[Federal Register Volume 69, Number 171 (Friday, September 3, 2004)]
[Notices]
[Pages 53952-53953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2047]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27886; 3-11616]
American Electric Power Company Inc. (70-9381); Notice and Order
for a Hearing Pursuant to Section 19 of the Public Utility Holding
Company Act of 1935
August 30, 2004.
This matter is before the Securities and Exchange Commission
(``Commission'') on remand from the United States Court of Appeals for
the District of Columbia (``Court'). The Court, in National Rural
Electric Cooperative Association, et al. v. Securities and Exchange
Commission, 276 F.3d 609 (D.C. Cir. 2002), considered a Commission
order \1\ that authorized the American Electric Power Company Inc.
(``AEP''), a holding company registered under the Public Utility
Holding Company Act of 1935, as amended (``Act''), to acquire Central
and South West Corporation (``CSW'').\2\ However, the Court found that
the Commission's order did not adequately explain its determination
that a unidirectional contract met the Act's interconnection
requirement and that it had not made sufficient evidentiary findings
and had not engaged in the proper legal analysis to support its
conclusion that the resulting system would operate in a single area or
region. The Court therefore remanded the matter for the Commission to
provide a fuller explanation of its rationale.
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\1\ American Electric Power Co., Inc., and Central and South
West Corp., Holding Co. Act Release No. 27186 (June 14, 2000). In
addition to approving the proposed transaction, the Commission
denied the hearing requests of the American Public Power Association
(``APPA''), the National Rural Electric Cooperative Association
(``NRECA''), Consumers for Fair Competition and Mr. Paul S. Davis.
The APPA and NRECA jointly filed the petition for review that led to
the Court of Appeals decision remanding this matter to the
Commission.
The merger was completed on June 15, 2000. The appeal did not
stay the operation of the order. See section 24(b) of the Act.
\2\ In the original proceeding, AEP and CSW, at that time each
public utility holding companies separately registered under the
Act, were joint applicants. AEP and CSW merged following issuance of
the Commission's order, with AEP as the surviving registrant.
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Section 10(c)(1) and, by reference, section 11(b)(1), of the Act
require the Commission to find that the utility operations to be
acquired by a holding company, when combined with its existing
operations, will constitute a ``single integrated public-utility
system.'' \3\ Section 2(a)(29)(A) of the Act defines an electric
``integrated public-utility system'' to mean,
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\3\ Section 10(c)(1) of the Act in pertinent part requires the
Commission not to approve an acquisition of securities or utility
assets that is ``detrimental to the carrying out of the provisions
of section 11.'' Section 11(b)(1) in pertinent part limits the
operations of a holding company system to a single integrated
public-utility system.
[A] system * * * whose utility assets, whether owned by one or more
electric utility companies, are physically interconnected or capable
of physical interconnection and which under normal conditions may be
economically operated as a single interconnected and coordinated
system confined in its operations to a single area or region, in one
or more States, not so large as to impair (considering the state of
the art and the area or region affected) the advantages of localized
management, efficient operation, and the effectiveness of
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regulation.
Section 10(c)(2) of the Act further requires the Commission to find
that a proposed acquisition will ``serve the public interest by tending
towards the economical and the efficient development of an integrated
public-utility system.''
The Court of Appeals upheld the Commission's finding under section
10(c)(2) that the merger would produce economies and efficiencies.
However, the Court found that the Commission's order did not adequately
justify two of its findings: (1) it did not ``provide a satisfactory
explanation'' for the determination that a unidirectional contract path
would ``interconnect'' AEP and CSW (together, ``Applicants''),\4\ and
(2) it ``failed to make any evidentiary findings'' or to engage in the
proper legal analysis to support its conclusion that the resulting
system would operate in a ``single area or region.'' \5\ Based on these
conclusions, the Court vacated the order and ``remanded for further
proceedings consistent with this opinion.''
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\4\ National Rural Electric Cooperative Association v. SEC, 276
F.3d at 616 (D.C. Cir. 2002).
\5\ Id at 617.
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We believe further supplementation of the record is required for us
to address the issues identified in the Court's opinion and to
determine on remand whether the combined AEP and CSW systems meet the
relevant standards of sections 10(c)(1) and 11(b)(1) of the Act and in
particular, what specific facts about AEP's and CSW's electric systems
and the geographic area covered by their systems are relevant to the
required determinations. We recognize that parties to this proceeding
may wish to introduce facts regarding the current state of the utility
industry, in particular facts regarding the growth of regional
transmission organizations and the unbundling of generation,
transmission and distribution assets that has occurred in recent years
that they believe are relevant to this determination. We also recognize
that the parties may wish to introduce further facts--demographic,
economic, and otherwise--regarding the geographic area in which the
combined AEP-CSW system operates that they believe are relevant to this
determination.
Therefore, in light of the issues raised by the Court of Appeals'
opinion, it appears to the Commission that it is appropriate in the
public interest that a hearing be held with respect to the proposed
transaction. The hearing shall be limited to determining whether AEP
and CSW are interconnected, through a unidirectional contract path or
otherwise, and whether the resulting combined system operates in a
single area or region. Accordingly,
It is ordered that a hearing shall be commenced, pursuant to
section 19 of the Act and in accordance with the Commission's Rules of
Practice,\6\ at a time and place to be fixed by further order, for the
purpose of determining whether the AEP and CSW systems are
interconnected and operate in the same area or region, and hence
satisfy the requirements of sections 10(c)(1) and 11(b)(1) of the Act
and that an Administrative Law Judge, to be designated by further
order, preside at the hearing.
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\6\ 17 CFR part 201.
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It is further ordered that the Administrative Law Judge shall issue
an initial decision no later than 300 days from the date of service of
this Order.
It is further ordered the Division of Investment Management shall
be a party to the proceeding.
It is further ordered that any person, other than the American
Electric Power Company and the Division of Investment Management, who
wishes to be heard or who otherwise desires to participate in the
proceeding, whether as a party or as a limited participant, shall file
a written motion seeking to do
[[Page 53953]]
so with the Secretary of the Commission in accordance with the
requirements of Rule 210(b) of the Commission's Rules of Practice.\7\ A
movant shall serve a copy of any such motion upon American Electric
Power Company Inc. at the address noted below in accordance with Rule
150(c) of the Commission's Rules of Practice, and proof of service
shall be filed with the Secretary of the Commission contemporaneously
with the motion.
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\7\ 17 CFR 201.210(b).
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It is further ordered that the Secretary of the Commission shall
give notice of the hearing by mailing copies of this Notice and Order
by certified mail to:
The American Electric Power Company, 1 Riverside Plaza, Columbus, Ohio
43215
The American Public Power Association, 2301 M Street, NW., Washington,
DC 20037
The National Rural Electric Cooperative Association, 4301 Wilson Blvd.,
Arlington, Virginia 22203
It is further ordered that the Secretary of the Commission shall
give notice to all other persons by publication of this Notice and
Order in the Federal Register; that a copy of this Notice and Order
shall be published in the ``SEC Docket''; and that an announcement of
the hearing shall be included in the ``SEC News Digest.''
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2047 Filed 9-2-04; 8:45 am]
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