File No. 70-10236
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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National Grid Transco plc New England Power Company
National Grid (US) Holdings Limited Massachusetts Electric Company
National Grid (US) Investments 4 The Narragansett Electric Company
National Grid (US) Partner 1 Limited Granite State Electric Company
National Grid (US) Partner 2 Limited Nantucket Electric Company
1-3 Strand New England Electric Transmission Corporation
London WC2N 5EH New England Hydro-Transmission Corporation
United Kingdom New England Hydro-Transmission Electric Co.
Inc.
National Grid General Partnership National Grid USA Service Company Inc.
c/o RL&F Service Corp. National Grid USA
One Rodney Square National Grid Holdings Inc.
Wilmington, 25 Research Drive
New Castle County, DE 19801 Westborough, MA 01582
And the direct and indirect nonutility Niagara Mohawk Holdings, Inc.
subsidiary companies of National Grid Transco Niagara Mohawk Power Corporation
plc listed on Exhibit A to the Application. 300 Erie Boulevard West
Syracuse, New York 13202
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National Grid Transco plc
(Name of top registered holding company)
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Gregory A. Hale
Deputy General Counsel
National Grid USA
25 Research Drive
Westborough, Massachusetts 01582
Telephone: (508) 389-3187
Facsimile: (508) 389-3518
(Name and address of agent for service)
The Commission is also requested to send copies
of any communication in connection with this matter to:
Markian M. W. Melnyk
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1875 Connecticut Ave.
Washington, D.C. 20009-5728
Telephone: (202) 986-8212
Facsimile: (202) 986-8102
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This Post-Effective Amendment No. 2 amends the Application originally filed
with the Securities and Exchange Commission (the "Commission") in File No.
70-10236 on July 15, 2004 and subsequently amended on August 30, 2004, September
30, 2004, and December 17, 2004 to provide further information in Item 1
regarding National Grid Transco plc's compliance with Rule 53(c) and to conform
Items 2, 5 and 6.
Item 1. Description of the Proposed Transaction
A. Introduction.
National Grid Transco plc ("National Grid Transco"), a registered public
utility holding company under the Public Utility Holding Company Act of 1935
(the "Act") requests the Commission to release jurisdiction regarding National
Grid Transco's issuance of securities for the purpose of financing additional
investments in foreign utility companies ("FUCOs").
B. Discussion
1. Request for Release of Jurisdiction
By order dated September 30, 2004, Holding Co. Act Release No. 27898
("September Order"), the Commission authorized National Grid Transco and the
direct and indirect National Grid Transco subsidiaries identified on the cover
page and in Exhibit A of the Application (collectively, the "Applicants") to
engage in certain financing and other transactions described in the September
Order and the Application in SEC File No. 70-10236, as amended. The September
Order authorized the Applicants to engage in the transactions proposed in the
Application but reserved jurisdiction over, among other things, National Grid
Transco's issuance of securities to finance an additional USD 20 billion of FUCO
investments, pending completion of the record. National Grid Transco now
supplements the record with additional information regarding its compliance with
Rule 53(c) under the Act and requests that, based on this supplementary
information, the Commission find that the additional FUCO investment
authorization proposed in the Application may be granted.
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Amendment number 1 to National Grid Transco's application on Form U-1/A
(SEC File No. 70-10236) requesting FUCO financing authorization was filed on
August 30, 2004. In that filing National Grid Transco noted that the FUCO
Order/1 had authorized National Grid Transco to invest up to USD 20 billion to
finance FUCO investments and NGT requested authorization "to issue up to $20
billion of securities during the Authorization Period for the purpose of
financing additional FUCO investments." (Emphasis added.) NGT explained at the
time that its current aggregate investment, as defined in Rule 53(a), in FUCOs
as of September 30, 2003 was USD 14,949 million, and based on that amount the
additional FUCO investment authorization of USD 20 billion could result in a
total aggregate investment in FUCOs of USD 34,949 million during the
Authorization Period.
The notice published by the Commission on August 30, 2004, Holding Co. Act
Release No. 27888, provided that "National Grid Transco now seeks to use the
authorization requested in this Application to issue up to $20 billion of
securities during the Authorization Period for the purpose of financing
additional FUCO investments beyond its current $14.9 [billion] investment." The
Commission's order granting National Grid Transco's application in chief, and
reserving jurisdiction over certain transactions including additional FUCO
investments in excess of USD 20 billion,/2 repeated the company's request for an
additional USD 20 billion of FUCO investment authorization. The Commission
reserved jurisdiction over FUCO investments in excess of USD 20 billion because
National Grid Transco had not fully demonstrated, principally
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1 By order dated October 16, 2002, Holding Co. Act Release No. 27577 (the "FUCO
Order"), the Commission authorized National Grid Transco to invest up to USD 20
billion in FUCOs.
2 The order reserved jurisdiction over "(a) the issuance of any guarantee or
other securities in reliance upon the authorization granted by the Commission
under this Application at any time that the Investment Grade Condition is not
satisfied, (b) the participation of any National Grid Transco System company in
the Money Pool, other than the Utility Subsidiaries and ServiceCo, as a borrower
and (c) the issuance of securities to finance additional FUCO investments
resulting in a total aggregate investment in excess of $20 billion pending
completion of the record." September Order at 50.
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through letters from state commissions regulating its public utility
subsidiaries, that the proposed investments would not have an adverse impact on
the utility subsidiaries or on the ability of the state commissions to protect
such subsidiaries and their customers.
The reservation of jurisdiction, therefore, permitted National Grid Transco
to continue to invest in FUCOs up to USD 20 billion, consistent with the
Commission's FUCO Order, until such time as the company completed the record
with appropriate letters from the state commissions with regard to the proposed
additional USD 20 billion of FUCO investments. Lifting the reservation of
jurisdiction would remove the restriction on National Grid Transco's investment
of up to an additional USD 20 billion in FUCOs.
In this application National Grid Transco requests that the Commission
release of jurisdiction over USD 17 billion of the additional USD 20 billion of
FUCO investment authorization and retain jurisdiction over the remaining USD 3
billion of the additional investment amount. In support, National Grid Transco
has provided the necessary letters from the state commissions with jurisdiction
over the retail operations of National Grid Transco's public utility subsidiary
companies. In addition, National Grid Transco has updated the record with regard
to its current level of aggregate investment in FUCOs. As of September 30, 2004,
National Grid Transco's aggregate investment in FUCOs was GBP 10,635 million
(USD 19,143 million). The increase over the aggregate investment in FUCOs as of
September 30, 2003 ($14,949 million), is attributable principally to movements
in guarantees and intercompany loans together with the registration of National
Grid Holdings One plc as a FUCO on April 1, 2004,
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and the transfer of Lattice Group plc to National Grid Holdings One plc, which
resulted in a step-up in basis of the Lattice Group plc investment to its fair
market value as of the date of transfer./3
The incremental investment in FUCOs between the USD 14,949 million figure
reported in the notice and the September Order, and the USD 19,143 million
figure reported in this application for release of jurisdiction should properly
be viewed as investments made under an extension of the Commission's prior order
permitting investments up to USD 20 billion./4 The release of jurisdiction
requested in this application would provide National Grid Transco with an
additional USD 17 billion of FUCO financing authority. Accordingly, when added
to the current aggregate FUCO investment, the release of jurisdiction over an
additional USD 17 billion would permit National Grid Transco to increase its
total aggregate FUCO investment authority to USD 36.143 billion. National Grid
Transco requests that the Commission continue to reserve jurisdiction over the
remaining USD 3 billion of the requested FUCO investment authorization until the
record is complete with respect to such investments.
2. Analysis Under Rule 53(c)
National Grid Transco's aggregate investment in FUCOs currently exceeds the
"safe harbor" afforded by rule 53(a) because its "aggregate investment" (as
defined in rule 53(a)(1)) exceeds 50% of its "consolidated retained earnings"
(also as defined in rule 53(a)(1)). At September 30, 2004, National Grid
Transco's current aggregate investment in FUCOs was GBP 10,635 million (USD
19,143 million), while its consolidated retained earnings calculated in
accordance with US GAAP were GBP 2,700 million (USD 4,860 million).
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3 National Grid Holdings One plc owns both National Grid Holdings Limited and
Lattice Group plc; the FUCOs as of March 31, 2004. As of that date, using a
conversion ratio at that time of 1 GBP to 1.83 USD, National Grid Transco's
aggregate investment, as defined in Rule 53, in FUCOs was GBP 8,998 million (USD
16,466 million).
4 Reference to National Grid Transco's current aggregate FUCO investment at any
point in time serves as a point of reference only; to put the request for an
additional FUCO investment authorization in perspective.
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Combined with the additional FUCO investment authorization of USD 17 billion
requested in this Application, National Grid Transco's aggregate authorized
investment in FUCOs would be USD 36,143 million during the Authorization Period.
Such amount would be 744% of the September 30, 2004 consolidated retained
earnings.
National Grid Transco's investments in FUCOs should not cause a material
adverse impact on National Grid Transco's consolidated capitalization. National
Grid Transco has no EWG investments. At September 30, 2004, National Grid
Transco's consolidated capitalization consisted of 38.3% equity, 61.5% debt and
0.2% preferred stock issued by subsidiaries. National Grid Transco's senior
unsecured debt is investment grade (rated A- by S&P and Baa1 by Moody's). In
accordance with an order of the Commission dated September 30, 2004, Holding Co.
Act Release No. 27898, National Grid Transco has committed to maintain a
consolidated common equity ratio (subject to certain qualifications), of at
least 30%. National Grid Transco asserts that the proposed transactions will
have no adverse impact on its ability to meet that commitment.
National Grid Transco satisfies the other conditions of paragraphs (a) and
(b) of Rule 53, except that the books and records of its FUCO subsidiaries are
maintained in accordance with UK GAAP, rather than US GAAP. National Grid
Transco is in compliance with the limit in rule 53(a)(3) which provides that no
more than 2% of the employees of National Grid Transco's U.S. public utility
companies ("Utility Subsidiaries") may render services, at any one time,
directly or indirectly, to FUCOs in which National Grid Transco directly or
indirectly holds an interest.
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Further, in accordance with rule 53(a)(4), National Grid Transco has provided a
copy of the application in this matter to each regulator referred to below, and
National Grid Transco will comply with the rule's other requirements concerning
the furnishing of information. None of the circumstances enumerated in
subparagraphs (1), (2) and (3) of rule 53(b) is currently triggered.
National Grid Transco's investments in FUCOs will be segregated from the
Utility Subsidiaries and none of the Utility Subsidiaries will provide financing
for, extend credit to, or sell or pledge its assets directly or indirectly to
any FUCO in which National Grid Transco owns any interest. In addition, FUCO
investments will not have any negative impact on the ability of the Utility
Subsidiaries to fund operations and growth. The Utility Subsidiaries will
continue to have financial facilities in place or access to National Grid
Transco financing facilities that will adequately support their operations.
The proposed FUCO financing authorization also will not have an adverse
impact on the ability of any state commission to protect the Utility
Subsidiaries or their customers. All state commissions with jurisdiction over
the retail rates of the Utility Subsidiaries have provided the Commission with
statements in support of this finding. Each of the affected state commissions
has confirmed that National Grid Transco's proposed additional FUCO investments
will not have an adverse impact on the ability of the state commissions to
protect National Grid Transco's utility subsidiaries subject to their
jurisdiction or the subsidiaries' customers.
In particular, the New York Public Service Commission ("NYPSC"), in its
letter dated December 1, 2004, has acknowledged that National Grid Transco's
"proposed investments will not have an adverse impact on Niagara Mohawk Power
Corporation, or its respective customers, or the ability of the [NYPSC] to
protect Niagara Mohawk Power Corporation or its ratepayers in
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New York." The NYPSC also confirmed that it has the authority and resources to
protect New York ratepayers and intends to continue exercising that authority./5
Similarly, the Rhode Island Public Utility Commission ("RIPUC") in its September
23, 2004 letter to the Commission concluded that "[National Grid Transco's]
proposed investments will not have an adverse impact on Narragansett Electric
[Company], or its respective customers, or the ability of the [RIPUC] to protect
ratepayers in Rhode Island. The [RIPUC] is of the view that it has the authority
and resources to protect Rhode Island ratepayers and it intends to continue
exercising that authority."
The New Hampshire Public Utility Commission ("NHPUC"), in a letter dated
September 30, 2004 raised concerns about the potential impact of National Grid
Transco's application on the utilities over which the NHPUC has jurisdiction./6
In its letter dated November 29, 2004, the NHPUC indicates that representatives
of the NHPUC and National Grid Transco met to discuss these concerns and the
NHPUC has been assured that it would continue to have the jurisdictional
authority it currently holds over the National Grid Transco retail utility
subsidiaries, including the NHPUC's standards regarding long and short term
debt. The NHPUC further expressed its satisfaction that "approval by the
Securities and Exchange Commission of the Form U-1 Application [of National Grid
Transco] will not infringe upon [the NHPUC's] regulatory authority."
The Massachusetts Department of Telecommunications and Energy ("MDTE")
concluded, in its letter dated September 24, 2004, that National Grid Transco's
existing interest
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5 The NYPSC letter references a November 3, 2004 letter from Kirk L. Ramsauer,
Deputy General Counsel, National Grid to Hon. William M. Flynn, Chair of the
NYPSC, clarifying that National Grid Transco will restrict any guarantees issued
by Niagara Mohawk Holdings, Inc. ("NIMO Holdings") to obligations of NIMO
Holdings' direct and indirect subsidiaries.
6 The New Hampshire jurisdictional utilities are Granite State Electric Company;
New England Hydro-Transmission Corporation; New England Power Company; and New
England Electric Transmission Corporation.
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and proposed additional investments in FUCOs will not have an adverse impact on
the ability of the MDTE to protect Massachusetts Electric Company or Nantucket
Electric Company or their respective customers./7 The MDTE also stated that
"pursuant to G.L. c. 164, the [MDTE] has the authority and resources to protect
ratepayers in Massachusetts and it intends to continue exercising that
authority."
Based on the foregoing statements from the affected state commissions, the
Commission should find that the requirements of Rule 53(c) are satisfied and it
should release jurisdiction over National Grid Transco's issuance of securities
to finance additional FUCO investments. The release of jurisdiction would permit
National Grid Transco to issue securities to finance USD 17 billion of
additional investments in FUCOs in excess of the current USD 19.143 billion
aggregate FUCO investment during the Authorization Period, subject to compliance
with the parameters set forth in the Application and the September Order
applicable to the issuance of securities by National Grid Transco. The relief
requested is necessary for National Grid Transco to continue to finance and
operate permitted FUCO businesses in compliance with the Act.
Applicants request that the Commission continue to reserve jurisdiction
over: (a) the issuance of any guarantee or other securities in reliance upon the
authorization granted by the Commission under this Application at any time that
the Investment Grade Condition is not satisfied, (b) the participation of any
National Grid Transco System company in the Money Pool, other than the Utility
Subsidiaries and ServiceCo, as a borrower, and (c) the USD 3 billion balance of
the requested FUCO investment authorization.
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7 The MDTE provided its statement to the Commission before the filing of
pre-effective Amendment No. 2 to the Application on September 30, 2004.
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Item 2. Fees, Commissions And Expenses
The fees, commissions and expenses to be paid or incurred by National Grid
Transco directly or indirectly in connection with the preparation of this
Post-effective Amendment to the Application are estimated to be approximately
USD 8,000.
Item 3. Applicable Statutory Provisions
Rule 53(c) under the Act is applicable to the relief requested in this
Post-Effective Amendment.
Item 4. Regulatory Approvals
No state commission and no federal commission, other than the Commission,
has jurisdiction over the relief requested in this Post-Effective Amendment.
Item 5. Procedure
The Commission issued a notice of the filing of the Application on August
30, 2004. A new notice of the instant request for a release of jurisdiction is
not required. The Commission is respectfully requested to issue an order
authorizing the relief requested herein forthwith.
A recommended decision by a hearing or other responsible officer of the
Commission is not needed for approval of the proposed release of jurisdiction.
The Division of Investment Management may assist in the preparation of the
Commission's decision. There should be no waiting period between the issuance of
the Commission's order and the date on which it is to become effective.
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Item 6. Exhibits and Financial Statements
Exhibits
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F Letter from the State of New York Department of Public Service, Public
Service Commission dated December 1, 2004 (including letter from Kirk L.
Ramsauer dated November 3, 2004) (previously filed).
G Letter from the State of Rhode Island Public Utilities Commission dated
September 23, 2004 (previously filed).
H Letters from the State of New Hampshire Public Utilities Commission dated
September 30, 2004 and November 29, 2004 (previously filed).
I Letter from the Commonwealth of Massachusetts Department of
Telecommunications and Energy dated September 24, 2004 (previously filed).
Item 7. Information as To Environmental Effects
The proposed transaction neither involves a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. No federal agency is preparing an environmental impact
statement with respect to this matter.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this Post-Effective Amendment
to its Application to be signed on its behalf by the undersigned thereunto duly
authorized. The signature of the applicants, through the undersigned, is
restricted to the information contained in this Amendment which is pertinent to
the Application.
Date: March 7, 2005 National Grid Transco plc and its subsidiaries
By: /s/ Gregory A. Hale
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Gregory A. Hale
Deputy General Counsel
National Grid USA
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