(As filed on July 15, 2003)
File No. 70-[_____]
SECURITIES AND EXCHANGE COMMISSION
FORM U-1
XCEL ENERGY INC.
(Names of companies filing this statement and addresses of principal executive offices)
None
(Name of top registered holding company parent of each applicant or declarant)
Gary R. Johnson
Vice President and General Counsel
Xcel Energy Inc.
800 Nicollet Mall
Minneapolis, Minnesota 55402
(Name and address of agent for service)
The Commission is requested to mail copies of all orders, notices and other communications to:
Gary R. Johnson
Vice President and General Counsel
Xcel Energy Inc.
800 Nicollet Mall
Minneapolis, Minnesota 55402
Item 1. Description of Proposed Transaction.
A. Background.
Xcel Energy Inc., a registered holding company (the “Applicant”), herein requests approval from the Commission pursuant to Sections 9(a)(1) and 10 of the Public Utility Holding Company Act of 1935, as amended (the “Act”) to acquire a membership interest in PowerTree Carbon Company, LLC (the “Company”), a Delaware limited liability company formed to facilitate investments by the Applicant and other energy companies in forestation projects in the Lower Mississippi River Valley, and possibly other sites, as a means for removing carbon dioxide (CO2) from the atmosphere. The Applicant proposes to acquire such membership interest either directly or indirectly through one or more subsidiaries, including a new subsidiary formed exclusively for the purpose of acquiring and holding the Applicant’s membership interest.
The Applicant directly [and indirectly] owns all of the outstanding common stock of Cheyenne Light, Fuel and Power Company, Northern States Power Company, Northern States Power Company (Wisconsin), Public Service Company of Colorado, and Southwestern Public Service Company (collectively, the “Utility Subsidiaries”). Together, the Utility Subsidiaries provide retail and wholesale electric service to more than 3.2 million customers in parts of Colorado, Kansas, Michigan, Minnesota, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin, and Wyoming. The Utility Subsidiaries of the Applicant own all or portions of 70 electric generating plants in the United States having a combined generating capability of approximately 15,246 megawatts (MW).
The Company has been formed under the sponsorship of the electric utility sector in cooperation with the Department of Energy (“DOE”). The Company is part of an industry-wide effort to voluntarily address climate change through measures designed to reduce greenhouse gas emissions in response to President Bush’s recent “Climate VISION” plan, or Climate, Voluntary Innovative Sector Initiatives: Opportunities Now. Climate VISION is the first step in the President’s policy of encouraging industry to produce voluntary cuts in greenhouse gas emissions. One proven means for reducing greenhouse gases is to use trees to remove CO2 from the atmosphere and store it in tree biomass and roots and soil. The Bush Administration has also proposed, as part of its Global Climate Change program, the creation of transferable credits for measures which reduce greenhouse gas emissions.
The Company has obtained commitments totaling approximately $3.5 million
from approximately twenty-five electric utilities, electric utility holding
companies and other energy concerns that will be used to fund six forestation
projects located in Louisiana, Mississippi and Arkansas. These projects will
provide multiple environmental benefits, including removing from the atmosphere
and storing over 2 million tons of CO2 over the projects’ 100-year lifetimes.
Other benefits will include: restoring habitat for birds and animals;
reducing fertilizer inputs to waters; and stabilizing soils. Two of the
projects will involve purchase and donation of land to the U.S. Fish & Wildlife
Service, while other projects will involve obtaining easements for tree
planting on private land. The contributions of the members to the Company will
be utilized for land acquisition and to pay the cost of planting tree
seedlings.
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Table of Contents
It is estimated that these projects will provide carbon benefits of more than 400 and 450 tons of CO2 per acre by years 70 and 100, respectively, at a cost of less that $2.00 per ton.
Unlike some earlier forestation projects that U.S. electricity generators have supported, the Company is being formed as a for-profit limited liability company (“LLC”), which it is believed will allow carbon or CO2 reduction credits, if and when they become available, to be more readily transferred. The LLC structure will also allow the members of the Company to take advantage of tax benefits of land donation. Nevertheless, although formed as a for-profit LLC, the Company is essentially a passive medium for making investments in projects that are not expected to have any operating revenues, and will not engage in any active business operations.
To the extent not exempt under Rule 43, the Applicant is also requesting authorization pursuant to Section 12(f) of the Act to sell all or a portion of its membership interest in the Company, in whole or in part, at any time to any of its associate companies. Any sale by the Applicant of its membership interest in the Company to an associate company shall be for an amount equal to the Applicant’s investment or pro rata share thereof in the case of a sale of a portion of the Applicant’s membership interest. No sale to an associate company that requires approval by any other regulatory commission shall take place until such approval has been obtained.
B. Capital Contribution Commitments of Initial Members.
The Applicant is one of eleven registered holding companies that have committed, either directly or through subsidiaries, to make capital contributions to the Company. The others are Ameren Corporation, American Electric Power Company, Inc., Cinergy Corp., Dominion Resources, Inc., Entergy Corporation, Exelon Corporation, FirstEnergy Corp., Great Plains Energy Incorporated, PEPCO Holdings, Inc., and Progress Energy, Inc. Other energy companies that have committed to make capital contributions are: CLECO Corporation, The Detroit Edison Company, Duke Energy Corporation, Minnesota Power (a division of ALLETE, Inc.), OGE Energy Corp., Oglethorpe Power Corporation, Peabody Energy Corporation, Pinnacle West Capital Corporation, Public Service Electric and Gas Company, Public Service Company of New Mexico, Reliant Resources, Inc., Tennessee Valley Authority, TXU Corp., We Energies (the trade name of Wisconsin Electric Power Company and Wisconsin Gas Company), and Wisconsin Public Service Corporation. The amount of the commitments of the eleven registered holding companies is as follows:
| Name of Registered Holding | Total Capital Contribution | |||
| Company | Commitment | |||
Ameren Corp. |
$ | 100,000 | ||
American Electric Power Co. |
$ | 300,000 | ||
Cinergy Corp. |
$ | 100,000 | ||
Dominion Resources, Inc. |
$ | 100,000 | ||
Entergy Corp. |
$ | 100,000 | ||
Exelon Corp. |
$ | 100,000 | ||
FirstEnergy Corp. |
$ | 100,000 | ||
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| Name of Registered Holding | Total Capital Contribution | |||||||
| Company | Commitment | |||||||
Great Plains Energy Inc. |
$ | 50,000 | ||||||
PEPCO Holdings, Inc. |
$ | 50,000 | ||||||
Progress Energy, Inc. |
$ | 100,000 | ||||||
Xcel Energy, Inc. |
$ | 100,000 | ||||||
| Total | $ | 1,200,000 | ||||||
In the aggregate, the capital contribution commitments of the eleven registered holding companies represent approximately 35% of the commitments of all of the initial members.
C. Principal Terms of Operating Agreement.
Under the Company’s Operating Agreement (Exhibit A hereto), the business and affairs of the Company shall be managed by its Board of Managers. Each member that commits to make a capital contribution of at least $100,000 is entitled to appoint one representative to the Board of Managers. In general, actions by the Board of Managers may be taken by a majority of the managers present at a meeting. However, certain actions of the Board of Managers or of any individual manager or any officer require authorization by a two-thirds vote of the full board. These include, among others actions: the sale, exchange or other disposition of any of the assets of the Company greater that $20,000 in value; the commencement of a voluntary bankruptcy proceeding; the declaration or making of any distributions to members; the incurrence of any indebtedness by the Company; capital expenditures exceeding $20,000; and the acquisition or lease of any real property and any sale of, donation, lease or sublease affecting real property owned by the Company.
New members may be admitted to the Company only upon the unanimous approval of the then existing members. Upon admission of any new member, the percentage interests of existing members shall be reduced accordingly. A member may transfer all or a portion of its membership interest only upon receiving approval of two-thirds of the existing members, except that, without the prior approval of the other members, a member may transfer all or a part of its membership interest to an affiliate of such member or to any other member. A two-thirds vote of the members is also required for the election of officers of the Company. The members have equal voting rights, regardless of their percentage interests in the Company.
The Operating Agreement provides that, so long as any member is a registered holding company or subsidiary company thereof, any voting rights in the Company received or otherwise obtained by such member equal to or exceeding 10% of the total outstanding voting rights in the Company shall be automatically (and without any requirement for consent on the part of the affected member) allocated to the other members in equal portions such that no registered holding company member will hold 10% or more of voting rights in the Company. In addition, any member may elect to limit its voting rights to less than 5% of the total voting rights in the Company, in which case the voting rights of such member or members equal to or exceeding 5% of the total voting rights in the Company would be automatically allocated in equal portions to the other members.
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The Operating Agreement further provides that each member (or its designee(s) or transferee(s)) shall be entitled to claim a pro rata share of all carbon that is determined to be sequestered by the Company’s efforts to which legal rights, if any, have been obtained (“Carbon Reductions”) based on the member’s percentage interest in the Company. A member may generally utilize such member’s share of any Carbon Reductions in connection with its participation in any greenhouse gas reporting or regulatory program or transfer or assign such Carbon Reductions to one or more other persons.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses incurred or to be incurred in connection with the preparation and filing of this Application/Declaration are estimated not to exceed $2,000.
Item 3. Applicable Statutory Provisions.
A. General.
Sections 9(a)(1) and 10 of the Act are applicable to the proposed acquisition of a membership interest in the Company, as well as to the acquisition of the securities of any new subsidiary formed exclusively for the purpose of acquiring and holding the membership interest. The subsequent sale of all or a portion of the membership interest in the Company acquired by the Applicant to any associate company thereof is subject to Section 12(f) of the Act, but may be exempt under Rule 43.
B. Standards of Sections 9(a) and 10.
The transaction proposed herein involves an acquisition of securities, as well as an acquisition of an interest in another (i.e., non-utility) business, and is therefore subject to the approval of this Commission under Section 10. The relevant standards for approval under Section 10 are set forth in subsections (b), (c) and (f). As applied to interests in non-utility businesses, Section 10(c)(1) of the Act provides that the Commission shall not approve an acquisition that is “detrimental to the carrying out of the provisions of section 11.” Section 11(b)(1), in turn, directs the Commission to limit the operations of a holding company system to a single integrated public-utility system and such non-utility businesses as are “reasonably incidental, or economically necessary or appropriate to the operations” of its integrated system or systems. The Commission and the courts have interpreted these provisions as expressing a Congressional policy against non-utility activities that bear no operating or functional relationship to the utility operations of the registered system.1
The Commission has previously authorized new registered holding companies to retain, under the standards of Section 11(b)(1), interests in ventures formed to invest in start-up companies that offer products or services that will generate greenhouse gas emission reductions for submission to the DOE as “Climate Challenge” credits pursuant to Title XVI of the Energy
| 1 See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-365 (1970), aff'd, 444 F.2d 913 (D.C.Cir.1971). |
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Policy Act of 1992.2 Further, under Rule 58(b)(1)(ii), a registered holding company may, without the need for prior approval by the Commission (subject to certain investment limitations), acquire the securities of companies that engage in the “development and commercialization of electrotechnologies related to energy conservation, storage and conversion, energy efficiency, waste treatment, greenhouse gas reduction, and similar innovations.” (Emphasis added.)
The Applicant’s proposed investment in the Company is intended to contribute positively to the national goal of reducing greenhouse gases through voluntary industry specific efforts. The forestation projects that the Company will fund have received strong backing from the DOE, Department of Agriculture and Department of Interior. Moreover, the proposed investment in the Company will provide the Applicant with a means to obtain carbon or CO2 reduction credits, if and when such credits become available.
C. Compliance with Rule 54. The proposed transaction is also subject to Rule 54. Rule 54 provides that, in determining whether to approve the issue or sale of any securities for purposes other than the acquisition of any “exempt wholesale generator” (“EWG”) or “foreign utility company” (“FUCO”) or other transactions unrelated to EWGs or FUCOs, the Commission shall not consider the effect of the capitalization or earnings of subsidiaries of a registered holding company that are EWGs or FUCOs if the requirements of Rule 53(a), (b) and (c) are satisfied. Under Rule 53(a), the Commission shall not make certain specified findings under Sections 7 and 12 in connection with a proposal by a holding company to issue securities for the purpose of acquiring the securities of or other interest in an EWG, or to guarantee the securities of an EWG, if each of the conditions in paragraphs (a)(1) through (a)(4) thereof are met, provided that none of the conditions specified in paragraphs (b)(1) through (b)(3) of Rule 53 exists.
Xcel Energy does not currently satisfy the requirements of Rules 53(a) and (b). The Proposed transaction nevertheless satisfies the requirements of Rule 53(c). Due to the de minimis nature of Xcel Energy’s investment in the Company ($100,000) and the purpose for which it is being made (namely, for the purpose of reducing greenhouse gas emissions), the proposed transaction will not have a substantial adverse impact upon the financial integrity of Xcel Energy, and will not have an adverse impact on any of the Xcel energy operating Companies or their customers or on the ability of State commissions to protect the Xcel Energy Operating Companies or their customers.
Item 4. Regulatory Approval.
No state commission, and no federal commission, other than this Commission, has jurisdiction over the proposed transaction.
| 2 See Exelon Corp., Holding Co. Act Release No. 27256 (Oct. 19, 2000); and CP&L Energy, Inc., Holding Co. Act Release No. 27284 (Nov. 27, 2000). |
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Item 5. Procedure.
The Commission is requested to publish a notice under Rule 23 with respect to the filing of this Application/Declaration as soon as practicable. The Applicant requests that the Commission’s order be issued as soon as practicable after the notice period and in any event not later than July 31, 2003 in order to accommodate the initial call of capital contributions by the Company. The Applicant further requests that there should not be a 30-day waiting period between issuance of the Commission’s order and the date on which the order is to become effective, hereby waives a recommended decision by a hearing officer or any other responsible officer of the Commission, and consents to the assistance of the Division of Investment Management in the preparation of the Commission’s decision and/or order, unless the Division of Investment Management opposes the matters proposed herein.
Item 6. Exhibits and Financial Statements.
A. Exhibits.
| A | - | Draft of Operating Agreement of PowerTree Carbon Company, LLC | ||||
| B | - | None | ||||
| C | - | Inapplicable | ||||
| D | - | None | ||||
| E | - | Inapplicable | ||||
| F-1 | - | Opinion of Counsel for the Applicant | ||||
| F-2 | - | Opinion of Morris, James, Hitchens & Williams LLP | ||||
| G | - | Form of Federal Register Notice |
B. Financial Statements.
| (Deemed unnecessary because of the de minimis nature of the proposed transaction) |
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Item 7. Information as to Environmental Effects.
None of the matters that are the subject of this Application/Declaration involves a “major federal action” nor do such matters “significantly affect the quality of the human environment” as those terms are used in section 102(2)(C) of the National Environmental Policy Act. The transaction that is the subject of this Application/Declaration will not result in changes in the operation of the Applicant that will have an impact on the environment. The Applicant is not aware of any federal agency that has prepared or is preparing an environmental impact statement with respect to the transaction that is the subject of this Application/Declaration.
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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 statement to be signed on its behalf by the undersigned thereunto duly authorized.
| XCEL ENERGY INC. | |||
| By: /s/ Gary R. Johnson | |||
| |
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Name: Gary R. Johnson Title: Vice President and General Counsel |
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Date: July 15, 2003
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