File No. 70-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1
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APPLICATION-DECLARATION
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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CENTRAL POWER AND LIGHT COMPANY
COLUMBUS SOUTHERN POWER COMPANY
OHIO POWER COMPANY
SOUTHWESTERN ELECTRIC POWER COMPANY
WEST TEXAS UTILITIES COMPANY
1 Riverside Plaza, Columbus, Ohio 43215
(Name of company or companies filing this statement
and address of principal executive offices)
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AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company parent)
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A. A. Pena, Senior Vice President and Treasurer
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
Susan Tomasky, Executive Vice President and General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
American Electric Power Company, Inc. ("AEP"), a New York corporation
and a registered holding company under the Public Utility Holding Company Act of
1935, as amended (the "Act"), and its direct and indirect public utility
subsidiaries Central Power and Light Company ("CPL"), Southwestern Electric
Power Company ("SWEPCo"), West Texas Utilities Company ("WTU"), Columbus
Southern Power Company ("CSP") and Ohio Power Company ("OPCo") (collectively,
"the Operating Subsidiaries") are seeking authorization to increase the
borrowing limits of certain of the subsidiaries from the AEP system money pool
as authorized in File No. 70-9381.
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
Background. By Order dated December 30, 1976 (HCAR No. 19829; 70-5930)
and in subsequent Orders, the Commission authorized Central and Southwest
Corporation ("CSW"), a Delaware corporation and a registered holding company
under the Act and a wholly owned subsidiary of AEP, to establish and utilize
a system money pool ("Money Pool") to co-ordinate short-term borrowings for CSW,
its electric subsidiary companies and Central and South West Services, Inc. as
set forth in Central and South West Corp., Holding Co. Act Release No. 26697
(Mar. 28, 1997) and Central and South West Corp., Holding Co. Act Release No.
26854 (Apr. 3, 1998).
By Order dated April 5, 1989, in File 70-7643 (HCAR 35-24855), the
Commission authorized the coordination of CSW's short-term borrowing program
through the use of the CSW System money pool ("the Money Pool"). The Money Pool
would be funded through surplus funds of CSW and its operating subsidiaries, a
commercial paper program of CSW or short-term loans from banks to CSW and its
subsidiaries.
In its Order in File 70-9381 (HCAR 35-27186), the Commission authorized
AEP to continue the Money Pool and to add its utility subsidiaries and certain
other subsidiaries as participants in the Money Pool and established borrowing
limits for all participants in the Money Pool.
Ohio and Texas Restructuring. CPL, SWEPCo and WTU are public utilities
operating in Texas. Tex. Util. Code Ann. ss. 39.001-909 (Vernon Supp. 2000),
commonly referred to as S.B. 7, requires vertically integrated electric
utilities, including WTU and CPL, to separate ownership of their generating and
other power supply assets from ownership of their transmission and distribution
assets no later than January 1, 2002. Under S.B. 7, vertically integrated
utilities are generally obligated to disaggregate into at least (1) a PGC that
will sell power and energy at wholesale; and (2) an EDC that will own
transmission and local distribution facilities and perform metering and billing
functions, but is prohibited from owning power supply facilities or selling
electricity. By order issued July 7, 2000, the Public Utility Commission of
Texas (PUCT) approved corporate separation plans CPL, SWEPCo and WTU filed to
explain how they will comply with S.B. 7.
CSP and OPCo are public utilities operating in Ohio. CSP and OPCo will
make certain transfers to comply with the provisions of an Ohio statute that
provides for Competitive Retail Electric Service, commonly referred to as S.B.
3. Ohio Rev. Code Ann. ss.ss. 4928.01-67 (Anderson 2000). The statute directs
vertically integrated electric utilities that offer retail electric service in
Ohio to separate their generating and other competitive operations (such as
aggregation, marketing, and brokering) and related assets from their
transmission and distribution operations and assets. On September 28, 2000, The
Public Utilities Commission of Ohio (Ohio PUC) approved corporate separation
plans CSP and OPCo filed to explain how they will comply with S.B. 3. Under
their approved corporate separation plans, CSP and OPCo proposed, subject to
receipt of federal regulatory approvals, to transfer their transmission and
distribution assets and operations to EDC affiliates.
The current short-term borrowing limits of the Operating Subsidiaries
and AEP under the Money Pool are as follows:
Money Pool Short-Term
Participant Borrowing Limit
AEP $ 5,000,000,000
CSP 350,000,000
CPL 600,000,000
OPCo 450,000,000
SWEPCo 250,000,000
WTU 165,000,000
Proposed Transaction. In order to comply with mandates by the Ohio and
Texas legislatures to restructure and pursuant to plans submitted and approved
by the PUCT and the Ohio PUC, CPL, CSP, OPCo, SWEPCo and WTU (collectively, the
"Operating Subsidiaries") may need to restructure their debt portfolios and may
retire and/or redeem their current outstanding long-term debt and replace such
long-term debt with short-term debt. AEP and the Operating Subsidiaries propose
to increase their borrowing limits as follows:
CPL increase from $600 million to $1.2 billion
CSP increase from $350 million to $800 million
OPCo increase from $450 million to $1.0 billion
SWEPCo increase from $250 million to $350 million
WTU increase from $165 million to $375 million
This increase in borrowing authority would require that AEP's borrowing
limit be increased from $5 billion to $6.910 billion with the aggregate amount
for all participants together not to exceed the limitation for AEP. This
increase in AEP's borrowing limit will ensure that AEP has sufficient borrowing
capacity to obtain external borrowings in order to loan funds through the Money
Pool to the participants when required. The Operating Subsidiaries request that
such authority extend to December 31, 2002.
Use of Proceeds: The proposed increase in short-term borrowings will
be used for the following purpose:
CPL, CSPCo, OPCo, SWEPCo and WTU intend to utilize the additional
borrowing capacity authorized in this file as a source of funding to replace a
portion of respective long-term securities. As of June 30, 2001, CPL, CSPCo,
OPCo, and SWEPCo and WTU currently have $1,597,279,000, $914,875,000,
$1,219,852,000, $760,175,000 and $258,387,000, respectively, in long-term
securities outstanding. These transactions will not change the debt/equity
ratios of the Operating Subsidiaries.
* * *
Rule 54 Compliance
Rule 54 provides that, in determining whether to approve an application
which does not relate to any EWG or FUCO, the Commission shall not consider the
effect of the capitalization or earnings of any such EWG or FUCO which is a
subsidiary of a registered holding company if the requirements of Rule 53(a),
(b) and (c) are satisfied.
AEP consummated the merger with Central and South West Corporation on
June 15, 2000 pursuant to an order issued June 14, 2000 (HCAR No. 27186), which
further authorized AEP to invest up to 100% of its consolidated retained
earnings, with consolidated retained earnings to be calculated on the basis of
the combined consolidated retained earnings of AEP and CSW (as extended pursuant
to HCAR No. 27316, December 26, 2000, the "Rule 53(c) Order").
AEP currently meets all of the conditions of Rule 53(a). At March 31,
2001, AEP's "aggregate investment", as defined in Rule 53(a)(1), in EWGs and
FUCOs was approximately $1.569 billion, or about 47.9% of AEP's "consolidated
retained earnings", also as defined in Rule 53(a)(1), for the four quarters
ended March 31, 2001 ($3.275 billion).
In addition, AEP has complied and will continue to comply with the
record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3)
on the use of operating company personnel to render services to EWGs and FUCOs,
and the requirements of Rule 53(a)(4) concerning the submission of copies of
certain filings under the 1935 Act to retail rate regulatory commissions.
AEP's consolidated retained earnings decreased on average approximately
1.32% per year over the last five years. In 2000, consolidated retained earnings
decreased $540 million, or 14.9%. AEP's interests in EWGs and FUCOs have made a
positive contribution to earnings over the four calendar years ending after the
Rule 53(c) Order. Accordingly, since the date of the Rule 53(c) Order, the
capitalization and earnings attributable to AEP's investments in EWGs and FUCOs
has not had an adverse impact on AEP's financial integrity.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
No fees, commissions or other expenses are to be paid or incurred,
directly or indirectly, by the Applicants or any associated company in
connection with the proposed transactions, other than fees and expenses to be
billed at cost by the American Electric Power Service Corporation and not to
exceed $2,000 in the aggregate.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Sections 6(a), 7, 9(a), 10 and 12(b) and Rules 43 and 45 thereunder are
or may be applicable to the proposed transactions. To the extent any other
sections of the Act may be applicable to the proposed transactions, the
Applicants hereby request appropriate orders thereunder.
ITEM 4. REGULATORY APPROVAL
No state regulatory authority and no federal regulatory authority,
other than the Commission under the Act has jurisdiction over the proposed
transactions.
ITEM 5. PROCEDURE
It is requested, pursuant to Rule 23(c) of the Rules and Regulations of
the Commission, that the Commission's order granting and permitting to become
effective this Application or Declaration be issued on or before September 14,
2001. Applicants waive any recommended decision by a hearing officer or by any
other responsible officer of the Commission and waive the 30-day waiting period
between the issuance of the Commission's order and the date it is to become
effective, since it is desired that the Commission's order, when issued, become
effective forthwith. Applicants consent to the Division of Investment Management
assisting in the preparation of the Commission's decision and/or order in this
matter, unless the Division opposes the matter covered by this Application or
Declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS:
The following exhibit and financial statements are filed as part of
this statement:
(a) Exhibit:
Exhibit A Opinion of counsel (to be filed by amendment)
(b) Financial Statements:
Balance Sheets as of December 31, 2000 and Statements of
Income and Retained Earnings for the 12 months ended December
31, 2000 of American and its subsidiaries consolidated and of
CPL, SWEPCo, WTU, CSP and OPCo (to be filed by amendment)
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The Commission's action in this matter will not constitute any major
federal action having a significant effect on the human environment. To the best
of AEP's knowledge, no federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this Form U-1 to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
and
Central Power and Light Company
Columbus Southern Power Company
Ohio Power Company
Southwestern Electric Power Company
West Texas Utilities Company
By: /s/ Henry W. Fayne
Vice President
Dated: August 6, 2001