-----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, Qziw4oa2zH8/qyMH/yoYUB/0XC8r7+mF0QFmKNCY6UhUdA4IbHbZTAkEThBsOxE7 OUS7dDAVq1ooh9+7BoBUfA== 0000072741-03-000108.txt : 20030604 0000072741-03-000108.hdr.sgml : 20030604 20030604143833 ACCESSION NUMBER: 0000072741-03-000108 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030604 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: 1935 Act SEC FILE NUMBER: 070-09755 FILM NUMBER: 03732302 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDEN ST CITY: BERLIN STATE: CT ZIP: 06037-1616 U-1/A 1 nuu1aamend3060303.txt NU U-1-A POS. EFF.3 AMEND 6 060403 FILE NO. 70-9755 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 POST-EFFECTIVE AMENDMENT NO. 3 (AMENDMENT NO. 6) TO FORM U-1 APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 Northeast Utilities Holyoke Water Power Company Western Massachusetts Electric Company One Canal Street 174 Brush Hill Avenue Holyoke, MA 01040 West Springfield, MA 01090-0010 The Connecticut Light and Power Company Public Service Company NU Enterprises, Inc. of New Hampshire Northeast Generation Service Company North Atlantic Energy E.S. Boulos Company Corporation Woods Network Services, Inc. Energy Park Woods Electrical Co., Inc. 780 North Commercial Street Northeast Generation Company Manchester, NH 03101 Select Energy, Inc. Select Energy Services, Inc. Select Energy New York, Inc. 24 Prime Parkway Mode 1 Communications, Inc. Natick, MA 01760 Northeast Utilities Service Company 107 Selden Street Berlin, CT 06037 Yankee Energy System, Inc. The Rocky River Realty Company Yankee Gas Services Company The Quinnehtuk Company Yankee Energy Financial Services Company Northeast Nuclear Energy NorConn Properties, Inc. Company Yankee Energy Services Company 107 Selden Street 107 Selden Street Berlin, CT 06037 Berlin, Connecticut 06037 Name of companies filing this statement and addresses of principal executive offices) NORTHEAST UTILITIES (Name of top registered holding company) Gregory B. Butler, Esq. Vice President, Secretary and General Counsel Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to Jeffrey C. Miller David R. McHale Assistant General Counsel Vice President and Treasurer Northeast Utilities Northeast Utilities Service Company Service Company P.O. Box 270 P.O. Box 270 Hartford, CT 06141-0270 Hartford, CT 06141-0270 The Application/Declaration in this file, as heretofore amended, is further amended and restated as follow: ITEM 1 DESCRIPTION OF PROPOSED TRANSACTION BACKGROUND 1. Northeast Utilities ("NU"), a public utility holding company registered under the Public Utility Holding Company Act of 1935, as amended (the "Act"), The Connecticut Light and Power Company ("CL&P"), Western Massachusetts Electric Company ("WMECO"), Public Service Company of New Hampshire ("PSNH"), Holyoke Water Power Company ("HWP"), North Atlantic Energy Corporation ("NAEC"), Northeast Nuclear Energy Company ("NNECO"), The Rocky River Realty Company ("RR"), The Quinnehtuk Company ("Quinnehtuk") and Northeast Utilities Service Company ("NUSCO"), each of which is a wholly-owned subsidiary of NU; Yankee Energy System, Inc. ("YES"), a wholly-owned public utility holding company subsidiary of NU and its wholly-owned subsidiaries, Yankee Gas Services Company ("Yankee Gas"), Yankee Energy Financial Services Company ("Yankee Financial"), Yankee Energy Services Company ("YESCO") and NorConn Properties, Inc. ("NorConn"); and NU Enterprises, Inc. ("NUEI"), a wholly owned nonutility holding company subsidiary of NU, and its direct and indirect wholly-owned subsidiaries, Northeast Generation Company ("NGC"), Northeast Generation Services Company ("NGS"), E. S. Boulos Company ("Boulos"), Woods Electrical Company, Inc. ("Woods"), Woods Network Services, Inc. ("Woods Network"), Select Energy, Inc. (Select Energy"), Select Energy New York, Inc. ("SENY"), Mode 1 Communications, Inc. ("Mode 1") and Select Energy Services, Inc., formerly HEC Inc. ("SESI") (each of the above companies being an "Applicant" and collectively referred to herein as the "Applicants") submit this amendment to the application/declaration in this File (the "Amendment") pursuant to Sections 6(a), 7, 9(a), 10 and 12 of the Act and Rules 43, 45 and 52 thereunder with respect to (i) the extension of certain financing authorizations granted by the Commission in the prior Commission order issued in this file and (ii) the granting of certain additional authorizations as requested herein. 2. By order dated December 28, 2000 (Holding Co. Act Release No. 27328) issued by the Commission in this File No. 70-9755 (the "Prior Order"), the Applicants were authorized to continue participation in the NU system money pool arrangement ("NU Money Pool"), and, to the extent not exempt under Rules 45(b) and 52, to enter into short-term debt transactions with NU and extend credit to (and acquire promissory notes from) each other through their participation in the NU Money Pool, through June 30, 2003. In addition, authorization was granted in the Prior Order for NU and five of its utility subsidiaries, CL&P, WMECO, PSNH, YES and Yankee Gas, among others, (CL&P, WMECO, PSNH, YES and Yankee Gas referred to collectively as the "Utility Borrowers") to issue notes or commercial paper to unaffiliated third parties to evidence short-term debt up to specified limits and within specified parameters. 3. The Applicants now request that the Commission issue an order in this file granting: (i) an extension, from the date of the order requested herein through June 30, 2006 (the "Authorization Period"), of the authorizations granted by the Commission in the Prior Order concerning (a) the issuance of notes or commercial paper by NU and the Utility Borrowers to unaffiliated third parties to evidence short-term debt, (b) the respective short-term debt limits of NU and the Utility Borrowers; and (c) participation by the Applicants in the NU System Money Pool as described herein through June 30, 2004 (the "Pool Authorization Period") provided that (i) the terms of the NU Money Pool are modified to provide priority over the borrowing of NU Money Pool Funds to the utility subsidiaries of NU over the nonutility subsidiaries and (ii) NU provides to the Commission, by December 31, 2003, the results of a feasibility study concerning the creation of a separate money pool for nonutility subsidiaries of NU; (ii) authorization, through the Authorization Period, for NU and the Utility Borrowers to enter into Interest Rate Hedges (as described herein), and (iii) authorization for Boulos, Woods and SENY to participate in the NU Money Pool as both borrowers and lenders and authorization for Woods Network to participate in the NU Money Pool solely as a lender through the Pool Authorization Period. SHORT-TERM DEBT OF NU AND THE UTILITY BORROWERS 4. In this Amendment NU and the Utility Borrowers seek an order of the Commission extending, through the Authorization Period, the authorization granted in the Prior Order for their short-term borrowing arrangements ("Short-term Debt"). NU and the Utility Borrowers propose to issue and sell from time to time during the Authorization Period, Short-term Debt in an aggregate principal amount at any time outstanding not to exceed, when added to any debt by such companies through the NU Money Pool, the respective limits for NU and the Utility Borrowers set forth below in paragraph 22 (which limits are the same or less than the limits provided in the Prior Order) ("Short-term Debt Limit"). The Short-term Debt for NU and the Utility Borrowers has taken and will take a variety of forms, including commercial paper issuances and/ or unsecured notes, and in the case of the Utility Borrowers, secured or unsecured notes, with banks or other institutional lenders under credit facilities having commitment periods not longer than the Authorization Period and on terms that are generally available to borrowers with comparable credit ratings. All Short-term Debt will have maturities of less than one year from the date of issuance. The Utility Borrowers request that the Commission reserve jurisdiction over their request to issue secured short-term debt pending completion of the record. 5. Commercial paper issued by NU or a Utility Borrower hereunder may be issued manually or through The Depository Trust Company in the form of book entry notes in denominations of not less than $50,000 of varying maturities. Such commercial paper would typically be sold to dealers at the discount rate prevailing at the date of issuance for commercial paper of comparable quality and maturities sold to commercial paper dealers generally. It is expected that the dealers acquiring the commercial paper will reoffer it at a discount to corporate and institutional investors. No commercial paper will be issued unless NU or the Utility Borrower issuing such commercial paper believes that the effective interest cost to it will be equal to or less than the effective interest rate at which such company could issue short-term notes in an amount at least equal to the principal amount of such commercial paper. The commercial paper will be publicly issued and sold without registration under the Securities Exchange Act of 1933 in reliance upon one or more applicable exemptions from registration thereunder. 6. NU and the Utility Borrowers also propose to continue, or to establish and maintain back-up credit lines with banks or other institutional lenders to support their commercial paper program(s), and other credit arrangements and/ or borrowing facilities generally available to borrowers with comparable credit ratings, providing for revolving credit or other loans and having commitment periods not longer than the Authorization Period. All amounts drawn and outstanding under these agreements and facilities will have maturities less than one year from the date of draw and will be counted against the proposed Short-term Debt Limits of NU or such Utility Borrower. 7. The effective cost of money on all external Short-term Debt of NU and the Utility Borrowers will not exceed competitive market rates available at the time of issuance for securities having the same or reasonably similar terms and conditions issued by companies of comparable credit quality, provided that in no event will the effective cost of capital exceed 500 basis points over the comparable term London Interbank Offered Rate ("LIBOR"). Issuance expenses in connection with any non-competitive offering of Short-term Debt will not exceed 5% of the principal amount thereof. Specific terms of any Short-term Debt will be determined by NU or the Utility Borrowers at the time of issuance and will comply in all regards to the parameters of financing authorizations set forth above. A copy of any new note or loan agreement executed pursuant to this Authorization will be filed under cover of the next quarterly report under Rule 24. 8. NU commits that, apart from the securities issued for the purpose of funding money pool operations, no Short-term Debt may be issued by NU in reliance upon this Order during the Authorization Period, unless: (i) the security to be issued, if rated, is rated investment grade; and (ii) all outstanding Short-term Debt of NU that is rated is rated investment grade. For purposes of this condition, a security will be considered investment grade if it is so rated by at least one nationally recognized statistical rating organization, as that term is used in paragraphs (c)(2)(vi)(E), (F) and (H) of Rule 15c3-1 under the 1934 Act. NU requests that the Commission reserve jurisdiction over the issuance by NU of any Short-term Debt that is rated below investment grade. 9. Subject to the applicable Short-term Debt Limits, NU and the Utility Borrowers intend to renew and extend outstanding short- term debt as it matures, to refund such short-term debt with other similar short-term debt, to repay such short-term debt or to increase the amount of their short-term debt from time to time. 10. Current Financial Condition (a) NU For the twelve (12) months ended December 31, 2002, NU's consolidated gross revenues and net income were approximately $5.0 billion and $152 million, respectively. As of December 31, 2002, NU's consolidated capitalization consisted of 33.4% common equity, 1.8% preferred stock, 28.6% of Rate Reduction Bonds, and 36.2% debt. When the Rate Reduction Bonds are excluded, NU's consolidated capitalization consisted of 46.8% common equity, 2.4% preferred stock and 50.8% debt. NU Credit Ratings (Senior Unsecured Debt) Moody's S&P Baa1 BBB (b) The Utility Borrowers The Connecticut Light and Power Company ("CL&P") As of December 31, 2002, CL&P's consolidated capitalization consisted of 24.1% common equity, 4.0% preferred stock, 43.2% of Rate Reduction Bonds, and 28.7% of long-term and short-term debt. When the Rate Reduction Bonds are excluded, CL&P's consolidated capitalization consisted of 42.4% common equity, 7.0% preferred stock and 50.5% debt. The credit rating for senior debt of CL&P is BBB+ by Standard and Poor's and A3 by Moody's. Western Massachusetts Electric Company ("WMECO") As of December 31, 2002, WMECO's consolidated capitalization consisted of 31.9% common equity, 28.8% of Rate Reduction Bonds, and 39.3% of long-term and short-term debt. When the Rate Reduction Bonds are excluded, WMECO's consolidated capitalization consisted of 44.8% common equity and 55.2% debt. The credit rating for senior unsecured debt of WMECO is BBB+ by Standard and Poor's and A3 by Moody's. Public Service Company of New Hampshire ("PSNH") As of December 31, 2002, PSNH's consolidated capitalization consisted of 26.0% common equity, 41.2% of Rate Reduction Bonds issued pursuant to state law, and 32.8% of long-term and short- term debt. When the Rate Reduction Bonds are excluded, PSNH's consolidated capitalization consisted of 44% common equity and 56% debt. The credit rating for senior secured debt of PSNH is BBB+ by Standard and Poor's and A3 by Moody's. Yankee Energy System, Inc. ("YES") As of December 31, 2002, YES's consolidated capitalization consisted of 77.7% common equity and 22.3% debt. YES is not currently rated by Standard and Poor's, Moody's or Fitch. Yankee Gas Services Company ("Yankee Gas") As of December 31, 2002, Yankee Gas' consolidated capitalization consisted of 76.8% common equity and 23.2% of debt. Yankee Gas is not currently rated by Standard and Poor's, Moody's or Fitch. INTEREST RATE HEDGES 11. To the extent not exempt under rule 52, each of NU and the Utility Borrowers also requests authorization to enter into interest rate hedging transactions with respect to its outstanding indebtedness ("Interest Rate Hedges"), subject to the limitations and restrictions below, in order to reduce or manage the effective interest rate cost. Interest Rate Hedges would only be entered into with counterparties ("Approved Counterparties") whose senior debt ratings, or the senior debt ratings of any credit support providers who have guaranteed the obligations of the Approved Counterparties, as published by S&P, are equal to or greater than BBB, or an equivalent rating from Moody's or Fitch, or through on-exchange transactions. 12. Interest Rate Hedges will involve the use of financial instruments commonly used in the capital markets, such as options, interest rate swaps, locks, caps, collars, floors, exchange-traded futures and options, and other similar appropriate instruments. The transactions would be for fixed periods and stated notional amounts as are generally accepted as prudent in the capital markets. In no case will the notional principal amount of any Interest Rate Hedge exceed that of the underlying debt instrument. Neither NU nor the Utility Borrowers will engage in speculative transactions within the meaning of such term in Statement of Financial Accounting Standard 133, as amended ("FAS 133"). Transaction fees, commissions and other amounts payable to brokers in connection with an Interest Rate Hedge will not exceed those generally obtainable in competitive markets for parties of comparable credit quality. 13. NU represents that each Interest Rate Hedge will qualify for hedge accounting treatment on a continuing basis under generally acceptable accounting practices ("GAAP"). NU will also comply with the then existing financial disclosure requirements of the Financial Accounting Standards Board associated with hedging transactions. Currently FAS 133 is the applicable standard. USE OF PROCEEDS 14. The proceeds from the Short-term Debt of NU and the Utility Borrowers authorized by the Commission pursuant to this Application will be used for (i) general corporate purposes, including investments by and capital expenditures of NU and its subsidiaries, including, without limitation, the funding of future investments in exempt wholesale generators ("EWG"), Foreign Utility Companies ("FUCO") (each to the extent permitted under the Act or Commission order), Rule 58 Subsidiaries (to the extent permitted under the Act), and exempt telecommunications companies ("ETC"), (ii) the repayment, redemption, refunding or purchase by NU or any subsidiary of any of its own securities from non-affiliates pursuant to Rule 42, and (iii) financing working capital requirements of NU and its subsidiaries. 15. NU represents that no financing proceeds will be used to acquire the securities of, or other interests in, any company unless such acquisition has been approved by the Commission in this or a separate proceeding or is in accordance with an available exemption under the Act or rules thereunder, including Sections 32 and 33 and Rules 53, 54 and 58. NU states that the aggregate amount of proceeds of financing approved by the Commission in this proceeding used to fund investments in EWGs and FUCOs will not, when added to NU's "aggregate investment" (as defined in Rule 53) in all such entities at any point in time, exceed 50% of NU's average "consolidated retained earnings" (also as defined in Rule 53), except as permitted and authorized by the Commission. . Further, NU represents that proceeds of financing utilized to fund investments in Rule 58 Subsidiaries will adhere to the limitations of that rule. NU MONEY POOL 16. By the Prior Order, NU and certain utility and nonutility subsidiaries were authorized to participate in the NU Money Pool. In this Application, the Applicants seek authorization to continue the NU Money Pool established under the authority granted in the Prior Order through the Pool Authorization Period and seek authorization for Boulos, Woods and SENY to be allowed to participate in the Money Pool as both borrowers and lenders, and for Woods Network to participate in the NU Money Pool solely as a lender. The Applicants request that the Commission reserve jurisdiction over the addition of any additional participants to the NU Money Pool. (For purposes of this section, the Applicants, with the exception of NUSCO, are referred to herein as the "Pool Participants" and NU, YES, Mode 1, Woods Network and NGC are referred to as the "Non-borrowing Nonutility Pool Participants"). The Pool Participants, other than the Non-borrowing Nonutility Pool Participants, to the extent not exempted by rule 52, also request authority to continue to enter into, from time to time, unsecured short-term debt transactions through the NU Money Pool, to contribute surplus funds to the NU Money Pool and to lend to (and acquire promissory notes from) one another through the NU Money Pool. The Non-borrowing Nonutility Pool Participants request authority solely to contribute surplus funds and to lend to the Pool Participants through the NU Money Pool. 17. The Applicants recognize that many registered holding company systems have established two separate system money pools, one for regulated utilities and the other for the system's competitive or non-utility companies. NU has historically maintained one system money pool in which both the utility and non-utility companies are participants. NU commits to the Commission to review and consider the possibility and feasibility of establishing two separate system money pools. NU commits to providing the Commission with the results of its review no later than December 31, 2003. 18. The NU Money Pool will continue to be administered on behalf of the Applicants by NUSCO under the direction of an officer of NUSCO . The NU Money Pool will consist principally of surplus funds received from Pool Participants, including NU. In addition to surplus funds, funds borrowed by NU through the issuance of short-term notes or other debt, or by the selling of commercial paper ("External Funds") are a source of funds for making loans advances to certain of its subsidiaries through the NU Money Pool. All External Funds will be subject to the Short- term Debt limits of NU set forth in paragraph 22 hereof. 19. NU Money Pool transactions will be designed to match, on a daily basis, the surplus funds of the Pool Participants with the short-term borrowing requirements of the Pool Participants (other than the Non-borrowing Nonutility Pool Participants), thereby minimizing the need for short-term debt to be incurred by the Pool Participants from external sources. Those Pool Participants in the NU Money Pool who are regulated utility subsidiaries of NU will have priority as borrowers from the NU Money Pool. 20. The funds available through the NU Money Pool will be loaned on a short-term basis to those Pool Participants, other than the Non-borrowing Nonutility Pool Participants, that have short-term debt requirements. If no such short-term requirements match the amount of funds that are available for the period such funds are available, NUSCO will invest the funds, directly or indirectly, as described below and will allocate the interest earned on such investments among the Pool Participants providing such funds on a pro rata basis according to the amount of the funds provided: (i) interest-bearing accounts with banks; (ii) obligations issued or guaranteed by the U.S. government and/or its agencies and instrumentalities, including obligations under repurchase agreements; (iii) obligations issued or guaranteed by any state or political subdivision thereof, provided that such obligations are rated not less than "A" (or "A-1" or "P-1" or their equivalent for short term debt) by a nationally recognized rating agency; (iv) commercial paper rated not less than "A-1" or "P-1" or their equivalent by a nationally recognized rating agency; (v) moneymarket funds; (vi) bank certificates of deposit, (vii) Eurodollar funds; and (viii) such other investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder and, with respect to contributions of WMECO, approved by the Massachusetts Department of Telecommunications and Energy ("MDTE") pursuant to Massachusetts General Laws Chapter 164, Section 17A and the regulations thereunder. 21. All borrowings from and contributions to the NU Money Pool will be documented and will be evidenced on the books of each Pool Participant that is borrowing from or contributing surplus funds to the NU Money Pool. Any Pool Participant contributing funds to the NU Money Pool may withdraw those funds at any time without notice to satisfy its daily need for funds. All short- term debt through the NU Money Pool (other than from NU's External Funds) will be payable on demand, may be prepaid by any borrowing Pool Participant at any time without penalty and will bear interest for both the borrower and lender, payable monthly, equal to the daily Federal Funds Effective Rate as quoted by the Federal Reserve Bank of New York. Short-term debt of Pool Participants derived from the proceeds of External Funds of NU will bear interest at the same rate paid by NU on such External Funds, and no such short-term debt may be prepaid by the Pool Participant unless NU is made whole for any additional costs that may be incurred because of such prepayment. NU will be fully reimbursed for all costs that it incurs in relation to loans made through the NU Money Pool to the Pool Participants. (See Exhibit A.3, Proposed Terms of The NU System Money Pool). PROPOSED SHORT-TERM DEBT LIMITS OF UTILITY COMPANIES 22. The Prior Order imposed short-term debt limits, either through the NU Money Pool or through unaffiliated third parties, on NU, CL&P, WMECO, PSNH, HWP, NAEC, NNECO, YES and Yankee Gas. None of these companies are seeking an increase in such limit. In fact, as a result of industry restructuring, WMECO, PSNH, NAEC and NNECO are now seeking a limit which is less than the limit provided in the Prior Order. The short-term debt of NU, CL&P, WMECO, PSNH, HWP, NAEC, NNECO, YES and Yankee Gas, through the Authorization Period, that will be outstanding at any one time, whether evidenced by short-term notes issued to lending institutions, by commercial paper or through borrowings though the NU Money Pool pursuant to the authority requested in this Application, will not exceed the following: Company Aggregate Limits NU $400 Million CL&P $375 Million WMECO $200 Million PSNH $100 Million HWP $ 5 Million NAEC $ 10 Million NNECO $ 10 Million YES $ 50 Million Yankee Gas $100 Million NU MONEY POOL DEBT LIMITS FOR NONUTILITY PARTICIPANTS 23. In the Prior Order, the Commission reserved jurisdiction over the Applicants' request that there be no NU Money Pool borrowing limit imposed on the Nonutility Pool Participants (as defined below). The Applicants now request that the Commission continue to reserve jurisdiction over such request and impose the following limits on the NU Money Pool borrowing of the Nonutility Pool Participants, until such reservation is released, as follows: Quinnehtuk $ 10 Million NUEI $100 Million NGS $ 25 Million Select $200 Million RR $ 30 Million Yankee Financial $ 10 Million NorConn $ 10 Million YESCO $ 10 Million SESI $ 35 Million Boulos $ 10 Million Woods $ 10 Million SENY $ 10 Million ITEM 2 FEES, COMMISSIONS AND EXPENSES 1. In addition to fees associated with specific borrowing or issuances of commercial paper as set forth in Item 1 above, the fees, commissions and expenses of the Applicants expected to be paid or incurred, directly or indirectly, in connection with the transactions described above are estimated as follows: Northeast Utilities Service Company (Legal, Financial, Accounting and Other Services) Not in excess of $10,000 ITEM 3 APPLICABLE STATUTORY PROVISIONS 1. The Applicants believe that Sections 6, 7, 9(a), 10, 12 and 13 of the Act and Rules 43, 45, 52, 90 and 91 thereunder are applicable to the transactions contemplated by this Application. 2. Within 45 days after the end of each calendar quarter, the Applicants will file certificates of partial consummation describing (i)the actual short-term debt of each Applicant, including Nonutility Participants, through the NU Money Pool, showing the names of the Participant incurring such debt, the dates and amounts of all new short-term debt, the names of the lenders, the maximum amount of notes outstanding to lending institutions and the NU Money Pool and the total amount of notes outstanding to lending institutions and the NU Money Pool at the end of the quarter; (ii) the issue and sale of short-term notes and commercial paper during that quarter by NU and the Utility Borrowers pursuant to the authority requested herein; (iii) the notional amount and principal terms of any Interest Rate Hedge entered into during the quarter and the identity of the parties to such instruments; and (iv) the amount and terms of any Short- term Debt issued directly or indirectly by NU or a Utility Borrower to third parties during the quarter. All other terms, conditions, limitations and reporting obligations contained in the Prior Order will apply to the proposed transactions. ITEM 4 REGULATORY APPROVALS 1. The approval of the MDTE is required pursuant to C.164, Section 17A of the Massachusetts General Laws for the lending of funds by WMECO to the NU Money Pool. The MDTE (formerly the Massachusetts Public Utilities Commission) granted such approval on October 29, 1986 as to lending of funds to CL&P, HWP, NNECO, Quinnehtuk and RR. Until further MDTE authorization is granted, WMECO may not lend its funds to other companies through the NU Money Pool. 2. NHPUC Order No. 20,416 (March 19, 1992), authorizes PSNH to participate in the NU Money Pool. In addition, under New Hampshire statute, PSNH may not issue short-term debt in excess of 10% of its net fixed plant without prior NHPUC approval. NHPUC Order 23,841, (November 9, 2001) authorizes PSNH to issue up to $100 million in debt which is in excess of 10% of net fixed plant debt limit. The NHPUC also has jurisdiction over the issuance by PSNH of Interest Rate Hedges. 3. To the extent any Applicant issues secured debt, the granting of such security may be subject to an order from the relevant state utility commission. ITEM 5 PROCEDURE 1. The Applicants hereby request that the Commission publish a notice under Rule 23 with respect to the filing of this Application as soon as practicable and that the Commission's order be issued as soon as possible. A form of notice suitable for publication in the Federal Register is attached hereto as Exhibit H.2. The Applicants respectfully request the Commission's approval, pursuant to this Application, of all transactions described herein, whether under the sections of the Act and Rules thereunder enumerated in Item 3 or otherwise. It is further requested that the Commission issue an order authorizing the transactions proposed herein at the earliest practicable date, but not later than June 30, 2003 as that is the date the Prior Order expires. Additionally, the Applicants (i) request that there not be any recommended decision by a hearing officer or by any responsible officer of the Commission, (ii) consent to the Office of Public Utility Regulation within the Division of Investment Management assisting in the preparation of the Commission's decision, and (iii) waive the 30-day waiting period between the issuance of the Commission's order and the date on which it is to become effective, since it is desired that the Commission's order, when issued, become effective immediately. OTHER MATTERS 1. Except in accordance with the Act, neither NU nor any subsidiary thereof (a) has acquired an ownership interest in an EWG or a 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. 2. NU currently meets all of the conditions of Rule 53(a), except for clause (1). At December 31, 2002, NU's "aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $448.2 million, or approximately 59% of NU's average "consolidated retained earnings," also as defined in Rule 53(a)(1), for the four quarters ended December 31, 2002 ($713.1 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 Co. 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. 3. In addition, NU and its subsidiaries are in compliance and will continue to comply with the other provisions of Rule 53(a) and (b), as demonstrated by the following determinations: (i) NGC maintains books and records, and prepares financial statements, in accordance with Rule 53(a)(2). Furthermore, NU has undertaken to provide the Commission access to such books and records and financial statements, as it may request; (ii) No employees of NU's public utility subsidiaries have rendered services to NGC; (iii)NU has submitted (a) a copy of each Form U-1 and Rule 24 certificate that has been filed with the Commission under Rule 53 and (b) a copy of Item 9 of the Form U5S and Exhibits G and H thereof to each state regulator having jurisdiction over the retail rates of NU's public utility subsidiaries; (iv) Neither NU nor any subsidiary has been the subject of a bankruptcy or similar proceeding unless a plan of reorganization has been confirmed in such proceeding; (v) NU's average CREs for the four most recent quarterly periods have not decreased by 10% or more from the average for the previous four quarterly periods; and (vi) In the previous fiscal year, NU did not report operating losses attributable to its investment in EWGs/FUCOs exceeding 3 percent of NU's consolidated retained earnings. 4. The proposed transactions, considered in conjunction with the effect of the capitalization and earnings of NU's EWGs and FUCOs, would not have a material adverse effect on the financial integrity of the NU system, or an adverse impact on NU's public- utility subsidiaries, their customers, or the ability of State commissions to protect such public-utility customers. The Rule 53(c) Order was predicated, in part, upon an assessment of NU's overall financial condition which took into account, among other factors, NU's consolidated capitalization ratio and its retained earnings, both of which have improved since the date of the order. NU's EWG investment (it has no FUCO investment) has been profitable for all quarterly periods ending June 30, 2000 through December 31, 2002 (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 5. The consolidated capitalization ratios of NU as of December 31, 2002, with consolidated debt including all short- term debt and non-recourse debt of the EWG, were as follows: As of December 31, 2002 (thousands of dollars) % Common shareholders' equity $2,210,521 33.4 Preferred stock 116,200 1.8 Long-term and short-term debt 2,400,050 36.2 Rate Reduction Bonds 1,899,312 28.6 $6,626,312 100.0 If Rate Reduction Bonds are excluded the consolidated capitalization ratio of NU as of December 31, 2002 is as follows: As of December 31, 2002 (thousands of dollars) % Common shareholders' equity $2,210,521 46.8 Preferred stock 116,200 2.4 Long-term and short-term debt 2,400,050 50.8 $4,726,771 100.0% 6. NGC has made a positive contribution to earnings by contributing $131.9 million in revenues in the 12-month period ending December 31, 2002 and net income of $30.4 million for the same period. Although since the date of the Rule 53(c) Order, the common equity ratio of NU on a consolidated basis has decreased, it still remains at a financially healthy level, above the 30% benchmark required by the Commission, and if Rate Reduction Bonds are excluded, the consolidated common equity ratio has increased. Accordingly, NU's investment in its EWG has not had an adverse impact on NU's financial integrity. ITEM 6 EXHIBITS AND FINANCIAL STATEMENTS 1. The following additional exhibits and financial statements are filed herewith: (a) Exhibits (exhibits marked with an asterisk (*) were previously filed, exhibits marked with an (#) filed with the SEC in paper form) *A.2 Proposed Terms of the NU Money Pool (Revised April 2003) A.3 Proposed Terms of the NU System Money Pool (revised June 2003) *D.1 New Hampshire Public Utilities Commission Order 20,416 Approving Participation of PSNH in NU Money Pool (March 19, 1992) D.2 MDTE Order Authorizing Participation by WMECO in NU Money Pool *D.3 New Hampshire Public Utilities Commission Order 23,841Approving $100 million of Short-term Debt for PSNH *F.2 Opinion of Counsel *H.2 Form of Notice #K.1 Balance Sheet and Income Statement of Nonutility Participants for 2002 #K.2 Balance Sheet and Income Statement of Nonutility Participants for 2001 (b) Financial Statements (previously filed) ITEM 7 INFORMATION AS TO ENVIRONMENTAL EFFECTS 1. None of the matters that are the subject of this Application involve a "major federal action" nor do they "significantly affect the quality of the human environment" as those terms are used in Section 102(2)(C) of the National Environmental Policy Act. None of the proposed transactions that are the subject of this Application will result in changes in the operation of the Applicants that will have an impact on the environment. The Applicants are not aware of any federal agency which has prepared or is preparing an environmental impact statement with respect to the transactions proposed herein." SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the Applicants have duly caused this Application-Declaration to be signed on their behalf by the undersigned thereunto duly authorized. June 4, 2003 Northeast Utilities Northeast Utilities Service Company The Connecticut Light and Power Company Western Massachusetts Electric Company Public Service Company of New Hampshire North Atlantic Energy Corporation Holyoke Water Power Company Northeast Nuclear Energy Company Yankee Energy System, Inc. Yankee Gas Services Company The Rocky River Realty Company The Quinnehtuk Company NU Enterprises, Inc. Northeast Generation Company Northeast Generation Service Company Woods Electrical Co., Inc. Woods Network Services, Inc. E. S. Boulos Company Select Energy, Inc. Select Energy New York, Inc. Mode 1 Communications, Inc. Select Energy Services, Inc. Yankee Energy Financial Services Company Yankee Energy Services Company NorConn Properties, Inc. By: /s/ Randy A. Shoop Name: Randy A. Shoop Title: Assistant Treasurer-Finance Northeast Utilities Service Company as Agent for all of the above-named Applicants - ----------------------------------------------------------------- In Holding Co. Act Release No. 35-27147 (March 7, 2000), the Commission noted that NU, CL&P, WMECO and PSNH would all be below the Commission's benchmark of 30% common equity-to- total capitalization ratio if Rate Reduction Bonds expected to be issued were included in the calculation. The Commission found that because of the exceptional circumstance of the state's restructuring legislation, the following representations mitigated the fact that the utilities were below the 30% test: (1) that CL&P, PSNH and WMECO had investment grade ratings of BBB- or better; (2) that CL&P, PSNH and WMECO's financial integrity would not be impaired by the payment of dividends; (3) that CL&P, PSNH and WMECO have and will continue to have, following the consummation of the transactions, adequate cash and access to working capital facilities to meet and support their normal business operations; and finally (4) that it is in the public's interest because both investors and consumers benefited. See also Holding Co. Act. Release No. 35-27529 (May 11, 2002). Id. The Commission has. by order dated March 7, 2000 (HCAR No. 27148)("Rule 53(c) Order") determined that NU's financing of its investment in NGC, 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). PSNH is authorized by order issued by the New Hampshire Public Utilities Commission to participate in the NU Money Pool. Thus the Applicants believe that the participation of PSNH in the NU Money Pool is exempt from Commission jurisdiction pursuant to Rule 52(a). To the extent the participation of PSNH is not exempt from Commission approval under Rule 52, PSNH seeks approval from the Commission herein. In addition, WMECO is currently authorized to borrow through the NU Money Pool under the Commission's Prior Order but has authorization from the Massachusetts Public Utilities Commission (now the Massachusetts Department of Telecommunications and Energy, the "MDTE") to lend funds through the NU Money Pool only to CL&P, HWP, NNECO, Quinnehtuk and RR, and is prohibited from lending funds to other affiliates without further MDTE approval. The Applicants request that the Commission reserve jurisdiction over any contributions of funds by WMECO to borrowers other than CL&P, HWP, NNECO, RR and Quinnehtuk, pending the issuance of an order from the MDTE. Until the time that such an order is received, all lending of funds by WMECO will be documented using grid notes. NUSCO is not a participant of the NU Money Pool and seeks authorization solely to administer the Money Pool under Section 13 of the Act and Rules 90 and 91. The Prior Order imposed the following short-term debt limits on the utility subsidiaries of NU: $400 million for NU $250 million for WMECO $375 million for CL&P $ 75 million for NNECO, $50 million for YES $100 million for Yankee Gas $ 5 million for HWP $225 million for PSNH $260 million for NAEC NU will not be a borrower through the NU Money Pool. The aggregate amount of unsecured debt that can be incurred by CL&P is also restricted by the provisions in its charter concerning its preferred stock. CL&P has authorization from the holders of its preferred stock through March 31, 2004, to issue securities representing unsecured indebtedness up to a maximum of 20% of its capitalization. Based on its capitalization as of December 31, 2002, CL&P is limited to $480 million of unsecured indebtedness, an amount in excess of the amount for which authorization is sought hereunder. The aggregate amount of short-term debt that can be incurred by PSNH is restricted by New Hampshire Statute and Regulations to an amount equal to 10% of its net fixed plant without further New Hampshire Public Utilities Commission ("NHPUC") approval. Any short-term debt of PSNH in excess of 10% of net fixed plant would require NHPUC approval and thus would be exempt from Commission jurisdiction pursuant to Rule 52(a). PSNH currently has approval from the NHPUC to issue up to $100 million in short-term debt, which is in excess of 10% of net fixed plant debt limit, for general corporate purposes. (NHPUC Order 23,841, November 9, 2001). However, in the event the NHPUC order is revoked, lapses or is rescinded, or to the extent the issuance of short-term debt in an amount up to $100 million is not exempt pursuant to rule 52, PSNH wishes to have the flexibility to issue short-term debt pursuant to Commission authorization hereunder. In the Prior Order, the Commission reserved jurisdiction over the Applicants' request that the Nonutility Pool Participants have no limit on their short-term debt from the money pool. As a result the Commission left in place limits on the Nonutility Pool Participant's NU Money Pool borrowing authority as follows: Quinnehtuk could borrow up to $16 million, NUEI up to $100 million, NGS up to $20 million, Select up to $200 million, RR up to $30 million, Yankee Financial up to $10 million, NorConn up to $10 million, YESCO up to $30 million, SESI up to $20 million and RMS up to $10 million. - ----------------------------------------------------------------- EX-99 3 nuu1aexha3060303.txt TEMS OF MONEY POOL EXH A.3 Exhibit A.3 TERMS OF THE NU SYSTEM MONEY POOL (Revised April, 2003) GENERAL 1. The participants of the money pool for the companies in the Northeast Utilities system (the NU Money Pool) are Northeast Utilities (NU), The Connecticut Light and Power Company (CL&P), Western Massachusetts Electric Company (WMECO), Northeast Nuclear Energy Company (NNECO), Holyoke Water Power Company (HWP), North Atlantic Energy Corporation (NAEC), The Rocky River Realty Company (RR), The Quinnehtuk Company (Quinnehtuk), Public Service Company of New Hampshire (PSNH), Select Energy Services, Inc. (SESI), Mode 1 Communications, Inc. (Mode 1), Select Energy, Inc. (Select), Select Energy New York, Inc. (SENY), NU Enterprises, Inc. (NUEI), Northeast Generation Company (NGC), Northeast Generation Services Company (NGS), E. S. Boulos Company (Boulos), Woods Electrical Co., Inc. (Woods), Woods Network Services, Inc. (Woods Network), Yankee Energy System, Inc. (YES), Yankee Gas Services Company (Yankee Gas), Yankee Energy Financial Services Company (Yankee Financial), NorConn Properties, Inc. (NorConn) and Yankee Energy Services Company (YESCO) (collectively, Pool Participants). NU, YES, Mode 1, Woods Network and NGC (collectively, the Non-Borrowing Participants) may not borrow from the NU Money Pool. 2. The NU Money Pool will be administered by Northeast Utilities Service Company (NUSCO). 3. Each Pool Participant will determine each day, the amount of surplus funds it has available for contribution to the NU Money Pool (Surplus Funds). In addition to its own Surplus Funds, NU may borrow funds from third party lenders (External Funds) in order to make these External Funds available to meet the borrowing needs of the Pool Participants other than the Non- borrowing Participants. CONTRIBUTIONS TO THE POOL 4. Each participant may contribute its Surplus Funds to the NU Money Pool. NU may also contribute any External Funds to the NU Money Pool. 5. Each Pool Participant will receive as interest with respect to its Surplus Funds, that fraction of the total interest received by the NU Money Pool equal to the ratio of the Surplus Funds the Pool Participant has contributed, times the period in which such Surplus Funds were available, to the total Surplus Funds in the NU Money Pool, times the period in which all Surplus Funds were in the NU Money Pool. NU will receive the same interest with respect to its External Funds that it pays for its External Funds. Interest will be computed on a daily basis and payable monthly. 6. Each Pool Participant may withdraw any of its Surplus Funds at any time without notice. NU may withdraw its External Funds at any time without notice. BORROWINGS FROM THE NU MONEY POOL 7. The Non-borrowing Participants shall not be entitled to borrow from the NU Money Pool. 8. No Pool Participant other than CL&P, NNECO, HWP, RR and Quinnehtuk may borrow Surplus Funds that are attributable to contributions from WMECO until the Massachusetts Department of Telecommunications and Energy or other appropriate Massachusetts regulatory agency which regulates WMECO ("MDTE") has issued an order authorizing WMECO to lend funds to such companies through the NU Money Pool. Until the time that such an order is received, all transactions between WMECO and those Pool Participants permitted to borrow funds attributable to contributions by WMECO will be documented using grid notes. 9. All short-term debt requirements of Pool Participants other than the Non-borrowing Participants, will be met by Surplus Funds in the NU Money Pool to the extent such funds are available and to the extent they are not restricted by the conditions specified in paragraph 8. All Pool Participants other than the Non- borrowing Participants may also meet their short-term debt requirements through External Funds made available from NU. The aggregate amount of short-term debt that may be outstanding at any one time, whether through borrowings from the NU Money Pool or otherwise, for the following Pool Participants may not exceed the following: NU $400 Million CL&P $375 Million WMECO $200 Million PSNH $100 Million HWP $ 5 Million NAEC $ 10 Million NNECO $ 10 Million YES $ 50 Million Yankee Gas $100 Million or such other amount which may be approved and authorized by the Securities and Exchange Commission or the appropriate state agency and the respective board of directors from time to time. 10. Restrictions on borrowings through the NU Money Pool are summarized as follows: May Not Borrow from May Not Borrow from the NU Money Pool NU's External Funds NU YES YES Mode 1 Mode 1 Woods Network Woods Network NGC NGC May Borrow from WMECO Contributions, subject to grid notes: CL&P HWP NNECO RR Quinnehtuk 11. All other Pool Participants may borrow from the NU Money Pool and from NU's External Funds. Priority over the borrowing of NU Money Pool Funds will be given first to the utility subsidiaries of NU over the nonutility subsidiaries. 12. Pool Participants borrowing Surplus Funds will pay interest at a rate equal to the daily Federal Funds Effective Rate as quoted by the Federal Reserve Bank of New York. The rate to be used for weekends and holidays will be the prior business day's rate. Pool Participants borrowing External Funds will pay interest at the same rate that NU pays for those External Funds. 13. All loans made by the NU Money Pool from Surplus Funds shall be for periods of less than 12 months and shall be payable on demand. 14. All loans made by the NU Money Pool from Surplus Funds may be prepaid by the borrowing Pool Participant without penalty. No loans from External Funds shall be prepaid by the borrowing Pool Participant prior to the maturity of the NU borrowing that resulted in the External Funds, unless the prepayment can be made without NU incurring additional costs or unless the prepayment is accompanied by payment of any additional costs incurred by NU as a result of such prepayment. 15. If there are more Surplus Funds in the NU Money Pool than are necessary to meet the short-term debt requirements of the Pool Participants, the Surplus Funds will be invested in one of the following instruments: (i) interest-bearing accounts with banks; (ii) obligations issued or guaranteed by the U.S. government and/or its agencies and instrumentalities, including obligations under repurchase agreements; (iii) obligations issued or guaranteed by any state or political subdivision thereof, provided that such obligations are rated not less than "A" (or "A-1" or "P-1" or their equivalent for short term debt) by a nationally recognized rating agency; (iv) commercial paper rated not less than "A-1" or "P-1" or their equivalent by a nationally recognized rating agency; (v) moneymarket funds; (vi) bank certificates of deposit, (vii) Eurodollar funds; and (viii) as to WMECO contributions, such other investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder and approved by the MDTE pursuant to Massachusetts General Laws Chapter 164, Section 17A and the regulations thereunder. TERMINATION 16. Any Pool Participant may terminate its participation in the NU Money Pool at any time without notice. EX-99 4 exhd2wmecomporder.txt D.P.U. 85-159 102986 EXH D-2 Exhibit D.2 SEAL OF THE COMMONWEALTH OF MASSACHUSETTS The Commonwealth of Massachusetts _____________ DEPARTMENT OF PUBLIC UTILITIES October 29, 1986 D.P.U. 85-159 Petition of Western Massachusetts Electric Company for approval by the Department of Public Utilities under Chapter 164A, Sections 17A, of the General Laws to participate in a Northeast Utilities System Money Pool, including short-term investment of any funds in excess of its cash requirements. ____________________________________________________________ APPEARANCES: John B. Keane, Esq. P.O. Box 270 Hartford, Connecticut 06141 FOR: WESTERN MASSACHUSETTS ELECTRIC COMPANY Petitioner D.P.U. 85-159 Page 1 I. INTRODUCTION On June 13, 1985, Western Massachusetts Electric Company ("WMECo" or "Company") filed a petition under the provisions of G.L. c. 164 requesting the approval and authorization by the Department of Public Utilities ("Department") to participate in a Northeast Utilities System Money Pool ("the Pool") along with certain other subsidiaries ("Participants") of Northeast Utilities ("NU"). The Department's approval is required under G.L. c. 164, sec. 17A, with respect to the feature of the Pool that would permit the short-term investment of any of WMECo's funds in excess of its cash requirements. A public hearing was held on the petition on August 26, 1985. The order of notice was returned in completed form and submitted as evidence of compliance with the requirements of publication and notice. In support of WMECo's proposed participation in the Pool, the Company presented David Boguslawski, assistant treasurer to WMECo, NU, and all of its subsidiaries. Among the documents introduced into evidence by the company were a filing letter accompanying the petition and terms of the Pool (Exh. WM-A) and Mr. Boguslawski's profiled testimony with a copy of certified resolutions of the Board of Directors of WMECo authorizing the transactions (Exh. WM-B). Mr. Boguslawski testified that the Company is seeking to establish and participate in a money pool that would allow participants having excess funds on any given day to place money into the Pool, rather than invest it; Participants needing funds D.P.U. 85-159 Page 2 on that day would borrow money from the Pool rather than from external sources (Tr. 8). The Participants consist of WMECo, Connecticut Light and Power Company, Holyoke Water Power Company, Northeast Nuclear Energy Company, the Quinnehtuk Company, the Rocky River Realty Company, and Northeast Utilities Service Company ("NUSCo"). NU will participate only as a lender through the Pool, not as a borrower. Mr. Boguslawski further testified that this type of arrangement does not currently exist at NU but that it is not an unprecedented transaction and is utilized by other companies (Tr. 9). The purpose of the Pool is to assist the Participants in meeting their short-term borrowing needs (as short as one day) while providing a higher investment return for NU and those Participants investing funds in excess of their cash requirements (Exh. WM-A, p. 3). The Pool will be administered on behalf of the Participants by NUSCo, under the direction of one of its assistant treasurers. The Company anticipates that short-term borrowing needs of Participants will be met first through the proceeds of borrowings available through the Pool and thereafter, to the extent necessary, through the proceeds of external short- term borrowings (Exh. WM-A, p. 3). If on any given day the available funds in the Pool are insufficient to meet the short-term borrowing needs of one or more of the Participants, after taking into account the proposed amount and maturity of the borrowing requirements and the available funds, such Participants may seek short-term D.P.U. 85-159 Page 3 borrowings through conventional sources outside the Pool (Exh. WM-A, p. 3). Those Participants who, by NUSCO's analysis and determination, will save more by borrowing from the Pool rather than from outside sources, will be given Pool funds first (Exh. WM-B, p. 6). Documentation will be in the form of daily book entries, and NUSCo is willing to create notes upon the request of any subsidiary (Tr. 9). Mr. Boguslawski stated, in his prefiled testimony, that all loans would be payable on demand, would be prepaid by any borrowing Participant at any time without premium or penalty, and would bear interest, payable monthly, equal to the daily Federal Funds Effective Rate as quoted by the Federal Reserve Bank of New York (Exh. WM-B, p. 5). Loans made to the borrowing Participants through the Pool would bear interest at the same rates, without mark-up, to be received by lending Participants (Exh. WM-D, p. 4). If there are funds remaining in the Pool after borrowing needs of Participants are satisfied and prepayments of outstanding external borrowings could be made without penalties, NUSCo, as agent of the Pool, would invest the funds in such instruments as are listed in Item 12, Terms of the NU Money Pool (Exh. WM-B, p. 7). Earnings on any investments would be allocated between or among those Participants, including NU, providing excess funds (Exh. WM-B, p. 7). Mr. Boguslawski also stated that each contributing Participant would receive as interest the fraction of the total interest received by the Pool that is equal to the ratio of the surplus funds the D.P.U. 85-159 Page 4 Participant has contributed to the Pool to the total surplus funds in the Pool (Exh. WM-B, p. 6). Any Participant, including NU, would be entitled to withdraw its surplus funds from the Pool at any time, without notice, to satisfy its daily need of funds (Exh. WM-B, p. 7). Finally, Mr. Boguslawski stated that WMECo would utilize funds derived from the Pool for working capital and assistance in financing WMECo's construction expenditures (including allowance for funds used during construction, but excluding nuclear fuel), which are estimated at $123,103,000 in 1985 and $55,644,000 in 1986 (Exh. WM-B, p. 7). II. FINDINGS Based on the evidence presented in this case, we find that the participation of WMECo, along with other subsidiaries of NU in the Pool, including the short-term investment of any of WMECo's funds in excess of its cash requirements, is reasonably necessary for the purposes for which this transaction has been proposed. We find that the evidence in this case demonstrates that WMECo intends to use funds derived from the proposed Pool for working capital and for financing construction expenditures (excluding nuclear fuel) and that the proposed transaction will help meet the short-term borrowing needs of Participants. The Department finds that the Company has sufficiently demonstrated that the requested transaction will be used for purposes reasonably related to its utility operations and that D.P.U. 85-159 Page 5 the decision-making process underlying this proposed transaction is based upon a consideration of appropriate factors. Issues concerning the economics of WMECo's participation and investment in the pool have been raised in this proceeding, but the Department's decision in this case does not represent a determination that any project is economically beneficial to the Company or its customers. With regard to these issues, the Department finds it appropriate in this case to defer to the judgment and decision-making responsibility of WMECo. The Department's determination in this order is not in any way to be construed as a ruling relative to the appropriate ratemaking treatment to be accorded the Company's construction program. The effect of the Department's order is limited to the approval and authorization of the proposed participation in the Pool by the Company. III. ORDER Accordingly, after due notice, public hearing, investigation and consideration, the Department hereby VOTES: That, pursuant to the findings above, the participation of Western Massachusetts Electric Company in a Northeast Utilities System Money Pool, including short-term investment of any funds in excess of its cash requirements, is reasonably necessary for the purposes for which such transaction has been authorized; and it is D.P.U. 85-159 Page 6 ORDERED,: That Western Massachusetts Electric Company is hereby authorized to participate in a Northeast Utilities System Money Pool, including short-term investment of any funds in excess of its cash requirements. By.Order of the Department, / s / ROBERT. J . KEEGAN Robert J. Keegan, Commissioner A true copy Attest; Commissioners participating in the decision of D.P.U. 85-159 were; Levy, Chairman; Keegan and Mclntyne Mary L. Cottrell Secretary. 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 4B5 of the Acts of 1971). -----END PRIVACY-ENHANCED MESSAGE-----