $ 25,000 EX-99 3 newdoc.txt EXHIBIT I PROPOSED FORM OF NOTICE (Release No. 35 - ; ) APPLICATION /DECLARATION WITH RESPECT TO CERTAIN TRANSACTIONS RELATING TO THE EXTENSION OF AN ACCOUNTS RECEIVABLE PURCHASE AND SALE PROGRAM UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 , 2001 The Connecticut Light and Power Company ("CL&P" or the "Company"), a wholly owned electric utility subsidiary of Northeast Utilities ("NU"), a public utility holding company, and CL&P Receivables Corporation ("CRC"), a wholly-owned special purpose subsidiary of CL&P, have filed an Application/Declaration pursuant to Section 12(c) and Rule 46 of the Public Utility Holding Company Act of 1935, as amended (the "Act"). CL&P and CRC are located at 107 Selden Street, Berlin, CT 06037-5457. CL&P previously sought, and received, approval from the Commission for five transactions in connection with its receivables program ("Program"). See The Connecticut Light and Power Company, Holding Company Act Release No. 35-26761, dated September 29, 1997 in File No. 70-9045 (the "Order"). Under the Order, authority was granted for (i) CL&P to organize CRC, (ii) CRC to issue shares of common stock, (iii) CL&P to acquire shares of CRC common stock, (iv) CL&P to make, directly and indirectly, initial and general equity contributions to CRC and (v) CRC to pay dividends to CL&P from time to time out of capital to achieve the optimum balance of capital to achieve economic efficiency. Transactions (i) through (iv) (with respect to initial equity contributions) have been undertaken and by their nature are permanent, while (v) by its nature is an ongoing process as the Program moves forward. In order to extend the Program beyond July 11, 2001, CL&P is now seeking authority to continue the actions set forth in (v) above, and any other aspect of the proposed transactions for which approval may be necessary, through July 8, 2004, the proposed date of expiration of the extended Program. The Program consists of two agreements . As extended to July 8, 2004, the Program will continue in place with the same provisions as present. The principal features of the Program are as follows: Under the first agreement, between CL&P and CRC (the "Company Agreement"), the Company sells or transfers as equity contributions from time to time all eligible categories of its billed and unbilled accounts received ("Receivables") and related assets ("Related Assets") to CRC. The purchase price paid by CRC for any Receivables and the Related Assets with respect thereto takes into account historical loss statistics on the Company's receivables pool and the purchaser's ("Purchaser") cost of funds. Under the second agreement (the "CRC Agreement"), CRC sells fractional undivided interests ("Receivable Interests") in the Receivables to the Purchaser from time to time. The availability of Receivables and Related Assets varies from time to time in accordance with electric energy use by CL&P's customers. As a result of this and certain other factors, the funds CRC has available to make a purchase at any time may not match the cost of Receivables and Related Assets available. The Program includes certain mechanisms to accommodate this mismatch. When the amount of Receivables and Related Assets originated by CL&P exceeds the amount of cash CRC has available, either CRC will make the purchase and owe the balance of the purchase price to CL&P on a deferred basis (the unpaid portion will accrue interest or the purchase price will involve a discount to reflect the deferral), or CL&P will make a capital contribution to CRC in the form of the Receivables and Related Assets for which CRC lacks purchase price funds at that time. Conversely, if CRC develops a substantial cash balance (due to collections of previously transferred Receivables exceeding the balance of newly created Receivables available for purchase), CRC will likely dividend the excess cash to CL&P. Such dividends may represent a return of previous capital contributions by CL&P to CRC and are the jurisdictional reason for this Application/Declaration. Through these mechanisms, CRC does not itself retain substantial cash balances at any time and substantially all cash realized from the collection of the Receivables (net of the costs of the program and any reductions in the outstanding balance of Receivable Interests) is made available to CL&P. The Company and CRC will continue to be obligated to reimburse the Purchaser and its agent ("Agent") for various costs and expenses associated with the Company Agreement and the CRC Agreement upon extension of the Program. CRC will also continue to be required to pay to the Agent certain fees for services in connection with such agreements. The arrangements under the Company Agreement and the CRC Agreement are scheduled to terminate on July 11, 2001, and the Company is working with the parties to the agreements to extend the program through July 8, 2004. CRC may, following written notice to the Agent, terminate in whole or reduce in part the unused portion of its purchase limit in accordance with the terms and conditions of the CRC Agreement. The CRC Agreement allows the Purchaser to assign all of its rights and obligations under the CRC Agreement (including its Receivable Interests and the obligation to fund Receivable Interests) to other persons. However, any such assignment will not change the nature of the obligations of CL&P or CRC under the Company Agreement and the CRC Agreement. As described in the Application/Declaration, CL&P intends that the above- described transactions will continue to permit it to accelerate its receipt of cash collections from accounts receivable and thereby meet its short term cash needs. The Application/Declaration and any amendments thereto are available for public inspection through the Commission's Office of Public Reference. Any interested persons wishing to comment or request a hearing on the Application should submit their views in writing by , 2001, to the Secretary, Securities and Exchange Commission, Washington, D.C. 20549, and serve a copy on the Company and CRC at the address specified above. Proof of service (by affidavit or, in the case of any attorney at law, by certificate) should be filed with the request. Any request for hearing shall identify specifically the issues of fact or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in this matter. After said date, the Application/Declaration, as filed or as it may be further amended, may be granted. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Secretary EX-99 4 n41226702_6.txt Exhibit D.1 STATE OF CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL SUPPLEMENTAL APPLICATION OF THE CONNECTICUT LIGHT AND POWER COMPANY WITH RESPECT TO THE SALE OF ACCOUNTS RECEIVABLE DOCKET NO. 96-05-24 I. Background 1. By Decision dated June 5, 1996, in the above referenced docket, the Department of Public Utility Control (the "Department") approved the transactions (collectively, the "Receivables Program") described in a letter dated May 20, 1996 and subsequent submissions by The Connecticut Light and Power Company ("CL&P" or the "Company"), a public service company within the meaning of Section 16-1 of the General Statutes of Connecticut, revision of 1958, as amended (the "Connecticut General Statutes"), with respect to the sale from time to time of fractional undivided interests ("Receivable Interests") in all eligible categories of CL&P's billed and unbilled accounts receivable and related assets ("Receivables"), pursuant to Section 16-43 of the Connecticut General Statutes. 2. In a supplemental application dated June 30, 1997 ("Supplemental Application I"), filed pursuant to Section 16-43 of the Connecticut General Statutes, CL&P requested that the Department approve the formation of CL&P Receivables Corporation ("CRC") and the restructuring of the Receivables Program from a one-step to a two-step sales transaction. By Decision dated September 10, 1997 ("Supplemental Decision I"), the Department approved the formation of CRC and the restructuring of the Receivables Program. 3. By supplemental application filed with the Department on September 29, 1998 ("Supplemental Application II"), CL&P requested the Department's approval for the payment of increased facility fees under the Receivables Program. By Decision dated November 28, 1998 ("Supplemental Decision II"), the Department approved an increase in such fees from 0.25% to 0.375%. 4. By Decision dated December 13, 2000, the Department reopened this docket pursuant to Section 16-9 of the Connecticut General Statutes for the limited purpose of considering the termination of certain reporting requirements set forth in Order Nos. 4 and 6 of Supplemental Decision I. By decision dated February 7, 2001, the Department terminated the reporting requirements under such Order Nos. 4 and 6. 5. By this application CL&P is seeking the Department's approval for the extension of the Receivables Program until July 8, 2004. II. The Receivables Program 1. The arrangements for the Receivables Program are set forth in two agreements. Under the first agreement (the "Company Agreement"), CL&P sells or transfers as an equity contribution from time to time Receivables to CRC. The purchase price for any Receivables so sold reflects a discount based on assumptions concerning the estimated collection period of the Receivables, collection costs and collection risks as well as CRC's anticipated funding costs. Under the second agreement (the "CRC Agreement"), CRC sells Receivable Interests to either Corporate Asset Funding Company, Inc. ("CAFCO") or Citibank, N.A. and any other bank or eligible financial institution that may become a party to the CRC Agreement in accordance with its provisions (the "Banks") or their respective successors and assigns (collectively, the "Purchaser") from time to time. Such Receivable Interests may be funded and repaid on a revolving basis. The size of Receivable Interests are calculated according to a formula that includes reserves based on a multiple of historical losses, carrying costs and other costs associated with the agreements. 2. The Company Agreement was amended and the CRC Agreement was amended and restated in connection with the issuance by Connecticut RRB Special Purpose Trust CL&P-1 of rate reduction bonds with respect to certain of CL&P's stranded costs pursuant to Sections 16-245e and 16-245f of the Connecticut General Statutes. Such amendments, which were consistent with the terms of Supplemental Decision I and Supplemental Decision II, make it clear that the RRB Charge authorized by the Department in its Decision dated November 8, 2000 and supplemented on December 12, 2000 and March 12, 2001, in Docket No. 00-05-01 is not part of any Receivables or Receivable Interests sold in the Receivables Program. Such amendments also reduced the maximum amount of Receivable Interests that can be outstanding under the Receivables Program at any time from $200,000,000 to $100,000,000. 3. A copy of each of the Company Agreement, the amendment to the Company Agreement referred to above and a draft of the amendment providing for the extension of the Company Agreement are filed herewith as Exhibits B.1 through B.3, respectively. A copy of each of the amended and restated CRC Agreement as currently in effect and a draft of the amendment providing for the extension of the CRC Agreement are filed herewith as Exhibits C.1 and C.2, respectively. 4. The availability of Receivables varies from time to time in accordance with electric energy use by CL&P's customers. As a result of this and other factors important to the overall structure of the Receivables Program, the funds CRC has available to make a purchase at any time may not match the cost of Receivables available. The Receivables Program includes certain mechanisms to accommodate this mismatch. When the amount of Receivables originated by CL&P exceeds the amount of cash CRC has available, either CRC makes the purchase and owes the balance of the purchase price to CL&P on a deferred basis, or CL&P makes a capital contribution to CRC in the form of the Receivables for which CRC lacks purchase price funds at that time. Conversely, if CRC develops a substantial cash balance (due to collections of previously transferred Receivables exceeding the balance of newly created Receivables available for purchase), CRC dividends the excess cash to CL&P. 5. Under the CRC Agreement, purchases may be funded by the Purchaser's issuance of commercial paper. The minimum purchase price for a Receivable Interest which may be sold in a single transaction is $5,000,000 with a purchase limit of $100,000,000. 6. Citicorp North America, Inc., as agent for the Purchaser under the CRC Agreement (the "Agent"), has the right to appoint a collection agent on behalf of the Purchaser and CRC, to administer and collect receivables and to notify the obligors of the sale of their receivables, at the Agent's option. CL&P has been appointed as the initial collection agent, and only under certain adverse conditions can the Agent appoint a successor collection agent. Therefore, CL&P's customers have not experienced, and are not expected to experience, any changes in servicing and collection procedures from what they would otherwise be. 7. Certain obligations under the Company Agreement create limited recourse against CL&P. Such recourse claims include liability for (i) failure to transfer to CRC a first priority ownership interest in the Receivables, (ii) CL&P's breach of its representations, warranties or covenants, and (iii) certain indemnity obligations. In order to secure these obligations, CL&P grants to the Agent a lien on, and security interest in, any rights which CL&P may have in respect of Receivables. The CRC Agreement creates comparable recourse obligations against CRC, and CRC grants a security interest in the Receivables and certain other rights and remedies (including its rights and remedies under the Company Agreement) to the Agent, for the benefit of the Purchaser, to secure such recourse obligations. Neither CRC's nor the Purchaser's recourse to CL&P includes any rights against CL&P should customer defaults on the Receivables result in collections attributable to the Receivable Interests sold to the Purchaser being insufficient to reimburse the Purchaser for the purchase price paid by it for the Receivable Interests and its anticipated yield. The Purchaser bears the risk for any credit losses on the Receivables which exceed the reserves for such losses included in the Receivable Interests. 8. The Company and CRC are obligated to reimburse the Purchaser, the Agent and the Banks for various costs and expenses associated with the Company Agreement and the CRC Agreement. The Company and CRC are also required to pay to the Agent certain fees for services in connection with such agreements. CL&P as collection agent receives fees from CRC and/or the Purchaser. However, CL&P does not pay any fees to CRC. See Exhibit E for details of fees, commissions and expenses. While CRC may realize a profit on these transactions, such profit will inure to the benefit of CL&P since CL&P wholly owns CRC. 9. CL&P believes that funding under the Receivables Program will continue to be more advantageous than other sources of funds available to CL&P. If the Receivables Program is fully utilized, its current cost (which is based on current commercial paper rates) is approximately equal to the 30- day LIBOR rate plus 0.285%. Included in this cost are a liquidity fee of 0.20 % and an investment fee of 0.01%, both of which are payable regardless of whether the facility is used. (The liquidity fee could increase to as high as 0.325% if CL&P's credit rating were to decline but, as indicated in Paragraph 3 of Part I of this Supplemental Application, the Department has authorized such fees of up to 0.375%.). By comparison, the cost of borrowing under CL&P's committed bank line is currently equal to the 30-day LIBOR rate plus 0.875%. See Exhibit E for a complete listing of fees and expenses. 10. Under applicable accounting rules, utilization of the Receivables Program is reflected on CL&P's consolidated financial statements as a sale and not as the incurrence of debt. Accordingly, utilization of the Receivables Program does not result in any increased leverage for CL&P. 11. The CRC Agreement allows the Purchaser to assign all of its rights and obligations under the CRC Agreement to other persons, including the providers of its bank facilities. However, any such assignment will not change the nature of the obligations of CL&P or CRC under the Company Agreement and the CRC Agreement. 12. The Receivables Program has permitted CL&P to accelerate its receipt of cash collections from accounts receivable and thereby increase its ability to meet its short term cash needs. The purchase and sale transactions have provided and will continue to provide CL&P with needed financial flexibility. It is anticipated that the proceeds from this facility will be used for general corporate purposes, including repayment of outstanding debt. 13. The arrangements under the Company Agreement and the CRC Agreement currently are scheduled to terminate on July 11, 2001. 14. CL&P's restructuring of the Receivables Program in accordance with Supplemental Order I was subject to certain approvals of the Securities and Exchange Commission (the "SEC") under the Public Utility Holding Company Act of 1935, as amended, and CL&P is requesting the SEC to approve those aspects of the extension of the Receivables Program requiring SEC approval. The SEC's approval of CL&P's proposed extension of the Receivables Program is subject to CL&P's receipt of all necessary state regulatory approvals, including the approval of the Department hereunder. CL&P hereby waives the requirement under Section 16-43 of the Connecticut General Statutes that the Department act on this Supplemental Application within 30 days. However, CL&P is desirous of obtaining all necessary approvals as soon as possible because it will not be able to utilize the Receivables Program after July 11, 2001 until such approvals are obtained; accordingly, final approval of this Supplemental Application by the Department is respectfully requested on or before August 15, 2001. A copy of CL&P's application to the SEC in connection with the proposed extension is attached as Exhibit D. 15. The financial statements attached as Exhibits F (CL&P) and G (Northeast Utilities), include a balance sheet, income statement, statement of retained earnings, capital structure and explanation of pro forma adjustments which reflect the proposed transactions. III. Additional Information The following additional information is supplied as part of this Supplemental Application: A. The exact legal name of the Applicant and its principal place of business: The Connecticut Light and Power Company 107 Selden Street Berlin, Connecticut 06037-5457 CL&P is a corporation specially chartered by the General Assembly of the State of Connecticut. B. The name, title, address, and telephone number of the attorneys and others to whom correspondence or communications in regard to this Supplemental Application are to be addressed: Randy A. Shoop Assistant Treasurer-Finance Northeast Utilities Service Company P.O. Box 270 Hartford, Connecticut 06141-0270 Telephone: (860) 665-3258 Fax: (860) 665-3847 and Jane P. Seidl Senior Counsel The Connecticut Light & Power Company c/o Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141 Telephone: (860) 665-5051 Fax: (860) 665-5504 and Thomas R. Wildman Day, Berry & Howard LLP CityPlace Hartford, Connecticut 06103-3499 Telephone: (860) 275-0114 Fax: (860) 275-0343 C. A concise and explicit statement of facts on which the Department is expected to rely in granting this Supplemental Application. 1. As a result of CL&P's determination that it would be beneficial to continue to have the ability to sell Receivable Interests in order to provide it with flexibility in meeting its short term cash needs, CL&P proposes to extend its existing accounts receivable sales program on the same terms as previously approved by the Department. 2. Sales of accounts receivable by CL&P permit the acceleration by 30 to 60 days of anticipated income through the conversion of accounts receivable to cash. The proposed transactions will not result in a rate increase to CL&P's retail customers now or in the future. Furthermore, CL&P does not expect its customers to experience any change in the procedures to service or collect on outstanding accounts since it is intended that CL&P will continue to serve as the collection agent for any accounts receivable sold under the program and can be removed as such collection agent only in certain unlikely circumstances. Thus, it is expected that the program will continue to provide CL&P with important financial flexibility with no change in the rates charged or CL&P's provision of service to the public. 3. CL&P believes that the purchase and sale program provides it with desirable financial flexibility. CL&P meets its short-term funding requirements through a combination of internally generated funds, borrowing under existing credit facilities and external financing arrangements such as this program. 4. CL&P further expects that the program will continue to offer attractive pricing as compared to alternative funding sources. 5. An estimate of the expenses that CL&P will incur in connection with the proposed transaction is filed herewith as Exhibit E. IV. Exhibits 1. CL&P is filing herewith the exhibits listed in Appendix 1 hereto. This Supplemental Application and Appendix 1 set forth all information and exhibits required to be filed by CL&P and which CL&P deems necessary or desirable to support the granting of this Supplemental Application. CL&P, however, hereby reserves the right to file such testimony and additional exhibits as it may consider to be necessary or desirable. 2. CL&P requests that the Department waive the requirement that CL&P file with this Supplemental Application copies of its or its parent's most recent annual report and proxy statement to stockholders. V. Requests for Approval WHEREFORE, CL&P respectfully requests the Department's approval, pursuant to Section 16-43 of the Connecticut General Statutes, of the transactions described herein. Dated this 29th day of June, 2001. Respectfully submitted, THE CONNECTICUT LIGHT AND POWER COMPANY By: Randy A. Shoop Treasurer SUPPLEMENTAL APPLICATION OF THE CONNECTICUT LIGHT AND POWER COMPANY WITH RESPECT TO THE SALE OF ACCOUNTS RECEIVABLE DOCKET NO. 96-05-24 APPENDIX 1 LIST OF EXHIBITS A. CL&P's authorizing resolution for the proposed transactions. B. Company Agreement. B.1 Agreement dated as of September 30, 1997 B.2 Amendment No. 1 dated as of March 30, 2001 B.3 Draft of Proposed Extension Amendment C. CRC Agreement. C.1 Agreement as Amended and Restated as of March 30, 2001 C.2 Draft of Proposed Extension Amendment D. Application to the Securities and Exchange Commission. E. Schedule of Fees, Commissions and Expenses. F. The Connecticut Light and Power Company. F.1 Balance Sheet, per books and pro forma. F.2 Income Statement, per books and pro forma. F.3 Statement of Retained Earnings, per books and pro forma, and Statement of Capital Structure per books and pro forma. F.4 Explanation of Pro Forma Adjustments. G. Northeast Utilities and Subsidiaries. G.1 Consolidated Balance Sheet, per books and pro forma. G.2 Consolidated Income Statement, per books and pro forma. G.3 Consolidated Statement of Retained Earnings, per books and pro forma, and Consolidated Statement of Capital Structure, per books and pro forma. G.4 Explanation of Pro Forma Adjustments. [FN] The only funds available to CRC are those resulting from its participation in the program and CL&P's capital contributions to it. -----END PRIVACY-ENHANCED MESSAGE-----