File No. 070- 10162
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1/A
AMENDMENT NO. 5
TO
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
CenterPoint Energy, Inc.
1111 Louisiana
Houston, Texas 77002
Utility Holding, LLC
200 West Ninth Street Plaza
Suite 411
Wilmington, Delaware 19801
(Name of companies filing this statement and address of
principal executive offices)
CenterPoint Energy, Inc.
1111 Louisiana
Houston, Texas 77002
(Name of top registered holding company parent of each applicant or declarant)
Rufus S. Scott
Vice President, Deputy General Counsel and Assistant Corporate Secretary
CenterPoint Energy, Inc.
1111 Louisiana
Houston, Texas 77002
(713) 207-7451
(Names and addresses of agents for service)
The Commission is also requested to send copies
of any communications in connection with this matter to:
James R. Doty Margo S. Scholin
Joanne C. Rutkowski Baker Botts L.L.P.
Stephanie Smith 3000 One Shell Plaza
Baker Botts L.L.P. Houston, Texas 77002-4995
The Warner (713) 229-1234
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2400
(202) 639-7700
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CenterPoint Energy, Inc. ("CenterPoint" or the "Company") and
Utility Holding, LLC (together the "Applicants") hereby amend and restate their
request for authorization and approval as set forth herein.(1)
Item 1. Description of the Proposed Transactions
A. Introduction and General Request
1. General
By order dated July 5, 2002 (HCAR No. 27548) (the "July
Order"), the Securities and Exchange Commission (the "Commission") authorized
the formation of a new registered holding company, CenterPoint, and the
distribution ("Distribution") to shareholders of the remaining common stock of
Reliant Resources, Inc. The formation of CenterPoint and the Distribution was
part of a plan adopted in 2000, and approved by the Public Utility Commission of
Texas (the "Texas Commission"), for the restructuring of Reliant Energy,
Incorporated pursuant to requirements of the Texas Electric Restructuring
Legislation adopted in 1999. The Distribution, which was made on September 30,
2002, completed the separation from CenterPoint of the merchant power generation
and energy trading and marketing business of Reliant Resources. As it expected
to qualify for exemption from registration within a year of the initial order,
CenterPoint did not intend to form a service company following the
restructuring. Instead, CenterPoint requested authority to provide certain goods
and services to its Subsidiaries on an interim basis.(2) The July Order
authorized CenterPoint to provide a variety of services in areas such as
accounting, rates and regulation, internal auditing, strategic planning,
external relations, legal services, risk management, marketing, financial
services and information systems and technology. For the third quarter of 2002,
the cost of these services was approximately $30 million; for the fourth quarter
of 2002, the cost was approximately $65.2 million.(3)
Since the July Order, CenterPoint has announced that it will
remain a registered holding company. In its order dated June 30, 2003 (HCAR No.
27692) (the "Omnibus Financing Order"), the Commission granted CenterPoint
certain authorizations through June 30, 2005. The Omnibus Financing Order noted
that the Company intended to form a service company and granted CenterPoint
interim authority to continue to provide goods and services to Subsidiaries
through December 31, 2003.
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(1) CenterPoint holds its utility interests through Utility Holding, LLC, a
Delaware limited liability company that is a conduit entity formed solely to
minimize tax liability.
(2) The term "Subsidiaries" refers to each direct or indirect subsidiary
company of CenterPoint as well as any direct or indirect subsidiary companies
that CenterPoint may form with the approval of the Commission or in reliance on
rules or statutory exemptions.
(3) See Exhibits F-3 and F-4 to CenterPoint's Annual Report on Form U-5S for
the year ended December 31, 2002.
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2. General Request
This Application/Declaration seeks the authorization and
approval by the Commission with respect to the provision of intra-system
services and goods, the form of the Master Services Agreement, the Form of
Services Agreement for services rendered by other system companies, the Service
Agreement Procedures Manual pursuant to Section 13 of the Public Utility Holding
Company Act of 1935, as amended (the "Act") and the Rules thereunder.(4)
Specifically, Applicants request that the Commission approve the formation and
capitalization of CenterPoint Energy Service Company, LLC ("ServiceCo"), as well
as the designation of ServiceCo as a subsidiary service company in accordance
with the provisions of Rule 88 under the Act and the Service Agreement (as
defined below) and the provision of services to third parties, as discussed
herein. Applicants further request that the Commission find that ServiceCo is so
organized and will conduct its operations so as to meet the requirements of
Section 13 of the Act and the Commission's Rules under the Act. Applicants also
request authority, to the extent not exempted under Rules 81 and 87, for their
Subsidiaries to provide certain services and goods to associate companies, as
more fully described below.
B. Description of the Parties to the Transaction
CenterPoint is a registered holding company under the Act, and
currently has three public-utility subsidiaries: CenterPoint Energy Houston
Electric, LLC (the "T&D Utility"), Texas Genco, LP ("Texas Genco"), and
CenterPoint Energy Resources Corp ("GasCo") as well as certain non-utility
subsidiaries that are engaged in duly-authorized non-utility businesses. These
subsidiaries are described in more detail in the following paragraphs. A
corporate organization chart of CenterPoint, showing the identity, relationship
and classification of the current direct and indirect subsidiaries of
CenterPoint, is attached hereto as Exhibit A-3. CenterPoint is proposing in this
proceeding to create ServiceCo as a subsidiary service company.
1. T&D Utility
The T&D Utility engages in the electric transmission and
distribution business in a 5,000-square mile area of the Texas Gulf Coast that
includes Houston.
2. Texas Genco
Texas Genco owns and operates the Texas generating plants
formerly belonging to the integrated electric utility that was a part of Reliant
Energy, Incorporated. CenterPoint currently is seeking regulatory approval in
connection with a determination by the Federal Energy Regulatory Commission that
Texas Genco is an exempt wholesale generator ("EWG") within the meaning of
Section 32 of the Act.
3. GasCo
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(4) Applicants ask the Commission to reserve jurisdiction, as appropriate,
over the Service Agreement Procedures Manual. Applicants undertake to submit the
Service Agreement Procedures Manual by 60-day letter on or before May 1, 2003.
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GasCo owns gas distribution systems that together form one of
the United States' largest natural gas distribution operations in terms of
customers served. Through unincorporated divisions, GasCo provides natural gas
distributions services in Louisiana, Mississippi and Texas (Entex Division),
Arkansas, Louisiana, Oklahoma and Texas (Arkla Division) and Minnesota
(Minnegasco Division). Through wholly owned subsidiaries, GasCo owns two
interstate natural gas pipelines and gas gathering systems and provides various
ancillary services.
4. ServiceCo
CenterPoint proposes that ServiceCo will be a direct,
wholly-owned subsidiary of Utility Holding, LLC. ServiceCo, as a subsidiary
service company, will enter into service agreements (each a "Service Agreement")
with CenterPoint, the T&D Utility, Texas Genco, GasCo, and certain other
Subsidiaries (associate companies who execute Service Agreements are referred to
as "Recipients"). A copy of the proposed form of the Service Agreement is filed
herewith as Exhibit B-1. Applicants are also preparing a ServiceCo Service
Agreement Procedures manual that will be filed by amendment.
Following the Commission's authorization, ServiceCo will
provide the Recipients with a variety of administrative, management and support
services, either directly or through agreements with associate or non-associate
companies, as needed. ServiceCo will begin operations no later than January 1,
2004.
ServiceCo is a limited liability company, formed in reliance
on Rule 58, but it does not currently hold any assets. It is anticipated that
ServiceCo will have a minimal equity capitalization - not more than 1,000
membership interests with total equity capital of not more than $1,000, and that
it will derive substantially all of its needs for additional working capital
from borrowings under CenterPoint's money pool (the "Money Pool") and/or
additional investments by CenterPoint pursuant to Rule 45 and/or Rule 52 as
applicable. ServiceCo will only borrow from CenterPoint or the Money Pool and
will not borrow directly from any other Subsidiary.
C. Intra-system Provision of Services
1. ServiceCo
In order to ensure adequate oversight and realize economies of
scale, certain administrative and service functions for the CenterPoint system
may be provided on a centralized basis through ServiceCo. As a general rule, the
individual system companies will maintain services that can benefit from
individualized application at the company level, with ServiceCo offering
system-wide coordination and strategy, compliance, oversight and other services
where economies can be captured by the centralization of services.
In particular, it is anticipated that, subject to the
requirements or limitations of state and federal law, the following services
will be offered by ServiceCo, through departments that will be established
following its formation.(5) A description of each of the services performed
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(5) These services, with a more detailed explanation of each service, are
contained in Exhibit I to the Service Agreement, Exhibit B-1.
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by ServiceCo, which may be modified from time to time, is presented below. In
addition to these services, ServiceCo will be the administrator of the
CenterPoint System Money Pool, as created by the July Order.
a) Accounting Services
ServiceCo may provide various services to the Recipients
including corporate accounting and reporting, general ledger maintenance and all
accounting record keeping, guidance regarding adoption and application of
accounting policies, risk oversight and financial reporting for Commission,
regulatory and other purposes and support to rate and other regulatory
proceedings. Each Recipient may also maintain its own corporate and accounting
group and engage ServiceCo to provide advice and assistance on accounting
matters, including the development of accounting practices, procedures and
controls, the preparation and analysis of financial reports and the filing of
financial reports with regulatory bodies, on a system-wide basis. Costs of a
general nature may be allocated using the Total Assets Ratio, Operating Expense
or Cash Flow Ratio.
b) Internal Auditing
ServiceCo may conduct periodic audits of administration and
accounting processes. Audits would include examinations of Recipients' service
agreements, accounting systems, source documents, allocation methods and
billings to assure proper authorization and accounting for services. Costs may
be allocated using the Operating Expense Ratio.
c) Finance and Treasury
ServiceCo may provide various services to the Recipients
including budgeting, corporate tax, treasury, risk management (insurance),
strategic planning, financing, money pool administration and cash management.
ServiceCo may also provide investor relations services to provide information to
the investment community regarding CenterPoint and its subsidiary companies and
provide stock transfer agent services to holders of its securities and to
shareholders of Texas Genco Holdings, Inc. and Reliant Resources. CenterPoint is
providing shareholder services regarding the common stock of Reliant Resources
on a temporary basis pursuant to the separation arrangements between CenterPoint
and Reliant Resources. It is currently anticipated that services for Reliant
Resources will terminate by January 2004. Costs of a general nature may be
allocated using the Total Assets Ratio, Operating Expense or Cash Flow Ratio.
d) Communications
ServiceCo may assist the Recipients to develop and support
branding and corporate promotions, advertising and brand equity. Individually,
the Recipients may maintain independent marketing personnel to handle the
day-to-day details of marketing campaigns. Costs of a general nature may be
allocated using the Total Assets Ratio.
e) Legal Services
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ServiceCo may provide various legal services, processing of
claims, administration of CenterPoint's corporate compliance program and general
legal oversight, as well as corporate secretarial functions and filing of
reports under securities laws and the 1935 Act for the benefit of the
Recipients. Costs of a general nature may be allocated using the Operating
Expense Ratio.
f) Human Resources
ServiceCo may assist the Recipients in developing policy and
planning for total compensation plans, workforce planning and training, employee
relations policies and programs, and in training personnel in a coordinated
manner throughout the CenterPoint System Companies. It may also design and
provide administration for corporate welfare and benefit plans, including
pension plans and executive benefits, and support for the negotiation of labor
contracts for the CenterPoint companies. ServiceCo may provide corporate
oversight for health and safety services for CenterPoint and its system
companies to comply with government regulation. Each Recipient may maintain a
human resources group to handle the individualized application of policies and
programs. Costs of a general nature may be allocated using the Head Count Ratio.
Costs of providing employee and executive benefits will be allocated directly to
the Recipient based on costs incurred for its employees and retirees, and any
costs of a general nature which are not otherwise recovered, such as through
payroll burden charges, will be allocated using the Head Count Ratio.
g) Executive
ServiceCo may provide the executive staff to provide executive
management and governance for CenterPoint, including supplying personnel to
serve on boards of directors of CenterPoint system companies, and assist the
Recipients in formulating and executing general plans and policies, including
operations, issuance of securities, appointment of executive personnel, budgets
and financing plans, expansion of services, acquisitions and dispositions of
property, public relations and other related matters. The executive staff will
oversee any corporate aircraft, the costs of which will not be allocated to
Recipients except in connection with the direct cost of flights on behalf of a
Recipient. Costs of a general nature may be allocated using the Total Asset
Ratio.
h) Regulatory and Governmental Affairs
ServiceCo may assist the Recipients in developing policy for
regulatory strategy, implementation of electric restructuring legislation, and
support for litigation and regulatory proceedings. Governmental Affairs will
develop strategy for legislative and other governmental initiatives and monitor
activities affecting the Company in the state and federal legislative arenas.
Costs of a general nature may be allocated using the Total Asset Ratio to the
extent such costs may be allocated to CenterPoint business units. Recipients may
maintain individual regulatory and governmental affairs units to support local
activities.
i) Information Systems and Technology
ServiceCo may provide the Recipients with the following
services: Mainframe Operations, Enterprise Document Management, Data Circuit
Management, Voice Services, IT
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Solutions Delivery, and Desktop Data Device services. Costs are billed to
Recipients based on various metrics (e.g., CU second, billable hour, phone line,
login ID) on cost allocations (e.g., headcount, operating expenses and direct
dollars billed).
j) Mainframe Operations
Methodology
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Legacy Mainframe CPU Utilization Client Unit Usage
Legacy Mainframe Data Storage Client Unit Usage
SAP Mainframe Data Storage Client Unit Usage
SAP Mainframe CPU Utilization Client Unit Usage
Enterprise Recipient Specific Client Unit Usage
Enterprise Document Management
Methodology: Client Unit Usage
Data Circuit Management
Methodology: Client Unit Usage
Voice Services
Methodology
-----------------
Telephone Basic Line Client Unit Usage
Moves/Adds/Change (MAC) Client Unit Usage
Call Center Basic Line Client Unit Usage
Video Conferencing Client Unit Usage
IT Solutions Delivery
Methodology: Client Unit Usage
SAP Production Support
Allocation Methodology: Headcount and Operating Expense
Desktop Data Device Services
Methodology
-----------------
Equipment Client Unit Usage
Lotus Notes Messaging Client Unit Usage
LAN and Security Account Creation Client Unit Usage
Network WAN/LAN Client Unit Usage
Client Support Center Help Desk Client Unit Usage
k) Business Services
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Real Estate and Facilities Management -- ServiceCo may provide
Recipients with general operating maintenance, administrative and management
duties for building operations, including project management services for
facility-related projects. Costs for Facilities Management not directly
assignable are allocated based on the square footage utilized.
Security - ServiceCo may provide security and security
monitoring for managed properties, security assessments and internal
investigations.
Office Support Services -- ServiceCo may provide Recipients
with copying, inserting, mailing, call center, and graphic design functionality.
This service also includes records management and managing office supplies,
forms and convenience copiers. Costs for Office Support Services may be
allocated based on Recipient unit usage (e.g., number of forms, mail pieces,
billable hours, direct dollars spent).
Financial Services -- ServiceCo may provide payroll, bank
reconciliation, processing certain accounts such as accounts payable and others
as may be deemed necessary, check disbursements, escheat processing/reporting
and remittance processing. This service may also provide Recipients with
assistance in Corporate Travel. Costs for Financial Services are generally
allocated based on client unit usage (e.g., number of payments processed,
checks, billable hours).
Purchasing and Logistics -- ServiceCo may provide Recipients
with procurement and Accounts Payable services. This service may also provide
Recipients with oversight of logistics operations and investment recovery
services. Costs for purchasing and logistics may be allocated based on client
unit usage (e.g., number of transactions, billable hours, managed dollars).
l) Administration of the Money Pool
In the July Order, the Commission authorized CenterPoint to
establish a Money Pool. ServiceCo will provide various services connected to the
administration of such Money Pool. Such services may include accounting and
bookkeeping and responsibility for investment in appropriate short-term
instruments of funds that are loaned by participants but not currently needed to
satisfy borrowing needs of other participants.
m) Leasing Services
ServiceCo may, in the future, enter into various leases of
personal property or licenses where such leases or licenses will pertain to more
than a single company in the CenterPoint system. ServiceCo will charge each
affected Recipient for the cost thereof pursuant to the Service Agreement and
associated Service Requests and office space subleases (where applicable) and
the Commission's rules.
* * * * *
Applicants wish to note that no core public utility operations
or functions, such as the dispatch or delivery of energy, will be performed by
ServiceCo. There are three public utilities currently in the CenterPoint system,
the T&D Utility, Texas Genco and GasCo, and it is
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anticipated that no economies would be realized by transferring these functions
and related personnel to ServiceCo at this time. Changes to the scope or
character of the services to be rendered by ServiceCo shall be done pursuant to
the Act and its regulations.
As compensation for the services to be rendered under the
Service Agreements, Recipients shall pay to ServiceCo all costs that reasonably
can be identified and related to particular services performed by Service
Company for or on their behalf. All charges for services shall be distributed
among Recipients, to the extent possible, based on direct assignment. The
amounts remaining after direct assignment shall be allocated among the
Recipients in a fair and equitable manner, using the allocation methods set
forth in Exhibit I of the Service Agreement, Exhibit B-1. Thus, charges for all
services provided by ServiceCo to its associated utility companies and
non-utility companies under the Service Agreements will be on an "at cost" basis
as determined under Rules 90 and 91 of the Act. Each Recipient will conduct a
periodic evaluation to determine whether such Recipient would be better served
to buy the services from a source other than ServiceCo.
ServiceCo's accounting and cost allocation methods and
procedures are structured so as to comply with the Commission's standards for
service companies in registered holding company systems. ServiceCo's billing
system will use the "Uniform System of Accounts for Mutual Service Companies,"
established by the Commission for holding company systems, as may be adjusted to
use the FERC uniform system of accounts.
As noted above, Applicants are preparing a proposed Service
Agreement Procedures to be used in implementing and administering the Service
Agreements.(6) Services will be provided pursuant to work orders, in the form of
"Service Requests", specifying the services to be performed by ServiceCo for
each Recipient.(7) Each Service Request will be approved by ServiceCo and the
Recipient, and will contain one or more Project IDs which will be used to
accumulate the costs of providing services under the Service Request. The
ServiceCo Accounting Division will be responsible for authorizing new Service
Requests, and for reviewing, monitoring and maintaining the Service Request
system, including assignment of Project IDs.
The Service Agreement Procedures require all ServiceCo
employees, including executives, to keep time records supporting labor charged
to separately identifiable goods and services performed for Recipients.
Employees will record time daily in a minimum of half-hour increments. The
employee's supervisor or authorized delegate will review and approve time
reports. ServiceCo will use an electronic time entry system for its employees.
Time records will be maintained in accordance with record retention requirements
set forth in 17 CFR 257, but in any event will be maintained for at least six
years. Prior to the commencement of operations by ServiceCo, training sessions
regarding time keeping requirements will be held with employees who are expected
to be transferred to ServiceCo, and periodic training sessions regarding the
Service Agreement procedures, including time keeping, will be held after the
establishment of ServiceCo.
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(6) A 60-day letter with a copy of the Service Agreement Procedures will be
filed no later than May 1, 2004.
(7) The form of Service Request is attached as Exhibit B to Exhibit B-2.
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The ServiceCo Internal Audit Department will conduct periodic
reviews of ServiceCo's business processes and systems to ensure that the
services provided are properly documented and charged to the Recipients on an
appropriate basis.
It is anticipated that ServiceCo will be initially staffed by
transfers of approximately 1100 personnel from CenterPoint and approximately 6
personnel from GasCo. A preliminary functional organization chart of ServiceCo
is attached as Exhibit B-4.
No change in the organization of ServiceCo, the type and
character of the companies to be serviced, the methods of allocating cost to
Recipients, or in the scope or character of the services to be rendered subject
to Section 13 of the Act, or any rule, regulation or order thereunder, shall be
made unless and until ServiceCo shall first have given the Commission written
notice of the proposed change not less than 60 days prior to the proposed
effectiveness of any such change. If, upon the receipt of any such notice, the
Commission shall notify ServiceCo within the 60-day period that a question
exists as to whether the proposed change is consistent with the provisions of
Section 13 of the Act, or of any rule, regulation or order thereunder then the
proposed change shall not become effective unless and until ServiceCo shall have
filed with the Commission an appropriate declaration regarding such proposed
change and the Commission shall have permitted such declaration to become
effective.
Rule 88(b) provides that "(A) finding by the commission that a
subsidiary company of a registered holding company ... is so organized and
conducted, or is to be so conducted, as to meet the requirements of Section
13(b) of the Act with respect to reasonable assurance of efficient and
economical performance of services or construction or sale of goods for the
benefit of associate companies, at cost fairly and equitably allocated among
them (or as permitted by [Rule 90]), will be made only pursuant to a declaration
filed with the Commission on Form U-13-1, as specified in the instructions for
that form, by such company or the persons proposing to organize it."
Notwithstanding the foregoing language, the Commission has on at least two
recent occasions made findings under Section 13(b) based on information set
forth in an application on Form U-1, without requiring the formal filing on Form
U-13-1. See Unitil Corp., 51 SEC Docket 562 (April 24, 1992); CINergy Corp., 57
SEC Docket 2353 (October 21, 1994). In this Application/Declaration, CenterPoint
has submitted substantially the same application information as would have been
submitted in a Form U-13-1.
Accordingly, it is submitted that it is appropriate to find
that ServiceCo will be so organized and shall be so conducted as to meet the
requirements of Section 13(b) of the Act, and that the filing of a Form U-13-1
is unnecessary or, alternatively, that this Application/Declaration should be
deemed to constitute a filing on Form U-13-1 for purposes of Rule 88.
2. Provision of Goods and Services by Other System Companies
a) Goods and Services Provided to ServiceCo.
Certain office space and other space currently occupied by
CenterPoint personnel is owned by CenterPoint Energy Properties, Inc.
("Properties"), a wholly-owned indirect
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subsidiary of CenterPoint, and from time to time other space may be acquired by
Properties, either in fee or by lease. It is anticipated that ServiceCo will
occupy portions of the owned or leased office space. ServiceCo will enter one or
more lease agreements with Properties and will enter into a sublease in the form
attached as Exhibit B-3 with Recipients that will occupy such space. Each
Recipient will be allocated costs associated with the occupancy of such office
space in proportion to its occupancy of such space.
CenterPoint is currently the owner or lessee of certain
computer hardware, communications facilities (including local, long distance,
internet and wireless services), office equipment and furnishings and vehicles,
and is the licensee under certain software license agreements. It is anticipated
that ServiceCo will use portions of the owned or leased computer hardware,
communications facilities, office equipment and furnishings and vehicles.
Further, ServiceCo will also use software currently licensed by CenterPoint or
by the T&D Utility.
The lessor in these arrangements will provide for such use
under license, lease, sublease or service arrangements with ServiceCo which will
be at cost in accordance with Rules 87, 90 and 91. Applicants state that none of
the property proposed to be occupied or used by, or provided to, ServiceCo
constitute facilities used for the production, transmission, transportation or
distribution of electric energy or natural or manufactured gas.
Such transactions, which will not involve the transfer of
utility assets, will be in accordance with Rules 87, 90 and 91.
b) Goods and Services Provided by Other System Companies
The following associate companies currently provide services
to other associate companies as indicated: (i) the T&D Utility provides various
services to the Entex division of GasCo in their overlapping service territory
and provides other common services such as surveying and mapping to GasCo, Texas
Genco and other system companies; (ii) the Entex division of GasCo provides line
locating services to the T&D Utility, and (iii) the Arkla Division of GasCo and
GasCo's pipelines subsidiaries share some facilities and services, as described
below. These arrangements have arisen from the historic operation of the
companies and the Applicants believe it is more economical to continue the
existing arrangements then to transfer the associated resources to ServiceCo.
Such services will be provided pursuant to the form of services agreement
attached hereto as Exhibit B-5.
A portion of the service territory of GasCo's Entex division
overlaps the service territory of the T&D Utility. CenterPoint seeks to obtain
the synergies that are inherent in this overlap. Thus, meter reading, trenching
operations, vehicle maintenance, line locating, call center and credit and
collection functions are shared between the two utility operations when the
companies determine it is efficient and cost effective to do so. The companies
also share some common warehouse space. Some of these functions, such as line
locating, are provided by Entex to the T&D Utility, and others are provided by
the T&D Utility to Entex. In addition, the T&D Utility provides a smaller group
of services, GIS mapping, to other GasCo divisions, GasCo's pipelines and other
CenterPoint System companies. Where such services are provided, costs of the
shared services are allocated on appropriate cost allocation measures, such as
number of meters with respect to meter reading, square footage occupied, where
location is shared.
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Prior to its acquisition by CenterPoint's predecessor in 1997,
GasCo operated as an independent local gas distribution company. Its pipeline
subsidiary provided a significant portion of the natural gas supply for one if
its distribution divisions. GasCo provided corporate and shared services to its
pipeline and other subsidiaries. ServiceCo will assume most corporate and shared
services functions for GasCo and its subsidiaries. However, environmental
services are provided to the local distribution company ("LDC") divisions of
GasCo by personnel from the pipeline subsidiaries, which are also providing
support to the LDCs for compliance with the new pipeline integrity law. Arkla's
telephone operations provide some services to the pipelines, and pipeline
personnel share office and warehouse space in Arkla's facilities. In connection
with operations, Arkla and CenterPoint Energy Gas Transmission Company ("CEGT")
share SCADA signals, with CEGT maintaining the equipment.(8) They also share
meter testing responsibilities, with Arkla testing small pipeline meter stations
and CEGT testing large distribution meters. Similarly, Arkla and CEGT share some
cathodic protection from rectifiers at certain points on the system, and Arkla
reads some rural and town border station meters where CEGT maintains the
equipment.
All such services are and will continue to be provided at
cost, in accordance with Rules 90 and 91.(9)
D. Provision of Goods and Services to Third Parties
Prior to the formation of CenterPoint, its predecessor Reliant
Energy, Incorporated ("Reliant Energy") entered into certain agreements with
Reliant Resources, relating to the separation of Reliant Resources from Reliant
Energy. Under the terms of those agreements, Reliant Energy was obligated to
provide certain services and facilities, including business services, corporate
services, and information technology services to Reliant Resources during a
defined transition period.(10) Reliant Resources also agreed to provide certain
services to Texas Genco. CenterPoint succeeded to the obligations of Reliant
Energy under these agreements and is currently providing those services on the
same cost basis as services are currently provided to companies in the
CenterPoint System. These arrangements will largely terminate in early 2004.
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(8) The term SCADA refers to a Supervisory Control and Data Acquisition
("SCADA") system that electronically monitors the physical operating conditions
of the distribution system.
(9) A form of the agreement pursuant to which such services will be provided
is attached hereto as Exhibit B-5.
(10) Transition Services Agreement, dated as of December 31, 2000, between
Reliant Energy, Incorporated and Reliant Resources, Inc., filed as Exhibit 10.2
to the Quarterly Report of Reliant Energy, Incorporated on Form 10-Q for the
quarter ended March 31, 2001 (File No. 1-3187), and Technical Services
Agreement, dated as of December 31, 2000, between Reliant Energy, Incorporated
and Reliant Resources, Inc., filed as Exhibit 10.3 to the Quarterly Report of
Reliant Energy, Incorporated on Form 10-Q for the quarter ended March 31, 2001
(File No. 1-3187), both incorporated here by reference.
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In addition, at the time CenterPoint distributed a portion of
its stock in Texas Genco to shareholders, CenterPoint and Texas Genco entered
into similar transition services agreements.(11) These agreements largely mirror
the business services to be provided to Texas Genco under CenterPoint's Master
Services Agreement and are priced on the same basis. The transition services
agreements were needed to document the relation between CenterPoint and Texas
Genco for corporate law purposes. It is contemplated that those services will
continue to be provided at least until the monetization of Texas Genco and,
depending on the terms of any sale of Texas Genco, for a brief transition period
after that monetization.
Upon commencement of its functions as a service company,
ServiceCo will assume the obligations for any transition services that continue
to be provided under those agreements. Such services will be provided at cost.
E. Rule 24 Filing
The Applicants undertake to file: (i) on or before April 30,
2004, calculations showing the application of the allocation factors set forth
in Exhibit I to the Master Services Agreement to services provided as of January
1, 2004, and (ii) on or before August 30, 2004, calculations showing the
application of the allocation factors set forth in Exhibit I to the Master
Services Agreement to services provided as of June 30, 2004.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses incurred or to be incurred
in connection with the transactions proposed herein are anticipated to not
exceed $50,000.
Item 3. Applicable Statutory Provisions.
Sections 6, 7, 9, 10, 12 and 13 of the Act and Rules 88, 90
and 91 are considered applicable to the proposed transactions.
The proposed transaction is subject to Rule 54 under the Act,
which refers to Rule 53. Rule 54 under the Act provides that in determining
whether to approve certain transactions other than those involving exempt
wholesale generators ("EWGs") or foreign utility companies ("FUCOs"), as defined
in the Act, the Commission will not consider the effect of the capitalization or
earnings of any Subsidiary which is an EWG or FUCO if Rule 53(a), (b) and (c)
under the Act are satisfied.
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(11) Transition Services Agreement, as of August 31, 2002, CenterPoint
Energy and Texas Genco, filed as Exhibit 10(cc)(2) to Annual Report of
CenterPoint Energy, Inc. on Form 10-K for the year ending December 31, 2002
(File No. 1-31447) and Assignment and Assumption Agreement for the Technical
Services Agreement entered into as of August 31, 2002, by and between
CenterPoint Energy and Texas Genco, LP, Exhibit 10.11 to the Registration
Statement of Texas Genco Holdings, Inc. on Form 10 (File No. 1-31449), and both
incorporated herein by reference.
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As a result of the Restructuring authorized in the July Order
(as such term is defined in the July Order), CenterPoint had negative retained
earnings as of December 31, 2002. Thus, although CenterPoint's aggregate
investment (as defined in Rule 53(a)(1)(i) under the Act), in EWGs and FUCOs as
of December 31, 2002 was approximately $8 million, the Company is not currently
in compliance with the requirements of Rule 53(a)(1) under the Act. CenterPoint
has disposed of its remaining interests in FUCOs. Texas Genco, LP ("Texas
Genco") has been qualified as an EWG. As noted previously, Reliant Resources,
Inc. has an option to acquire CenterPoint's remaining interest in Texas Genco.
CenterPoint does not intend to seek any permanent financing authority in this
regard.
CenterPoint complies with, and will continue to comply with,
the record-keeping requirements of Rule 53(a)(2) under the Act, the limitation
under Rule 53(a)(3) under the Act on the use of domestic public-utility company
personnel to render services to EWGs and FUCOs, and the requirements of Rule
53(a)(4) under the Act concerning the submission of copies of certain filings
under the Act to retail regulatory commissions. Further, none of the
circumstances described in Rule 53(b) under the Act has occurred or is
continuing. Rule 53(c) under the Act is by its terms inapplicable to the
transactions proposed herein that do not involve the issue and sale of
securities (including guarantees) to finance an acquisition of an EWG or FUCO.
To the extent that the proposed transactions are considered by
the Commission to require authorization, exemption or approval under any section
of the Act or the rules and regulations other than those set forth above,
request for such authorization, exemption or approval is hereby made.
Item 4. Regulatory Approvals.
The formation of ServiceCo will not require prior approval
from regulatory authorities other than the Commission. The subject services
agreements will be submitted for review and/or approval by the Minnesota Public
Utilities Commission (the "Minnesota Commission") and the Mississippi Public
Service Commission (the "Mississippi Commission").
Item 5. Procedure
Applicants respectfully request the Commission issue and
publish not later than October 15, 2003, the requisite notice under Rule 23 with
respect to the filing of this Application/Declaration, such notice to specify a
date not later than November 10, 2003 by which comments may be entered and a
date not later than November 30, 2003 as a date after which an order of the
Commission granting and permitting this Application/Declaration to become
effective may be entered by the Commission.
Applicants submit that a recommended decision by a hearing or
other responsible officer of the Commission is not needed for approval of the
requests made herein. The Division of Investment Management may assist in the
preparation of the Commission's decision. The Applicants further request that
there 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
A-1 Organization of ServiceCo
A-2 Limited Liability Company Regulations of ServiceCo
A-3 Corporate Organization Chart of CenterPoint Energy Incorporated
and Subsidiaries (filed with Form U5S and incorporated herein by
reference)
B-1 Form of Master Services Agreement
B-2 Form of Policies and Procedures Manual*
B-3 Form of Sublease Agreement
B-4 Functional Organization Chart of ServiceCo
B-5 Form of Intercompany Services Agreement
D-1 Filing with the Minnesota Commission*
D-2 Filing with the Mississippi Commission*
F-1 Opinion of Counsel
F-2 Past Tense Opinion of Counsel*
H-1 Form of Notice
* To be filed by amendment.
Financial Statements
FS-1 Consolidated Balance Sheets of CenterPoint as of December 31, 2002
and Statements of Consolidated Operations, Statements of Consolidated
Comprehensive Income and Statements of Consolidated Cash Flows for the year
ended December 31, 2002 (incorporated by reference to CenterPoint's Annual
Report on Form 10-K for the year ended December 31, 2002 (File No. 1-31447)).
FS-2 Consolidated Balance Sheets of CenterPoint as of September 30,
2003 (unaudited) and Statements of Consolidated Income and Statements of
Consolidated Cash Flows for the nine months ended September 30, 2003 (unaudited)
(incorporated by reference to CenterPoint's Quarterly Report on Form 10-Q for
the nine months ended September 30, 2003 (File No. 1-31447)).
FS-3 Consolidated Balance Sheets of CenterPoint as of December 31,
2002, and Statements of Consolidated Operations, Statements of Consolidated
Comprehensive Income and
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Statements of Consolidated Cash Flows for the year ended December 31, 2002
(incorporated by reference to the Current Report of CenterPoint on Form 8-K
dated as of November 7, 2003 (File No. 1-31447)).
Item 7. Information as to Environmental Effects.
The transactions proposed herein will not involve major federal actions
significantly affecting the quality of human environment as those terms are used
in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C. 4321 et
seq. Second, consummation of these transactions will not result in changes in
the operations of CenterPoint or its subsidiaries that would have any
significant impact on the environment. To the knowledge of Applicants, no
federal agency is preparing an environmental impact statement with respect to
this matter.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of 1935,
as amended, the Applicants have duly caused this Application/Declaration to be
signed on their behalf by the undersigned thereunto duly authorized.
Date: December 17, 2003
CENTERPOINT ENERGY, INC.
and its Subsidiaries
By: /s/ Rufus S. Scott
-----------------------------------
Rufus S. Scott
Vice President, Deputy General Counsel and Assistant Corporate Secretary
CenterPoint Energy, Inc.
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