ML17059C166

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Request for Consent to Indirect Transfer of Control Over Nine Mile,Units 1 & 2,operating Licenses in Connection W/Creation of New Holding Company.W/Securities & Exchange Commission Financial Info
ML17059C166
Person / Time
Site: Nine Mile Point  Constellation icon.png
Issue date: 07/21/1998
From:
NIAGARA MOHAWK POWER CORP.
To:
NRC
Shared Package
ML17059C167 List:
References
NUDOCS 9807310004
Download: ML17059C166 (24)
v • d • e


Text

ATTACHIVKNT ANIAGARAMOHAWKPOWERCORPORATION

)DocketNos.Unit1-50-220, Unit2-50-410)Operating LicenseNos.DPR-63,NPF-69VNXI'EDSTATESOFAMERICABEFORETHENUCLEARREGULATORY COMMISSION REQUESTFORCONSENTTOINDIRECTTRANSFEROFCONTROLOVERTHENINEMILE1AND2OPERATING LICENSESI.INTRODUCTION NiagaraMohawkPowerCorporation

("NMPC"orthe"Company"

),pursuantto10C.F.R.g50.80,herebyrequestsNuclearRegulatory Commission

("NRC"orthe"Commission"

)consenttotheindirecttransferofcontroloverNMPC'sinterestinOperating LicenseNos.DPR-63andNPF-69(collectively, the"Operating Licenses"

)for,respectively, UnitNo.1("NineMile1")andUnitNo.2("NineMle2")(collectively, the"facilities"

)oftheNineMilePointNuclearPowerStationlocatedinScriba,NewYork.NMPCisa100percentownerofNineMile1anda41percentco-ownerofNineMile2.NMPCoperatesbothfacilities.

Commission consentisnecessary inordertoallowthecreationofanewholdingcompanystructure forNMPC.Therestructuring willnotaffectNMPC'sposition, responsibility orcommitment asownerandoperatorofthefacilities.

NMPCrespectfully submitsthattheproposedindirecttransferofcontrolovertheOperating Licensesisconsistent withapplicable provisions oflaw,Commission regulations, andCommission ordersandwillnotaffectNMPC'squalifications asalicensee.

Accordingly, therequestshouldbegranted.$8075OOO220eaO72tIpogAQQCK0~PPage1of12 gpss' II.DESCRIPTION OFTHENEWHOLDINGCOMPANYSTRUCTURE Undertheproposedholdingcompanystructure, NMPCwillbecomeawholly-owned subsidiary ofanewholdingcompany,NiagaraMohawkHoldings, Inc.("Holdings"

),aNewYorkcorporation.

EachshareofNMPC'scommonstockwillbeexchanged foronenewshareofHoldingscommonstock.NMPC'soutstanding preferred stockwillnotbeexchanged butwillcontinueassharesofNMPC'spreferred stock.Thecorporate restructuring willresultinachangeintheidentityofthedirectholderofNMPC'scommonstock,butnochangeinthebeneficial ownersofthatequity,whowillmerelyexchangetheirNMPCsharesforsharesinHoldings.

Thecorporate restructuring ismorefuuydescribed intheFormS-4Registration Statement forNiagaraMohawkHoldings, Inc.withAmendments, datedMay29,1998,acopyofwhichisattachedheretoasExhibit1.NMPCcommonshareholders approvedthecorporate restructuring attheirAnnualMeetingonJune29,1998.III.BACKGROUND NMPCisaregistered publicutilityincorporated underthelawsofNewYorkState.NMPCisengagedprincipally inthegeneration,

purchase, transmission, distribution, andsaleofelectricity andthepurchase, distribution, sale,andtransportation ofgas.NineMile1and2areamongtheelectricgenerating facilities ownedbyNMPC.NMPCsupplieselectricity atbothretailandwholesale.

Page2of12

NMPC'sutilityoperations aresubjecttoregulation bytheNewYorkPublicServiceCommission (the"NYPSC")pursuanttoNewYork'sPublicServiceLaw(the"PSL").TheNYPSC'sjurisdiction includessupervision overNMPC'sretailrates.Further,NMPCisa"publicutility"asdefinedinSection201(e)oftheFederalPowerAct,16U.S.C.g824(e).NMPCsellselectricenergyatwholesale to,andtransmits electricenergyininterstate commercefor,otherelectricutilities underrateschedules andtariffsapprovedbytheFederalEnergyRegulatory Commission

("FERC").

Byvirtueoftheregulatory authority exercised bytheseagenciesoverNMPC'sratesforelectricity, NMPCisan"electric utility"asdefinedin10C.F.R.550.2.Inadditiontoitsutilityoperations, NMPCownsanunregulated subsidiary, OpinacNorthAmerican, Inc.("OpinacNA"),which,inturn,ownsOpinacEnergyCorporation,"

PlumStreetEnterprises, Inc.andPlumStreetEnergyMarketing (asubsidiary ofPlumStreetEnterprises)

(collectively, the"non-utility subsidiaries"),

whichparticipate principally inenergy-related services.

CanadianNiagaraPowerCo.,LTD("CNP")isowned50percentbyOpinacEnergyCorporation.

CNPownsa99.9percentinterestinCanadianNiagaraWindPowerCompanyInc.andCowleyRidgePartnership, respectively',

whichtogetheroperateawindpowerjointventureintheProvinceofAlberta,Canada.NMPCalsohasseveralothersubsidiaries including NMUraniumInc.,NMHoldings, Inc.,MoreauManufacturing Corp.,BeebeeIslandCorp.,andNMReceivables Corp.II.~QpinacEnergyCorporation isanexemptholdingcompanyunderSection3(a)(5)ofthePublicUtilityHoldingCompanyActof1935.'tio52S.E.C.Docket1475(1992).Page3of12

'r Subjecttothevariousregulatory approvals, including theapprovalofthisCommission, NMPCproposestoformtheholdingcompanystructure discussed above,wherebyNMPCwillbecomeasubsidiary ofHoldings, aNewYorkcorporation.

Aspartoftheproposal, certainofNMPC'snon-utility subsidiaries willbetransferred toHoldings.

Theresulting corporate structure willmoreclearlyseparateNMPC'sregulated andnon-regulated businesses.

Thisseparation isconsistent withfederalandstateinitiatives fortherestructuring oftheelectricutilityindustry."

Itisalsoconsistent withaSettlement Agreement (the"Settlement"

),datedOctober10,1997,amongtheStaffoftheNYPSC,NMPC,andotherparties,whichprovidesforfundamental changestothestructure ofNMPC'sbusiness.

Amongotherthings,theSettlement callsforNMPCtodivestallofitshydroandfossilgeneration assets.NMPC'snuclearassetswillremainpartofitsregulated business.

NMPCwillcontinuetodistribute electricity throughitstransmission anddistribution systems,but,bytheendof1999,allofNMPC'scustomers willbeabletochoosetheirelectricity supplierinacompetitive market."E.g.,ChderNo.888:Promoting Wholesale Competition ThroughOpenAccessNon-Discriminatory Transmission (1997);NYPSCOpinion96-12,Cases94-E-0952,

~OpinionandOrderRegarding Competitive Opportunities forElectricService(1996).Page4of12

Electricrateswillbeunbundled intoseparatechargesfortransmission, distribution, customerservice,electricsupply,andanon-bypassable competitive transition charge(the"CTC").NMPC'snuclearcostswillbesubjecttocost-of-service regulation.

Finally,theSettlement allowsNMPCtoform,atitselection, theholdingcompanystructure discussed herein.TheSettlement wasapprovedbytheNYPSConMarch19,1998."TheSettlement ismorefullydescribed intheSettlement

Document, acopyofwhichisattachedheretoasExhibit2.Moregenerally, theholdingcompanystructure willenableHoldingstoengageinunregulated businesses withoutobtaining thepriorapprovalofthePSC,therebyenablingHoldingstopursueunregulated businessopportunities inatimelymanner.Underthenewcorporate structure, financing ofunregulated activities ofHoldingsanditsnon-utility subsidiaries willnotrequirePSCapproval.

Inaddition, thecapitalstructure ofeachnon-utility subsidiary maybeappropriately tailoredtosuititsindividual business.

Also,undertheholdingcompanystructure,

Holdings, wouldnotneedPSCapprovaltoissuedebtorequitysecurities tofinancetheacquisition ofthestockorassetsofothercompanies.

Theabilitytoraisecapitalforacquisitions withoutpriorPSCapprovalshouldallowcompetition onalevelbasiswithotherpotential

acquires, someofwhicharealreadyholdingcompanies.

Underaholdingcompanystructure, theissuanceofdebtorequitysecurities byHoldingstofinancetheacquisition ofstockorassetsofanothercompanyshouldnotadversely affectNMPC'scapitaldevotedtoandavailable forregulated utilityoperations.

"NiagaraMohawkPowerCorp.,Cases94-E-0098 and94-E-0099,

~etaOpinionandOrderAdoptingTermsofSettlement Agreement SubjecttoModification andConditions (1998)(thc"Settlement Order").Page5of12

Theholdingcompanystructure separates theoperations ofregulated andunregulated businesses.

Asaresult,itprovidesabetterstructure forregulators toassurethatthereisnocross-subsidization ofcostsortransferofbusinessriskfromunregulated toregulated linesofbusiness.

Aholdingcompanystructure alsoispreferred bytheinvestment community becauseitmakesiteasiertoanalyzeandvalueindividual linesofbusiness.

Moreover, theuseofaholdingcompanystructure provideslegalprotection againsttheimposition ofliability onregulated utilities fortheresultsofunregulated businessactivities.

Inshort,theholdingcompanystructure isahighlydesirable formofconducting regulated andunregulated businesses withinthesamecorporate group.IV.EFFECTOFNEWHOLDINGCOMPANYSTRUCTURE Thetransferofdirectcommonequityownership ofNMPCtoHoldingsinvolvesachangeoflegalownership ofNMPCand,therefore, atechnical changeinthecontrolofNMPCanditsinterestintheOperating

Licenses, whichtransferofcontrolissubjecttopriorconsentof,theCommission.

3z42U.S.C.g2234and10C.F.R.g50.80(a).

Thecorporate restructuring willhaveaminimaleffectontheunderlying ownership ofNMPCbecausetheexistingshareholders ofNMPCwillcontinuetocontrolNMPCindirectly, andNMPCwillcontinuetoholdtheOperating Licenses.

Page6of12

Afterthecorporate restructuring, NMPCwillcontinuetobean"electric utility"engagedinthetransmission, distribution and,throughNineMile1and2,thegeneration ofelectricity.

NMPCwillcontinuetobetheownerofNineMle1andtheco-ownerofNineMile2andwillcontinuetooperatebothfacilities.

Noactualtransferoftheownership interestinNineMile1and2ortheOperating Licenseswillbeeffectedbythecorporate restructuring.

Further,NMPCwillJcontinuetorecoverthecostsofowningandoperating theplantsonamodifiedcost-of-service basisthroughthenon-bypassable CTCandwillcontinuetoberegulated bytheNYPSCandtheFERC.Thus,pursuantto10C.F.R.g50.80(c),

thecorporate restructuring willnotaffectNMPC'squalifications asalicenseeforNineMile1and2,willnotaffectthestatusofNMPCasan"electric utility,"

andisotherwise consistent withapplicable provisions oflaw,Commission regulations, andCommission orders.V.REGULATORY APPROVALS Theproposedcorporate restructuring requirestheapprovaloftheNYPSC,theSECpursuanttothePublicUtilityHoldingCompanyActof1935andtheFERC.TheSettlement, whichincludesadescription ofthecorporate restructuring, hasbeenapprovedbytheNYPSCintheSettlement Order.Concurrent withthefilingofthisApplication, NMPCisfilingapplications withtheFERCandtheSECforapprovaltoeffecttheproposedcorporate restructuring.

Additionally, acompliance filingwiththeNYPSC.will berequiredconsistent withtheSettlement andtheSettlement Order.Nosimilarapplication isrequiredtobefiledwithanyotherStateorfederalregulatory body.Page7of12

VI.NUCLEARREGULATORY COMMISSION REVIEWToassisttheNRCinitsreviewofthisrequest,NMPCisproviding information withrespecttothefollowing areaswhichhavebeenthefocusoftheNRC'sreviewinpriorcasesinvolving thecreationofholdingcompanies overNRClicensees:

1.Thenewholdingcompanystructure willnotimpairNMPC'sabilitytocarryoutitsresponsibilities underitsNRClicenses, orotherwise affectthefinancial healthofNMPC.Thecorporate restructuring willnothaveanadverseimpactonNMPC'sabilitytofulfillitsresponsibilities underitsNRClicenses.

Specifically, thecorporate restructuring willnotadversely affecttheabilityofNMPCtomeetitsfinancial obligations withrespecttothefacilities'uture operating andcapitalrequirements ortomeetitsfundingobligations withrespecttotheeventualnucleardecommissioning ofthefacilities.

TheNRCrecentlyaddressed thefuturerestructuring oftheelectricutilityindustryandvoicedconcernsthatNRClicensedentitiescontinuetohaveaccesstoadequatefundssothatfundsareavailable forsafereactoroperation andthepaymentofdecommissioning costs.~,.~62Fed.Reg.44071(1997).Page8of12

hWithrespecttobothfinancial qualification reviewsforoperating licenseapplicants anddecommission fundingassurance reviews,theNRChasdistinguished betweenan"electric utility"andotherlicensees.

Asdefinedin10C.F.R.$50.2,an"electric utility"isanentitythatgenerates ordistributes electricity thecostsofwhicharerecovered byratessetbytheentityitselforbyaseparateregulatory authority.

Investor-owned utilities, suchasNMPC,areincludedwithinthemeaningof"electric utility."

Theunderlying rationale fordifferent treatment isthatrateregulators typically allowanelectricutilitytorecoverprudently incurredcostsofgenerating, transmitting anddistributing electricservices.

TheNRCrecentlyproposedrevisions tothedefinition of"electric utility"initsproposedrulemaking regarding Rmgf~,62Fed.Reg.47588(1997).TheCommission proposedtoreviseitsdefinition of"electric utility"tointroduce additional flexibility priortothederegulation oftheelectricindustryderegulation.

TheCommission notedthatthekeycomponent ofthereviseddefinition isthatalicensee's ratesareestablished eitherthroughcost-of-service mechanisms orthroughothernon-bypassable chargemechanisms, suchastheCTCproposedundertheNMPC/NYPSC Settlement.

Thecorporate restructuring willnotchangethestatusofNMPCasan"electric utility,"

asdefinedin10C.F.R.g50.2.Aftertheholdingcompanystructure iscomplete, NMPCwillretainitsnuclearassetsandwillcontinuetobeapublicutilitysubjecttoregulation bytheNYPSCwithrespectto,amongotherthings,itsretailrates.NMPCwillcontinuetorecoverthecostsofowningandoperating theplantsonacost-of-service basis.Inaddition, FERCwillcontinuetoregulateNMPC'stransmission andwholesale electricrates.Thus,NMPCwillPage9of12 0

remainan"electric utility,"

asdefinedinboth"theCommission's currentandproposedregulations, Withregardtothedivesture ofNMPC'snon-nuclear generating assets,whichwillbeeffectedbyauction,andinaccordance withCommission

practice, NMPCagreestonotifytheCommission 60daysinadv'anceofanytransferofassetshavingadepreciated bookvalue/exceeding tenpercent(10%)ofNMPC'sconsolidated netutilityplant,asrecordedonNMPC'sbookofaccounts.

Thetransferofsuchgenerating assetshasalreadybeenapprovedbytheNYPSCintheSettlement Order.2.Thenewholdingcompanystructure willnotadversely affectthemanagement ofNMPC'snuclearoperations oritstechnical qualifications, Thenewholdingcompanystructure retainsNMPCasadiscreteandseparateentity.Noresponsibility fornuclearoperations withinNMPCwiHbechangedbythecorporate restructuring.

Officerresponsibilities attheholdingcompanylevelwillbeprimarily administrative andfinancial innatureandwillnotinvolveoperational mattersrelatingto¹ineMile1and2.AftertheUcorporate restructuring, NMPCwillcontinuetoberesponsible forthefacilities'ay-to-day operations andthetechnical qualifications requiredbytheOperating Licenses.

NoNMPCnuclearmanagement positions willbechangedasapre-requisite ordirectresultofthecorporate restructuring.

Page10of12 t'

3.Thenewholdingcompanystructure willnotresultinNMPCbecomingowned,controlled ordominated byanalien,aforeigncorporation, oraforeigngovernment.

Atthetimetherestructuring becomeseffective, HoldingswillbecomethesoleholderofNMPC'scommonstock,andthecurrentholdersofNMPC'scommonstockwillbecomeholdersofthecommonstockofHoldingsonashare-for-share basis.Therefore, immediately following theimplementation oftheholdingcompanystructure, thecommonstockofHoldingswillbeownedbythepreviousholdersofNMPC'scommonstockinthesameproportions inwhichtheyheldNMPC'scommonstock.Baseduponcurrently available information, sharesofNMPC'scommonstockheldinforeignaccountsrepresent lessthan0.1percent(0.1%)ofthetotaloutstanding sharesofNMPC.Further,allmembersoftheBoardsofDirectors ofNMPCandHoldingsareUnitedStatescitizens.

Thus,thecorporate restructuring willnotresultinNMPCbeingowned,controlled ordominated byforeigninterests.

VII.THENEWHOLDINGCOMPANYSTRUCTURE WILLHAVENOSIGNIFICANT ENVIRONMENTAL EFFECTAsdiscussed above,thenewholdingcompanystructure willhavenosignificant effectontheoperation ofNineMile1and2.Therewillbenophysicaloroperational changestothefacilities asaresult.Itwillnotaffectthequalifications ortheorganizational affiliation ofthepersonnel whooperateandmaintainthefacilities.

Further,itwillnotincreasetheprobability orconsequences ofaccidents, nochangeswillbemadeinthetypesofeffluents thatmaybereleasedoffsite,andtherewillbenosignificant increaseintheallowable individual orcumulative Page11of12

occupational radiation exposure.

Thecorporate restructuring wouldnotaffectnon-radiological effluents ofthefacilities andwouldhavenootherenvironmental impact.Accordingly, NMPCrequeststhattheCommission issueandpublishafindingofnosignificant radiological environmental impactpursuantto10C.F.R.5551.31and51.35.VIII.CONCLUSION Basedupontheforegoing, NMPCrespectfully requeststhattheCommission consenttotheindirecttransferofcontroldescribed herein.Thecommonshareholders approvedthereorganization onJune29,1998.Approvals fromtheNYPSC,theSECandFERCareanticipated byOctober15,1998.NMPCrespectfully requestsNRCactiononthisapplication byOctober15,1998.Page12of12

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