-----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, EfA5Nzgn64ScuDzuNszAWbXkwNNP1337sRSjVzWTbeEH2h2KKEJ8QdFRTVaJg4M+ k0noPgtbqi5l8ozNTrLQzw== 0000072741-00-000025.txt : 20000207 0000072741-00-000025.hdr.sgml : 20000207 ACCESSION NUMBER: 0000072741-00-000025 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST UTILITIES SYSTEM CENTRAL INDEX KEY: 0000072741 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 042147929 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: SEC FILE NUMBER: 070-09543 FILM NUMBER: 524091 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 U-1/A 1 AMENDMENT NO. 5 TO FORM U-1 FILE No. 70-9543 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------------------ AMENDMENT NO. 5 TO FORM U-1 APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 NORTHEAST UTILITIES NORTHEAST GENERATION SERVICES 174 Brush Hill Avenue COMPANY West Springfield, MA 01090-0010 107 Selden Street Berlin, CT 06037 (Name of companies filing this statement and addresses of principal executive offices) NORTHEAST UTILITIES (Name of top registered holding company) Cheryl W. Grise, Esq. Senior Vice President, Secretary and General Counsel Northeast Utilities Service Company P.O. Box 270 Hartford, Connecticut 06141-0270 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to David R. McHale Jeffrey C. Miller, Esq. Vice President and Treasurer Assistant General Counsel Northeast Utilities Northeast Utilities Service Company Service Company P.O. Box 270 P.O. Box 270 Hartford, Connecticut Hartford, Connecticut 06141-0270 06141-0270 The Application/Declaration in this File, as amended, is hereby amended by the filing of the following exhibits: Item 6. EXHIBITS AND FINANCIAL STATEMENT (a) Exhibits b.1 Form of Service Agreement* b.3 Assumption Agreement* d.1 Connecticut Department of Public Utility Control Order d.2 Massachusetts Department of Telecommunications and Energy Order dated November 26, 1999 d.3 New Hampshire Public Utility Commission Order d.4 Massachusetts Department of Telecommunication and Energy Order dated January 31, 2000 f.1 Legal Opinion* g Financial Data Schedule* h.1 Form of Notice* (b) Financial Statements* * previously filed SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned companies have duly caused this Amendment to be signed on their behalf by the undersigned thereunto duly authorized. Date: February 4, 2000 NORTHEAST UTILITIES By: /s/ Randy A. Shoop Name: Randy A. Shoop Title: Assistant Treasurer-Finance NORTHEAST GENERATION SERVICES COMPANY By: /s/: Frederic Lee Klein Name: Frederic Lee Klein Title: Assistant Secretary EX-99.1 2 EXHIBIT D.1 TO U-1 Exhibit d.1 STATE OF CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL TEN FRANKLIN SQUARE NEW BRITAIN, CT 06051 DOCKET NO. 98-10- 08RE02 DPUC REVIEW OF THE CONNECTICUT LIGHT AND POWER COMPANY'S DIVESTITURE PLAN - SALE OF ASSETS September 15, 1999 By the following Commissioners: Donald W. Downes Glenn Arthur Linda Kelly Arnold DECISION TABLE OF CONTENTS I. INTRODUCTION 1 A. SUMMARY 1 B. BACKGROUND OF THE PROCEEDING 2 C. CONDUCT OF THE PROCEEDING 2 D. PARTIES AND INTERVENORS 2 II. DEPARTMENT ANALYSIS 3 A. JOINT APPLICATION 3 B. CL&P APPLICATION ON CALCULATION OF PROCEEDS 5 III.FINDINGS OF FACT 6 IV. Conclusion and Orders 7 A. CONCLUSION 7 B. ORDERS 7 DECISION I. INTRODUCTION A. SUMMARY In this Decision, the Department of Public Utility Control approves the sale of The Connecticut Light and Power Company's non-nuclear generating assets pursuant to the Company's Divestiture Plan as approved by the Department in the Decision dated January 8, 1999, in this docket. The sale of the generating assets was conducted by the Department through its consultant, J. P. Morgan, as authorized by Section 6 of Public Act 98-28, An Act Concerning Electric Restructuring. NRG, a wholly-owned subsidiary of Northern States Power Company, is purchasing 2235 MW of fossil generating assets consisting of four plants in Connecticut. NGC is purchasing 1057 MW of CL&P's hydroelectric generating assets as well as 272 MW representing the ownership share of Western Massachusetts Electric Company in the same assets, for a total of 1329 MW. NGC is an unregulated subsidiary of NU Enterprises, Inc., which is a wholly- owned subsidiary of Northeast Utilities, the parent company of CL&P and Western Massachusetts Electric. The sale to NGC involves 10 hydroelectric facilities in Connecticut and the Northfield Mountain System located in Massachusetts. The sale price for the hydroelectric facilities is $865.5 million. NGC as the purchaser of the hydroelectric facilities is required to observe certain land use conditions imposed by the Department in approving CL&P's divestiture plan. The Department also makes certain findings that are necessary for the generating assets to qualify as "exempt wholesale generators" since the purchasers intend to operate them solely for the purpose of wholesale sales. In addition, since Select Energy, an unregulated affiliate of CL&P, will be providing some or all of the electricity supply necessary for CL&P's standard offer service and will be contracting with NGC to do so, the Department makes other findings that the arrangement will benefit consumers; does not violate any State law; would not provide NGC with an unfair competitive advantage by virtue of its association with CL&P, and is in the public interest. In approving the sale of these assets, the Department finds that the sales price exceeds book value; the purchasers meet applicable qualifications established by federal law and regulation; the sale was conducted in accordance with the divestiture plan approved by the Department; the purchasers will preserve labor agreements in effect at the time of sale, and that the sale will result in a net benefit to customers. The Department also approves the methodology for CL&P to calculate the proceeds of the sale of assets with the exception of the Devon Station gas turbines lease. The Department reserves judgment on the lease and the dollar values of the other expenses until actual costs are known. B. BACKGROUND OF THE PROCEEDING By letter dated June 18, 1999, The Connecticut Light and Power Company (CL&P or Company) requested that the Department of Public Utility Control (Department) reopen the instant docket for the limited purpose of considering the results of the auction of the Company's non-nuclear generating assets and the sale of the assets. By Decision dated June 30, 1999, the Department reopened the instant docket for the limited purposes requested by the Company. By Joint Application dated July 19, 1999 (Joint Application), The Company, Western Massachusetts Electric Company (WMECO), J. P. Morgan Securities, Inc. (J. P. Morgan), NRG Energy, Inc. (NRG) and Northeast Generation Company (NGC) requested Department approval of the results of the auction of the non-nuclear generating assets of the Company pursuant to Public Act 98-28, An Act Concerning Electric Restructuring (Act). By separate application dated July 19, 1999 (CL&P Application), the Company requested Department approval of CL&P's proposed sale proceeds calculation. C. CONDUCT OF THE PROCEEDING By Notice of Reopened Hearing dated July 9, 1999, the Department indicated its intention to conduct a public hearing in this matter on August 16, 1999. By Notice of Rescheduled Hearing dated July 22, 1999, the hearing was rescheduled to August 11, 1999. The hearing was held on the date in the Department's offices, Ten Franklin Square, New Britain, CT. The Department issued a draft Decision in this matter on August 27, 1999. Parties and intervenors were provided an opportunity to provide written exceptions to and give oral argument on the draft Decision. D. PARTIES AND INTERVENORS Parties and intervenors to the original docket maintained their status in the instant proceeding. In addition, the Department designated J. P. Morgan, 60 Wall Street, New York, NY 10260-0060, NGC, P.O. Box 270, Hartford, CT 06141-0270, and NRG, 1221 Nicollet Mall, Suite 700, Minneapolis, MN 55403, as parties to this proceeding. II. DEPARTMENT ANALYSIS A. JOINT APPLICATION Section 6(b)(3) of the Act states that: the department shall not approve a sale [of a non-nuclear generating asset] unless (A) the sale price . . . equals or exceeds book value for the asset . . . , (B) the department determines the bidder meets all applicable qualifications established by federal law and regulation, (C) the sale is conducted in accordance with the divestiture plan as approved by the department, (D) the bidder proves to the satisfaction of the department that the bidder will preserve labor agreements in effect at the time of the sale, and (E) the sale will result in a net benefit to ratepayers, as determined by the department. Transfer in ownership of any asset shall not occur until the department determines the purchaser is fully qualified to provide electric generation services pursuant to section 16-245 of the general statutes, as amended by this act, or pursuant to applicable federal law and regulation. According to the Joint Application, the Company has entered into a Purchase and Sale Agreement with NRG to divest 2235 megawatts (MW) of fossil generating assets for $460 million subject to certain costs that will be known at closing. The Company and WMECO entered into a Purchase and Sales Agreement to divest 1329 MW of hydroelectric generation assets (1057 of CL&P's and 272 MW of WMECO's) to NGC, an unregulated affiliate of CL&P and WMECO. The hydroelectric assets have a sale price of $865.5 million subject to certain costs that will be known at closing. Joint Application, pp. 8 and 9. NGC is purchasing the hydroelectric facilities subject to land use restrictions set forth in agreements between CL&P and the Connecticut Department of Environmental Protection (DEP) and between CL&P and certain municipalities. Id., Exhibit 4, p. 7. All assets were sold subject to the Memorandum of Understanding between CL&P and DEP adopted in the January 8, 1999 Decision in the instant docket (Original Decision). A Company witness testified that the sale price of the fossil assets is 5.3 times book value and the winning bid for the hydroelectric assets is 6.9 times book value. Both these figures are as of December 31, 1998. Joint Application, Exhibit 2, p. 5. Based on the evidence presented, the Department finds that the sale prices for both the fossil and hydroelectric assets exceed their respective book values, as required by Section 6(b)(3)(A) of the Act. In accordance with Section 6(b)(2) of the Act, the Department hired J.P. Morgan to act as its agent and conduct the auction. J. P. Morgan filed testimony as part of the Joint Application describing the auction process and the steps taken to meet the requirements of the Original Decision, which approved CL&P's divestiture plan. J. P. Morgan further testified that the auction process was conducted in a commercially reasonable manner as required by Section 6(b)(1) of the Act, and met all the requirements of Section 6(b)(3) of the Act. Joint Application, Exhibit 1, pp. 2-19. J. P. Morgan also provided testimony at the hearing describing the auction process and how it and the results comported with the Original Decision and the Act. Tr. 8/11/99, pp. 996-1016. In the Original Decision, the Department designated the Utility Operations and Management Analysis Unit (UOMA) of the Department to oversee the auction process " . . . to ensure that the terms of this Decision [the Original Decision] and the Department's engagement with the auction agent are executed and the requirements in the Act are observed." Original Decision, pp. 5 and 6. On July 19, 1999, the Department received a position paper from UOMA (UOMA Position Paper), which recommended the results of the auction conducted by J. P. Morgan to the Department for approval. UOMA attested to the integrity of the auction process and the fairness of the results and indicated its support for the Joint Application. UOMA further attested that " . . . the Auction complied with each of the requirements of the . . . Decision . . ." and stated its belief that the requirements of the Act had been met. UOMA Position Paper, pp. 1-4. UOMA reiterated its position and urged Department approval of the auction results in direct testimony at the hearing. Tr. 8/11/99, pp. 1083-1088. OCC believes because of Department rulings on discovery issues, the record is inadequate as a basis for determining whether the auction was commercially reasonable or whether the sale comported with the Divestiture Plan as approved by the Department or whether the sale results in a net benefit to subscribers. OCC Brief, p. 6. The Department has reviewed the evidence presented, some of which was filed as confidential under protective order, and the testimony of the two entities charged with representing the Department in the auction process, J.P. Morgan and UOMA, and finds that the results of the auction meet the requirements of Section 6(b)(3)(B) through (E) of the Act. NRG and NGC intend to operate their respective generating facilities exclusively for wholesale sales rather than for sales to end use customers. Therefore, as a condition precedent to closing the respective sales, NRG and NGC each must obtain the determination from the Federal Energy Regulatory Commission (FERC) that it is an "exempt wholesale generator" (EWG) under Section 32 of the Public Utility Holding Company Act (PUHCA), 15 U.S.C. 79z- 5a(c). In this manner, both companies will be allowed to acquire and operate the purchased facilities without causing their parent companies to become subject to restrictions that PUHCA would impose. An eligible facility is one that is used for the generation of electric energy exclusively for sale at wholesale. Further, when the generating asset, formerly used for retail sales and reflected in a regulated utility's rate base is to be removed from rate base and no longer used for retail purposes, the state regulatory commission having jurisdiction over such facilities must make certain findings. The findings are "that allowing such facility to be an eligible facility (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law. . . . " 15 U.S.C. 79z-5a(c). With respect to these findings, the General Assembly has required the divestiture of an electric company's non-nuclear generating assets at this time. The Department gave prior approval to CL&P's divestiture plan in its previous Decision in this docket. The sales price of these assets is far above book value with the net proceeds to be used to reduce costs associated with restructuring. The Department hereby finds that allowing the generating assets to be sold to become eligible facilities under PUHCA (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law. In so ruling, the Department determines that NRG and NGC are fully qualified to provide electric generation services in accordance with the requirements of Section 6(b)(3) of the Act. The Department approved CL&P's procurement of at least 50% of its electricity supply for the standard offer service (SOS) from CL&P's affiliate Select Energy Inc (Select). June 25, 1999 Interim Decision in Docket 99-03- 36, DPUC Determination of The Connecticut Light and Power Company's Standard Offer (Interim Decision), p. 4. Select will enter into a contract with NGC under which NGC will be directly or indirectly providing a portion of the electricity supply for CL&P's SOS from the hydroelectric assets it is purchasing from CL&P. Joint Application, Exhibit 4, p. 8. Therefore, additional findings are necessary to allow NGC to qualify as an EWG. Pursuant to section 32(k) of PUCHA, 15 U.S.C. 79z-5a(k), a state commission having jurisdiction over the retail rates of an electric utility that may enter into a contract to purchase electric energy at wholesale from an EWG that is an affiliate or associate company must make a determination that such commission has sufficient regulatory authority, resources and access to books and records of the electric utility company and any relevant associate, affiliate or subsidiary company to exercise its duties and that the potential transaction (1) will benefit consumers, (2) does not violate any State law, (3) would not provide NGC any unfair competitive advantage by virtue of its affiliation and association with CL&P; and (4) is in the public interest. In approving the competitive solicitation scheme allowing Select to provide 50 percent of the electricity supply for CL&P's SOS, the Department recognized that Section 20 of the Act allows CL&P to obtain generation capacity from an affiliate to meet its SOS obligation. The fact that NGC is the recommended purchaser of part of CL&P's generating assets and will use them, in part, to sell electricity to Select at wholesale, does not affect the Department's previous determination in Docket No. 99-03-36 that Select's participation in supplying the SOS was fair, reasonable and provided significant benefits to CL&P customers. Interim Decision, pp. 2-4. The Department hereby endorses the necessary findings and determination to allow the transaction to proceed. B. CL&P APPLICATION ON CALCULATION OF PROCEEDS CL&P has calculated the proceeds from the auction using the base purchase price adjusted for estimated transaction costs, items related to the Purchase and Sale Agreements and other closing adjustments. CL&P has not reflected any tax impacts related to the fossil and hydroelectric generation assets divestiture. The Company believes that the Department will address the calculation of the net proceeds (including tax impacts) from the divestiture in Docket No. 99-03-36. CL&P proposes that the Department use this calculation, plus any associated tax adjustments, in Docket No. 99-03-36 to reduce stranded costs for nuclear generation assets as required by the Act. Mahoney PFT, pp. 2, 3 and 4. The Company estimated the transaction costs include legal; financial; environmental and engineering fees; auction fees to J.P. Morgan, and fees to Morgan Stanley and Co., the Company's auction agent, for its assistance in the preparation for the auction prior to the Company's filing in the original proceeding in the instant docket. Mahoney PFT, Exhibit MJM-1; p. 5. The Company indicated that it would update its estimated transaction costs at the closing of the sale of its fossil and hydroelectric generation assets. Section 6(a)(2) of the Act defines net proceeds as "the book income from the sale or divestiture of assets, consisting of sales price less reasonable expenses of the sale, related income and other taxes." With the exception of the estimated $53,525,000 cost of terminating the Devon gas turbine lease, the Department believes that the types of transaction costs set forth by CL&P appear to be reasonable expenses of the sale and should be deducted from the sales price. Because the final amounts are currently unknown, the Department limits its approval to the Company's methodology in calculating the non- nuclear divestiture proceeds. The Department will review the actual costs when they are submitted for final approval. The Department will also review the cost of the Devon lease at that time. III. FINDINGS OF FACT 1. The sale prices of the fossil and hydroelectric assets are 5.3 and 6.9 times book value, respectively. 2. The Department hired J. P. Morgan to act as its agent and conduct the auction. 3. The Department designated UOMA to oversee the auction process. 4. Both J. P. Morgan and UOMA recommended approval of the auction results. 5. NRG and NGC intend to operate their respective generating facilities exclusively for wholesale sales rather than for sales to end use customers. 6. Both NRG and NGC are fully qualified to provide electric generation services pursuant to applicable federal law as exempt wholesale generators. 7. Some or all of the output of the plants that NGC will acquire will be contracted to another CL&P unregulated generation affiliate, Select Energy, Inc., to supply CL&P's SOS requirements. 8. The Act allows CL&P to obtain generation from an affiliate to meet its SOS obligations. 9. The proposed calculation of the proceeds resulting from the fossil and hydroelectric generation assets auction used the base purchase price adjusted for estimated transaction costs, items related to the Purchase and Sale Agreements, and other closing adjustments. 10. The Company did not include any tax impacts in its proposed calculation. 11. Section 6(a)(2) of the Act defines net proceeds as "the book income from the sale or divestiture of assets, consisting of sales price less reasonable expenses of the sale, related income and other taxes." 12. NRG and NGC meet all applicable qualifications established by federal law and regulation. 13. The sale was conducted in accordance with the divestiture plan approved in the Original Decision. 14. NRG and NGC have proven to the satisfaction of the Department that NRG and NGC will preserve labor agreements in effect at the time of sale. 15. The sale will result in a net benefit to ratepayers. IV. CONCLUSION AND ORDERS A. CONCLUSION Based on the evidence presented, the Department finds that the sale by CL&P of 2235 MW of fossil generating assets to NRG for $460 million less certain costs to be determined at closing meets the requirements of the Original Decision and the Act and is hereby approved. The Department also finds that the sale by CL&P and WMECO of a total of 1329 MW of hydroelectric generating assets to NGC for $865.5 million less certain costs that will be known at closing meets the requirements of the Original Decision and the Act and is hereby approved. The Department further concludes that allowing the generating assets formerly used for retail sales and reflected in CL&P's rate base to be removed from rate base and no longer used for retail purposes (1) will benefit consumers, (2) is in the public interest, and (3) does not violate State law. In addition, the Department has sufficient regulatory authority, resources and access to books and records of CL&P and any associate, affiliate or subsidiary company to exercise its duties and the potential transaction between NGC, Select Energy and CL&P (1) will benefit consumers, (2) does not violate any State law, (3) would not provide either affiliate an unfair competitive advantage by virtue of its affiliation and association with CL&P; and (4) is in the public interest. The Department also concludes that NRG and NGC are fully qualified to provide electric generation services in accordance with the requirements of Section 6(b)(3) of the Act. With the exception of the cost for terminating the Devon gas turbine lease, the Department concludes that the Company's methodology for calculating the proceeds is reasonable and hereby approves it. The Department reserves judgment of the actual costs until they are submitted for final approval. The Department will review the Devon lease cost as that time as well. B. ORDERS For the following Orders, please submit an original and 10 copies of any requested material to the Executive Secretary, identified by Docket Number, Title and Order Number. 1. At the time of the sale, the Company shall submit to the Department an itemization of actual costs that will be used in the calculation of the proceeds. In addition, CL&P shall provide the Department with all journal entries resulting from the sale 2. The Company shall file with the Department a copy of the final document indicating that the terms and conditions of the sale are substantially as specified by CL&P and that no further material written or oral supplements to, or material modifications of, those terms and conditions shall be executed or accepted without the Department's approval. The Company shall include confirmation that it has received all other approvals required to complete the transaction. DOCKET NO. 98-10-08RE02 DPUC REVIEW OF THE CONNECTICUT LIGHT AND POWER COMPANY'S DIVESTITURE PLAN - SALE OF ASSETS This Decision is adopted by the following Commissioners: Donald W. Downes Glenn Arthur Linda Kelly Arnold CERTIFICATE OF SERVICE The foregoing is a true and correct copy of the Decision issued by the Department of Public Utility Control, State of Connecticut, and was forwarded by Certified Mail to all parties of record in this proceeding on the date indicated. September 16, 1999 Louise E. Rickard Date Acting Executive Secretary Department of Public Utility Control EX-99.2 3 EXHIBIT D.2 TO U-1 Exhibit d.2 THE COMMONWEALTH OF MASSACHUSETTS DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY November 26, 1999 D.T.E. 99-80 Petition of Connecticut Light & Power Company for findings required under Section 32C of the Public Utility Holding Company Act of 1935. __________________________________________________________________________ APPEARANCES: Stephen H. Klionsky, Esq. 260 Franklin Street Boston, MA 02110 - -and- Cynthia Brodhead, Esq. Northeast Utilities Service Company 107 Selden Street Berlin, CT 06037 FOR: THE CONNECTICUT LIGHT AND POWER COMPANY Petitioner Dwight A. Johnson, Esq. Murtha, Cullina, Richter and Pinney LLP CityPlace I 185 Asylum Street Hartford, CT 06103 - -and- Michael Yount, Esq. 1221 Nicollet Mall, Suite 700 Minneapolis, MN 55403 FOR: NRG ENERGY, INC. Intervenor Philip M. Small, Esq. Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141 Intervenor I. INTRODUCTION On September 3, 1999, The Connecticut Light and Power Company ("CL&P") filed with the Department of Telecommunications and Energy ("Department") a petition requesting that the Department make the requisite findings pursuant to 15 U.S.C. Section 79z-5a in connection with CL&P's sale of 2,235 megawatts ("MW") of its fossil-fueled generating assets to NRG Energy, Inc. ("NRG"), and 1,058 MW of its hydroelectric generating assets to Northeast Generation Company ("NGC") (collectively, the "assets"). <1> Specifically, CL&P requests that the Department consider the assets as facilities eligible to be exempt wholesale generators ("EWG") by the Federal Energy Regulatory Commission ("FERC"), pursuant to 15 U.S.C. Section 79z-5a(c).<2> In accordance with 15 U.S.C. Section 79z-5a(c), for an asset to be considered an "eligible facility," the Department must find that the divestiture of the assets would:(1) benefit consumers, (2) be in the public interest, and (3) be in conformance with state law. The petition was docketed as D.T.E. 99-80. The Department granted the petitions to intervene of NRG and NGC. CL&P is a wholly-owned operating company subsidiary of Northeast Utilities and an affiliate of Western Massachusetts Electric Company ("WMECo"), an electric company that operates in Massachusetts. CL&P is not engaged in the business of supplying retail electric service in Massachusetts, has no ratepayers in Massachusetts, is not selling assets in Massachusetts, and is regulated by numerous other jurisdictions.<3> Because CL&P is an affiliate of WMECo, findings by the Department are required. With its petition, CL&P filed a Motion for Protective Treatment for the Purchase and Sales Agreements ("PSAs") that it entered into with NRG and NGC. The Motion is discussed in Section II, below. After notice duly published, the Department conducted a public hearing at its Boston offices on October 27, 1999 to afford interested persons an opportunity to comment on CL&P's proposal. II. MOTION FOR PROTECTIVE TREATMENT A. Introduction CL&P filed, pursuant to G.L. c. 25, Section 5D, a Motion for Protective Treatment ("Motion") of the PSAs that it entered into with NRG and NGC for the sale of its fossil-fueled and hydroelectric generating assets. CL&P argues that the PSAs are commercially sensitive in that they establish bidder strategy and are the outcome of the auction process (Motion at 1). CL&P notes that the DPUC has awarded confidential status to the PSAs (id. at 2-3). To bolster its argument, CL&P incorporated into its Motion, the arguments of J.P. Morgan Securities, Inc.("J.P.Morgan") in the Motion for Protective Order that they filed in Western Massachusetts Electric Company, D.T.E. 99-74.<4> In that case, J.P. Morgan contended that withholding a PSA from public disclosure is consistent with the Commonwealth's electric restructuring statutes in light of the importance of an expectation of privacy in promoting competition (JPM Motion at 4). J.P. Morgan argued that, in light of the developing and relatively narrow market to purchase generating assets, information about a bidder's approach to an auction does not become less commercially sensitive simply because the auction is ended (id.). B. Standard of Review General Law c. 25, Section 5D provides that the Department may protect from public disclosure trade secrets, confidential, competitively sensitive or other proprietary information provided in the course of proceedings before the Department. Section 5D also states that "[t]here shall be a presumption that the information for which such protection is sought is public information and the burden shall be upon the proponent of such protection to prove the need for such protection." Thus, the burden on the company is to establish the need for protection of the information cited by the company. In determining the existence and extent of such a need, the Department must consider the presumption in favor of disclosure and the specific reasons that disclosure of the information benefits the public interest. The Berkshire Gas Company et al., D.P.U. 93-187/188/189/190, at 16 (1994). C. Analysis and Findings The Department has found that information regarding the specific bids that a company received in preparing to divest is competitively sensitive and should be protected from public disclosure. Fitchburg Gas and Electric Light Company, D.T.E. 98-121 (1998). In Fitchburg, the Department stated that disclosure of information regarding the specific bids that were received could undermine its efforts to secure the highest bids during the on-going divestiture process. Id. at 4. Moreover, the Department has stated that protecting information from public disclosure concerning specific bids would likely add value to a company's assets and increase its ability to negotiate higher prices when divesting other portions of its portfolio. Id. In the instant matter, no such information is contained in the PSA. While it is true that the PSA is the outcome of an auction process, we reject the argument that the PSA reflects bidder strategy. The Department notes that the PSA delineates the terms and conditions of the sale of specific assets; it does not describe the strategy of either the buyer or seller of those assets. Moreover, the PSA is no indication of the strategy that the buyer or seller would employ in the future.<5> The Department also rejects the argument that we should protect the PSA from public disclosure as a gesture of comity to the DPUC. The DPUC is governed by the laws and regulations of the State of Connecticut and makes its findings in accordance with those laws. Similarly, this Department is governed by Massachusetts' laws and regulations. As noted above, the Department finds that CL&P's arguments to protect the PSA from public disclosure do not meet the standard established by the Massachusetts General Court and implemented by this Department. Accordingly, the Department finds that the CL&P has not provided sufficient reasons to protect the PSA from public disclosure in accordance with G.L. c. 25, Section 5D, and hereby denies CL&P's Motion for Protective Treatment. IV. FINDINGS UNDER 15 U.S.C. 79z-5a(c) A. Introduction As noted above, CL&P requests that the Department designate the assets being sold to NRG and NCG, as facilities eligible for EWG status pursuant to 15 U.S.C. 79z-5a(c) (Exh. CL&P-1, at 3-5). CL&P explains that it seeks this finding so that when the assets are ultimately transferred, NRG and NGC would be able to file with the FERC for EWG designation of those assets (id. at 2). CL&P states that for the fossil-fueled and the hydroelectric generating assets to be considered as eligible facilities, the Department must make a specific determination that divestiture of the assets: (1) will benefit consumers, (2) is in the public interest, and (3) does not violate state law. U.S.C. Section 79z-5a(c) (id. at 3-4). B. Position of CL&P In support of its motion, CL&P posits that wholesale power generation facilities, once divested, will compete openly in the wholesale market, causing the reduction in wholesale power prices (id. at 4). CL&P argues that the reduction of wholesale prices that will result from this divestiture will benefit consumers (id.). Further, CL&P states that designation of the assets as eligible facilities is in the public interest since it would accomplish the Commonwealth's stated goals of eliminating the vertical integration of the electric utility industry and of making electricity generation a competitive function (id.). Finally, CL&P contends that the designation proclaiming the assets as eligible facilities does not violate state law (id.) To the contrary, CL&P argues that the sale of assets is consistent with the G.L. c. 164, Section 1 et seq., which mandates divestiture of generating assets (id. at 5-6). C. Analysis and Findings The Department, as a state commission with retail rate authority over WMECo has reviewed CL&P records relating to sale of its fossil-fueled and hydroelectric generating assets (Exh. CL&P-1, Att. B). The Department notes that NGC and NRG propose to purchase the assets in order to operate them as an EWG, with the purchase price reflecting that expectation (id.). The Department agrees with CL&P that the sale of the assets will likely add to the availability of generating capacity in the competitive generation market in New England. This increased competition will lower the price to generate electricity from what it otherwise would have been. The Department finds that such a reduction in the cost to generate electricity will benefit consumers. In addition to the benefit to consumers, the record indicates that a designation of the assets as EWGs would likely reduce the vertical integration of the electric utility industry in New England. Consequently, this will contribute to the development of a competitive wholesale generation market. The Department finds that the development of the competitive wholesale generation market is in the public interest. Finally, because competing wholesale generators will be an integral part of the competitive generation industry that the Act was designed to enable, the Department finds that the designation of CL&P's assets as an EWG does not violate state law, but rather, furthers the objectives of the state law. Accordingly, because the Department has found that designating CL&P's fossil- fuel and hydroelectric assets as eligible facilities will benefit consumers, is in the public interest, and does not violate state law, the Department approves CL&P's petition. VII. ORDER Accordingly, after due notice, opportunity for public comment, and consideration, it is hereby ORDERED: That the sale of Connecticut Light and Power Company's 2,235 MW of fossil-fueled generating assets to NRG Energy, Inc., and 1,058 MW of hydroelectric generating assets to Northeast Generation Company be granted eligible facility status pursuant to 15 U.S.C. Section 79z-5a(c); and it is FURTHER ORDERED: That the Motion For Protective Treatment filed by Connecticut Light and Power Company is denied. By Order of the Department, __________________________________ Janet Gail Besser, Chair __________________________________ James Connelly, Commissioner __________________________________ W. Robert Keating, Commissioner __________________________________ Paul B. Vasington, Commissioner __________________________________ Eugene J. Sullivan, Jr., Commissioner Appeal as to matters of law from any final decision, order or ruling of the Commission may be taken to the Supreme Judicial Court by an aggrieved party in interest by the filing of a written petition praying that the Order of the Commission be modified or set aside in whole or in part. Such petition for appeal shall be filed with the Secretary of the Commission within twenty days after the date of service of the decision, order or ruling of the Commission, or within such further time as the Commission may allow upon request filed prior to the expiration of twenty days after the date of service of said decision, order or ruling. Within ten days after such petition has been filed, the appealing party shall enter the appeal in the Supreme Judicial Court sitting in Suffolk County by filing a copy thereof with the Clerk of said Court. (Sec. 5, Chapter 25, G.L. Ter. Ed., as most recently amended by Chapter 485 of the Acts of 1971). <1> CL&P is divesting the assets pursuant to Section 6(b) of Connecticut's Public Act 98-28, an Act Concerning Electric Restructuring, codified as Conn. Gen. Stat. Section 16-244f. <2> Title 15 of U.S.C.A. Section 79z-5(a)(a)(1) defines an EWG as "exclusively in the business of owning, operating, or both owning and operating all or part of one or more eligible facilities and selling electric energy at wholesale." Further, an eligible facility is used for the "generation of electric energy exclusively for sale at wholesale." 15 U.S.C.A. Section 79-5a(2)(A). Title 15 of U.S.C.A. Section 79z-5a(c) requires specific state determinations before a facility that was already under construction or operating on the date of enactment of these provisions may become an eligible facility. <3> In addition to the Department, CL&P must also receive the approval of FERC, the New Hampshire Public Utilities Commission, and the Connecticut Department of Public Utility Control. <4> Western Massachusetts Electric Company, D.T.E. 99-74 is currently under consideration by the Department. <5> The Department notes that Northeast Utilities System issued a press release announcing the agreement to the sell the assets and detailing the price to be paid for the non-nuclear generation facilities. Hence, information contained within the PSA is already in the public domain. EX-99.3 4 EXHIBIT D.3 TO U-1 Exhibit d.3 DE 99-117 CL&P AND WMECO Joint Application of The Connecticut Light and Power Company and Western Massachusetts Electric Company for Findings Under Section 32(C) of the Public Utility Holding Company Act of 1935 (Eligible Facilities) Final Order O R D E R N O. 23,354 November 29, 1999 APPEARANCES: Gerald M. Eaton, Esq. And Cynthia Brodhead, Esq. for Connecticut Light and Power Company and Western Massachusetts Company; Robert A. Bersack, Esq. For Public Service Company of New Hampshire; Murtha, Cullina, Richter and Pinney, L.L.P. by Dwight Johnson, Esq. For NRG Energy; James Rubens for THINK, New Hampshire; Michael Holmes, Esq. and Kenneth Traum for the Office of Consumer Advocate; Lynmarie Cusack, Esq. and Gary Epler, Esq. in separate appearances on behalf of members of the Staff of the New Hampshire Public Utilities Commission. I. PROCEDURAL HISTORY On August 13, 1999, Connecticut Light and Power Company and Western Massachusetts Electric Company (CL&P and WMECO) filed with the New Hampshire Public Utilities Commission (Commission) a Joint Application for Findings Under Section 32(c) of the Public Utility Holding Company Act of 1935 (15 U.S.C.A. Section 79, referred to as "1935 Act"). The filing requests a determination by the Commission as to whether allowing certain non-nuclear generation assets of CL&P and WMECO, which are affiliates of Public Service Company of New Hampshire (PSNH), to become "eligible facilities," as defined by 15 U.S.C. Section 79z-5a(2), subsequent to their sale to NRG Energy, Inc. (a subsidiary of Northern States Power) and Northeast Generating Company ("NGC") is consistent with the requirements of the 1935 Act. An Order of Notice was issued on September 24, 1999, ordering that a hearing be held at the offices of the Commission on this matter on October 12, 1999 at 10:00 a.m. As directed by the Commission, Public Service Company of New Hampshire (PSNH) caused a copy of the Order of Notice to be published in The Union Leader on September 30, 1999. On October 11, 1999, a Petition to Intervene was filed by Dwight Johnson, Esq. on behalf of NRG Energy ("NRG"). Intervention was orally granted to both NRG and James Rubens of THINK-NH by the Commission during the first day of hearings on October 12, 1999. On October 18, 1999, the testimony of Michael D. Cannata, Jr., Chief Engineer of the Commission was filed. Hearings before the Commission were held on October 12, October 13 and October 25, 1999. Briefs or written comments were submitted to the Commission by NRG on November 4, 1999, jointly by CL&P and WMECO on November 5, 1999, by PSNH on November 5, 1999, by PSNH on November 5, 1999, jointly by the OCA and THINK-New Hampshire on November 5, 1999, and on behalf of Staff Chief Engineer Michael Cannata on November 5, 1999. The Commission deliberated this matter at its public agenda meeting of November 15, 1999. II. POSITIONS OF THE PARTIES AND STAFF A. CL&P and WMECO CL&P and WMECO argue that they have requested a very narrow finding in this matter: whether to allow the generating facilities these entities propose to sell to be "eligible facilities" under the Public Utilities Holding Company Act of 1935 (PUHCA), 15 U.S.C. Section 79z-5(a) (c) (A). Granting approval, and assuming such approval is obtained from the other necessary jurisdictions, would enable the proposed purchaser of the facilities to qualify as an exempt wholesale generator (EWG). The designation of EWG status is alleged to be of benefit to an owner of generating assets as it provides exemption from certain regulations and accompanying oversight by the Federal Energy Regulatory Commission (FERC) and the Securities and Exchange Commission (SEC). The Petitioners believe that the Commission, in its previous order in DE 99-074 (Order No. 23, 254, issued July 7, 1999) has established a narrow test for the public interest which reflects the public policy goal favoring competition in the production and marketing of electricity. They argue further that this standard is implicit in the congressional enactment of the Energy Policy Act of 1992 (Pub. L. No. 102-486, 106 Stat. 2776, 2905- 10 (1992)) establishing EWG status and the regional and state policies favoring a strong competitive market for electric generation services. The Petitioners also cite to decisions from other jurisdictions where the state commissions have granted the requested findings, and consistently applied a narrowly focused public interest standard based on favoring the development of a competitive electric generation market. At the hearing, CL&P and WMECO presented the testimonies of Anne Bartosewicz, Manager of Regulatory Policy for WMECO and Stephen Hall, Manager of Rates and Regulatory Matters for PSNH. Mr. Hall testified as to how the proposed sale of CL&P's and WMECO's non-nuclear assets, due to the Connecticut and Massachusetts restructuring legislation, would affect the Sharing Agreement and the Capacity Transfer Agreements, and therefore the costs PSNH recovers from customers through the Fuel and Purchased Power Adjustment Clause (FPPAC). According to Mr. Hall, due to Massachusetts and Connecticut restructuring legislation, all three agreements become inoperable on January 1, 2000. This occurs because there will no longer be an Initial System with its own generating assets and load responsibility for purposes of calculating combined system dispatch savings or capacity transfer revenues. CL&P and WMECO emphasize, however, that the denial of the requested findings in the instant proceeding will not alter the fact that they must sell these assets pursuant to a legislative mandate. It is alleged that denial of the petition would require that CL&P and WMECO go out to auction again. The Petitioners also point out that a purchaser who did not require exempt wholesale generator status from FERC would not need this Commission's approval. The Petitioners assert that non-EWG status would result in a lower bid price and therefore less revenue to offset stranded costs for CL&P's and WMECO's customers. B. PSNH PSNH notes that it was not made a party to this proceeding. Nonetheless, counsel for PSNH made an appearance, and PSNH provided a witness, Mr. Stephen Hall, to respond to questions concerning the effect of the pending generation asset sales in Connecticut and Massachusetts on the Sharing Agreement and the Capacity Transfer Agreements. PSNH supports the positions of WMECO and CL&P with respect to the scope of review in this proceeding. It also submits that testimony concerning the Sharing Agreement and Capacity Transfer Agreements is not relevant to the narrow findings the Petitioners are requesting pursuant to PUHCA. PSNH argues that the changes to those agreements will occur notwithstanding the Commission's decision in this proceeding. PSNH states that if the Commission were to make the requested findings, it would be making no findings or rulings with respect to the Sharing Agreement or the Capacity Transfer Agreements, and that issues concerning those agreements may be addressed in the context of Docket No. DE 99-099, where the Settlement Agreement proposes to terminate the agreements. PSNH also warrants that: if the Commission makes the requested findings under the limited scope, PSNH will not argue in any other proceeding or forum that such findings in this proceeding constitute a decision or an admission with respect to the Rate Agreement, Sharing Agreement or Capacity Transfer Agreements including performance thereunder by PSNH or other Northeast Utilities subsidiary. (Letter from Robert Bersack, Assistant General Counsel, PSNH, to Debra Howland, Acting Secretary, NHPUC, November 5, 1999). C. NRG Energy, Inc. NRG Energy, Inc. (NRG) is a wholly-owned subsidiary of Northern States Power Company, which is based in Minneapolis, Minnesota. Northern States is a combination electric and gas utility company with operations in Minnesota, North Dakota, South Dakota, Wisconsin and Michigan. NRG is an independent power producer, and was the winning bidder for CL&P's fossil-fuel assets in Connecticut, and has entered into a contract with CL&P to purchase 2,235 megawatts of those assets at a price of $460 million. NRG asserts that CL&P's assets are being sold as part of the restructuring of Connecticut's electricity market pursuant to the state's restructuring act. NRG also states that failure to complete the sale of CL&P's generation assets to NRG by the end of the year will seriously interfere with the ability of CL&P to meet the various requirements under the restructuring act. NRG presented one witness, Mr. Ross Hammond, an electrical engineer employed by NRG to assist in the transition of power plants from the regulated business environment to a non-regulated business environment. Mr. Hammond testified as to his experience in achieving substantial cost savings and reliability improvements in such transitioned plants, and the expectation of NRG that similar savings could be realized at the Connecticut plants. Mr. Hammond also testified that reducing the costs of the Connecticut plants would, in turn, benefit New Hampshire customers by making lower cost power available to the New England power pool. NRG argues that while it is difficult to specifically quantify the benefits to New Hampshire customers as a result of NRG's acquisition of the Connecticut plants, it must be recognized that because of the interconnected ness of the New England system, the restructuring efforts of the New England state are clearly interdependent. The full scale of benefits will only be realized when restructuring takes place throughout the entire region. The requested findings are a necessary "piece of the puzzle of electric restructuring." D. OCA and THINK-NH OCA and THINK-NH argue that, in order for the Commission to make the findings required under 15 U.S.C. Section 79z-5a(c), it is not sufficient to only allege that New Hampshire consumers will realize certain competitive benefits if the generating plants in question are deemed "eligible facilities." They argue that the Commission must find that status as an "eligible facility," as opposed to traditional regulation of those assets, is preferable in terms of consumer benefits and the public interest. OCA and THINK-NH argue further that the "eligible facilities" designation is requested in this case only in order to facilitate the sale of these assets. To the extent it facilitates a sale, "eligible facilities" status likewise facilitates a breach of contract if those assets are required to meet contractual obligations to PSNH under the Capacity Transfer and Sharing Agreements. OCA and THINK-NH submit that the Commission must consider whether Northeast Utilities (NU) and PSNH have committed a material breach to a commitment that is vital to the Rate Agreement such as the Sharing or Capacity Transfer Agreement. If so, they are concerned that granting the findings requested concerning the "eligible facilities" designation would provide a defense of that breach to NU and PSNH, and would violate the Commission's obligation to protect ratepayers. As a result, OCA and THINK-NH argue that the only course for the Commission is to deny the petition for the requested findings and let NU renegotiate the proposed CL&P and WMECO sales in a way that recognizes the obligations owed to New Hampshire ratepayers. In the event the Commission grants the relief requested in the petition, OCA and THINK-NH recommend that the Commission make clear that it has not found that a breach of the Sharing Agreement has occurred, but that one will occur unless cured because the pending sale of the generation assets by CL&P and WMECO are to take place without being subject to the Sharing Agreement obligations. Second, the Commission should request that NU and all of its affiliates waive any and all claims or defenses that would be based upon the grant of the relief requested in this docket to a later complaint alleging that these parties have breached the Sharing Agreement. E. Staff Chief Engineer Michael Cannata Staff Chief Engineer Michael Cannata testified that the present filing is identical to the filing by WMECO approved by the Commission in Docket DE 99-074, and that Staff was not opposed to the relief granted in that docket. Mr. Cannata discussed how the generating units which are the subject of the petition are expected to participate in the competitive market, and that this should bring lower prices and choice to consumers. According to Mr. Cannata, this satisfies the first requested finding. Mr. Cannata next discussed how this Commission and the other five Commissions in New England have been working to bring a competitive market into existence and have found that said market would be in the public interest, that RSA 374-F:3, XIII calls for the encouragement of restructuring on a regional basis, and that generation targeted to provide for this competitive market must also be in the public interest. This, Mr. Cannata argues, satisfies the second requested finding. As to the third requested finding, Mr. Cannata points out that the Commission previously found that no state laws are violated by the granting of "eligible facility" status. Mr. Cannata testified that other matters, such as the impact of the proposed asset sales upon the Sharing Agreement and Capacity Transfer Agreements are beyond the narrow focus of the "eligible facility" status sought by the Petitioners, and while these matters need to be considered, that should not occur in this case. Rather, these issues should be considered in Docket DE 99-099. In the brief submitted by Ms. Cusack, it is argued that in DE 99- 074 the Commission's decision observed the proper jurisdictional distinction between the attachment of "eligible facility" status to certain assets, and the effects the sale of the underlying assets might have on New Hampshire customers, and urges the Commission to make the same distinction in this docket. It is also argued that, based on the legislative history of the Energy Policy Act the "public interest" standard in 15 U.S.C. Section 79z- 5a(c) is narrow and should be restricted to the attachment of eligible facility status. III. COMMISSION ANALYSIS The Joint Petition requests that the Commission make specific findings required by the PUHCA with respect to certain generating assets owned by the Joint Petitioners, CL&P and WMECO. This request is made of the Commission because the Joint Petitioners are concurrently seeking a determination from the SEC that these generating assets may be deemed "eligible facilities"1 when the assets are sold to entities that intend to use them to sell power to the wholesale electricity market. The designation of generating facilities as "eligible facilities" is considered beneficial as it would tend to increase the market value of the facility, for it enables the owner to operate as an "exempt wholesale generator" (EWG), and avoid regulation as an electric utility company under PUHCA. See 15 U.S.C. Section 79z-5(a). ________________________________ 1. As defined in 15 U.S.C Section 79z-(a)(2), an "eligible facility" is a plant used for the generation of electric energy exclusively at wholesale or used for the generation of electricity and leased to one or more public utility companies, where the lease is treated as a sale at wholesale. These generating assets are being divested by CL&P and WMECO pursuant to restructuring directives in Connecticut and Massachusetts. In both states, the proceeds from the sales of these assets will be employed as an offset to the stranded costs of CL&P and WMECO found to exist by their respective state commissions. It is apparent that any action that increases the market value of these plants will result in a greater offset to stranded costs, and a reduction to the amount of stranded costs either borne by the companies or by their customers. Thus, obtaining the designation of the generating assets as "eligible facilities" is in the direct interest of the states where the facilities are included in rates. PUHCA states that if the costs of a generating facility were included in retail rates under the laws of any state, in order for that facility to be considered an "eligible facility," every state utility commission having jurisdiction over that facility's rates must determine that allowing the designation "eligible facility" 1) will benefit customers; 2) is in the public interest; and 3) does not violate state law. PUHCA further provides that if the facility in question is owned by an affiliate of a registered holding company, then each state commission having jurisdiction over the retail charges of any other affiliate of that registered holding company must make the same three determinations in order to obtain the eligible facility designation. Because CL&P and WMECO are subsidiaries of NU and affiliates of PSNH, and because this Commission regulates PSNH's retail rates, PUCHA requires that this Commission, along with the relevant commissions of Connecticut and Massachusetts, make the same three specific determinations in order for CL&P and WMECO to obtain the "eligible facilities" designation for the assets in question. The determination of whether the public interest findings applied for may be made by this Commission for the assets in question is complicated by the litigation concerning the restructuring orders issued by the Commission and the status of the Rate Agreement entered into between the Governor and the Attorney General, and PSNH and NU on November 22, 1989.2 Pursuant to the Rate Agreement, a Sharing Agreement was entered into between PSNH and the NU initial system and two Capacity Transfer Agreements were entered into between PSNH and CL&P. Since their inception, these agreements have provided tangible benefits to PSNH and its customers. _______________________________ 2. Public Service Company of New Hampshire, et al. v. Douglas Patch, et al., C.A. 97-97-JD (New Hampshire), 97-121 L (Rhode Island). In Order No. 23, 254, issued July 7, 1999, WMECO petitioned for, and received, similar approvals to those sought in the instant case under the PUHCA for its sale of non-nuclear generating facilities to Consolidated Edison Energy, Inc. That Order states that: The concerns raised by Staff and the OCA on the effects this sale and the pending CL&P sale will have on the Sharing Agreement and cost allocation are shared by this Commission. PSNH's claim in this proceeding that the Sharing Agreement will become inoperable or effectively nullified on January 1, 2000, as a result of actions by other states and state regulators, raises questions about the validity of PSNH's arguments concerning New Hampshire's restructuring orders as they pertain to any obligations under the Sharing Agreement. The effects of WMECO's and CL&P's asset divestitures as they relate directly to PSNH's customers will be subject to further review by the Commission in an appropriate proceeding. In the Order Of Notice for this proceeding, issued on September 24, 1999, we stated that CL&P and WMECO's Joint Petition raises the issue of whether the effects of the proposed sale as it relates to PSNH's customers should be considered at this time. Accordingly, a considerable amount of discussion during the hearing of this case focused on the fact that the Connecticut assets proposed to be sold have been used by CL&P to satisfy its obligations under the Capacity Transfer and Sharing Agreements. There was also testimony concerning the effect that electric industry restructuring has upon the continued viability of the Sharing Agreement and the Capacity Transfer Agreement. The Commission also heard testimony that PSNH would receive approximately $4.7 million in November and December, 1999, under the Sharing Agreement, but that revenue under the Sharing Agreement and the Capacity Transfer Agreement would no longer be forthcoming. According to CL&P, this is because it will no longer have load responsibility after January 1, 2000, and the new ISO rules make it impossible to calculate its obligations under the Sharing Agreement and the Capacity Transfer Agreements and renders those agreements meaningless. There was also cross-examination and testimony concerning whether PSNH had acted prudently and in accord with its fiduciary obligations towards its customers with respect to protecting and asserting its rights under the Sharing Agreement and Capacity Transfer Agreements. The Joint Petitioners urge the Commission to focus its attention on the very limited question of whether the designation of the facilities as eligible under PUHCA is beneficial to consumers, in the public interest and does not violate the state law. They, along with PSNH and NRG, argue that, because these assets are intended to be used by participants in New England's regional competitive electricity market, the eligible facility status is consistent with RSA 374-F:3, XIII, which directs New Hampshire to work with other New England states to achieve restructuring on a regional basis. Moreover, the Petitioners stress, that, due to the divestiture requirements of the Connecticut and Massachusetts restructuring legislation, the underlying sale would occur regardless of the action taken by the Commission, and the same impact upon the Sharing Agreement and Capacity Transfer Agreement would result. Finally, we note PSNH's express warranty, set out above, not to argue in any other forum that the Commission's findings in this proceeding would constitute a decision or an admission with respect to the Rate Agreement, Sharing Agreement or Capacity Transfer Agreements, or the prudence of PSNH's or NU's actions. Based upon the record before us, we make a limited and narrow finding that allowing the generating assets in question to be an "eligible facility" will be beneficial to consumers and is in the public interest because the assets in question are being transferred to an entity that will be engaged in the competitive electricity market in New England, and the development and growth of that market is in the interest of New Hampshire electric customers. We also find that such designation would not violate state law.3 ____________________________ 3. We note that the "eligible facility" designation will tend to increase the market value of the assets which, in turn, will reduce stranded costs for consumers in Connecticut and Massachusetts. While we do not base our findings upon this consideration, we do believe that a healthy market for generating assets should provide similar benefits to New Hampshire ratepayers if and when the state's utility companies' generation assets are divested. In reaching this decision, the Commission has interpreted the terms "benefit to consumers" and "public interest" in 15 U.S.C. Section 79z-5(a)(c) as applying only to the question of whether those assets, if sold, should be allowed to be deemed "eligible facilities." The Commission is not rendering an opinion on the terms of the proposed underlying sale of these generating assets; nor have we determined the impact, if any, the underlying sale will have on either the Sharing Agreement or the Capacity Transfer Agreement. We believe that we have the necessary jurisdiction to judge these matters, and deferring their consideration is in the interest of judicial economy and within our discretion, and will not compromise our position in the federal litigation, particularly in light of PSNH's warranty. Therefore, we determine that all questions concerning the status of the Sharing Agreement and the Capacity Transfer Agreement, the prudence of PSNH's actions with respect to these Agreements, and PSNH's and NU's obligations under the Rate Agreement are not before the Commission at this time. We reserve the detailed review of these questions to the PSNH Settlement Agreement docket (DE 99-099) or other existing dockets, or such other investigations that may be opened to consider such matters. Based upon the foregoing, it is hereby ORDERED, that the findings requested by Petitioners Connecticut Light and Power and Western Massachusetts Electric Company are approved as described herein; and it is FURTHER ORDERED, that the unresolved matters discussed above may be raised by interested parties for consideration by the Commission in Docket DE 99-099 or otherwise as discussed above. By order of the Public Utilities Commission of New Hampshire this twenty-ninth day of November, 1999. Douglas L. Patch Susan S. Geiger Nancy Brockway Chairman Commissioner Commissioner Attested by: Thomas B. Getz Executive Director and Secretary EX-99.4 5 EXHIBIT D.4 TO U-1 Exhibit d.4 The Commonwealth of Massachusetts Department of Telecommunications and Energy January 31, 2000 D.T.E. 99-74 Petition of Western Massachusetts Electric Company for Approval of Asset Divestiture. APPEARANCES: Stephen Klionsky, Esq. 260 Franklin Street, 21st Floor Boston, Massachusetts 02110 -and- Cynthia Brodhead, Esq. P.O. Box 270 Hartford, Connecticut 06141 FOR: WESTERN MASSACHUSETTS ELECTRIC LIGHT COMPANY Petitioner Thomas F. Reilly, Attorney General By: Joseph W. Rogers Office of the Attorney General 200 Portland Street Boston, Massachusetts 02114 Intervenor Philip M. Small, Esq. 107 Selden Street Berlin, Connecticut 06037 FOR: NORTHEAST GENERATION COMPANY Intervenor Sonja G. Shuford, Esq. 10 Franklin Square New Britain, Connecticut 06051 FOR: CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL-UTILITY OPERATIONS MANAGEMENT ANALYSIS Limited Participant Carmen D. Legato, Esq. Kevin C. Clayton, Esq. Laura M. Wilson, Esq. White & Case LLP 601 Thirteenth Street, N.W. Suite 600 South Washington, D.C. 20005 -and- John DeTore, Esq. Maribeth Ladd, Esq. Rubin and Rudman LLP 50 Rowes Wharf Boston, Massachusetts FOR: J.P. MORGAN SECURITIES, INC. Limited Participant Robert M. Granger, Esq. Ferriter Scobbo Caruso & Rodophele PC 75 State Street Boston, Massachusetts 02108 FOR: MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY Limited Participant I. INTRODUCTION On August 13, 1999, Western Massachusetts Electric Company ("WMECO" or "Company") filed a petition with the Department of Telecommunications and Energy ("Department") for approval to divest several non-nuclear generating facilities. Specifically, WMECo proposes to sell its portion of the Northfield Mountain pumped storage generating facility ("Northfield Mountain"), Turner Falls No. 1 ("Turners Falls") and Cabot ("Cabot") ("Related Facilities" or "Assets") to its affiliate, Northeast Generation Company ("NGC")1 WMECo also asks the Department to find that the Assets are eligible for exempt wholesale generator ("EWG") status in accordance with 15 U.S.C. Section 79-5a. 2 _________________________________________ 1. NGC is an unregulated subsidiary of NU Enterprises, Inc., which is a wholly-owned unregulated subsidiary of Northeast Utilities. WMECo is a wholly-owned operating subsidiary of Northeast Utilities. WMECo is a wholly- owned operating subsidiary of Northeast Utilities (Petition at 3). 2. As detailed below, without exempt wholesale generator status, the purchaser of the assets would be required to operate the facilities as a single integrated utility system, and be subjected to constraints on the scope and nature of their operations (Exh. DTE 1-4). On September 27, 1999 and October 18, 1999, the Department held public hearings in Boston and Springfield, respectively, to afford interested persons an opportunity to be heard. An evidentiary hearing was conducted on October 21, 1999.3 __________________________________________ 3. All cites to transcripts refer to the evidentiary hearing. The Attorney General of the Commonwealth ("Attorney General") intervened as of right, pursuant to G.L. c. 12, Section 11E. The Department granted NGC's petition to intervene, and afforded limited participant status to J.P. Morgan Securities, Inc. ("J.P. Morgan"), the Utility and Operations Management Analysis unit ("UOMA") of the Connecticut Department of Public Utility Control ("DPUC"), and Massachusetts Municipal Wholesale Electric Company. On January 11, 2000, the Hearing Officer granted UOMA and J.P. Morgan's Motion for Protective Treatment ("Motion") allowing specific discovery responses and testimony to be afforded confidential status.4 This Motion supersedes all other motions for protective treatment filed by UOMA and J.P. Morgan. _________________________________ 4. In addition to the exhibits entered into evidence at the conclusion of the evidentiary hearing, the Department, on its own Motion, admits the following proprietary exhibits into evidence: AG 1-3; AG 1-4; AG1-10(a); AG 1-15; AG 1-27; AG 1-40(b)(c)(e); AG 1-41(b); AG 1-44(a)(b)(c)(e)(f)(g); AG 1-51; AG 1- 52(a)(b); AG 1-53; AG 1-83; AG 1-86(b); AG 2-4; AG 2-12; AG 2-13(a)(b)(c); AG 2-14; AG 2-15; AG 2- 16; AG 2-17; DTE 1-24; DTE 1-27; DTE 1-29; DTE 1-30; and, the unredacted version of Paul Dabbar's supplemental direct testimony (JPM-2(P)). The redacted version of Mr. Dabbar's supplemental direct testimony and Mr. Corey's testimony will be marked as JPM-2and UOMA-1, respectively. In support of its filing, WMECo submitted the testimony of John B. Keane, Northeast Utilities Service Company's ("NUSCo") vice president for administration;5 Michael J. Mahoney, NUSCo's director of revenue requirements; and Michael C. Finnegan, J.P. Morgan's managing director. Additionally, J. P. Morgan and UOMA submitted the supplemental testimony of Paul Corey, executive director of the DPUC, and director of UOMA; and Paul M. Dabbar, an associate at J.P. Morgan ____________________________________ 5. NUSCO provides management and other services to WMECo and related companies in the Northeast Utilities System (Exh. WMECo-3, at 1). II. STANDARD OF REVIEW The Legislature has vested broad authority in the Department to regulate the ownership and operation of electric utilities in the Commonwealth. See, e.g., G.L. c. 164, Section 76; D.P.U./D.T.E. 97-111, at 17. The Department's authority was most recently augmented by the Restructuring Act, G.L. c. 164, Section 1 et seq.6 See Boston Edison Company, D.P.U./D.T.E. 96-23, at 9 (1998). The Restructuring Act requires that each electric company organized under the provisions of Chapter 164 file a plan for restructuring its operations to allow for the introduction of retail competition in generation supply in accordance with the provisions of Chapter 164, G.L. c. 164, Section 1A(a). Among other things, the Restructuring Act requires that all restructuring plans contain a detailed accounting of the company's transition costs and a description of the strategy to mitigate those transition costs. Id. One possible mitigation strategy is the divestiture of a company's generating units. G.L. c. 164, Section 1. ___________________________________________ 6. An Act Relative to Restructuring the Electric Utility Industry in the Commonwealth, Regulating the Provisions of Electricity and Other Services and Promoting Enhanced Consumer Protections (the "Restructuring Act"). The Department previously approved WMECo's Restructuring Plan. Western Massachusetts Electric Company, D.T.E. 97-120 (1998). In reviewing a company's proposal to divest its generating units, the Department considers the consistency of the proposed transactions with the company's restructuring plan, or in some cases the company's restructuring settlement, and the Restructuring Act. A divestiture transaction will be determined to be consistent with the company's restructuring plan or settlement and the Restructuring Act if the company demonstrates to the Department that the "sale process is equitable and maximizes the value of the existing generation facilities being sold." G.L. c. 164, Section 1A(b)(1). A sale process will be deemed both equitable and structured to maximize the value of the existing generation facilities being sold, if the company establishes that it used a "competitive auction or sale" that ensured "complete, uninhibited, non-discriminatory access to all data and information by any and all interested parties seeking to participate in such auction or sale." G.L. c. 164, Section 1A(b)(2). The Restructuring Act provides that all proceeds from any such divestiture of generating facilities "that inure to the benefit of ratepayers, shall be applied to reduce the amount of the selling company's transition costs." G.L. c. 164, Section 1A(b)(3). Where the Department has approved a company's restructuring plan or settlement as consistent or substantially complaint with the Restructuring Act, the Department will approve a company's proposed ratemaking treatment of any divestiture proceeds if the company's proposal is consistent with the company's approved restructuring plan or settlement III. DESCRIPTION OF ASSET DIVESTITURE A. Overview WMECo has proposed to divest 272.1 megawatts ("MW") of hydroelectric generating assets. Specifically, WMECo seeks the Department's approval to sell; (1) its 19 percent interest in Northfield Mountain; and (2) its 100 percent interest in the Cabot and Turners Falls hydroelectric stations.7 Cabot and Turners Falls are operationally interrelated with Northfield Mountain (Exh. WMECo-1 at 3). The Company states that it offered Northfield Mountain and the Related Facilities for sale through an open and competitive auction conducted by J.P. Morgan on behalf of the DPUC (id.).8 The DPUC delegated several members of their staff to serve on the UOMA team and to supervise J.P. Morgan (id.). _______________________________________ 7. WMECo's proposed sale was combined with the offer by Connecticut Light and Power Company to sell 81 percent of its interest in Northfield Mountain and certain other assets to NGC (Exh. WMECo-1, at 3). 8. In Connecticut, the DPUC is charged with conducting the auctions that lead to divestiture of assets pursuant to Connecticut Public Act 98-28, An Act Concerning Electric Restructuring (Conn. Gen. Stat. Section 16-224f). J.P. Morgan was contracted by the DPUC to conduct the auction on its behalf (Petition at 5). The sale is documented in several agreements entered into by WMECo and NGC. WMECo requests that the Department approve the following agreements: (1) Purchase and Sale ("PSA"); (2) Interconnection and Operation; (3) Assignment and Assumption; (4) Asset Demarcation; (5) Generation and Support Services; and (6) Property Tax (id. At 7). B. Description of The Divestiture Process WMECo states that it offered Northfield Mountain and the Related Facilities in conjunction with Connecticut Light and Power's ("CL&P") majority interest in Northfield Mountain,9 in a public auction conducted pursuant to Connecticut law (Exh. WMECo-1, at 5). Together, CL&P offered to sell 3,564 MW of generation assets located in Massachusetts and Connecticut (id. At 7).10 To prevent an affiliate from receiving any undue advantage in the auction process, the Connecticut Restructuring Act required the appointment of an auction agent unrelated to the selling company (Exh. JPM-1, at 3). J.P. Morgan was selected as the auction agent after a competitive solicitation was conducted by the DPUC (id.).11 Under UOMA's supervision, J.P. Morgan: (1) developed a strategy for the sale; (2) assisted in the production of the descriptive memorandum and related marketing materials; (3) formulated and contacted a list of potential interested parties; (4) coordinated management presentations, site visits, responses to bidders' due diligence questions and legal activities; and (5) prepared bid evaluations for each round of bids (id., at 60). _________________________________________ 9. CL&P is a wholly-owned operating subsidiary of NU. 10. Cabot and Turners Falls operate under a single FERC license and are connected with Northfield Mountain because of the operational synergies between the facilities and the FERC license (Exh. WEMCo-2, at 9; Tr. At 68-69). 11. Although J.P. Morgan acted as an independent auction agent for the DPUC, not as an agent for WMECo, the Assets are sold pursuant to the auction conducted for Connecticut Light & Power Company (Tr. 1, at 57). J.P. Morgan notes that NUSCo employees were segregated into buy and sell teams which were required to abide by a code of conduct established by the DPUC (Exhs. AG-1-58; AG-1-59; WMECo-2, Schedule JBK-2, at 2).12 This code of conduct was necessary to prevent an affiliate from gaining an unfair advantage in the bidding process (Exh. AG 1-63; JPM-2 at 9). ____________________________________ 12. The duties of the sell team were to (1) manage the document center established by NU; (2) facilitate bidder due diligence investigations; (3) conduct orientation presentations; (4) provide guides for site visits; and (6) respond to bidder inquiries (Exh. WMECo-2, at 7). Also, by structuring the auction so that the sell team could not exercise any control over the terms and conditions of the sale for the benefit of the buy team, J.P. Morgan states that an arms-length relationship between the two teams was established (id.) Moreover, J.P. Morgan explains that to avoid the differences in income tax laws between a sale to affiliates as opposed to nonaffiliates, J.P. Morgan instructed bidders that the basis for selection would be, in addition to other non-price criteria, the gross sales price without adjustment to account for any differences in tax to the seller (id. at 13). As a result, J.P. Morgan contends that any increase in the net proceeds, after tax, available to ratepayers resulting from a sale to an affiliate would not subsidize the bid of an affiliate, thereby prohibiting the undue selection of an affiliate (id. at 13). According to J.P. Morgan, this method required the affiliate to bid a higher price than it otherwise would have (id. at 13). J.P. Morgan states that they compiled a list of 236 potential buyers using (1) information internal to J.P. Morgan (e.g., existing client base and other entities); (2) information from WMECo; and (3) trade publications and other industry sources (Tr. 1, at 61). According to J.P. Morgan, of the 236 potential bidders contacted, 82 executed confidentiality agreements and 35 submitted round one nonbinding bids (Tr.1, at 61). J.P. Morgan states that those bidders who executed a confidentiality agreement received details concerning the auction process and the Assets (JPM-1, at 10). J.P. Morgan informed prospective bidders that they could be disqualified from the sale process if they contacted the sell team directly (id.). Once bidders executed confidentiality agreements, code names were assigned. J.P. Morgan states that the identity of a bidder was shared only with UOMA and DPUC (Tr. 1, at 86). According to J.P. Morgan, first round bidders were required to submit a non-binding bid that (1) identified the assets being bid;13 (2) provided financial, operating, and due diligence plans; (3) stated that existing labor agreements would be honored; and (4) listed required regulatory and board approvals (Exh. JPM-1, at 11; Exh. D.T.E. 1-16). ___________________________________ 13. Bidders were instructed that they could make an offer to purchase the assets either individually or collectively (Tr. 1, at 69). J.P. Morgan received 35 non-binding bids from prospective buyers and evaluated the qualifications of each bidder to ensure that they would be capable of purchasing and operating the assets (Exhs. JPM-1, at 11; JPM-2, at 17). In addition to evaluating the bids on financial, operational, and other qualifications, J.P. Morgan placed particular emphasis on bids that were not contingent on significant exceptions to the selling documents, and where a plant's operational plans maximized opportunities for current employees (Exh. JPM-2, at 17). Of the 35 bids received, J.P. Morgan narrowed the list to 13 bidders who were invited to make binding bids in the second round of the auction (id.)14 Twelve bidders elected to participate in due diligence meetings, access the data room, and visit the site (Tr. 1, at 81). Upon completion of that process, J.P, Morgan received eight binding bids (Exhs. JPM-1, at 14; JPM-2 at 18). J.P. Morgan evaluated each bid and compared price, the portion of the assets bid, whether changes would be required to the seller's documents, and the bidder's ability to close expeditiously (id.). According to J.P. Morgan, negotiations were conducted with the three bidders that produced the greatest aggregate value for Northfield Mountain and Related Facilities (Exh. JPM-2 at 17). As a result of those negotiations, J.P. Morgan narrowed the field to two final bidders; each bidder was offered the opportunity to submit supplemental bids and was requested to allocate its bid among Northfield Mountain, Cabot and Turners Falls (id., at 21). After evaluating the supplemental bids, J.P. Morgan and UOMA selected NGC as the winning bidder (id.). J.P. Morgan states that the two bidders accepted the same PSA, therefore, the decision was based on the highest price (id.). ______________________________________ 14. J. P. Morgan asserts that the sell team was not involved in the process of reviewing and selecting the indicative bids, and that the identity of the bidders was not revealed to the sell team (JPM-1, at 11). 2. Analysis and Findings In evaluating WMECo's divestiture of the Assets, the Department first determines whether the sale process was equitable and structured to maximize the value of the assets being sold. In making these determinations, the Department considers whether the Company used a "competitive auction or sale" that ensured "complete, uninhibited, non-discriminatory access to all data and information by any and all interested parties seeking to participate in such auction or sale." G.L. c. 164, Section 1A(b)(2). The record establishes that all bidders had equal access to data, thereby facilitating due diligence inquiries. Moreover, each bidder was permitted to conduct corporate management meetings and site visits. To ensure that no inappropriate information was exchanged with plant employees during a site visit, each bidder was escorted to the facilities by an employee of J.P. Morgan and a member of the UOMA team. Finally, the entire auction process was guided by a strict code of conduct established by the DPUC. Based on the above evidence, the Department finds that the auction process used by WMECo to divest Northfield Mountain and the Related Facilities ensured complete, uninhibited, non-discriminatory access to all data and information by all parties seeking to participate in the auction, and therefore was equitable. The process satisfied the requirements of G.L.c. 164, Section 1A(b)(2). 3. Maximization of Asset Value a. Description The auction was structured so that the proceeds from the sale of the assets would be realized by WMECo in two transactions. First, WMECO's 19 percent ownership interest in Northfield Mountain was accounted for in the same percentage applied to the total value ascribed by bidders to that plant. Second, the Related Facilities, which are owned 100 percent by WMECo, were required to be given a separate value by the bidders. WMECo ratepayers were credited with 100 percent of the market values which the bidders ascribed to these particular assets. J.P. Morgan reports that NGC allocated $54 million of its final bid of $739 million for Northfield Mountain and the Related Facilities. WMECo's share of the Northfield Mountain is reported by J.P. Morgan $130.15 million. The combination of both of these values constituted the $184 million of value that has been allocated to WMECo as a result of the auction (Exh. JPM-2 at 40). The auction results in a sales price of about 4.4 times the book value (Exh. WMEC0-1, at 7). According to WMECo, this sale price is subject to adjustment to account for, among other things, (1) inventories, (2) capital expenditures; and (3) certain expenditures incurred during the period between the date of signing the PSA and the closing date (id., at 4). According to WMECo, the estimate net proceeds before taxes is approximately $179.54 million (Exh. WMECo-3, Schedule MJM-1, at 1). b. Analysis and Findings In evaluating WMECo's divestiture of Northfield Mountain the Related Facilities, the Department determines whether the value of the Assets was maximized. The record shows that J.P. Morgan employed several measures in the divestiture process to ensure the assets were sold at the highest price without potential affiliate abuse. First, a code of conduct was established in which the NUSCo buy and sell team had to strictly abide. Second, confidentiality was maintained throughout the divestiture process and therefore the bidders as well as the NUSCo buy and sell teams were uncertain of the identity of other bidders. Shielding bidder identity enhanced the competitiveness of the divestiture process, thus maximizing the value of the sale. In addition, strict bidder confidentiality contributed to ensuring that all bidders received equal treatment throughout the process. Third, J.P. Morgan used an indicative first round bidding state as an opportunity to select qualified bidders, who submitted non-binding bids based on initial due diligence. J.P. Morgan managed the final stage of bidding in order to produce the maximum value for ratepayers. J.P. Morgan conducted confidential discussions with the two bidders that had submitted highly competitive bids and solicited supplemental bids from each of the two bidders. Throughout the process, UOMA and J.P. Morgan evaluated the bids with the objective of selecting bids that provided the highest overall value to WMECo' customers. Based on the evidence above concerning the auction process and the bid selection, the Department finds that J.P. Morgan and UOMA selected the higher of the two final bids from an equitable auction process. Accordingly, the Department finds that the divestiture process used by J.P. Morgan and UOMA maximized the value of WMECo's Assets. 4. Consistency with Company's Plan and Restructuring Act In evaluating WMECo's divestiture of the Assets, the department determines whether the divestiture transaction is consistent with the Company's restructuring plan and with the Restructuring Act. Because the Department has found (1) that the Company's sale process is equitable and structured to maximize value, and (2) that the value of the Company's Assets has been maximized, the Department finds that the Company's divestiture transaction is consistent with the Company's restructuring plan and consistent with the Restructuring Act. 5. Calculation of Net Proceeds The Company proposes several adjustments to the sale proceeds to derive net proceeds: (1) pre-approved capital expenditures; (2) materials and supplies inventory; (3) leased vehicles purchase costs; (4) Northfield Mountain adder, an amount to compensate the seller for the costs of achieving the water level of the upper reservoir; (5) transaction costs; and (6) post- 1995 capital additions(WMECo-3, at 5). Based on its estimates of the adjustments, the Company calculates $179,546,000 in net proceeds before taxes (Exh. WMECo-3, Sch. MJM-1, at 1). The Department finds that the method the Company's calculation of net proceeds is reasonable and is therefore, approved. The Department directs WMECo to provide actual costs after the sale is completed and will review these costs in the Company's next reconciliation proceeding. 6. Designation of Generating Assets as Exempt Wholesale Generators WMECo states that in accordance with the regulations of the Securities and Exchange Commission, assets to be sold that have previously been in rate base of a retail company cannot be sold and retain EWG status by the buyer unless the ratemaking jurisdiction approves and makes certain specified findings (Exh. DTE 1-4). Accordingly, WMECo requests that the Department make the requisite findings to designate Northfield Mountain and the Related Facilities as eligible to be EWGs pursuant to 15 U.S.C. 79z-5a (id.). 15 ___________________________________________ 15. 15 U.S.C. Section 79z-5a(a)(1) defines an EWG to be "exclusively in the business of owning, operating, or both owning and operating all or part of one or more eligible facilities and selling electric energy at wholesale." Further, an eligible facility is a facility used for the "generation of electric energy exclusively for sale at wholesale." 15 U.S.C. Section 79z- 5a(2)(A). 15 U.S.C. Section 79z-5a(2)(c) requires specific state determinations before a facility that was already under construction or operating on the date of enactment of these provisions may become an eligible facility. In accordance with 15 U.S.C. Section 79z-5a(c), for an asset to be considered an "eligible facility," the Department must find that the divestiture of the assets would: (1) benefit customers, (2) be in the public interest, and (3)not violate state law. WMECo states without EWG status, few entities would have been willing to bid for the Assets, and the purchase price realized by WMECo would have been greatly reduced (id.). WMECo further states that by obtaining the highest competitive price for the facilities, the Company has maximized mitigation of its transition costs (id.). WMECo also claims that the entry of NGC into the generation market will advance the goal of competition contemplated by the Restructuring Act (id.). Based on the evidence that the expectation of eligible status underlies the purchase price of the facilities and that the price mitigates transition costs paid by ratepayers, the Department finds that the designation of the requested facilities as eligible facilities will benefit consumers. In addition to benefitting ratepayers, the record indicates that a designation of the assets as EWGs would contribute to the development of the competitive wholesale generation market. The Department finds that the development of the competitive wholesale generation market is in the public interest. Finally, the Department notes that competing wholesale generators, including EWGs, will be an integral part of the competitive generation industry that the Restructuring Act was designed to enable. Thus, the Department finds that the divestiture does not violate state law, but rather, furthers the objectives of the state law. Accordingly, for the above reasons, the Department approves Northfield Mountain and the Related Facilities as eligible for EWG status. IV. ORDER Accordingly, after due notice, hearing and consideration, it is hereby ORDERED: That the Asset Divestiture involving the sale by Western Massachusetts Electric Company of Northfield Mountain, Cabot, and Turners Falls to Northeast Generation Company, as embodied in the Purchase and Sale Agreement and other related documents, is approved; and it is FURTHER ORDERED: That Western Massachusetts Electric Company's calculation of net proceeds is approved; and it is FURTHER ORDERED: That Northfield Mountain, Cabot and Turners Falls are eligible for exempt wholesale generator status before FERC; and it is FURTHER ORDERED: That Western Massachusetts Electric Company comply with all orders and directives contained herein. By Order of the Department ____________________________ James Connelly, Commissioner ____________________________ W. Robert Keating, Commissioner ____________________________ Paul B. Vasington, Commissioner A true copy Attest: ____________________________ Eugene J. Sullivan, Jr., Commissioner Appeal as to matters of law from any final decision, order or ruling of the Commission may be taken to the Supreme Judicial Court by an aggrieved party in interest by the filing of a written petition praying that the Order of the Commission be modified or set aside in whole or in part. Such petition for appeal shall be filed with the Secretary of the Commission within twenty days after the date of service of the decision, order or ruling of the Commission, or within such further time as the Commission may allow upon request filed prior to the expiration of twenty days after the date of service of said decision, order or ruling. Within ten days after such petition has been filed, the appealing party shall enter the appeal in the Supreme Judicial Court sitting in Suffolk County by filing a copy thereof with the Clerk of said Court. (Sec. 5, Chapter 25, G.L. Ter. Ed., as most recently amended by Chapter 485 of the Acts of 1971). -----END PRIVACY-ENHANCED MESSAGE-----