UNITED STATES OF AMERICA 113 FERC ¶ 61,248 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Parts 365 and 366 

(Docket No. RM05-32-000, Order No. 667) 

Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the Public 

Utility Holding Company Act of 2005 

(Issued December 8, 2005) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Final Rule. 

SUMMARY: In this Final Rule, the Federal Energy Regulatory Commission 

(Commission) is amending its regulations to implement the repeal of the Public Utility 

Holding Company Act of 1935 and the enactment of the Public Utility Holding Company 

Act of 2005, by adding a new Subchapter and Part to its regulations and removing its 

exempt wholesale generator rules as they are no longer necessary. 

EFFECTIVE DATE: This Final Rule will become effective on February 8, 2006. 

FOR FURTHER INFORMATION CONTACT: 

Brandon Johnson (Legal Information) 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, DC 20426 

(202) 502-6143 

Lawrence Greenfield (Legal Information) 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, DC 20426 

(202) 502-6415 
James Guest (Technical Information) 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, DC 20426 

(202) 502-6614 

SUPPLEMENTARY INFORMATION:
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Joseph T. Kelliher, Chairman; 

 Nora Mead Brownell, and Suedeen G. Kelly. 

Repeal of the Public Utility Holding 

Company Act of 1935 and Enactment of 

the Public Utility Holding Company Act of 

2005 

Docket No. RM05-32-000

ORDER NO. 667 

FINAL RULE 

(Issued December 8, 2005) 

Introduction

1. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005)1

 was signed into 

law. In relevant part, it repeals the Public Utility Holding Company Act of 1935 

(PUHCA 1935)2

 and enacts the Public Utility Holding Company Act of 2005 (PUHCA 

2005),3

 which, with one exception not relevant here, will become effective six months 

from the date of enactment (February 8, 2006).4

 Sections 1266, 1272, and 1275 of EPAct 

2005 direct the Commission to issue certain rules and to provide detailed 

recommendations to Congress on technical and conforming amendments to federal law 

 1

 Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594 (2005). 

2

 15 U.S.C. §§ 79a et seq. (2000). 

3

 EPAct 2005 at §§ 1261 et seq. 

4 Id. at § 1274(a). 
Docket No. RM05-32-000 - 2 -

within four months after the date of enactment, i.e., by December 8, 2005.5

 In addition, 

EPAct 2005 directs the Commission to issue a final rule exempting certain entities from 

the federal access to books and records provisions of EPAct 2005 within 90 days of the 

effective date of Title XII, Subtitle F of EPAct 2005. This rulemaking addresses all 

mandatory rulemaking requirements contained in PUHCA 2005. 

2. On September 16, 2005, the Commission issued a notice of proposed rulemaking 

(NOPR)6

 in which it proposed to add a new Subchapter U and Part 366 to Title 18 of the 

Code of Federal Regulations to implement Title XII, Subtitle F of EPAct 2005 and to 

remove Subchapter T and Part 365 of Title 18 of the Code of Federal Regulations. 

3. Section 1264 of PUHCA 2005 concerns Commission access to the books and 

records of holding companies and other companies in holding company systems, and 

section 1275 of PUHCA 2005 addresses the Commission’s review and authorization of 

the allocation of costs for non-power goods or administrative or management services 

when requested by a holding company system or state commission. As we stated in the 

NOPR, the federal books and records access provision, section 1264, and the non-power 

goods and services provision, section 1275, of PUHCA 2005 supplement the 

Commission’s existing authorities under the Federal Power Act (FPA)7

 and the Natural 

 5 Id. at §§ 1266, 1272, 1275. 

6 Repeal of the Public Utility Holding Company Act of 1935 and Enactment of the 

Public Utility Holding Company Act of 2005, Notice of Proposed Rulemaking, 70 Fed. 

Reg. 55,805 (2005), FERC Stats. & Regs. ¶ 32,588 (2005). 

7

 16 U.S.C. §§ 824d-e (2000). 
Docket No. RM05-32-000 - 3 -

Gas Act (NGA)8

 to protect customers against improper cross-subsidization or 

encumbrances of assets, including the Commission’s broad authority under FPA section 

301 and NGA section 8 to obtain the books and records of regulated companies and any 

person that controls or is controlled by such companies if relevant to jurisdictional 

activities.9

 

4. In responding to the comments on the NOPR and in deciding whether to adopt the 

proposals in the NOPR, our decisionmaking has been guided by the clear intent of 

Congress to repeal the regulatory regime established by PUHCA 1935 and to rely on state 

regulatory authorities and the Commission to protect energy customers, by 

supplementing the Commission’s books and records authority under PUHCA 2005 and 

by enhancing our already significant authority over public utility mergers, acquisitions 

and dispositions of jurisdictional facilities.10 As we recognized in the NOPR, PUHCA 

2005 is primarily a “books and records access” statute and does not give the Commission 

any new substantive authorities. In fact, the only substantive requirement contained in 

the new law is that we address requests involving certain allocations of costs of nonpower goods and services. Accordingly, as discussed in greater detail below, we are 

rejecting requests that we re-impose particular requirements in PUHCA 1935 that 

Congress chose not to include in PUHCA 2005. 

 8

 15 U.S.C. §§ 717c-d (2000). 

9

 16 U.S.C. § 825 (2000); 15 U.S.C. § 717g (2000). 

10 EPAct 2005 at § 1289. 
Docket No. RM05-32-000 - 4 -

5. Our primary means of protecting customers served by jurisdictional companies 

that are members of holding company systems continues to be the FPA and NGA. In 

particular, the Commission’s rate authorities and information access authorities under the 

FPA and NGA enable the Commission to detect and disallow from jurisdictional rates 

any imprudently-incurred, unjust or unreasonable, or unduly discriminatory or 

preferential costs resulting from affiliate transactions between companies in the same 

holding company system.11 This includes both power transactions and non-power goods 

or services transactions between Commission-regulated companies that have captive 

customers and their “unregulated” affiliates. The Commission routinely places code of 

conduct restrictions on power sales at market-based rates between regulated and nonregulated affiliates. In the context of registered holding companies, we also have placed 

conditions on non-power goods and services transactions involving public utilities. 

Further, as discussed in greater detail infra, in the context of individual rate cases 

involving public utilities that seek to flow through in jurisdictional rates the costs of 

affiliate purchases of non-power goods or services, the Commission has the ability to 

protect customers by reviewing the prudence and the justness and reasonableness of such 

costs. The Commission also has adopted rules and policies regarding cash management 

practices or arrangements that involve Commission-jurisdictional companies. 

Importantly, repeal of PUHCA 1935 also does not repeal non-PUHCA securities laws 

 11 Since the vast majority of registered holding companies have been electric 

public utility holding companies, our description here focuses primarily on the FPA. 

However, except for merger and corporate authority under the FPA, our authorities and 

processes under the NGA are similar. 
Docket No. RM05-32-000 - 5 -

and accounting requirements for companies. 

6. It is against this backdrop that we have determined not to require in this Final Rule 

all of the filing requirements that we originally proposed to adopt. In addition, in 

response to the numerous comments filed, we have determined that it is appropriate to 

permit certain exemptions from those requirements that are being adopted, based upon an 

expedited notification process. An overview of the Final Rule’s requirements and 

exemptions is provided below. We emphasize, however, that this Final Rule (including 

its exemptions) does not affect the Commission’s independent ability to obtain access to 

books and records under the FPA and NGA. Further, to the extent additional 

rulemakings or orders may be needed to protect customers, the Commission will take 

appropriate actions in the future. The Commission will hold a technical conference no 

later than one year from the effective date of PUHCA 2005 to assess whether additional 

actions are needed. 

Overview of Final Rule

7. In the NOPR, the Commission proposed to incorporate in Part 366 of its 

regulations, largely without modification, the provisions of PUHCA 2005, and we have 

adopted a number of those proposals in the Final Rule. However, based on the very 

constructive comments received, the Final Rule modifies or departs from the approach in 

the NOPR in several respects, and we summarize the Final Rule below. 

8. In the NOPR, we proposed adopting several of the Securities and Exchange 

Commission’s (SEC) accounting and record-retention requirements into our own 

regulations and stated that we did not intend to broaden their applicability beyond the 
Docket No. RM05-32-000 - 6 -

types of companies to which they now apply. Specifically, the NOPR proposed to adopt 

the following portions of the SEC’s accounting and record-keeping requirements: 

17 C.F.R. 250.26 (financial statement and recordkeeping requirements for registered 

holding companies and subsidiaries); 17 C.F.R. 250.27 (classification of accounts 

prescribed for utility companies not already subject thereto); 17 C.F.R. 250.80 

(definitions of terms used in rules under section 13 of PUHCA 1935); 17 C.F.R. 250.93 

(accounts and records of mutual and subsidiary service companies); 17 C.F.R. 250.94 

(annual reports by mutual and subsidiary service companies); 17 C.F.R. Part 256 

(uniform system of accounts for mutual and subsidiary service companies) (SEC Uniform 

System of Accounts); and 17 C.F.R. Part 257 (preservation and destruction of records 

for registered holding companies and of mutual and subsidiary service companies) 

(SEC record-retention rules). 

9. Additionally, the NOPR proposed to require companies to file certain SEC forms 

with the Commission, including: SEC Form U-13-60 (annual report for mutual and 

subsidiary service companies); SEC Form U-5S (annual report for registered holding 

companies); and a version of SEC Form U-5A (notification of registration status). 

10. As discussed further below, the Commission has concluded that there is no 

statutory basis for continuing to apply the statutory exemptions contained in PUHCA 
Docket No. RM05-32-000 - 7 -

1935, which Congress has repealed.12 Although, as also discussed below, we will 

provide certain exemptions from PUHCA 2005, we will not re-create the PUHCA 1935 

distinction between “exempt” and “registered” holding companies. Accordingly, we will 

apply the books and records requirements of PUHCA 2005 equally to all holding 

companies. However, the Commission will give holding companies until January 1, 

2007, to comply with the Commission’s record-retention requirements; holding 

companies, in contrast to traditional, centralized service companies (as distinguished 

from service companies that are special-purpose companies such as a fuel supply 

company or a construction company), will not be required to comply with the 

Commission’s Uniform System of Accounts. 

11. The Final Rule adopts modified, streamlined versions of 17 C.F.R. 250.1, 250.26, 

250.80, 250.93, 250.94, and 259.313 in Part 366 of its regulations. Section 366.4(a) of 

our regulations will be a modified and simplified version of 17 C.F.R. 250.1(a), which 

originally required registered holding companies to file SEC Form U-5A, notification of 

 12 Section 5(a) of PUHCA 1935 provides five statutory exemptions for: 

(1) predominantly intrastate holding companies; 

(2) public-utility holding companies whose operations as such do not extend 

beyond the State in which they are organized and states contiguous thereto; 

(3) holding companies that are only incidentally a holding company; 

(4) holding companies that are temporarily holding companies; or 

(5) primarily foreign utility holding companies. 

15 U.S.C. §§ 79c(a)(1)-(5) (2000). 
Docket No. RM05-32-000 - 8 -

registration. Section 366.4 requires holding companies to file a FERC-65 (Notification of 

Holding Company Status), and, if they wish to claim an exemption from PUHCA 2005 or 

a waiver of the Commission’s regulations thereunder, FERC-65A (Exemption 

Notification) or FERC-65B (Waiver Notification). The Final Rule does not adopt the 

17 C.F.R. 250.1(b) (registration statement) and 250.1(c) (annual report for holding 

companies, to be filed on SEC Form U-5S). Section 366.21 of our regulations instead 

contains a modified version of 17 C.F.R. 250.26 (financial statement and recordkeeping 

requirements for holding companies and subsidiaries), including subparagraph (a)(2) 

(requirement to maintain books and records for auditing purposes), paragraphs (d) and (f) 

(compliance with Commission and other agencies’ record-retention rules), and paragraph 

(e) (savings clause for previous accounting orders). It does not adopt paragraphs (a)(1) 

(mandating compliance with SEC Regulation S-X), (b) (information to be supplied with 

form SEC Form U-5S), (c) (mandating use of the equity method of accounting), or 

(g) (cross reference to section 250.26). In section 366.1, we adopt the definitions 

contained in 17 C.F.R. 250.80 (definitions of terms), i.e., “services,” “goods,” and 

“construction”, and we add a definition for service company. We also adopt streamlined 

versions of 17 C.F.R. 250.93 (accounts and records of service companies), 250.94 

(annual reports for service companies), and 259.313 (SEC Form U-13-60, for annual 

reports pursuant to 250.94), in sections 366.21, 366.22 and 366.23, which prescribe the 

Uniform System of Accounts and annual reporting requirement for service companies. 

The Final Rule does not adopt 17 C.F.R. 259.5s, and it does not require the submission of 

SEC Form U-5S. The Commission has determined that the information in these 
Docket No. RM05-32-000 - 9 -

eliminated provisions is not relevant to the costs incurred by jurisdictional entities or is 

not necessary or appropriate for the protection of utility customers with respect to 

jurisdictional rates. 

12. Specifically, the Final Rule also adopts the following requirements: 

(1) Holding companies will file FERC-65 (Notification of Holding Company 

Status), which will be treated as an informational filing. 

(2) Holding companies seeking to claim an exemption from PUHCA 2005 or 

waiver of the Commission’s regulations thereunder may file FERC-65A 

(Exemption Notification) or FERC-65B (Waiver Notification). 

(3) Traditional, centralized service companies will be required to file a newlycreated FERC Form No. 60 (Annual Report for Service Companies), which 

is based on a streamlined version of SEC Form U-13-60. The FERC Form 

No. 60 eliminates the following supporting schedules originally contained 

in SEC Form U-13-60: Outside Services Employed - Account 923; 

Employee Pensions and Benefits - Account 926; General Advertising 

Expenses - Account 930.1; Rents - Account 931; Taxes Other Than Income 

Taxes - Account 408; Donations - Account 426.1; and Other Deductions - 

Account 426.5. The schedules were eliminated to remove information that 

is either duplicative or that the Commission has determined is not 

necessary to carry out its statutory responsibilities under PUHCA 2005. 

(4) Unless otherwise exempted by Commission rule or order, all holding 

companies and service companies must maintain and make available to the 
Docket No. RM05-32-000 - 10 -

Commission their books and records. In addition, all holding companies 

and all service companies that do not currently follow the Commission’s 

record-retention requirements in Parts 125 and 225 of the Commission’s 

regulations, as applicable, will be required to transition to the 

Commission’s requirements by January 1, 2007. Holding companies 

registered under PUHCA 1935 that currently follow the SEC’s recordretention rules in 17 C.F.R. Part 257, and their service companies, have the 

option to follow either the Commission’s or the SEC’s record-retention 

rules, as they exist on the day before the effective date of PUHCA 2005, for 

calendar year 2006, but these entities must transition to the Commission’s 

record-retention rules by January 1, 2007. And, as noted above, holding 

companies, unlike traditional, centralized service companies, will not be 

required to comply with the Commission’s Uniform System of Accounts. 

13. The NOPR did not propose any specific exemptions from the books and records 

requirements of PUHCA 2005, except as required by section 1266 (i.e., persons that are 

holding companies solely with respect to one or more exempt wholesale generators 

(EWGs), foreign utility companies (FUCOs), or qualifying facilities (QFs)), but sought 

comments on whether passive investors and mutual funds should be exempted. Rather, 

we proposed to rely on case-by-case petitions for declaratory order to determine what 

additional waivers are appropriate. Based on the extensive comments received, in the 

Final Rule we have modified our original proposal to rely on declaratory order requests 

for exemptions and we have determined that it is appropriate to use an expedited 
Docket No. RM05-32-000 - 11 -

notification process to either exempt from the books and records requirements of PUHCA 

2005 or waive the Commission’s accounting, record-retention and reporting regulations 

thereunder for the following persons and classes of transactions: 

(1) passive investors, including mutual funds and other financial institutions; 

(2) Commission-jurisdictional utilities that have no captive customers; 

(3) certain holding company and affiliate transactions that will not affect 

jurisdictional rates; 

(4) electric power cooperatives; 

(5) local distribution companies; 

(6) single-state holding companies; 

(7) holding companies that own 100 MW or less of generation used 

fundamentally for their own load or for sales to affiliated end-users;13 and 

(8) investors in independent transmission companies. 

Other exemptions and waivers will be considered through the declaratory order process 

on a case-by-base basis. 

14. With respect to Commission review of service company cost allocations in section 

1275(b) and the exemption for single-state holding companies in section 1275(d), the 

Commission sought comments as to whether the Commission should require the formal 

filing of service company cost-allocation agreements under the FPA and NGA, and 

 13 Holding companies that own more than 100 MW of generation used 

fundamentally for their own load or for sales to affiliated end users may seek waivers, 

and the Commission will consider them, on a case-by-case basis. 
Docket No. RM05-32-000 - 12 -

whether the Commission should apply its traditional “market” standard for the pricing of 

non-power goods and services provided by system service companies or instead adopt the 

SEC “at-cost” standard. We conclude below that we will not require the formal filing of 

cost allocation agreements and that we will not require any entities that are currently 

using the SEC’s “at-cost” standard for traditional centralized service companies to switch 

to our “market” standard. With respect to traditional, centralized service companies that 

use the “at cost” standard, we will apply a presumption that “at cost” pricing of the nonpower goods and services they provide to public utilities within their holding company 

system is reasonable, but persons may file complaints if they believe that use of at cost 

pricing results in costs that are above market price. We will also retain the Commission’s 

existing “market” standard for non-power goods or services transactions between specialpurpose subsidiaries and public utilities. 

15. With respect to EWGs, we proposed to cease making case-by-case determinations 

of exempt wholesale generator status in the future and we proposed to delete our EWG 

regulations. In light of the comments received, we have determined that it is reasonable 

to interpret PUHCA 2005 to permit new wholesale sellers to obtain EWG status. We will 

thus establish procedures in section 366.7 of our regulations for both self-certification of 

EWG and FUCO status, and Commission determinations of EWG and FUCO status, 

similar to the options available for entities seeking QF status. 

16. Additionally, for those definitions and other aspects of PUHCA 1935 that have 

been re-enacted as part of PUHCA 2005, we will, where appropriate, follow the past 

practice and precedent of the SEC in interpreting these provisions of PUHCA 2005 to the 
Docket No. RM05-32-000 - 13 -

extent that they are consistent with the statutory language adopted by Congress in 

PUHCA 2005. 

17. Finally, we do not view this Final Rule as the only opportunity to address the 

books and records requirements and related reporting requirements under PUHCA 2005, 

exemptions from and waivers of these requirements, and any other issues that may arise 

as a result of the repeal of PUHCA 1935 and the implementation of PUHCA 2005. We 

intend to hold a technical conference no later than one year after PUHCA 2005 becomes 

effective to evaluate whether additional exemptions, different reporting requirements, or 

other regulatory actions (under PUHCA 2005 or the FPA or NGA) need to be considered. 

The technical conference will also address any needed changes or additions to 

accounting, cost allocation, recordkeeping, cross-subsidization, encumbrances of utility 

assets, and related rules, including any changes necessary to address difficulties with 

compliance encountered by companies within previously-exempt holding company 

systems during this transition period. In addition, while we do not adopt the SEC 

Uniform System of Accounts and record-retention rules in 17 C.F.R. Parts 256 and 257 

into the Commission’s regulations at this time, we will initiate a separate rulemaking 

proceeding to address how the Commission’s Uniform System of Accounts and recordretention rules in Parts 101, 125, 201, and 225 of its regulations can be modified to adopt 

or otherwise integrate the relevant parts of the SEC’s Uniform System of Accounts and 

record-retention rules. The Commission intends to issue a final rule on any appropriate 

accounting or record-retention rule modifications well in advance of January 1, 2007, so 

that service companies will be able to transition to the Commission’s Uniform System of 
Docket No. RM05-32-000 - 14 -

Accounts and record-retention rules and holding companies can transition to the 

Commission’s record-retention rules by the January 1, 2007 deadline. 

1. Definitions

18. The Commission proposed in the NOPR to largely incorporate in section 366.1 of 

its regulations the text of section 1262 of EPAct 2005, which contains the definitions of 

relevant terms used in PUHCA 2005 and in our proposed regulations. Commenters 

suggested a number of changes to these definitions. As these definitions are taken from 

section 1262 of EPAct 2005, any modification would likely create undesirable 

discrepancies between our regulations and the statutory language. Accordingly, we will 

address these comments below under the heading “Additional Technical and Conforming 

Amendments,” below. However, to the extent that a given comment requesting 

clarifications of the definitions proposed in section 366.1 of the Commission’s 

regulations can be addressed consistent with the statutory text, they are addressed below. 

Comments

19. American Public Power Association and National Rural Electric Cooperative 

Association (APPA/NRECA) note that section 1268 of EPACT 2005 expressly exempts 

States and any political subdivision of a state from the provisions of PUHCA 2005, while 

the definition of “electric utility company” in the proposed section 366.1 includes “any 

company that owns or operates facilities used for the generation, transmission, or 

distribution of electric energy for sale,” which appears to come directly from section 

1262(5) of EPACT 2005. According to APPA/NRECA, this section, read standing alone, 

could be construed to state that the regulations apply to all electric utilities. 
Docket No. RM05-32-000 - 15 -

APPA/NRECA thus urge the Commission to make explicit the exclusion of states and 

their political subdivisions from the regulations by cross-referencing in its regulations the 

exclusion in section 1268 of the statute.14 

20. Coral Power, L.L.C. and Shell WindEnergy, Inc. (Coral Power and Shell 

WindEnergy) request that the Commission deem EWGs, FUCOs, and QFs not to be 

“electric utility companies” under PUHCA 2005, so that their upstream owners will not 

be “holding companies” under PUHCA 2005.15 

21. With respect to the definition of “public-utility companies,” the Edison Electric 

Institute (EEI) urges the Commission to clarify that energy marketers are not “publicutility companies” under the PUHCA 2005 definition. EEI notes that, under PUHCA 

2005, a “public-utility company” is either an “electric utility company,” which is an 

entity that owns or operates facilities used for the generation, transmission or distribution 

of electric energy for sale, or a “gas utility company,” which is basically an entity that 

owns or operates facilities used for distribution at retail of natural or manufactured gas. 

EEI further asserts that the SEC has found that the ownership of only contracts and 

related books and records are not facilities used for the generation of electric energy, but 

that only physical facilities are used for the generation of electric energy. According to 

EEI, if power marketers are not electric utility companies, their parent companies would 

not be considered utility holding companies under PUHCA 2005 by reason of their 

 14 APPA/NRECA Comments at 42. See also City of Santa Clara (Santa Clara) 

Comments at 23, Transmission Agency of Northern California (TANC) Comments at 23. 

15 Coral Power/Shell WindEnergy Comments at 9-10. 
Docket No. RM05-32-000 - 16 -

ownership of such marketers. The same logic would apply to gas marketers, and they too, 

therefore, should not be considered gas utility companies, provided they own no physical 

gas distribution assets and their gas retail sales are made through contracts.16 

22. Goldman Sachs Group (Goldman Sachs) and Morgan Stanley Capital Group 

(Morgan Stanley) urge the Commission to adopt a rule similar to the SEC’s 7(d) that 

excludes owner-lessor and owner participants in lease financing transactions involving 

utility assets from the definition of “public-utility company” and their parent companies 

from the definition of “holding company.”17 

23. NiSource Inc. (NiSource) requests that the Commission clarify that gas utility 

companies authorized to make sales for resale of natural gas pursuant to a blanket 

certificate are not subject to new part 366 of the Commission’s regulations.18

24. Finally, a number of commenters urge the Commission to amend certain 

definitions to exclude rural electric cooperatives from the scope of PUHCA 2005. 

APPA/NRECA argue that the Commission should recognize that, under longstanding 

SEC precedent, electric cooperatives were not regulated as public utility holding 

companies under PUHCA 1935 because member interests in cooperatives do not 

constitute a “voting security” interest.19 Cooperatives state that the Commission could, 

 16 EEI Comments at 19-20. 

17 Goldman Sachs Comments at 7, Morgan Stanley Comments at 5. 

18 NiSource Comments at 15. 

19 APPA/NRECA Comments at 42. See also Santa Clara Comments at 23, TANC 

Comments at 23. 
Docket No. RM05-32-000 - 17 -

alternatively, declare definitively that member interests in cooperatives do not constitute 

a “voting security” interest for purposes of PUHCA 2005.20 If the Commission does not 

adopt this interpretation of “voting securities,” APPA/NRECA urge the Commission to, 

at the very least, make clear that those cooperatives that have received no-action letters or 

other assurances in the past from the SEC can continue to rely on those assurances 

without any need to seek additional confirmation or a no-action assurance or waiver from 

the Commission.21 Arizona Electric Power Cooperative, Inc., Southwest Transmission 

Cooperative, Inc., and Sierra Southwest Cooperative Services, Inc. (Cooperatives) argue 

that, while the Commission could grant the Cooperatives an individual waiver, the better 

course would be for the Commission to create a class exemption from PUHCA 2005 for 

cooperatives. According to Cooperatives, with the recent amendment of FPA § 201(f), 

cooperatives are unlikely to qualify as public utilities, and cooperatives do not operate 

any NGA jurisdictional pipelines.22

Commission Determination

25. We will grant the request of APPA/NRECA and others to clarify that section 1268 

exempts from PUHCA 2005 states and any political subdivision of a state. Accordingly, 

we clarify in section 366.2(a) that, for the purposes of this subchapter, no provision of 

PUHCA 2005 shall apply to or be deemed to include: (1) the United States; (2) a state or 

 20 Cooperatives Comments at 8. 

21 APPA/NRECA Comments at 42-44. See also Tri-State Comments at 3-7.

22 Cooperatives Comments at 7. See also APPA/NRECA Comments at 44. 
Docket No. RM05-32-000 - 18 -

political subdivision of a state; (3) any foreign governmental authority not operating in 

the United States; (4) any agency, authority, or instrumentality of any entity referred to in 

subparagraphs (1), (2) or (3); or (5) any officer, agent, or employee of any entity referred 

to in subparagraphs (1), (2), (3), or (4) as such in the course of his or her official duty. 

26. In response to the request of Coral Power and ShellWindEnergy that we consider 

EWGs, FUCOs, and QFs not to be “electric utility companies” so that their upstream 

owners would not be holding companies under PUHCA 2005, we note that Congress has 

exempted from section 1264 of EPAct 2005 entities that are holding companies solely 

with respect to EWGs, FUCOs, and QFs and that exemption is reflected in the regulations 

we adopt herein. However, we clarify that EWGs themselves are not considered “electric 

utility companies” under PUHCA 2005. The purpose of creating “exempt” wholesale 

generators in the amendments to section 32 of PUHCA 1935 made by the Energy Policy 

Act of 1992 (EPAct 1992)23 was to exempt from PUHCA 1935 persons that meet the 

definition of EWG. This was reflected in section 32(e) of PUHCA 1935, which 

specifically provided that EWGs would not be considered electric utility companies 

under PUHCA 1935 and would be exempt. Here, we have determined to continue to 

allow generators to obtain EWG status, so they will not be considered electric utility 

companies subject to PUHCA 2005. 

27. With respect to FUCOs and QFs, we clarify as follows. Section 1262(6) of 

PUHCA 2005 contains the term “foreign utility company,” and cross-references section 

 23 79 U.S.C. § 79z-5a (2000). 
Docket No. RM05-32-000 - 19 -

33 of PUHCA 1935. Section 33 of PUHCA 1935, as amended by EPAct 1992,24

provided that a FUCO would be exempt from PUHCA 1935 and not deemed an electric 

utility company, but the exemption would not apply or be effective unless the relevant 

state commission(s) certified that they had the authority and resources to protect 

ratepayers of public utility companies that are associated or affiliated with the FUCO. As 

with EWGs, we will continue to allow persons to obtain FUCO status. FUCOs will not 

be considered electric utility companies subject to PUHCA 2005 and will be exempt from 

PUHCA 1935 if they can demonstrate that the relevant state commission(s) have made 

the determination described in section 33 of PUHCA 1935. However, even if FUCOs do 

not demonstrate that they should be totally exempted from PUHCA 2005, we will waive 

the accounting, record-retention, and reporting requirements thereunder.25 As for QFs, 

QFs previously received an exemption from PUHCA pursuant to the Commission’s 

regulations under the Public Utility Regulatory Policies Act of 1978. Nothing in PUHCA 

2005 changes that. 

28. With respect to EEI’s request that we clarify that power marketers are not “publicutility companies,” we note that EEI’s reference to the “Commission” appears to be to the 

SEC rather than to this Commission. While the SEC has not treated power marketers as 

 24 79 U.S.C. § 79z-5b (2000). 

25 As discussed infra, we will waive our accounting, record-retention, and 

reporting requirements for FUCOs, but we will not exempt them from the general 

provision in section 1264 of PUHCA 2005 and repeated in section 366.2 of our 

regulations, which authorizes access to their books and records as necessary, with respect 

to jurisdictional rates. 
Docket No. RM05-32-000 - 20 -

electric utility companies under PUHCA 1935, the Commission has determined that 

electric marketers own facilities used for wholesale sales, i.e., “paper facilities,” and 

therefore are public utilities under the FPA. Similarly, we have treated natural gas 

marketers making jurisdictional sales as natural gas companies under the NGA. In light 

of long-standing SEC precedent in interpreting PUHCA 1935, we will follow the same 

interpretation under PUHCA 2005 and will exempt power and natural gas marketers from 

the definition of “public-utility company,” as that term is used in PUHCA 2005. 

However, our interpretation here does not change our long-standing precedent with 

respect to these entities’ jurisdictional status under the FPA and the NGA. 

29. We will grant the request for clarification from Goldman Sachs and Morgan 

Stanley that we not treat owner-lessors and owner participants in lease financing 

transactions involving utility assets as “public-utility companies” and their parents as 

“holding companies” under PUHCA 2005, so long as the ownership arrangements are 

passive. 

30. We find that, as discussed below, electric power cooperatives should not be 

regulated as holding companies under PUHCA 2005. 

2. Books and Records Requirements

31. Sections 1264(a) and (b) of EPAct 2005 generally provide that each holding 

company and each associate company of a holding company, as well as each affiliate of a 

holding company or any subsidiary company of a holding company, shall maintain, and 

shall make available to the Commission, such books, accounts, memoranda, and other 

records (books and records) as the Commission determines are relevant to the costs 
Docket No. RM05-32-000 - 21 -

incurred by a public utility or natural gas company that is an associate company of such 

holding company and necessary or appropriate for the protection of public utility or 

natural gas company customers with respect to jurisdictional rates. Moreover, 

section 1264(c) empowers the Commission to examine the books and records of any 

company in a holding company system, or any affiliate thereof, that the Commission 

determines are relevant to the costs incurred by a public utility or natural gas company 

within such holding company system and necessary or appropriate for the protection of 

public utility or natural gas company customers with respect to jurisdictional rates. 

Finally, section 1264(d) forbids any member, officer, or employee of the Commission 

from divulging any fact or information that has come to his or her knowledge during the 

course of the examination of such books and records, except as may be directed by the 

Commission or a court of competent jurisdiction.26 In the NOPR, the Commission 

proposed to incorporate largely without modification the text of section 1264 by adding 

section 366.2 to the Commission’s regulations. 

32. In the NOPR, the Commission also proposed to adopt certain accounting, costallocation, recordkeeping, and related rules promulgated by the SEC for holding 

companies and their service companies, as they existed on the date of enactment of 

EPAct 2005, specifically 17 C.F.R. 250.1, 250.26, 250.27, 250.80, 250.93, 250.94, 

259.5S, and 259.313 and 17 C.F.R. Parts 256 and 257. The Commission invited 

 26 There are comparable confidentiality provisions in the FPA and the NGA for 

public utility books and records and natural gas company books and records. 16 U.S.C. 

§ 825 (2000); 15 U.S.C. § 717g (2000). 
Docket No. RM05-32-000 - 22 -

comments on which SEC reporting requirements the Commission should retain, which 

ones it should not retain, and whether the Commission should adopt any additional 

accounting, cost-allocation, recordkeeping and related rules to carry out its statutory 

duties under PUHCA 2005. Finally, the Commission stated that it does not intend to 

broaden the applicability of any adopted reporting requirements beyond the types of 

companies to which they now apply and invited comments as to whether the proposed 

scope of applicability is appropriate. 

33. The comments below focused primarily on the Commission’s proposal to adopt 

certain SEC regulations and are organized as follows: (a) scope of applicability, i.e., 

whether the books and records requirements will apply to all holding companies equally 

or only to holding companies registered under PUHCA 1935; (b) general comments on 

the Commission’s proposal to adopt certain SEC regulations, including whether PUHCA 

2005 grants the Commission the legal authority to adopt them; (c) comments on 

particular provisions of the SEC regulations; (d) other issues related to the adoption of 

SEC regulations; and (e) other comments related to the books and records requirements 

of section 1264. 

a. Scope of Applicability

 Comments

34. The majority of commenters urged the Commission to apply any SEC regulations 

adopted equally to all holding companies, without regard to whether an entity was 

registered or exempt under PUHCA 1935, primarily because PUHCA 2005 does not state 
Docket No. RM05-32-000 - 23 -

that PUHCA 1935 exemptions should continue in force.27 APPA/NRECA state that the 

Commission should apply any rules to the full universe of companies because, postPUHCA 1935, there is no longer a statutory basis for distinguishing between the former 

registered and exempt holding companies. APPA/NRECA contend that the Commission 

cannot treat some holding companies differently from others without a reasonable basis 

and that their legal designations under a now-repealed statute are not a reasonable basis. 

According to APPA/NRECA, the Commission should make distinctions based on the 

complexity of each holding company’s corporate structure, the quantity and type of 

business risks in the corporate family, the magnitude of potential for cross subsidization 

(e.g., due to the presence of common costs between the public utility and non-utility 

businesses), and the geographic reach of the holding company (which could make state 

regulation more difficult). They argue that, to avoid charges of undue discrimination, the 

Commission can apply the rules to all holding companies initially, announce these factors 

as among those it will consider in granting exemptions, and then invite requests for 

 27 See, e.g., Allegheny Energy, Inc. (Allegheny) Comments at 2, American 

National Power, Inc. (American National Power) Comments at 3, American Public Gas 

Association Comments at 3; Arkansas Public Service Commission (Arkansas PSC) 

Comments at 19, E.ON AG and LG&E Energy LLC (E.ON/LG&E Energy) Comments at 

8, Missouri Public Service Commission (Missouri PSC) Comments at 25, National Fuel 

Gas Company (National Fuel Gas) Comments at 6, National Association of Regulatory 

Utility Commissioners (NARUC) Comments at 7, Southern Company Services 

Comments at 2-3. But see Detroit Edison Company (Detroit Edison) Reply Comments at 

1, PPL Companies (PPL) Reply Comments at 3-4 (urging Commission to reject 

comments proposing to apply SEC regulations to holding companies exempted from 

PUHCA 1935). 
Docket No. RM05-32-000 - 24 -

exemption from some or all of the reporting companies.28 Similarly, American Electric 

Power Service Corporation (AEP) and National Fuel Gas argue that the statute mandates 

equal treatment of all holding companies.29

35. However, a number of commenters argue that the Commission should continue to 

exempt under PUHCA 2005 those holding companies exempted under PUHCA 1935 and 

SEC precedent. MidAmerican Energy Company (MidAmerican) states that the 

Commission should not impose a new set of accounting and reporting requirements on 

entities that have been exempt from the requirements developed by the SEC to enforce 

PUHCA 1935. According to MidAmerican, the information required under the SEC 

rules would require these entities to prepare and file reports that are duplicative of 

information contained in reports already filed with the Commission (e.g., FERC Forms 1 

and 2 and the quarterly financial reports) and reports filed with the SEC (e.g., Form 10-K 

and Form 10-Q) and imposes an unnecessary burden and expense on such entities and 

provides no significant additional information to the Commission. Accordingly, 

MidAmerican states that the Commission should make it perfectly clear that its proposal 

to adopt the accounting, cost-allocation, recordkeeping and related rules promulgated by 

the SEC applicable to registered holding companies and their service companies does not 

extend to public utility holding companies that were not registered under PUHCA 1935 

and that, in addition, such rules should not apply to any entities that may become public 

 28 APPA/NRECA Comments at 30-31. 

29 AEP Comments at 2-3, National Fuel Gas Reply Comments at 3-4. 
Docket No. RM05-32-000 - 25 -

utility holding companies after February 8, 2006, the effective date of repeal of PUHCA 

1935.30 

36. FirstEnergy suggests that, if the Commission adopts this proposal, it should clarify 

the regulatory text of proposed section 366.2(e) to delineate between those holding 

company systems to which the rules apply and those that are exempt from such 

provisions, and should explain the reasons justifying such distinction.31 Alcoa states that, 

even if the Commission decides not to exempt from the reach of proposed section 366.2 

all companies that are currently exempt holding companies under PUHCA 1935, 

consideration at least should be given to blanket exemptions for holding companies 

having a section 3(a)(3) exemption which are, by definition and determination by SEC, 

engaged in a business other than being a public utility holding company.32

Commission Determination

37. With respect to the general applicability of the federal access to books and records 

requirements in section 1264 of EPAct 2005, there is no basis in PUHCA 2005 for 

distinguishing between holding companies based on their registered or exempt status 

under PUHCA 1935. Accordingly, the Commission will subject all holding company 

systems, whether previously exempt or registered, to the books and records requirements 

 30 MidAmerican Comments at 5-7. See also CEOB Comments (3) (supports caseby-case exemptions), Chairman Barton Reply Comments at 5, Detroit Edison Comments 

at 3-5, Questar Reply Comments at 2. 

31 FirstEnergy Comments at 9. 

32 Alcoa Comments at 5. 
Docket No. RM05-32-000 - 26 -

that PUHCA 2005 imposes on holding companies and affiliates, associate companies, 

and subsidiaries thereof, unless they qualify for one of the statutory exemptions provided 

for under section 1266 of PUHCA 2005.33 We have also determined that, while we 

cannot exempt certain persons from the statutory requirements of PUHCA 2005, we can 

and should grant waivers of the accounting, record-retention, and reporting requirements 

adopted herein for certain persons and classes of transactions. Additionally, for entities 

that do have to comply with our filing requirements, we will limit the filings that have to 

be made and will delay until January 1, 2007, the compliance deadline for companies not 

currently subject to the SEC rules. Finally, throughout the following discussion, we will 

distinguish between obligations that apply to all service companies and those that apply 

to traditional, centralized service companies.34 Traditional, centralized service 

companies are a subset of service companies that holding companies have formed. They 

provide certain specialized services35 to other companies in the holding company system. 

 33 Section 1266, discussed infra, requires the Commission to exempt any person 

that is a holding company solely with respect to EWGs, FUCOs, and QFs. It also 

requires the Commission to exempt a person or transaction if it finds that the books and 

records of a person are not relevant to jurisdictional rates or a class of transactions is not 

relevant to jurisdictional rates. 

34 “Service companies” are defined in section 366.1 as “any associate company 

within a holding company system organized specifically for the purpose of providing 

non-power goods or services or the sale of goods or construction work to any public 

utility in the same holding company system.” 

35 These “services,” as defined in section 366.1, include “any managerial, 

financial, legal, engineering, purchasing, marketing, auditing, statistical, advertising, 

publicity, tax, research, or any other service (including supervision or negotiation of 

construction or of sales), information or data, which is sold or furnished for a charge. 
Docket No. RM05-32-000 - 27 -

They are to be distinguished from other service companies that are special-purpose 

companies such as a fuel supply company or a construction company. 

38. Specifically, the Commission will require the following for entities that are not 

otherwise exempted from PUHCA 2005 requirements or granted a waiver of the 

Commission’s regulations thereunder: 

(1) Unless otherwise exempted by Commission rule or order or granted a 

waiver, all holding companies and all service companies that do not 

currently follow the Commission’s record-retention requirements in Parts 

125 and 225 of the Commission’s regulations must, effective January 1, 

2007, comply with the Commission’s record-retention requirements. 

Formerly-registered holding companies and service companies in such 

holding company systems that currently follow the SEC’s record-retention 

rules in 17 C.F.R. Part 257 have the option, until December 31, 2006, to 

follow either the Commission’s or the SEC’s record-retention 

requirements. But these service companies must transition to the 

Commission’s rules by January 1, 2007. Formerly-exempt holding 

companies and service companies within such holding company systems, 

which currently do not follow either the SEC’s or the Commission’s 

record-retention requirements will not be required to comply with the 

Commission’s record-retention requirements until January 1, 2007. 

(2) Unless otherwise exempted by Commission rule or order or granted a 

waiver, traditional, centralized service companies (i.e., those that are not 
Docket No. RM05-32-000 - 28 -

special-purpose companies such as a fuel supply company or a construction 

company) that do not currently follow the Commission’s Uniform System 

of Accounts in Parts 101and 201 of the Commission’s regulations, will be 

given until January 1, 2007, to transition to the Commission’s Uniform 

System of Accounts. Traditional, centralized service companies in 

formerly-registered holding company systems that currently follow the 

SEC’s Uniform System of Accounts have the option to follow either the 

Commission’s or the SEC’s Uniform System of Accounts for calendar year 

2006. But these service companies must transition to the Commission’s 

rules by January 1, 2007. Traditional, centralized service companies 

within formerly-exempt holding company systems, which currently do not 

follow either the SEC’s or the Commission’s Uniform System of Accounts, 

will not be required to comply with the Commission’s Uniform System of 

Accounts until January 1, 2007. And, as noted above, holding companies, 

while they will be required to comply with the Commission’s recordretention requirements, will not be required to comply with the 

Commission’s Uniform System of Accounts. 

(3) All entities that are currently or become holding companies under PUHCA 

2005, whether previously exempt or registered under PUHCA 1935, must 

file FERC-65 (Notification of Holding Company Status), which will be 

treated as an informational filing, and holding companies seeking to claim 

an exemption from PUHCA 2005 or waiver of the Commission’s 
Docket No. RM05-32-000 - 29 -

regulations there under may file FERC-65A (Exemption Notification) or 

FERC-65B (Waiver Notification). All persons that are holding companies 

on the effective date of PUHCA 2005 must file FERC-65 within 30 days of 

the effective date of PUHCA 2005, and any person that becomes a holding 

company thereafter must file FERC-65 within 30 days after becoming a 

holding company; and 

(4) All traditional, centralized service companies will be required to submit an 

annual report on FERC Form No. 60. Such service companies in formerlyregistered holding company systems must submit their first annual report, 

for calendar year 2005, by May 1, 2006. Such service companies in 

formerly-exempt holding company systems will be required to submit their 

first FERC Form No. 60, for calendar year 2007, by May 1, 2008. 

39. The Commission will not require the filing of SEC Forms U-5A (notification of 

registration status), U-5S (annual reports for registered holding companies), U3A-2 

(statement by holding company claiming exemption), or U-5B (registration statement), as 

previously proposed or suggested by some commenters. Information in these forms is in 

many cases available elsewhere and/or was for the purpose of monitoring activities or 

transactions that, with the repeal of PUHCA 1935, are no longer prohibited or no longer 

require prior approval. Additionally, this information is either not relevant to the costs 

incurred by jurisdictional entities or is not necessary or appropriate for the protection of 

utility customers with respect to jurisdictional rates. Further, information needed to 
Docket No. RM05-32-000 - 30 -

protect against inappropriate cross-subsidization will be contained in the accounting and 

record-keeping requirements that we are adopting herein. 

b. General Comments Concerning Adoption of SEC Regulations

 Comments

40. APPA/NRECA suggest that, rather than incorporate the SEC rules by reference, 

the Commission should import the actual wording (with appropriate revisions as 

discussed below) into its own regulations. Merely cross-referencing existing SEC 

regulations (as proposed section 366.2(e) would do) would fail in its purpose if the SEC 

subsequently revises its own regulations to eliminate its PUHCA 1935-related 

regulations. Moreover, rather than adopt the SEC rules word-by-word, APPA/NRECA 

urge the Commission to make certain wording adjustments and offer rationales based on 

the current and likely future industry structure.36

41. EEI urges the Commission to integrate whatever it adopts from SEC practice into 

current Commission procedures and forms. According to EEI, repeal of PUHCA 1935 

was intended to reduce the level of holding company regulation, but if current exempt 

holding companies suddenly are required to contend with unfamiliar SEC practice, it 

would have precisely the opposite effect. These formerly-exempt companies in effect 

would become subject to a new level of complex regulation. To avoid this unintended 

consequence of repealing PUHCA 1935, EEI believes that the Commission should seek 

to integrate whatever it adopts from SEC practice into current Commission procedures 

 36 APPA/NRECA Comments at 23-24. See also FirstEnergy Service Company 

(FirstEnergy) Comments at 9. 
Docket No. RM05-32-000 - 31 -

and forms, which would involve simply including existing public filings, in particular a 

holding company's SEC Form 10-K, as exhibits to the Commission’s Form 1.37

42. For the same reasons, EEI requests that the Commission provide a reasonable 

period between the effective date of its new rules and the date on which the initial filings 

will be due. EEI proposes that the initial filings should be due in April 2007, giving 

companies time to adopt any new recordkeeping and reporting requirements and to file 

information starting with the next round of Form 1 for which the new information would 

be available. The Commission also should specify the format that will be required for 

filings under its new rules, and the Commission should make clear when adopting the 

final rule, the date(s) on which companies will first be required to make any newly 

required filings under such rules.38 

43. Georgia Public Service Commission (Georgia PSC) urges the Commission to 

ensure that the rules to implement PUHCA 2005 provide that the Commission will have 

access to all of the information and documents previously provided to the SEC under 

PUHCA 1935. Georgia PSC emphasizes that state commissions have relied upon the 

filings made by holding companies with the SEC and on audits of holding companies 

performed by the SEC as a crucial source of information necessary in setting rates for the 

holding companies' subsidiaries that are regulated by state commissions. Accordingly, 

the Commission should adopt all provisions of the SEC rules and retain all SEC reporting 

 37 EEI Comments at 3-4. 

38 Dominion Comments at 3, EEI Comments at 6. 
Docket No. RM05-32-000 - 32 -

requirements.39 Similarly, the California Electricity Oversight Board (CEOB) and Utility 

Workers Union of American (Utility Workers) supports the Commission’s adoption of 

the SEC accounting, cost-allocation, recordkeeping, and related rules identified in the 

PUHCA NOPR.40

44. Entergy Services, Inc. states that it agrees with the Commission’s proposal to 

adopt the SEC regulations, but that the Commission should limit the applicability of these 

rules to those items that are “relevant to costs incurred by a public utility or natural gas 

company” and “necessary or appropriate for the protection of utility customers with 

respect to jurisdictional rates” as required by EPAct 2005 section 1264(a).41 Similarly, 

FirstEnergy argues that the Commission should provide a clear explanation of why each 

category of information that is to be maintained is within the statutory limits above. To 

reflect these limits, FirstEnergy argues that, at a minimum, the Commission should 

modify proposed section 366.2(e), consistent with the other subsections of section 366.2, 

to add the following qualification at the end of the paragraph: “insofar as the Commission 

determines that such accounting, cost-allocation and related rules are relevant to costs 

incurred by a public utility or natural gas company that is an associate company of such 

holding company and necessary or appropriate for the protection of utility customers with 

 39 Georgia PSC Comments at 1. 

40 CEOB Comments at 2-3, Utility Workers Comments at 3. 

41 Entergy Comments at 3. 
Docket No. RM05-32-000 - 33 -

respect to jurisdictional rates.”42

45. Several commenters argued that the Commission lacks the authority to adopt SEC 

regulations under PUHCA 200543 or that PUHCA 2005 does not specifically authorize 

the imposition of reporting requirements.44 AGL Resources, Inc. (AGL Resources) 

questions the appropriateness of any requirement to file any reports at all, emphasizing 

that the requirement in section 1264 to maintain records does not amount to a 

requirement to file reports. AGL Resources emphasizes that section 14 of PUHCA 1935, 

which permits the SEC to require certain reports from companies subject to its 

jurisdiction, has been repealed by EPAct 2005, and the EPAct did not grant the 

Commission similar authority.45

46. Electric Power Supply Association (EPSA) argues that the adoption of the SEC 

rules as a means of implementing PUHCA 2005 is neither wise nor necessary or 

appropriate for the protection of utility customers with respect to jurisdictional rates. 

According to EPSA, the two statutory regimes are completely different and the PUHCA 

1935 regulations are incompatible with the considerably more narrow scope of PUHCA 

2005, which the Commission itself notes is primarily a books and records access statute 

and a statute that does not give the Commission authority to pre-approve holding 

 42 FirstEnergy Comments at 6. 

43 See, e.g., Energy East Comments at 4-7, National Fuel Gas Comments at 2. 

44 See, e.g., E.ON/LG&E Energy Comments at 12. 

45 AGL Resources Comments at 5. 
Docket No. RM05-32-000 - 34 -

company activities.46 EPSA further contends that the adoption of such rules would be 

contrary to Congress’ intent and exceed the authority granted to it under PUHCA 2005, 

improperly and unnecessarily imposing PUHCA 1935-type regulation on all PUHCA 

2005 holding companies and their relevant affiliates, including a large number of holding 

companies exempted from PUHCA 1935.47 Moreover, EPSA emphasizes that, while the 

Commission has the authority to disallow a utility's recovery in its jurisdictional rates of 

improper affiliate charges, the Commission does not have the authority to regulate 

transactions among non-utility affiliates by requiring “at cost” pricing, and, therefore, has 

no authority to impose financial and complex accounting and reporting requirements to 

implement “at cost” pricing.48

Commission Determination

47. We agree with the comments of APPA/NRECA and EEI that any SEC regulations 

that the Commission adopts should be imported into and integrated with the 

Commission’s regulations, rather than, for example, being incorporated by reference. 

However, the Commission does not find it appropriate to incorporate all of the relevant 

SEC rules at this time. Accordingly, the Commission will adopt in Part 366 of its 

regulations certain provisions of 17 C.F.R. Parts 250 and 259, which are discussed further 

below. We will not adopt the SEC Uniform System of Accounts and record-retention 

 46 EPSA Comments at 6-7. 

47 Id. at 7. 

48 Id. at 10. 
Docket No. RM05-32-000 - 35 -

rules in 17 C.F.R. Parts 256 and 257 into the Commission’s regulations at this time. 

Instead, the Commission will initiate a separate rulemaking proceeding, which we intend 

to complete well in advance of the January 1, 2007 deadline, to address how the 

Commission’s Uniform System of Accounts and record-retention rules in Parts 101, 125, 

201, and 225 of its regulations can be modified to adopt or otherwise integrate the 

relevant parts of the SEC’s Uniform System of Accounts and record-retention rules into 

the Commission’s regulations. As discussed above, unless otherwise exempted or 

granted a waiver, both holding companies and service companies will be required to 

comply with the Commission’s record-retention requirements effective January 1, 2007, 

but only traditional, centralized service companies will be required to comply with the 

Commission’s Uniform System of Accounts. We will give holding companies registered 

under PUHCA 1935 and service companies within formerly-registered holding company 

systems that currently follow the SEC’s record-retention rules in 17 C.F.R. Part 257 the 

option to follow either the Commission’s or the SEC’s record-retention rules, as they 

exist on the day before the effective date of PUHCA 2005, for calendar year 2006. 

Similarly, traditional, centralized service companies in formerly-registered holding 

company systems that currently follow the SEC’s Uniform System of Accounts in 17 

C.F.R. Part 256 may follow either the SEC’s or the Commission’s Uniform System of 

Accounts for calendar year 2006. But, as discussed above, these entities must transition 

to the Commission’s rules, by January 1, 2007. 

48. We also agree with the comments of EEI that it is appropriate to provide a 

reasonable transition period between the effective date of this Final Rule and the date on 
Docket No. RM05-32-000 - 36 -

which the initial filings will be due. As discussed above, we will give traditional, 

centralized service companies until January 1, 2007 to conform their accounts and 

records to the requirements of the Commission’s Uniform System of Accounts and 

record-retention rules. Similarly, we will give holding companies and service companies 

until January 1, 2007 to conform to the requirements of the Commission’s recordretention rules. 

49. However, as discussed below, this transition period will not apply to the filing of 

FERC-65 (Notification of Holding Company status). Accordingly, all persons that are 

holding companies within the meaning of PUHCA 2005 on the effective date of PUHCA 

2005 will be required to file FERC-65 within 30 days of the effective date of PUHCA 

2005 to inform the Commission of their holding company status (and by the same date, 

holding companies seeking exemption or waiver must file a separate FERC-65A 

(Exemption Notification) or FERC-65B (Waiver Notification) to assert their claims that 

they qualify for the statutory exemptions contained in section 1266(a) of EPAct 2005 or 

the other exemptions and waivers adopted in this Final Rule). Any entities that become 

holding companies after the effective date of PUHCA 2005 will be required to file 

FERC-65 no later than 30 days after becoming a holding company. FERC-65 is in lieu of 

the NOPR proposal to adopt SEC Form U-5A, but will contain a subset of the 

information that the Commission originally proposed to be filed. FERC-65 will be an 

information-only filing. We find that it is appropriate to impose this notification 

requirement on all holding companies equally because it will permit the Commission to 

identify the companies that may have books and records relevant to jurisdictional 
Docket No. RM05-32-000 - 37 -

responsibilities under the FPA and the NGA. This notification requirement, moreover, 

will impose only a de minimis burden. 

50. We reject the recommendation of Georgia PSC that the Commission retain all 

SEC regulations and ensure collection of the same information as under PUHCA 1935. 

As we emphasized above, Congress repealed PUHCA 1935 and nowhere in PUHCA 

2005 did it give us the same substantive regulatory authority that the SEC had under 

PUHCA 1935. Accordingly, we will adopt only those SEC regulations that would be 

consistent with Congress’ intent in enacting PUHCA 2005, namely, those that provide the 

Commission with access to books and records relevant to the costs incurred by a public 

utility or natural gas company and necessary or appropriate for the protection of public 

utility or natural gas company customers with respect to jurisdictional rates. 

51. With respect to FirstEnergy’s request that we amend section 366.2(e), we note that 

we are not adopting this paragraph in the Final Rule. Instead, to avoid ambiguity, we 

have imported the text of these SEC regulations that the Commission is adopting, with 

appropriate modifications, into Part 366 of the Commission’s regulations. Furthermore, 

as explained above, we will not adopt into the Commission’s regulations the SEC’s 

Uniform System of Accounts and record-retention rules at this time. Instead, we will 

initiate a separate rulemaking proceeding to address how the Commission’s Uniform 

System of Accounts and record-retention rules in Parts 101, 125, 201, and 225 of its 

regulations can be modified to adopt or otherwise integrate the relevant parts of the 

SEC’s Uniform System of Accounts and record-retention rules. 

52. We reject the contention submitted by EPSA and others that the Commission lacks 
Docket No. RM05-32-000 - 38 -

the authority under PUHCA 2005 to adopt SEC regulations (or versions thereof) and that 

doing so is contrary to Congress’ intent in repealing PUHCA 1935. The accounting, 

record-retention and filing requirements adopted herein impose no substantive 

restrictions and prior approval requirements such as those contained in PUHCA 1935. 

Moreover, sections 1264(a) and 1264(b) of EPAct 2005 expressly require each holding 

company and each associate company, affiliate or subsidiary thereof to “maintain” and 

“make available” books and records as the Commission determines are relevant to costs 

incurred by a public utility or natural gas company and necessary or appropriate for the 

protection of utility customers with respect to jurisdictional rates. In turn, section 

1272(1) of EPAct 2005 directs the Commission to issue such regulations as may be 

necessary or appropriate to implement PUHCA 2005, including section 1264. In 

addition, section 1270 of EPAct 2005 states that that the Commission shall have the same 

powers as set forth in sections 306 through 317 of the FPA to enforce the provisions of 

PUHCA 2005. In this regard, we note that section 309 of the FPA grants the 

Commission the power to perform any and all acts and to prescribe by order, rule or 

regulation, as it may find necessary or appropriate to carry out the provisions of the FPA, 

“the form of all statements, declarations, applications, and reports to be filed with the 

Commission.”49 PUHCA 2005 did not specify the manner in which books and records 

are to be made available to the Commission, and, in the face of statutory silence on this 

specific issue and the clear statements in sections 1272 and 1270 of EPAct 2005, we find 

 49 16 U.S.C. § 825h (2000); accord 15 U.S.C. § 717o (2000). 
Docket No. RM05-32-000 - 39 -

that Congress has granted the Commission the discretion to prescribe the manner in 

which these entities are to “make available” their books and records to the Commission 

and “the form or forms of all statements, declarations, applications, and reports to be filed 

with the Commission.” 

53. For the same reasons, we similarly reject the argument submitted by AGL 

Resources, who notes that the SEC was empowered to require the filing of reports by 

section 14 of PUHCA 1935, which has been repealed, and concludes from the fact that 

Congress has not enacted an identically-worded provision in PUHCA 2005 that the 

Commission lacks the authority to require entities to file any reports under PUHCA 2005. 

AGL Resources’ interpretation appears to rest on the erroneous assumption that, by using 

the terms “maintain” and “make available,” Congress necessarily meant that entities were 

only required to make these books and records available to the Commission on the 

entities’ premises, rather than in the form of a report filed with the Commission. Had 

Congress meant to restrict the Commission’s access to books and records in this manner, 

it clearly could have done so, as it did with respect to state commissions under section 

1265; section 1265 provides that entities are to “produce for inspection” “upon ... written 

request” of a state commission a much more limited range of documents. Here, in 

section 1264 (and sections 1272 and 1270), Congress chose not to adopt such a 

restriction. 

54. Finally, we note that, where appropriate, we have removed from the SEC 

regulations adopted herein all references to PUHCA 1935 and related SEC regulations 

and, where appropriate, replaced them with references to PUHCA 2005 or to the relevant 
Docket No. RM05-32-000 - 40 -

Commission regulations. Therefore, we will not further address in this Final Rule the 

various comments received suggesting that we remove such references. 

c. Comments on Particular SEC Regulations

17 C.F.R. §§ 250.1 and 259.5A (Form U-5A)

Comments

55. SEC Form U-5A requires each non-exempt holding company to submit a complete 

list of corporate affiliates and brief description of the kind of business each affiliate 

transacts. APPA/NRECA support the adoption of 17 C.F.R. 250.1, which will require 

each public utility holding company to inform the Commission of its status. As to 

exemptions, APPA/NRECA argue that the Commission should distinguish between the 

exemption available under section 1266(a) (for QFs, EWGs and FUCOs) and 1266(b) 

(for persons and classes of transactions “not relevant to the jurisdictional rates of a public 

utility or natural gas company”), so that the notification the Commission requests would 

be limited to section 1266(a). According to APPA/NRECA, the “relevance” exemption 

of section 1266(b) requires more Commission attention, in the form of general standards 

to be applied case by case.50

56. Energy East Corporation (Energy East) opposes the adoption of this section 

because it contends that the notification requirement is inconsistent with the statement in 

the NOPR indicating that the Commission does not intend to reimpose the registration 

requirement. Energy East states that the Commission could simply instead rely on 

 50 APPA/NRECA Comments at 24. 
Docket No. RM05-32-000 - 41 -

disclosure in FERC Forms 1 and 2 which require a public utility or natural gas company 

to state the name of any controlling corporation, the manner in which control is held and 

the extent of control.51 Similarly, Dominion Resources, Inc. (Dominion) and EEI state 

that the Commission's intention to not reimpose the registration requirement is 

inconsistent with the adoption of the three filing requirements set forth in section 250.1 

(i.e., SEC Forms U-5A, U-5B, and U-5S).52 

57. Dominion agrees with retention of the Form U-5A filing requirement because this 

form is considerably less burdensome than either Form U-5B or U-5S. Dominion also 

suggests that this form be revised to provide for a claim of exemption under section 1266 

of EPAct 2005.53 Scottish Power PLC (Scottish Power) also supports the retention of 

Form U-5A and suggests that the Commission consider adding a component to the Form 

U-5A to allow a holding company to make a claim for an exemption from the books and 

records requirements of section 1264.54

Commission Determination

58. The Commission will adopt in section 366.4(a) of its regulations a provision 

analogous to that contained in paragraph (a) of 17 C.F.R. 250.1. However, the 

Commission will not require holding companies to submit a Commission-adopted version 

of SEC Form U-5A and will instead require persons that are holding companies on the 

 51 Energy East Comments at 4. 

52 Dominion Comments at 11-12, EEI Comments at 16. 

53 Dominion Comments at 12. 

54 Scottish Power Comments at 4. 
Docket No. RM05-32-000 - 42 -

effective date of PUHCA 2005 to submit FERC-65 (Notification of Holding Company 

status) and, for companies seeking exemption or waiver, FERC-65A (Exemption 

Notification) or FERC-65B (Waiver Notification) within 30 days of the effective date of 

PUHCA 2005, February 8, 2006. Furthermore, any entity that becomes a holding 

company after the effective date of PUHCA 2005 must submit FERC-65 (and, if 

appropriate, FERC-65A or FERC-65B) within 30 days of the date on which such entity 

becomes a holding company. This filing will be for informational purposes and will not 

be noticed in the Federal Register, but will be available on the Commission’s website. 

59. As discussed above, entities seeking exemption or waiver may do so by filing 

FERC-65A or FERC-65B, along with their FERC-65. All notifications of exemption or 

waiver submitted on FERC-65A and FERC-65B will be noticed in the Federal Register. 

60. However, we will limit the use of FERC-65A and FERC-65B to those persons 

who claim that they qualify for one of the mandatory statutory exemptions in section 

1266(a) (i.e., that they are a holding company solely with respect to one or more EWGs, 

FUCOs, or QFs) or for one of the class exemptions or waivers that the Commission 

adopts in this Final Rule, which are listed in section 366.3(b) and (c) of the 

Commission’s regulations, or in subsequent rules or orders. Persons will be considered 

to have a temporary exemption or waiver upon a good faith filing of FERC- 65A or 

FERC-65B and the exemption or waiver will be deemed granted after 60 days from the 

date of the filing, absent Commission action to the contrary before that date. The Office 

of the Secretary will periodically issue a notice listing the persons whose notifications of 

exemption or waiver have gone into effect by operation of the Commission’s regulations, 
Docket No. RM05-32-000 - 43 -

i.e., in the absence of Commission action to the contrary within 60 days after the date of 

filing. 

61. Persons seeking any other type of exemption or waiver must file a petition for 

declaratory order pursuant to section 385.207(a) of the Commission’s regulations, as 

required by section 366.3(d) of the regulations adopted herein. These petitions for 

declaratory order will be noticed in the Federal Register and no temporary exemption or 

waiver will attach. Such requests for exemptions or waivers will be considered case-bycase and deemed granted only upon order of the Commission. 

62. We reject the assertion of Energy East and others that the adoption of a 

Commission analogue to 17 C.F.R. 250.1(a) (i.e., the SEC’s registration requirement) is 

tantamount to re-imposing the registration requirement under PUHCA 1935. First and 

foremost, the Commission in the NOPR proposed to use a version of the SEC Form U-5A 

as a notification requirement, not as a registration requirement. Moreover, in this Final 

Rule, we are not adopting the proposal in the NOPR to require submission of SEC Form 

U-5A and instead using what is called FERC-65 (Notification of Holding Company 

Status). This notification requirement simply requires persons that are holding 

companies to inform the Commission of their status as such and thus that they are subject 

to the Commission’s access to books and records under PUHCA 2005. As commenters 

have noted, the registration system established by PUHCA 1935 was part of a pervasive 

regulatory regime addressing virtually all aspects of a registered holding company’s and 

its subsidiaries’ financial and corporate activities, while PUHCA 2005 is a narrower 

statute intended to give the Commission access to books and records relevant to costs 
Docket No. RM05-32-000 - 44 -

incurred by a public utility or natural gas company and necessary or appropriate for the 

protection of utility customers with respect to jurisdictional rates. For the Commission to 

carry out its jurisdictional rate responsibilities, it must be able to identify the entities that 

are holding companies of jurisdictional public utilities or natural gas companies. The 

requirement to notify the Commission facilitates our ability to do so and is thus consistent 

with Congress’ intent in enacting PUHCA 2005, and, in any event, is hardly burdensome. 

17 C.F.R. § 250.26

Comments

63. 17 C.F.R. 250.26 directs registered holding companies and their subsidiaries to 

comply with a number of SEC accounting and record-keeping rules, including Regulation 

S-X, the equity accounting method, and the record-retention rules in 17 C.F.R. Part 257. 

E.ON and LG&E Energy assert that section 250.26(c), which requires holding companies 

to use the equity method of accounting for investments in subsidiaries, is outside the 

jurisdiction of the Commission under section 1264 of EPAct 2005 and should not be 

adopted by the Commission.55 Dominion and EEI argue that section 250.26(b), which 

deals with information to be supplied with Form U-5S, should be deleted and that 

sections 250.26(c) and (g) should not be adopted by the Commission. Moreover, EEI and 

Dominion argue that, rather than adopting section 250.26(d), which mandates the use of 

SEC record-retention policy, holding companies should have the option of following 

 55 E.ON/LG&E Energy Comments at 16. 
Docket No. RM05-32-000 - 45 -

either SEC or Commission document retention requirements.56 EPSA states that 17 

C.F.R. 250.26 pertains to financial recordkeeping requirements that would conflict with 

accounting and reporting requirements that many non-registered holding company 

systems are not currently required to follow, i.e., Regulation S-X. Moreover, EPSA notes 

that Rule 250.26 prohibits any company in a registered holding company system to 

declare or pay dividends or reacquire its securities absent SEC approval under section 12 

of PUHCA 1935.57 Finally, Energy East opposes the adoption of this rule because all 

top-tier registered holding companies are public issuers and most large holding 

companies subject to PUHCA 2005 are likely to be public issuers and are thus already 

required to prepare financial statements in accordance with Regulation S-X, unless 

exempted by other SEC rules or form instructions.58 

Commission Determination

64. With respect to the concerns expressed by E.ON and LG&E Energy on the use of 

the equity method of accounting for investments in subsidiaries and Energy East and 

EPSA regarding SEC Regulation S-X, the Commission is not adopting paragraph (a)(1) 

of 17 C.F.R. 250.26 (a)(1), which mandates compliance with this SEC Regulation S-X, or 

paragraph (c), which mandates use of the equity method of accounting. In addition, the 

Commission is not adopting paragraph (b), which requires certain information to be 

 56 Dominion Comments at 12, EEI Comments at 17. See also Southern Company 

Services, Inc. (Southern Company Services) Comments at 5. 

57 EPSA Comments at 11. 

58 Energy East Comments at 7. 
Docket No. RM05-32-000 - 46 -

supplied with the Form U-5S, or paragraph (g), which is a cross reference to 17 C.F.R. 

250.26. Also, as recommended by Dominion and EEI, the Commission will not adopt 

paragraph (d) regarding the SEC rules on record retention in 17 C.F.R. Part 257. Instead, 

as discussed above, we will permit holding companies registered under PUHCA 1935 

and service companies within such holding company systems that currently follow the 

SEC’s record-retention rules in 17 C.F.R. Part 257 to follow either the Commission’s or 

the SEC’s record-retention rules, as they exist on the day before the effective date of 

PUHCA 2005, for calendar year 2006. These entities must transition to the 

Commission’s rules by January 1, 2007. 

17 C.F.R. § 250.27

Comments

65. 17 C.F.R. 250.27 requires registered holding companies and public-utility 

company subsidiaries thereof that are not subject to the Commission’s or a state 

commission’s system of accounts to conform to a classification of accounts prescribed by 

the Commission. If the public-utility company subsidiary is a gas utility company, it 

must conform to the system of accounts recommended by NARUC. According to 

Dominion and EEI, it is questionable whether this rule currently applies to any companies 

and whether there are any public utility companies under PUHCA 1935 that would not be 

subject to the Commission’s Uniform System of Accounts or the requirements of a state 

utility commission. In addition, Dominion and EEI assert that section 250.27 is 

potentially inconsistent with the waiver of Part 101 of the Commission's regulations 

commonly received in connection with an authorization to sell power at market-based 
Docket No. RM05-32-000 - 47 -

rates because this section would subject to Part 101 any public utility under the FPA that 

is not required to comply with it.59

66. APPA/NRECA oppose the adoption of this section because it does not seem to 

add anything presently required by the Commission’s Uniform System of Accounts.60 

Finally, Energy East opposes the adoption of this section as unnecessary because there is 

no evidence that utilities subject to the Commission’s ratemaking jurisdiction lack a 

uniform system of accounting standards.61 

Commission Determination

67. We agree with commenters that this provision should not be adopted as part of the 

Commission’s regulations because it does not add anything to the Commission’s Uniform 

System of Accounts. All public utilities and natural gas companies, except those that 

have been granted waiver of the Commission’s accounting, record-retention, and 

reporting requirements (e.g., power marketers), already maintain their books and records 

in accordance with the Commission’s Uniform System of Accounts in Parts 101 and 201 

of its regulations. 

 59 Dominion Comments at 12-13, EEI Comments at 18. 

60 APPA/NRECA Comments at 25. 

61 Energy East Comments at 9. 
Docket No. RM05-32-000 - 48 -

17 C.F.R. § 250.80

Comments

68. Section 250.80 defines the terms “construction,” “goods,” and “services,” as used 

in the SEC regulations under PUHCA 1935. APPA/NRECA support the adoption of 

section 250.80, but suggest that the Commission should import the definitions of 

“service,” “goods,” and “construction” in this section into its own rules.62 EEI and 

Dominion also support the adoption of this section.63 E.ON and LG&E Energy also 

endorse the Commission’s proposal to adopt section 250.80.64

Commission Determination

69. We agree with APPA/NRECA and other commenters, and as these terms and their 

definitions are relevant under PUHCA 2005, we will adopt the definitions contained in 

17 C.F.R. 250.80 in section 366.1 of the Commission’s regulations and thereby import 

the SEC’s definitions of these terms for the purposes of PUHCA 2005. In addition, we 

will remove references to PUHCA 1935, where appropriate, as we have done with the 

other regulations adopted in this Final Rule. 

 62 APPA/NRECA Comments at 25-26. 

63 Dominion Comments at 13, EEI Comments at 18. 

64 E.ON/LG&E Energy Comments at 14. 
Docket No. RM05-32-000 - 49 -

17 C.F.R. § 250.93 and 17 C.F.R. Parts 256 and 257

Comments

70. Section 250.93 requires service companies to adopt the SEC’s Uniform System of 

Accounts in 17 C.F.R. Part 256 and its record-retention rules in 17 C.F.R. Part 257. 

Some commenters opposed the adoption of these SEC regulations, while others supported 

their adoption or suggested various ways in which their application could be limited, in 

particular, by allowing holding companies and service companies to adopt the 

Commission’s Uniform System of Accounts in Part 101 of its regulations and its recordretention rules under Part 125 of its regulations.65

71. Dominion and EEI agree with the Commission’s proposal to adopt the SEC’s 

Uniform System of Accounts. However, they state this system of accounts closely tracks 

the requirements of SEC Form U-13-60 and therefore includes a number of components 

that no longer will be relevant following repeal of PUHCA 1935. They thus recommend 

that the Commission adopt only those portions of 17 C.F.R. Part 256 that correspond to 

the information it recommends be included with SEC Form U-13-60.66 

72. Dominion and EEI also argue that holding company service companies should 

have the option of adopting the Commission’s Uniform System of Accounts and recordretention rules instead of the SEC’s. They further contend that there is no reason that any 

company that currently follows the Commission’s record-retention regulations should be 

 65 But see APPA/NRECA Comments at 25-26. 

66 Dominion Comments at 16, EEI Comments at 20. 
Docket No. RM05-32-000 - 50 -

required to adopt those found in 17 C.F.R. Part 257 and that the Commission could 

reconcile the differences between the two sets of requirements in a subsequent 

rulemaking.67 

73. Entergy encourages the Commission to consider limiting the applicability of these 

requirements to service companies and, in the case of the record-retention requirements 

imposed under 17 C.F.R. Part 257, limiting the scope of these requirements to 

information that bears a direct relationship to costs incurred by service companies or 

other associate companies whose costs are reflected in the jurisdictional rates or charges 

of public utilities.68

74. Energy East also opposes the adoption of 17 C.F.R. Part 257 because, it contends, 

some of the SEC’s records retention requirements are outdated, particularly as to the 

storage media specified, given information storage and retrieval technologies that are 

now available and in common use. The Commission’s rules are more flexible because a 

public utility or licensee may select its own storage media subject to conditions related to 

life expectancy and internal control procedures to assure data reliability. Energy East 

thus urges the Commission to expand its Part 125 rules, making them applicable to public 

utilities, service companies, and holding companies.69

 67 Dominion Comments at 16-17, EEI Comments at 20-21. According to 

Dominion and EEI, to the extent the coverage of the SEC requirements is broader than 

the Commission’s, the additional requirements relate largely to securities matters that are 

no longer relevant under PUHCA 2005. 

68 Entergy Comments at 6. 

69 Energy East Comments at 9. 
Docket No. RM05-32-000 - 51 -

75. Finally, APPA/NRECA suggest that the Commission adjust the requirements of 

the SEC’s Uniform System of Accounts to make them consistent with the Commission’s 

Uniform System of Accounts under the FPA applicable to public utilities.70

Commission Determination

76. As discussed above, the requirements of section 1264 of EPAct 2005 to maintain 

and make available books and records apply equally to all holding companies and 

affiliates, associate companies, and subsidiaries thereof, regardless of their registered or 

exempt status under PUHCA 1935, absent a prospective exemption or waiver. 

Nevertheless, the Commission recognizes the long-standing differences in the treatment 

of these classes of entities under PUHCA 1935 and SEC regulations, namely, that 

companies in formerly-registered holding companies systems were subject to PUHCA 

1935 and the SEC’s accounting and other regulations thereunder, while companies in 

formerly-exempt holding company systems were not. We will therefore provide all 

holding companies and service companies with a reasonable period of time to transition 

to the Commission’s regulations under PUHCA 2005. Specifically, all traditional, 

centralized service companies that do not currently follow the Commission’s Uniform 

System of Accounts (Parts 101 and 201) will have until January 1, 2007 to comply with 

the Commission’s Uniform System of Accounts, and all holding companies and service 

companies that do not currently follow the Commission’s record-retention requirements 

(Parts 125 and 225) will have until January 1, 2007 to comply with the Commission’s 

 70 APPA/NRECA Comments at 25. 
Docket No. RM05-32-000 - 52 -

record-retention requirements. Furthermore, traditional, centralized service companies 

within registered holding company systems that currently follow the SEC’s Uniform 

System of Accounts in 17 C.F.R. Part 256 have the option to follow either the 

Commission’s or the SEC’s Uniform System of Accounts, as they exist on the day before 

the effective date of PUHCA 2005, for calendar year 2006. Similarly, all holding 

companies and service companies within registered holding company systems that 

currently follow the SEC’s record-retention rules in 17 C.F.R. Part 257 have the option to 

follow either the Commission’s or the SEC’s record-retention requirements, as they exist 

on the day before the effective date of PUHCA 2005, for calendar year 2006. But, as 

discussed above, these entities must transition to the Commission’s rules by January 1, 

2007. 

77. However, traditional, centralized service companies following the Commission’s 

Uniform System of Accounts must also comply with the General Instructions and other 

requirements contained in the SEC’s Uniform System of Accounts. These instructions 

and requirements pertain specifically to service company accounts and are not, at present, 

adequately addressed in the Commission’s Uniform System of Accounts. 

17 C.F.R. §§ 250.94 and 259.313 (Form U-13-60)

Comments

78. Service companies are required by 17 C.F.R. 250.94 and 259.313 to file SEC 

Form U-13-60, which is the annual report for service companies in registered holding 

company systems. It requires the submission of the service company’s financial 

statements for each calendar year prepared using the SEC’s Uniform System of 
Docket No. RM05-32-000 - 53 -

Accounts. It also contains certain supporting schedules providing a more detailed 

analysis of amounts recorded in individual accounts, an analysis of billings to associated 

and non-associated companies, expense distribution by service company department, and 

an accompanying statement of methods of cost allocation. 

79. Several commenters support the adoption of 17 C.F.R. 250.94 and 259.313. 

APPA/NRECA support the retention of 17 C.F.R. 250.94 and Form U-13-60.71 Energy 

East states that it is beneficial to have one form of service company report that could be 

filed with the Commission and state commissions that require affiliate transactions 

reporting and thus supports the proposed SEC Form U-13-60 filing requirement, with 

which the states are already familiar. Energy East further recommends that the 

Commission focus the requirements of Form U-13-60, as recommended by EEI, on the 

information that is most relevant to allocations of costs.72 

80. Dominion and EEI also note that the current Form U-13-60 requires companies to 

file a substantial amount of information that is not relevant to the Commission's duties 

under PUHCA 2005. EEI therefore proposes that the balance sheet and income statement 

portions of the Form U-13-60 be retained, but that a number of accounts and schedules 

not relevant to cost-allocation issues be eliminated, as these accounts and schedules in 

question are extremely time consuming to prepare and in some cases require invoice level 

detail to complete, and EEI offers suggestions as to accounts and schedules that should be 

 71 APPA/NRECA Comments at 25-26. 

72 Energy East Comments at 10. 
Docket No. RM05-32-000 - 54 -

modified.73 Finally, EEI requests that the Commission clarify that the form applies to 

system service companies and provide a definition of “service company” in section 366.1 

that tracks the language in section 1275(b) of PUHCA 2005, i.e., “a company organized 

specifically for the purpose of providing non-power goods and services to any public 

utility in the same holding company system.”74

81. E.ON and LG&E Energy contend that the implementation of section 250.94 and 

Form U-13-60 is beyond the scope of the jurisdiction granted to the Commission in 

section 1275 of EPAct 2005, which is much more limited than that granted to the SEC to 

authorize the organization and conduct of service companies under section 13 of PUHCA 

1935. They suggest that, if it is nonetheless appropriate for the Commission in its 

administration of PUHCA 2005 to impose reporting requirements under the FPA, the 

nature and extent of such reports should be limited to those matters over which the 

Commission is granted jurisdiction. They further contend that Form U-13-60 largely 

contains information which is not relevant to the jurisdiction of the Commission and 

propose that the Commission should instead require that FERC Form 1 be supplemented 

to include the following information: (i) annual filing of cost-allocation methodology 

used by the service company to allocate costs; (ii) annual filing of statement of 

receivables from and payables to associated companies, identified by associate company 

name; and (iii) annual filing of all charges received by associate companies from a 

 73 Id.

74 Dominion Comments at 14, EEI Comments at 19. 
Docket No. RM05-32-000 - 55 -

services company, identified by associate company and by FERC account.75

Commission Determination

82. Based on the comments received, the Commission has decided not to adopt SEC 

Form U-13-60, and the Commission will instead require traditional, centralized service 

companies to file their annual reports on FERC Form No. 60, attached as Appendix 2, 

which is based on a streamlined version of SEC Form U-13-60. FERC Form No. 60 

substantially reduces the amount of information required by SEC Form U-13-60 by 

deleting certain schedules not necessary to fulfill our jurisdictional responsibilities. 

Section 366.23 of the Commission’s regulations, which are based on 17 C.F.R. 250.94 

and 259.313, will thus require all traditional, centralized service companies to file with 

the Commission FERC Form No. 60 by May 1 of the year following the calendar year 

that is the subject of the report. Traditional, centralized service companies in formerlyregistered holding company systems must submit their first FERC Form No. 60, for 

calendar year 2005, by May 1, 2006, while traditional, centralized service companies in 

formerly-exempt holding company systems will have until May 1, 2008, to submit their 

first annual report, for calendar year 2007, on FERC Form No. 60. 

83. SEC Form U-13-60 contains a set of financial statements for service companies, 

detailed supporting schedules, organizational charts, a list of cost-allocation methods they 

use, and other information. Prior to the repeal of PUHCA 1935, the companies to which 

these reporting requirements applied were entities formed specifically for the purpose of 

 75 E.ON/LG&E Energy Comments at 15-16. See also Entergy Comments at 6. 
Docket No. RM05-32-000 - 56 -

providing non-power goods and services to a public-utility company, as defined in 

section 366.1 of the Commission’s regulations, of a holding company system. In 

17 C.F.R. 250.80, the SEC defined the type of specialized services that these traditional, 

centralized service companies provided to public-utility companies within their holding 

company systems, and we have taken over this definition in section 366.1 of our 

regulations.76 With the repeal of PUHCA 1935 and its associated rules on crosssubsidization, diversification, and requirements to obtain SEC approval for affiliate 

transactions and the formation of service companies, these traditional, centralized service 

companies may increasingly provide centralized services not only for public utility 

affiliates, but also for non-utility affiliates of financial institutions or other industrial 

conglomerates, increasing the opportunity for cross-subsidization. 

84. The annual financial reporting requirement for service companies in FERC Form 

No. 60, which is based on a truncated version of SEC Form U-13-60, will provide 

transparency and will enable the Commission and others to better monitor for crosssubsidization. Such information will aid the Commission in carrying out its statutory 

duties in a number of contexts, including in its assessment of whether a given disposition 

of jurisdictional facilities under section 203 of the FPA will result in cross-subsidization, 

in its ratemaking under sections 205 and 206 of the FPA and sections 4 and 5 of the 

NGA, and in its review and approval of cost-allocations under section 1275 of EPAct 

 76 Section 366.1 defines these “services” as “any managerial, financial, legal, 

engineering, purchasing, marketing, auditing, statistical, advertising, publicity, tax, 

research, or any other service (including supervision or negotiation of construction or of 

sales), information or data, which is sold or furnished for a charge.” 
Docket No. RM05-32-000 - 57 -

2005. The accounting, record-retention, and reporting rules for service companies that 

we are adopting in this Final Rule are a measured response to the need for information 

about service company costs and functions necessary for the Commission to carry out its 

statutory responsibilities. Finally, in response to EEI’s request that the Commission 

provide a definition of service company that tracks the language in section 1275(b), 

we note that we have added a definition of service company in section 366.1 of the 

Commission’s regulations. 

85. While we believe an annual reporting requirement for service companies is an 

important tool to aid the Commission in carrying out its responsibilities under the FPA 

and NGA, and its review of cost allocations requested under section 1275 of PUHCA 

2005, as noted above, we have considered the comments received regarding the current 

content of SEC Form U-13-60 and concluded that some, but not all, recommendations for 

modifications and deletions of certain schedules should be adopted. Specifically, there 

are a number of schedules currently contained in the SEC Form U-13-60 that provide a 

greater level of detail for some items than the Commission will require in FERC Form 

No. 60 to carry out its statutory responsibilities. Therefore, we will not carry over from 

SEC Form U-13-60 to FERC Form No. 60 the requirement to submit supporting 

schedules for Outside Services Employed, Employee Pensions and Benefits, General 

Advertising Expenses, Rents, Taxes Other than Income Taxes, Donations, and Other 

Deductions. 
Docket No. RM05-32-000 - 58 -

86. We will not, however, adopt EEI’s request to delete Schedule XIII – Current and 

Accrued Liabilities. This schedule contains information about the outstanding balances 

of accounts and notes payable to associated companies. We consider this information to 

be integral to understanding inter-company transactions and cost allocations within the 

holding company system. 

87. We also will not adopt requests to modify or delete the Schedule of Expense by 

Department or Service Function or the Departmental Analysis of Salaries. This 

information is relevant to affiliate costs recovered in jurisdictional rates. Section 1275(b) 

of EPAct 2005 specifically requires the Commission in certain circumstances to review 

and authorize the allocation of costs for non-power goods or services provided by service 

companies to public utilities within the same holding company system. The 

determination of proper cost allocation requires knowledge of the total costs and how 

they are distributed within the holding company system, particularly to the jurisdictional 

entity(ies). The submission of the information in this schedule will facilitate the 

Commission’s understanding of cost allocations within the holding company system.77 

The Departmental Analysis of Salaries shows how salary expenses are allocated to each 

parent company, associate company, and non-associate company based on the department 

or service function allocation methods. This schedule is a tool to determine whether cost 

 77 As discussed elsewhere in this Final Rule, although we have the authority to 

require the filing of cost allocation agreements pursuant to our ratemaking authority 

under sections 4 and 5 of the NGA and sections 205 and 206 of the FPA, we will not do 

so because the Commission believes that the submission of relevant cost-allocation 

information on FERC Form No. 60 provides a less burdensome method for collecting this 

information, for both service companies and the Commission. 
Docket No. RM05-32-000 - 59 -

allocations are being made in accordance with the authorized methods of cost allocation 

and whether inappropriate cross-subsidization has occurred. The Schedule of Expense by 

Department or Service Function similarly promotes this end. 

88. Finally, the Commission will not adopt EEI’s recommendation to delete the 

supporting schedule for Account 930.2, Miscellaneous General Expenses. Account 930.2 

is a catch-all account for recording expenses not provided for elsewhere. A single-sum 

total for this account simply does not provide sufficient information about the nature of 

the items included in the account or the associated amounts for each item. The additional 

disclosure that this schedule provides therefore remains important for understanding 

service company costs and functions. Additionally, we note that a similar schedule is 

required for the FERC Form No. 1 submitted by public utilities. 

17 C.F.R. § 259.5S (Form U-5S)

Comments

89. SEC Form U-5S is the annual report registered holding companies must submit, 

which includes information about the company’s corporate structure, board of directors, 

acquisitions or sales of utility assets, securities transactions, investments in companies 

outside the holding company family, political contributions, contracts between the service 

company and utility affiliates; relations between the holding company and any EWG or 

FUCO, and a copy of the company’s yearly financial reports. 
Docket No. RM05-32-000 - 60 -

90. APPA/NRECA support the retention of Form U-5S.78 Georgia PSC also supports 

the adoption of this reporting requirement, and suggests that the Commission should add 

cash flow statements to the Financial Statement and Exhibits section of Form U-5S.79

91. The majority of commenters, however, oppose the adoption of Form U-5S. EEI 

argues that the Form U-5S filing requirement should not be adopted because it imposes 

burdensome and duplicative information collection requirements. EEI states that, 

although the Office of Management and Budget estimates that companies need 

approximately 13 hours to complete Form U-5S, in the experience of EEI's registered 

holding company members this form requires hundreds of hours to complete and as a 

result imposes millions of dollars in costs on ratepayers and shareholders. Much of the 

information required by Form U-5S is contained in other public filings, including the 

Commission's Form 1 and 3Q and the quarterly and annual reports that companies file 

with the SEC on Forms 10-Q and 10-K. Other information included in the Form U-5S 

relates to matters that repeal of PUHCA 1935 has made irrelevant and that holding 

companies no longer should be required to file.80 

92. Similarly, AGL Resources and Emera Incorporated (Emera) argue that the 

information solicited by this SEC form is generally irrelevant to the Commission’s 

ratemaking jurisdiction. They further contend that the Commission already obtains the 

 78 APPA/NRECA Comments at 25-26. 

79 Georgia PSC Comments at 2. 

80 EEI Comments at 5. See also E.ON/LG&E Energy Comments at 14, PacifiCorp 

Comments at 5, Progress Energy Comments at 5. 
Docket No. RM05-32-000 - 61 -

information that it needs to regulate public utilities and natural gas companies on FERC 

Forms 1 and 2 and that the Commission’s need for holding company-level information 

can be satisfied by reviewing regular SEC reports on Forms 10-K, 10-Q and 8-K, and by 

soliciting targeted information on a case-by-case basis should particular issues arise. 

Finally, they argue that the Commission should delay the imposition of additional 

reporting requirements until it has had sufficient time to evaluate the extent of its 

information needs.81

93. FirstEnergy suggests that, to the extent that the Commission desires to utilize 

information contained in those forms, it should modify those forms so that the only 

information required to be maintained is information that is deemed to be necessary or 

appropriate for the protection of utility customers with respect to jurisdictional rates. The 

Commission should also provide a clear explanation of why each category of information 

that is to be maintained is within the statutory limits.82 Finally, FirstEnergy notes that 

Item 10 of Form U-5S contemplates that the annual report for each holding company 

system include consolidating financial statements for the parent holding company and 

each of its subsidiaries for the year of the report, and will be accompanied by the opinion 

of the independent accountants as to the consolidated financial statements. This 

requirement for an accountant’s opinion imposes additional costs of obtaining an opinion 

of the independent accountants with respect to the consolidated financial statements. 

 81 AGL Resources Comments at 4, Emera Comments at 10. 

82 FirstEnergy Comments at 5-6. 
Docket No. RM05-32-000 - 62 -

Because the financial statements of the individual subsidiaries would have been audited 

and opinions prepared in anticipation of development of consolidated financial 

statements, this need for an additional opinion with respect to the consolidated financial 

statements is not necessary and should be eliminated.83

94. Entergy submits that the proposed implementation of the comprehensive reporting 

requirements of the Form U-5S is unduly burdensome and unnecessary for the 

Commission to prevent cross-subsidization or otherwise to achieve purposes within the 

scope of its jurisdiction. Entergy asserts that, at a minimum, the Commission should at 

least review the individual items in the rules and SEC Forms and determine what, if any, 

additional information is really necessary for it to discharge its statutory obligations 

under PUHCA 2005 or the FPA.84

Commission Determination

95. We will not require entities that are holding companies under PUHCA 2005 to 

continue to file SEC Form U-5S. We agree with commenters that the information in this 

form is available in other Commission or SEC filings and/or is not relevant to costs 

incurred by jurisdictional entities and is not necessary or appropriate for the protection of 

utility customers with respect to jurisdictional rates. 

 83 Id. at 7. See also Emera Comments at 10. 

84 Entergy Comments at 6. 
Docket No. RM05-32-000 - 63 -

d. Other Issues Concerning Adoption of SEC Regulations

 Comments

96. NARUC submits that the Commission should retain the reporting requirement set 

forth in 17 C.F.R. 250.58(c), Quarterly Report on Form U-9C-3 because this form 

contains information that is not reflected in the Annual Report on Form U-13-60.85 FPL 

Group, Inc. (FPL Group) suggests that the Commission adopt a simplified annual filing 

requirement based solely on Part 3 of Form U-3A-2, which requires the submission of 

certain quantifiable factors upon which the exemption is based. Other provisions in Form 

U-3A-2 should not be adopted, as they are redundant to other required filings under the 

books and records provisions (to which exempt holding companies previously were not 

subject), or would not assist the Commission in making the PUHCA 2005 exemption 

determination.86 PacifiCorp and Scottish Power argue that the Commission should not 

adopt any rules similar to that of 17 C.F.R. 250.24 which require holding companies and 

their subsidiaries to file certificates of notifications regarding terms and conditions to 

declarations and order issued by the SEC prior to the enactment of PUHCA 2005.87 

97. Detroit Edison requests that the Commission narrow the scope of the rule by 

clarifying that the Commission will not require any holding company (or its associate 

 85 NARUC Comments at 2. 

86 FPL Group Comments at 4. 

87 PacifiCorp Comments at 6, Scottish Power Comments at 6. 
Docket No. RM05-32-000 - 64 -

companies) to maintain books, records or memoranda that are not used in preparing 

quarterly and annual filings for the Commission.88 

Commission Determination

98. The FERC-65 (Notification of Holding Company Status) and FERC Form No. 60 

(Service Company Report) adopted above will provide us with information to carry out 

our statutory rate responsibilities under PUHCA 2005. It is neither necessary nor 

appropriate to require the submission of additional forms at this time, though, in light of 

the first year’s submissions, the comments received at the technical conference within the 

next year, and our day-to-day experience in implementing PUHCA 2005, we do not 

foreclose the possibility that additional filing requirements will later be found necessary. 

99. With respect to PacifiCorp and Scottish Power’s concerns, we will not adopt 

17 C.F.R. 250.24. However, as discussed below with respect to previously authorized 

activities, we have concluded that filings directed by prior SEC financing authorizations 

should continue to be made, but should now be made with the Commission. 

100. We will not grant Detroit Edison’s requested clarification that the Commission 

will not require any holding company (or its associate companies) to maintain books and 

records that are not used in preparing quarterly and annual filings for the Commission. 

The clarification Detroit Edison requests could produce loopholes in holding company 

obligations to maintain and make available to the Commission their books and records in 

sufficient detail to permit examination, audit, and verification of the financial statements, 

 88 Detroit Edison Comments at 6. 
Docket No. RM05-32-000 - 65 -

schedules, and reports they are required to file with the Commission or that are issued to 

shareholders, as required by sections 366.21 and 366.22. For example, we will not carry 

over from SEC Form U-13-60 to FERC Form No. 60 the requirement to submit a 

schedule that provides a more detailed breakdown of outside services, but the removal of 

this schedule does not relieve the traditional, centralized service company of its 

obligation to provide this information upon request by the Commission. If we were to 

adopt Detroit Edison’s suggested clarifying language, the traditional, centralized service 

company (which is an associate company within the holding company system) could 

argue that it does not have to provide the requested information because it was not kept as 

it was not necessary to complete FERC Form No. 60. 

e. Other Comments on the NOPR

Definition of “Relevance”

Comments

101. Several commenters urge the Commission to clarify its standard for relevance

under section 1264.89 For example, APPA/NRECA propose that the Commission should 

consider the books and records relating to a corporate relationship or transaction, and the 

parties thereto, are “relevant” if there is a reasonable possibility that the arrangement will 

affect a public utility affiliate in any material way, including increasing its costs; 

adversely impacting it financial rating or access to capital; diminishing its sales 

 89 Arkansas PSC Comments at 8-11, Black Hills Comments at 2-3, National 

Association of State Consumer Advocates (NASUCA) Comments at 7, Missouri PSC 

Comments at 16-18. 
Docket No. RM05-32-000 - 66 -

opportunities; or adversely affecting operations, planning or maintaining activities.90 

102. Detroit Edison submits that section 366.2 as currently worded is far too openended, and leaves holding companies in an untenable state of uncertainty with respect to 

the relevance of any “books, accounts, memoranda” or “other records.”91 PacifiCorp 

concurs and urges that, at a minimum, the Commission clarify that it will provide a 

notice-and-comment proceeding before expanding its current information collection 

under this provision.92

Commission Determination

103. In PUHCA 2005, Congress left it to the Commission’s discretion to determine 

what books and records are relevant to the costs incurred by a public utility or natural gas 

company and necessary or appropriate for the protection of public utility or natural gas 

company customers with respect to jurisdictional rates. We do not find it appropriate 

here to follow APPA/NRECA’s suggestion that we provide a general definition of 

 90 APPA/NRECA Comments at 19. According to APPA/NRECA, the following 

new corporate relationships and transactions are of relevance to the Commission: (i) 

ownership by a holding company of public utilities having no operational integration with 

each other; (ii) ownership by multi-state holding companies (or their public utility 

affiliates) of non-utility businesses having no functional relationship to the public utility 

businesses; (iii) ownership of multiple public utility companies by non-utility ventures; 

(iv) financings by multi-state public utility companies that fall outside standard 

debt-equity ratios, or that would fail the six criteria of Section 7(d)(1) of PUHCA 1935; 

(v) public utility loans to, or guarantees of indebtedness of, the holding company or any 

other affiliate. Id. at 17-18. 

91 Detroit Edison Comments at 5-6. See also Cinergy Comments at 21, EEI 

Comments at 5. 

92 PacifiCorp Comments at 5. 
Docket No. RM05-32-000 - 67 -

relevance. We have instead adopted the requirements in Part 366 of the Commission’s 

regulations. In particular, sections 366.21 and 366.22 require that holding companies and 

service companies maintain books and records of their transactions in sufficient detail to 

permit examination, audit, and verification of the financial statements, schedules, and 

reports they are required to file with the Commission or that are issued to shareholders. 

We will provide further guidance as to what books and records are relevant at the 

technical conference that we will convene within one year of the effective date of 

PUHCA 2005 and in the separate rulemaking proceeding we will institute to address 

changes in the Commission’s Uniform System of Accounts and record-retention 

requirements. We believe that these provisions provide adequate certainty as to which 

books and records that holding companies and service companies need to maintain and 

make available to the Commission. 

Preemption of State Laws

Comments

104. Several commenters request that the Commission confirm that its own access 

under section 1264 does not preempt rights to access information by state commissions 

under section 1265. In order to prevent future arguments that the federal access 

provisions of section 1264 preempt state commission access under section 1265, Santa 

Clara urges the Commission to grant this clarification in the final rule.93 NARUC 

emphasizes that Congress expressly provided that states would have access under 

 93 Santa Clara Comments at 23-24. See also Arkansas PSC Comments at 21, 

Missouri PSC Comments at 26-27, TANC Comments at 23-24. 
Docket No. RM05-32-000 - 68 -

section 1265; that this means of state access was non-exclusive; and that Congress did not 

contemplate federal occupation of this field.94 Moreover, according to NARUC, there is 

no inherent conflict between state access under either section 1265 or state law and 

federal access under section 1264.95 Finally, Indiana Utility Regulatory Commission 

(IURC) requests that the final regulations include language paralleling the language of 

sections 1265(d), 1267(b), 1269, and 1275(c) of EPAct 2005 that confirms that the new 

law (and regulations promulgated under it) does not disturb historical state authority in 

the identified areas.96

Commission Determination

105. We agree with NARUC that there is no inherent conflict between state access 

under either section 1265 or state law and federal access under section 1264. We find 

that our own access under section 1264 does not preempt rights to access information by 

state commissions under section 1265. With respect to IURC’s argument, we do not find 

it necessary to adopt regulatory text on this point, in light of the clear statutory language. 

Scope of Commission Authority and Access to Data

 Comments

106. APPA/NRECA urge the Commission to explicitly state in the final rule that the 

data access granted under section 1264(a) of EPAct 2005 supplements, rather than 

 94 NARUC Reply Comments at 3. 

95 Id. at 3-4. 

96 IURC Comments at 6. 
Docket No. RM05-32-000 - 69 -

supplants, the Commission’s pre-EPAct 2005 access to books and records and that this 

pre-existing access stems from the Commission’s ratemaking authority and from the 

general provisions of section 301 of the FPA and section 8 of the NGA.97

Commission Determination

107. The Commission grants APPA/NRECA’s proposed clarification. The 

Commission’s pre-EPAct 2005 access to books and records pursuant to section 301 of the 

FPA and section 8 of the NGA remains unchanged. As provided in section 1271 of 

EPAct 2005, nothing in PUHCA 2005 limits the Commission’s authority under the FPA 

or the NGA. 

State Access to Books and Records Obtained by the Commission

 Comments

108. Oklahoma Corporation Commission recommends that the Commission consider 

language that would allow state commissions to continue to receive notices of any 

investigations of regulated public utility companies.98 Public Citizen notes that Congress 

has not given state commissions in PUHCA 2005 the right to require holding companies 

or their associate companies to maintain, keep or preserve any records affecting retail 

rates, so that the state commission can only require the maintenance of holding 

company/associate company books and records that affect only retail rates if the 

Commission uses its existing authorities under FPA section 301 to do so. Public Citizen 

thus urges the Commission to explicitly state in the final rule that the Commission has the 

 97 APPA/NRECA Comments at 21. 

98 Oklahoma Corporation Commission Comments at 4. 
Docket No. RM05-32-000 - 70 -

authority under FPA section 301 to require holding companies and their associates to 

maintain books and records that state commissions determine affect their retail rates and 

provide a process through which the states can request the maintenance and preservation 

of such books and records.99

Commission Determination

109. In response to the request of Oklahoma Corporation Commission that state 

commissions be apprised of any investigations of regulated public utility companies, we 

believe our current practices regarding the disclosure of investigations are appropriate 

and should not be broadened at this time. We are open to further consideration on this 

point at the technical conference. However, Congress set forth the rights of state 

commissions to obtain access to the books and records of companies within a holding 

company system in section 1265 of EPAct 2005, and they may seek to obtain access to 

the books and records of holding companies in accordance with that provision. With 

respect to Public Citizen’s request that the Commission use section 301 of the FPA to 

give states the opportunity to request the maintenance and preservation of books and 

records that state commissions determine affect their retail rates, we do not interpret 

section 301 to give the Commission the authority to provide a process for states to 

request maintenance of books and records for retail purposes. Congress has addressed in 

section 1265 the issue of state access to books and records of holding company systems 

and their members. 

 99 Public Citizen Comments at 4. 
Docket No. RM05-32-000 - 71 -

3. Exemption Authority

110. Section 1266(a) of EPAct 2005 directs the Commission to issue a final rule within 

90 days after the effective date of Subtitle F exempting from the requirements of section 

1264 of EPAct 2005 any person that is a holding company, solely with respect to one or 

more: 

(1) qualifying facilities under the Public Utility Regulatory Policies Act of 

1978 (16 U.S.C. §§ 2601 et seq. (2000)); 

(2) exempt wholesale generators; or 

(3) foreign utility companies. 

111. Section 1266(b) further directs the Commission to exempt a person or transaction 

from the requirements of section 1264 if, upon application or sua sponte: 

(1) the Commission finds that the books and records of a person are not 

relevant to the jurisdictional rates of a public utility or natural gas 

company; or 

(2) the Commission finds that a class of transactions is not relevant to the 

jurisdictional rates of a public utility or natural gas company. 

112. PUHCA 2005 requires the Commission to exempt any person that falls within the 

classes designated by section 1266(a) from the requirements of section 1264, and 

therefore, the Commission proposed to adopt such an exemption. In the NOPR, however, 

the Commission did not propose to categorically exempt classes of entities or transactions 

described in section 1266(b) from the requirements of section 1264. Rather, we proposed 

to rely on case-by-case applications for these exemptions until we have gained further 
Docket No. RM05-32-000 - 72 -

experience subsequent to the repeal of PUHCA 1935. However, we sought comment on 

whether the Commission should exempt classes of transactions involving mutual fund 

passive investors or other groups of passive investors from the new federal books and 

records access requirements. 

113. Finally, we noted that, although a person that is a holding company solely with 

respect to EWGs or QFs will be exempted from the federal access to books and records 

provisions in section 1264, many EWGs and QFs may nevertheless be public utilities 

under section 201 of the FPA100 and remain subject to the Commission’s authority with 

regard to their books and records under section 301 of the FPA, unless otherwise 

exempted.101 Below, the Commission addresses comments requesting that the 

Commission adopt the following exemptions or waivers: (a) passive investors; 

(b) nontraditional utilities with no captive customers or non-utilities, including power 

marketers; (c) certain holding company and affiliate transactions; (d) electric power 

cooperatives; (e) local distribution companies; (f) single-state holding companies; 

(g) holding companies owning small generators; and (h) investors in independent 

transmission companies. 

114. As discussed further below, the Commission is adopting certain specific 

exemptions and waivers proposed by commenters. We are also providing in section 

366.4(b) and (c) of our regulations the procedures for filing for exemption or waiver, 

 100 16 U.S.C. § 824(e) (2000). 

101 Id. at § 825. 
Docket No. RM05-32-000 - 73 -

which are available for specified persons or classes of transactions. A holding company 

that falls into one of the identified categories may file for exemption or waiver by 

submitting FERC-65A (Exemption Notification) or FERC-65B (Waiver Notification) and 

shall be deemed to have a temporary exemption or waiver upon a good faith filing. 

Notices of all such notifications of exemption or waiver will be published in the Federal 

Register. If the Commission has taken no action within 60 days after the date of the 

filing, the exemption or waiver shall be deemed to have been granted. The Commission 

may toll the 60-day period to request additional information or for further consideration 

of the request; in such case, the claim for exemption or waiver will remain temporary 

until such time as the Commission has informed the holding company of its decision to 

grant or deny the application by letter or order. In addition, the Office of the Secretary 

will periodically issue notices listing the holding companies whose notifications of 

exemption or waiver are deemed to have been granted in the absence of Commission 

action to the contrary within 60 days after the date of filing. 

115. Holding companies that seek exemptions or waivers other than those specifically 

identified in section 366.3(b) or (c) of the Commission’s regulations may not do so by 

means of FERC-65A or FERC-65B. Such holding companies must instead seek an 

individual exemption or waiver by filing a petition for declaratory order pursuant to 

sections 366.3(e), 366.4(b)(2) and 366.4(c)(2). Such petitions will be noticed in the 

Federal Register. No temporary exemption or waiver will attach, and the requested 

exemption or waiver will be effective only if approved by the Commission. 
Docket No. RM05-32-000 - 74 -

116. Finally, if a holding company that has been granted an exemption or waiver under 

section 366.4(b) or (c) fails to conform with any material facts or representations 

presented in its submittals to the Commission in FERC-65A or FERC-65B, the 

exemption or waiver may no longer be relied on. Also, the Commission may, on its own 

motion or on the motion of any person, revoke the exemption or waiver granted under 

section 366. 4(b), if the holding company fails to conform to any of the Commission’s 

criteria under this part for obtaining the exemption or waiver. 

a. Exemption of Passive Investors

 Comments

117. Commenters expressed near-unanimous support for an exemption for mutual fund 

and other passive investors from the requirements of section 1264.102 Commenters note 

that the SEC exempted passive investors under PUHCA 1935 and contend that such 

passive investors are similarly exempt from PUHCA 2005.103 EEI urges the Commission 

to follow current SEC no-action letter practice for exempting passive investors from 

holding company status under section 2(a)(7) of PUHCA 1935 and Commission practice 

 102 See, e.g., APPA/NRECA Comments at 20, Arkansas PSC Comments at 12, 

Capital Research and Management Company Comments at 3-4, Emera Comments at 8, 

E.ON/LG&E Energy Comments at 9-11, International Transmission Company 

Comments at 10, Investment Adviser Association Comments at 2, Investment Company 

Institute Comments at 2-3, Missouri PSC Comments at 19, PacifiCorp Comments at 5, 

Southern Company Services Comments at 9, Tri-State Generation Comments at 8. 

103 Chairman Barton Reply Comments at 5, EPSA Comments at 21-22 (stating that 

there is a long line of SEC no-action letter precedent addressing passive investor equity 

interests in holding companies and public utility companies under PUHCA 1935 in which 

it was determined that passive investors did not own voting securities), Scottish Power 

Comments at 6-7. 
Docket No. RM05-32-000 - 75 -

in disclaiming jurisdiction under section 201(e) of the FPA.104 Barclays requests the 

Commission establish an additional, regulatory exclusion from the books and records 

requirements for passive investments in utilities that are made by collective investment 

vehicles whose assets are managed by banks, savings and loan associations and their 

operating subsidiaries, or brokers and dealers.105 National Grid suggests that the 

Commission should define a passive investor as an entity that holds 50 percent or less of 

outstanding voting securities of public utility or holding company and does not otherwise 

exercise controlling influence.106 Alternatively, National Grid suggests that, if 

Commission does not adopt this proposal, it should define “holding company” to exclude 

passive investors who own, control, or hold 20 percent or less of the outstanding voting 

securities.107 Finally, Morgan Stanley recommends that the Commission modify 

section 366.2 of the proposed rules to make clear that holding securities in the ordinary 

course of business as a broker/dealer, underwriter or as a fiduciary, and not exercising 

operations control over the utility, does not make one a “holding company.”108 

118. Some commenters expressed general support for the proposed exemption, but 

argued that passive investors should not be exempted when certain circumstances were 

present. NARUC submits that the Commission should not exempt passive investors 

 104 EEI Comments at 21. 

105 Barclay Comments at 5. 

106 National Grid Comments at 12. 

107 Id. at 14. 

108 Morgan Stanley Comments at 9. 
Docket No. RM05-32-000 - 76 -

where either of the following conditions occurs or is present: (1) the transaction involves 

and will result in an ownership interest of ten percent or more of the debt or equity capital 

of any entity within the holding company system; or (2) the transaction will result in the 

mutual fund or other passive investor groups holding two or more seats or ten percent or 

more of the voting representation seats on the board of directors of any entity within the 

holding company system.109 Wisconsin PSC and CEOB assert that passive investors can 

exert control where their stock ownership or debt interest grants them control or influence 

over the selection of the board of directors. They urge the Commission to scrutinize 

carefully an application for an exemption filed by a passive investor who holds the power 

to influence the outcome of any jurisdictional issue that comes before the holding 

company’s board of directors, and to deny the application for exemption in those 

circumstances.110 MBIA Insurance, on the other hand, argues that the Commission 

should not at this time grant an across-the-board exemption for entities that may claim 

passive investor status.111

Commission Determination

119. We agree with the majority of commenters that the Commission should exempt 

passive investors from section 1264. Passive investors do not exercise control over 

jurisdictional companies, and thus the Commission does not need access to their books 

 109 NARUC Comments at 7-8. 

110 CEOB Comments at 3, Wisconsin PSC Comments at 5. 

111 MBIA Insurance Comments at 14. 
Docket No. RM05-32-000 - 77 -

and records for purposes of ensuring just and reasonable rates. In response to the 

comments of Barclay’s and Morgan Stanley, we will also clarify here that the exemption 

for passive investors applies to the following entities: mutual funds; passive investments 

in collective investment vehicles whose assets are managed by banks, savings and loan 

associations and their operating subsidiaries, or brokers/dealers; and persons that directly, 

or indirectly through their subsidiaries or affiliates, buy and sell the securities of public 

utilities in the ordinary course of business as a broker/dealer, underwriter or fiduciary, 

and not exercising operational control over the public utility. 

120. We will not adopt a specific definition of “passive investor” at this time. Our 

precedent under the FPA on whether certain asset owners are “passive” and thus not 

public utilities provides guidance for purposes of claiming exemption under PUHCA 

2005; further guidance may be provided in the Commission’s rulemaking to implement 

EPAct 2005 amendments to section 203 of the FPA. In addition, claimants should 

describe the relevant facts in their FERC-65 (Notification of Holding Company Status), 

FERC-65A (Exemption Notification), or petition for declaratory order. 

b. Nontraditional Utilities With No Captive Customers or Non-Utilities 

 Comments

121. EPSA proposes that the following classes of entities be exempted from 

section 1264’s requirements: (i) utilities that do not serve captive customers and are not 

affiliated with a utility that serves captive customers (nontraditional utilities); and (ii) a 

holding company that owns only nontraditional utilities and/or EWGs, FUCOs, or 
Docket No. RM05-32-000 - 78 -

QFs.112 According to EPSA, the PUHCA 2005 rate protections simply are not needed for 

such entities.113 EPSA notes that the Commission has reasoned that when nontraditional 

utilities serve no captive customers, the potential for “transactions undertaken by any of 

the non-traditional affiliates [affiliates without captive customers] at the expense of other 

non-traditional affiliates simply results in an allocation of revenues among the ‘nonregulated’ affiliates; the profits ultimately go to the shareholders regardless of the entity 

that makes the sale.”114

122. EPSA proposes that the Commission should not consider energy marketers (i.e., 

energy sellers owning no “hard” assets for power sales but only contracts for wholesale 

or retail electric energy sales or retail gas sales) to be “public-utility companies” under 

the PUHCA 2005 definition. According to EPSA, if power marketers are not electric 

utility companies, their parent companies would not be considered utility holding 

companies under PUHCA 2005 by reason of their ownership of such marketers. The 

same logic would apply to gas marketers, and they too, therefore, should not be 

considered gas utility companies, provided that they own no physical gas distribution 

assets and their gas retail sales are made through contracts.115

Commission Determination

 112 EPSA Comments at 18. 

113 Id.

114 Id. (citing US Gen Power Services, L.P., 73 FERC ¶ 61,037 at 61,846 (1995)). 

115 EPSA Comments at 19-20. 
Docket No. RM05-32-000 - 79 -

123. The Commission will exempt power marketers and other utilities that do not serve 

captive customers and are not affiliated with a utility that serves captive customers (i.e., 

non-traditional utilities) from section 1264 because we find that the books and records of 

these entities are not necessary to protect customers. Although we regulate most power 

marketers’ rates under the FPA pursuant to their authorizations to sell at market-based 

rates, in situations where they have no captive customers and are not affiliated with 

anyone that does have such customers, their records are not necessary to fulfilling our 

jurisdictional responsibilities to ensure just and reasonable rates. With respect to EPSA’s 

request for exemption of holding companies that own only nontraditional utilities and/or 

EWGs, FUCOs, or QFs, PUHCA 2005 already exempts persons that are holding 

companies solely with respect to one or more EWGs, FUCOs, or QFs, and we have 

determined it appropriate to exempt power marketers and other utilities that do not have 

captive customers. With respect to power marketers, as previously noted, the SEC did 

not treat power marketers as public-utility companies under PUHCA 1935, in contrast to 

the Commission’s long-standing determination that power marketers are public utilities 

under the FPA. As discussed above, we will follow SEC precedent for purposes of 

interpreting PUHCA 2005 and will not treat power marketers as “electric utility 

companies” under PUHCA 2005. However, this interpretation will not affect our longstanding interpretation that power marketers selling at wholesale in interstate commerce 

are public utilities under the FPA. 
Docket No. RM05-32-000 - 80 -

c. Certain Holding Company and Affiliate Transactions

 Comments

124. MidAmerican proposes that the Commission exempt from proposed section 

366.2(e) the following classes of transactions: (i) where the holding company 

affirmatively certifies on behalf of itself and its subsidiaries, as applicable, that it will not 

charge, bill or allocate to the public utility or natural gas company any costs or expenses 

in connection with goods and service transactions, and will not engage in financing 

transactions with any public utility except as authorized by a state commission or the 

Commission; (ii) transactions between or among affiliates that are independent of and do 

not include a public utility or natural gas company; and (iii) transactions between a public 

utility company or a natural gas company and an affiliate if such transactions are 

conducted in the ordinary course of business, occur at prevailing market prices or on 

terms not different from those made available to unaffiliated entities and do not exceed 

individually or in the aggregate in cost to the public utility company or natural gas 

company one-half of one percent of its operating revenue during its most recent fiscal 

year, or are conducted in accordance with and pursuant to an approved rate or service 

tariff.116

125. MidAmerican states that, by granting an exemption where a holding company 

certifies that it will not charge, bill or allocate to the public utility or natural gas company 

any costs in connection with goods and service transactions, the Commission will be 

 116 MidAmerican Comments at 8-11. 
Docket No. RM05-32-000 - 81 -

encouraging additional investments from outside the utility industry in the country’s 

energy infrastructure.117 Further, the Commission could periodically confirm the 

exemption through a review of the books and records of the public utility or natural gas 

company or annual certification by the holding company.118

126. MidAmerican proposes exemptions for transactions in the ordinary course of 

business between and among a public utility holding company’s non-utility subsidiaries 

and affiliates and de minimis ordinary course transactions involving the public utility 

company. In arguing for these exemptions, MidAmerican states that without these 

exemptions these transactions will be too numerous to track and requiring an individual 

exemption for each of them from Rule 366.2(e) could overwhelm the Commission while 

increasing the cost of doing business for the regulated entities.119 

Commission Determination

127. We will grant MidAmerican’s first and second requests for exemptions: (i) in 

cases where the holding company affirmatively certifies on behalf of itself and its 

subsidiaries, as applicable, that it will not charge, bill or allocate to the public utility or 

natural gas company any costs or expenses in connection with goods and service 

transactions, and will not engage in financing transactions with any public utility except 

as authorized by a state commission or the Commission; and (ii) transactions between or 

 117 Id. at 8. 

118 Id.

119 Id. at 11. 
Docket No. RM05-32-000 - 82 -

among affiliates that are independent of and do not include a public utility or natural gas 

company. These classes of transactions are not relevant to jurisdictional rates and will 

therefore be exempted from the books and records requirements of section 1264. 

128. The Commission will deny MidAmerican’s request for an exemption of 

transactions between a public utility or a natural gas company and an affiliate if such 

transactions are conducted in the ordinary course of business, occur at prevailing market 

prices or on terms not different from those made available to unaffiliated entities and do 

not exceed individually or in the aggregate in cost to the public utility or natural gas 

company one-half of one percent of its operating revenue during its most recent fiscal 

year, or are conducted in accordance with and pursuant to an approved rate or service 

tariff. These transactions involve regulated companies, and we do not believe they 

should be exempted because of the potential for cross-subsidization between regulated 

and non-regulated companies in the same holding company system, which could 

adversely affect jurisdictional rates. 

d. Rural Electric Cooperatives

Comments

129. Several commenters urge the Commission to exempt rural electric cooperatives 

from section 1264. APPA/NRECA argue that the Commission should recognize that 

under longstanding SEC precedent, electric cooperatives were not regulated as public 

utility holding companies under PUHCA 1935 and that, read together with the plain 

language of PUHCA 2005, that precedent shows that rural cooperatives fall outside 

PUHCA 2005. In addition, APPA/NRECA contend that, at an absolute minimum, the 
Docket No. RM05-32-000 - 83 -

Commission should make clear that those cooperatives that have received no-action 

letters or other assurances in the past from the SEC can continue to rely on those 

assurances without any need to seek additional confirmation or a no-action assurance or 

waiver from the Commission and adopt a class exemption from PUHCA 2005 for 

cooperatives that are organized and operate in reliance on such well-settled precedent.120 

Similarly, Santa Clara and TANC note that the SEC has consistently excluded rural 

cooperatives from PUHCA 1935 requirements for several reasons, including the fact that 

the ownership relationship in a cooperative is not a voting security under PUHCA 1935 

and urge the Commission to follow this precedent in implementing PUHCA 2005.121 

Commission Determination

130. The Commission finds the arguments of APPA/NRECA and other commenters in 

this regard persuasive. We find that all electric power cooperatives, including those that 

are regulated by the Commission under the FPA, i.e., those that are not financed under 

the Rural Electrification Act of 1936 or that sell four million or more megawatt-hours of 

electricity per year, should be exempted. We are therefore granting the request to define 

“voting security” to not include member interests in electric power cooperatives; this 

definition in and of itself should result in most cooperatives being excluded from the 

definition of a holding company, and thus most cooperatives will automatically fall 

outside the scope of PUHCA 2005. For those cooperatives that might still fall within the 

 120 APPA/NRECA Comments at 42-44. 

121 Santa Clara Comments at 23, TANC Comments at 23. See also Redding 

Comments at 3. 
Docket No. RM05-32-000 - 84 -

definition of holding company and thus within the scope of PUHCA 2005, they may be 

exempted from PUHCA 2005 by filing for exemption pursuant to the procedures in 

section 366.4(b).122

e. Local Distribution Companies 

Comments

131. American Gas Association requests that the Commission clarify that local 

distribution companies that are not regulated by the Commission are not embraced within 

the phrase “natural-gas company.”123 American Gas Association also notes that the 

Commission does not regulate local distribution companies.124 Washington Gas & Light 

argues that the Commission should clarify that the proposed rules do not apply to local 

distribution companies and section 7(f) companies that have previously been exempt 

from regulation by the Commission.125 Washington Gas & Light notes that no regulatory 

gap exists here, and new Commission regulation would be duplicative.126 

 122To the extent electric cooperatives are public utilities subject to our jurisdiction 

under the FPA, as noted above, we have broad authority under FPA section 301 to obtain 

the books and records of regulated companies and any person that controls or is 

controlled by such companies if relevant to jurisdictional activities. 16 U.S.C. § 825 

(2000); accord 15 U.S.C. § 717g (2000). 

123 American Gas Association Comments at 2. See also Keyspan Corporation 

(Keyspan) Comments at 6-7. 

124 American Gas Association Comments at 3. 

125 Washington Gas & Light Comments at 3. 

126 Id. at 4. 
Docket No. RM05-32-000 - 85 -

Commission Determination

132. The Commission finds that the books and records of local distribution companies 

that are not regulated by the Commission are not relevant to jurisdictional rates. 

Therefore, we will amend the proposed rules to reflect that local distribution companies 

are exempt from the regulations. 

f. Single-State Holding Companies

 Comments

133. Consolidated Edison (ConEd) contends that customers of single-state holding 

companies are adequately protected by the Commission’s existing regulatory authority 

under the FPA and NGA, so that the imposition of additional books-and-records 

requirements would be superfluous. Accordingly, ConEd requests that the proposed 

regulations be revised to expressly exempt from the provisions of section 366.2 all singlestate holding companies that were exempt under PUHCA 1935 as of the date of 

enactment of PUHCA 2005 and all companies that subsequently demonstrate to the 

Commission their status as a single-state holding company. Those companies should 

remain exempt pending a change in circumstances that alters a company’s single-state 

status.127

134. In its reply comments, Public Citizen argues that the single state exemption, for 

example, requires that both a utility and its holding company primarily operate in a single 

state, so that the state is capable of regulating the holding company, as well as the utility, 

 127 ConEd Comments at 3. 
Docket No. RM05-32-000 - 86 -

under state law. Such companies at a minimum should be required to file an annual 

statement, as they do now, to show that they continue to meet the standards for such an 

exemption.128

Commission Determination

135. We cannot approve a categorical exemption for single-state holding companies. 

Congress has chosen not to re-enact this exemption from PUHCA 1935, and ConEd has 

not demonstrated that single-state holding companies satisfy the criterion for exemption 

pursuant to section 1266(b) of PUHCA 2005 (i.e., that their books and records are not 

relevant to the jurisdictional rates of a public utility or natural gas company). 

Nevertheless, single-state holding companies do not present the scope of potential crosssubsidy and cost allocation issues that multi-state holding companies do; state 

commissions generally have significant regulatory authority over single-state holding 

companies and their transactions, and we have sufficient authority pursuant to sections 

205 and 206 of the FPA and sections 4 and 5 of the NGA to address any issues that could 

affect jurisdictional rates for public utilities in single-state holding companies. Therefore, 

the Commission will grant a waiver of our requirements in sections 366.21, 366.22, and 

366.23 of our regulations129 for single-state holding companies. 

 128 Public Citizen Reply Comments at 13. 

129 The Commission is permitted to exempt entities from the requirements of 

section 1264 only if their books and records are not relevant to jurisdictional rates. In 

this case, the books and records are relevant to jurisdictional rates, so we cannot exempt 

single-state holding companies from the statute. However, the Commission always 

possesses discretion to waive a regulatory requirement. 
Docket No. RM05-32-000 - 87 -

g. Holding Companies Owning Industrial Small Generators

 Comments

136. Barrick Goldstrike Mines argue that the Commission should exempt the holding 

companies of small industrial generators and their transactions from regulatory oversight 

because the exemptions that have existed until now, have encouraged the development of 

additional electrical generation.130 Alternatively, Mittal Steel requests that the 

Commission issue an exemption to any company who would not otherwise qualify as a 

“holding company,” but for its ownership of an entity that has been granted authority to 

sell electric power for resale at market-based rates. If the Commission is unwilling to 

adopt a general exemption as proposed by Barrick and Mittal Steel at this time, the 

Commission should grant a limited waiver of its PUHCA 2005 regulations to persons that 

file good faith applications for exemptions under section 366.3 within sixty (60) days of 

the Commission’s final order in this proceeding, with such waiver effective until such 

time as the Commission denies the exemption application.131 

Commission Determination

137. The Commission is not persuaded by the arguments of Barrick and Mittal Steel to 

provide a blanket exemption for holding companies owning industrial small generators, 

since they have not demonstrated that the statutory criterion is satisfied, i.e., that books 

and records of such holding companies are not relevant to jurisdictional rates. However, 

 130 Barrick Goldstrike Mines Comments at 9. See also Morgan Stanley Reply 

Comments at 6. 

131 Mittal Steel Reply Comments at 1-2. 
Docket No. RM05-32-000 - 88 -

to eliminate what might otherwise be a barrier to the development of additional electric 

generation, we will allow a waiver of our requirements in sections 366.21, 366.22, and 

366.23 of our regulationsto persons that own a small amount of generation (100 MW or 

less) used fundamentally for their own load or for sales to affiliated end-users. Similar 

entities, but owning more than 100 MW of generation, may individually seek waiver by 

filing a petition for declaratory order, and we will consider such petitions in light of all 

relevant information. 

138. With respect to Mittal Steel’s request regarding good faith applications, we note 

that in section 366.4(b) of our regulations, we have provided that the filing of FERC-65B 

provides temporary waiver upon a good faith filing and that after 60 days a waiver is 

deemed to be granted, absent timely Commission action to the contrary. 

h. Investors in Independent Transmission Companies

 Comments

139. International Transmission Company submits that investors in independent 

transmission companies that are subject to Commission jurisdiction should be exempted 

and that, without this exemption, this requirement creates a new barrier to investment.132

Commission Determination

140. The Commission will grant waiver of the our regulations under PUHCA 2005 for 

investors in independent transmission companies. The rate issues that may arise in 

connection with entities that serve retail customers or that generate or sell electricity at 

 132 International Transmission Company Comments at 8. 
Docket No. RM05-32-000 - 89 -

wholesale are not present with respect to an independent transmission company. Further, 

the Commission has sufficient authority under sections 205 and 206 of the FPA, as well 

as informational authority under section 301 of the FPA and section 1264 of EPAct 2005, 

to obtain the relevant books and records of a jurisdictional independent transmission 

company, and any company that controls or is controlled by such jurisdictional company. 

Therefore, the Commission will grant a waiver our requirements in sections 366.21, 

366.22, and 366.23 of our regulations for investors in independent transmission-only 

companies. 

4. Allocation of Costs of Non-Power Goods or Services

141. Section 1275(b) of EPAct 2005 provides that, in the case of non-power goods or 

administrative or management services provided by an associate company organized 

specifically for the purpose of providing such goods or services to any public utility in 

the same holding company system, at the election of certain holding company systems or 

a state commission having jurisdiction over the public utility, the Commission, after the 

effective date of PUHCA 2005, shall review and authorize an allocation of costs for such 

goods and services to the extent relevant to that associate company. In the NOPR, we 

proposed to reflect this statutory provision in new section 366.5(b) of our regulations. 

a. Mandatory Filing of Cost-Allocation Agreements 

142. In the NOPR, we noted that, irrespective of the new section 1275(b) of PUHCA 

2005, with the repeal of PUHCA 1935 and the elimination of SEC review of the 

allocation of costs for non-power goods and services, we have authority under sections 

205 and 206 of the FPA and sections 4 and 5 of the NGA to review the rate recovery in 
Docket No. RM05-32-000 - 90 -

jurisdictional rates of such associate and affiliated company non-power goods and 

services costs, either upon application under section 205 of the FPA or section 4 of the 

NGA or upon complaint or our own motion under section 206 of the FPA and section 5 

of the NGA, and that we also have the authority to review and/or require the filing of 

cost-allocation agreements with the Commission since they are contracts affecting 

jurisdictional rates.133 We invited comments as to whether, in light of the repeal of 

PUHCA 1935, holding companies that prior to the repeal of PUHCA 1935 were 

registered holding companies should be required to file such cost-allocation agreements 

with the Commission under section 205 of the FPA and section 4 of the NGA. 

Comments

143. A number of commenters supported the Commission’s proposal to require holding 

companies that were registered under PUHCA 1935 to file cost-allocation agreements 

under section 205 of the FPA and section 4 of the NGA.134 These commenters 

emphasize the importance of information on cost allocations for effective federal and 

state regulation.135 In addition, Santa Clara argues that Commission oversight of cost 

 133 16 U.S.C. §§ 824d-e (2000); accord 15 U.S.C. §§ 717c-d (2000); see generally

EPAct 2005 at § 1275(c) (stating that nothing in section 1275 affects the authority of the 

Commission under other applicable law). While the scope of our jurisdiction over 

wholesale sales of natural gas is more limited than our jurisdiction over wholesale sales 

of electric energy, and our rate review may differ in certain respects, such reviews could 

be undertaken under sections 4 or 5 of the NGA. 

134 See, e.g., Georgia PSC Comments at 2, Santa Clara Comments at 6-7, TANC 

Comments at 6-7. 

135 Georgia PSC at 2, IURC Comments at 7, NARUC Comments at 9, Ohio PSC 

Reply Comments at 2. 
Docket No. RM05-32-000 - 91 -

allocations is necessary due to the lack of uniformity of state review.136 Santa Clara 

further emphasizes that, under current rules promulgated pursuant to section 13 of 

PUHCA 1935, the SEC generally requires that such companies seek prior approval from 

the SEC to engage in such transactions. Thus, the requirement to file cost-allocation 

agreements with the Commission would simply maintain the current obligation, albeit 

with a different agency.137

144. Some commenters suggest expansion of the Commission’s proposed filing 

requirement. APPA/NRECA noted that the risk of misallocation of costs and crosssubsidization does not depend on whether the public utility holding company was 

registered or statutorily exempted under PUHCA 1935 and urge the Commission to 

require the filing of all cost-allocation practices between public utility and non-utility 

activities, including both formerly registered and exempted utility holding companies.138 

NARUC recommends that the Commission institute procedures for periodic audits of 

cost allocations, to be conducted in coordination with state regulators.139

 136 Santa Clara Comments at 8. 

137 Id. at 6. See also American Public Gas Association Comments at 4. 

138 APPA/NRECA Comments at 7. See also American Public Gas Association 

Comments at 4, MBIA Insurance Comments at 20, Missouri PSC Comments at 8-9, 

NASUCA Comments at 9, Ohio PUC Comments at 3, Utility Workers Comments at 3-4, 

Wisconsin PSC Comments at 7. 

139 NARUC Comments at 9 (arguing that multi-state holding companies should be 

subject to filing requirement), Ohio PUC Reply Comments at 2, AGPA Comments at 4, 

NASUCA Comments at 9. But see National Grid Reply Comments at 9-10. National 

Grid responds to NARUC, arguing that there is no general distinction under PUHCA 

2005 between formerly registered multi-state holding companies and typically exempt 
Docket No. RM05-32-000 - 92 -

145. Several commenters opposed the Commission’s proposed filing requirement as 

contrary to Congress’ intent and inconsistent with the statutory scheme established by 

PUHCA 2005 and the FPA. FirstEnergy contends that there is nothing in PUHCA 2005 

to suggest that the Congress intended to grant the Commission the authority to regulate 

the agreements for procurement of non-power goods and services by public utility 

companies from associated service companies in the same way that it regulates the sale of 

electricity for resale and that, if the Commission found that such agreements are 

“...contracts affecting jurisdictional rates” within the meaning of section 205(c) of the 

FPA it would be asserting jurisdiction over virtually every agreement for procurement of 

non-power goods and services by all regulated electric utilities.140 Entergy argues that 

the Commission’s proposal is inconsistent with the voluntary review procedures 

established under section 1275(b) of EPAct 2005. According to Entergy, to mandate the 

filing of such service company agreements would read out of PUHCA 2005 the ability of 

the holding company or applicable retail regulators to elect or, more importantly, to not 

elect Commission review and authorization of cost allocations.141 

146. EPSA opposes the mandatory filing requirement because it contends that the 

Commission lacks jurisdiction to impose this requirement under the FPA. EPSA asserts 

 

single-state holding companies except in section 1275’s single-state exemption and that 

there is no reason to impose a separate requirement to file cost allocation agreements on 

any holding company. 

140 FirstEnergy Comments at 11. 

141 Entergy Comments at 7-8. See also Chairman Barton Reply Comments at 9, 

Southern Company Services Comments at 3. 
Docket No. RM05-32-000 - 93 -

that section 205 of the FPA requires only public utilities as defined in section 201(e) of 

the FPA to file with the Commission the schedules, tariffs and agreements under which 

they provide FPA jurisdictional services. Registered holding companies, by contrast, 

(and non-registered holding companies) may have public utility subsidiaries, but they are 

not public utilities under section 201(e) of the FPA. In addition, EPSA claims that being 

required to make filings under section 205 of the FPA could force a holding company to 

become a fully regulated public utility. Under existing Commission precedent, upon the 

acceptance of a filing under section 205 of the FPA, the Commission has deemed that the 

filing entity owns FPA jurisdictional facilities within the meaning of section 201(e) of the 

FPA. Hence, they argue, if registered holding companies are required to file costallocation agreements under section 205, this could have the unintended effect of forcing 

such companies to become public utilities.142 

147. A number of commenters state that the Commission already has authority under 

sections 205, 206, and 301 of the FPA and PUHCA 2005 to require the public utility to 

file any relevant cost-allocation agreements with affiliates to the extent they affect 

jurisdictional rates. Thus, they argue, there is no need to impose an additional filing 

requirement.143 Dominion and EEI argue that there should be no mandatory filing unless 

 142 EPSA Comment at 23-25. EPSA’s argument that the filing of a contract 

affecting jurisdictional rates forces every party to the contract to become a jurisdictional 

public utility is erroneous and a misunderstanding of the law. See also NiSource 

Comments at 13. NiSource further states that it is opposed to the mandatory filing 

requirement, but if filing is made mandatory, such agreements should be filed for 

informational purposes only in the same manner as cash management agreements. 

143 Ameren Services (Ameren) Comments at 15-16, Entergy Comments at 14, 
Docket No. RM05-32-000 - 94 -

these agreements are relevant to Commission review of cost-allocation at the election of a 

holding company or a state commission pursuant to section 1275(b) of PUHCA 2005, or 

where they are relevant to a Commission rate proceeding. According to Dominion and 

EEI, there are no grounds for reopening all cost-allocation arrangements at this time by 

requiring that allocation agreements to be filed for review under section 205 of the FPA 

and section 4 of the NGA.144

148. Finally, Coral Power and Shell WindEnergy argue that holding companies that 

own only EWGs, FUCOs, and QFs and are not affiliated with traditional utilities with 

captive ratepayers should be exempted from the filing requirement. They argue that such 

entities typically sell energy at negotiated or market-based rates, not at cost-based rates, 

so there can be no issue of cost allocation when rates are not based on the generator’s 

costs, so that they cannot pass through excessive costs associated with affiliate 

transactions without pricing themselves out of the market.145

Commission Determination

149. We reject arguments that the Commission does not have the authority under the 

FPA to require public utilities that are members of a holding company system to file 

 

E.ON/LG&E Energy Comments at 19, EPSA Comments at 24-25, Scottish Power 

Comments at 9, Santa Clara Comments at 6-7. See also Energy East Comments at 14 

(arguing that cost-allocation methods are disclosed in the report on Form U-13-60, so 

there is no reason to require their filing in another context). 

144 Dominion Comments at 18-19, EEI Comments at 25-26. See also Alliant 

Comments at 6, Ameren Comments at 15, Scottish Power Comments at 9. 

145 Coral Power/Shell WindEnergy Comments at 12. 
Docket No. RM05-32-000 - 95 -

agreements involving the allocation of costs of non-power goods and services to public 

utilities and other members of the holding company. Clearly, if one or more of the public 

utility members of the holding company seeks to recover their share of the allocated costs 

in jurisdictional rates, the agreement is a contract affecting rates and may be reviewed by 

the Commission insofar as it pertains to jurisdictional rates. 

150. We also disagree with Entergy’s argument that, if the Commission were to require 

cost-allocation agreements affecting jurisdictional rates to be filed, this would be 

inconsistent with section 1275(b) of PUHCA 2005, which allows holding company 

systems or state commissions to obtain a Commission determination of appropriate cost 

allocations under such agreements. While the Commission has discretion under 

section 205(c) of the FPA to require contracts affecting jurisdictional rates to be filed 

(i.e., contracts affecting rates are to be filed within such time and in such form as the 

Commission may prescribe),146 and may on its own change cost allocations to 

jurisdictional companies that seek recovery of the costs in jurisdictional rates, we 

interpret section 1275(b) to require the Commission to make a cost-allocation 

determination if one is sought by the holding company system or the state commission.

151. The Commission will not mandate the blanket filing of cost-allocation agreements 

governing the costs of non-power goods and services purchased by jurisdictional public 

utilities from affiliated service companies under section 1275(b) of EPAct 2005. As 

discussed above, although we have the authority to require the filing of cost-allocation 

 146 16 U.S.C. § 824d(c) (2000). See also 15 U.S.C. § 717c(c) (2000). 
Docket No. RM05-32-000 - 96 -

agreements pursuant to our ratemaking authority under sections 4 and 5 of the NGA and 

sections 205 and 206 of the FPA, we do not find it necessary to do so in light of the 

requirement that traditional, centralized service companies (i.e., service companies that 

are not special-purpose companies such as a fuel supply company or a construction 

company) file relevant cost-allocation information on FERC Form No. 60. FERC Form 

No. 60 is a less burdensome method for collecting this information from service 

companies. Furthermore, where appropriate, we will rely on our ratemaking authority to 

examine these agreements or require them to be filed on an as-needed basis to determine 

whether the regulated utility’s purchases of non-power goods and services were prudently 

incurred and just and reasonable. 

152. We agree with the numerous commenters who express a desire to protect captive 

customers from inflated affiliate transactions. However, imposing a blanket requirement 

to file each cost-allocation agreement for non-power goods and services is not necessary 

to fulfill our jurisdictional responsibilities. Instead, we believe that the review of costallocation information contained in FERC Form No. 60 submissions by traditional, 

centralized service companies, review of service agreements and other information in the 

context of rate proceedings, and/or review of cost information through the audit function 

provide sufficient protection for customers. 

b. Inclusion of Natural Gas Companies under Section 1275(b) 

153. In the NOPR, we also noted that section 1275(b) provides that holding companies 

and state commissions may under certain circumstances require Commission review and 

authorization of cost allocations for non-power goods or services provided by service 
Docket No. RM05-32-000 - 97 -

companies to public utilities, but it does not provide for such determinations where such 

non-power goods and services are provided to gas utility companies and natural gas 

companies. We invited comments as to whether the Commission should recommend an 

amendment clarifying that holding company systems and state commissions having 

jurisdiction over gas utility companies and natural gas companies in the holding company 

systems are included within the scope of section 1275(b). 

Comments

154. Commenters were generally supportive of the Commission’s proposal in this 

regard. Dominion and EEI state that such a clarification would be appropriate with 

respect to holding companies with combined electric utility company and gas utility 

company systems because cost allocations in those systems will affect both types of 

companies and the inclusion of both in section 1275(b) would help ensure that a 

consistent approach is applied throughout the system.147 NARUC also supports the 

proposal, arguing that, since gas utility companies and natural gas companies are 

included in most of the other provisions of PUHCA 2005, their omission from section 

1275(b) impacts the Commission’s ability to prevent the cross-subsidization of affiliates 

of public utilities and natural gas companies, as well as effectively eliminating the prior 

review of the allocation of service company costs upon the request of state commissions 

 147 Dominion Comments at 19-20, EEI Comments at 26. See also Ameren 

Comments at 16, Cinergy Comments at 24-25, Energy East Comments at 12, Keyspan 

Comments at 5, NASUCA Comments at 3, Northeast Utilities Comments at 6, Oklahoma 

Corporation Commission Comments at 5. 
Docket No. RM05-32-000 - 98 -

and holding company systems to public utilities.148 In addition, NARUC recommends 

that gas-related agreements be filed with the Commission and that the Commission 

institute procedures for periodic audits, as discussed above in reference to the electric 

context.149 

155. Duke opposes the inclusion of natural gas companies under section 1275(b) 

because, unlike public utilities, natural gas companies are not subject to the ratemaking 

authority of state regulatory commissions, and therefore are not in danger of incurring 

trapped or otherwise unrecoverable costs as a result of conflicting state commission 

decisions.150

Commission Determination

156. In the report to Congress mandated by section 1272(2) of EPAct 2005, we intend 

to request that Congress clarify whether it intended section 1275(b) to include natural gas 

companies and, if so, to adopt a conforming amendment. As EEI and Dominion note, 

many holding company systems include both electric and natural gas companies, utilities, 

affiliates, and subsidiaries. Maintaining a consistent standard would add to transparency 

and reduce confusion. 

 148 NARUC Comments at 9-10. See also IURC Comments at 9-10, Ohio PUC 

Comments at 3-4. 

149 Id. at 10. 

150 Duke Comments at 5. See also NiSource Comments at 9. 
Docket No. RM05-32-000 - 99 -

c. Adoption of the SEC “At Cost” Standard

157. The SEC and state commissions previously have been primarily responsible for 

determining allocations of costs for non-power goods and services among the various 

associate companies in registered holding company systems, and these allocations have 

been made on an “at cost” basis. By contrast, the Commission’s long-standing policy is 

that registered holding company special-purpose subsidiaries must provide non-power 

goods and services to a public utility regulated by the Commission at a price no higher 

than market. For at least a decade, we have imposed this standard as a condition for 

approval of mergers that result in the creation of a new registered holding company.151 

We invited comments as to whether the Commission should apply the market standard 

for the allocation of costs for non-power goods and services, or if we should instead 

adopt the SEC at cost standard. 

Comments

158. The comments as to whether the Commission should adopt the SEC’s “at cost” 

standard were mixed, with a number of entities expressing general support for a lower of 

 151 See Inquiry Concerning the Commission’s Merger Policy Under the Federal 

Power Act: Policy Statement, Order No. 592, 61 FR 68595 (Dec. 18, 1996), FERC 

Stats. & Regs., Regulations Preambles July 1996-December 2000 ¶ 31,044 at 30,124-25 

(1996) (Merger Policy Statement), reconsideration denied, Order No. 592-A, 62 FR 

33341 (June 19, 1997), 79 FERC ¶ 61,321 (1997). Where the regulated public utility has 

provided non-power goods or services to the non-regulated affiliate, our policy has been 

that the public utility provides the goods or services at the higher of cost or market. 
Docket No. RM05-32-000 - 100 -

cost or market standard.152 APPA/NRECA argue that, first, with respect to purchases of 

goods and services by the public utility from a non-utility affiliate, a public utility should 

not pay to a non-utility affiliate a price exceeding what the public utility would have 

incurred had the public utility self-provided the service or purchased it prudently from an 

unaffiliated third party; similarly, if the affiliate can produce the good or service at a 

below-market price, presumably so can the public utility. APPA/NRECA assert that the 

pricing rule that supports these principles is the Commission’s market standard.153 

Second, with respect to the sale of goods and services by the public utility to the nonutility affiliate, APPA/NRECA contend that the price to the non-utility affiliate should be 

at no less than cost. According to APPA/NRECA, this rule follows from the public 

utility’s obligation to minimize its revenue requirement, and a standard of no less than 

cost removes any incentive for a public utility to “over acquire” resources and provide 

them at a price below cost to a non-utility affiliate.154 Finally, with respect to public 

utility provision of financial support to affiliated non-utility ventures, APPA/NRECA 

 152 See, e.g., Georgia PSC Comments at 3, NASUCA Comments at 10, Northeast 

Utilities Comments at 6 (Commission should also apply standard to construction 

activities), Santa Clara Comments at 10-12, TANC Comments at 10-12. 

153 APPA/NRECA Comments at 9. See also Arkansas PSC Comments at 3, 

Electricity Consumers Resource Council, et al. (ELCON) Comments at 6, Kentucky 

Public Service Commission (Kentucky PSC) Comments at 1, Missouri PSC Comments at 

11, NASUCA 10. 

154 Id. at 10. See also Arkansas PSC Comments at 3, Missouri PSC Comments at 

14, NASUCA Comments at 10. 
Docket No. RM05-32-000 - 101 -

note that section 12(c) of PUHCA 1935 prohibited a registered holding company from 

receiving any such benefit from a public utility subsidiary or any other subsidiary and 

urges the Commission to continue this prohibition.155 

159. APPA/NRECA note that the argument made for service companies is the 

efficiency of centralization, but argue that the use of such companies can do damage to 

auditability. The damage arises from the holding company practice, endorsed by the 

SEC, of charging service company costs to FERC Account 923—Outside Services. 

According to APPA/NRECA, what appears on the public utility’s books is not detail 

about each service company cost, but instead a single large charge representing the public 

utility’s allocated share of total service company cost. They further argue that the use of 

the Commission’s “Outside Services” account implies an arm’s-length relationship 

between the buyer of the outside services and the supplier; but in fact the relationship 

between service company and public utility is not at arm’s length. APPA/NRECA 

contend that the solution for this problem would be for the Commission to require an 

accounting process that treats the public utility operating company incurring these interaffiliate costs as if the public utility had incurred the costs directly. The public utility 

then would post the charges to the appropriate accounts (making sure to segregate the 

costs passed through by the service company from the public utility’s own directly 

 155 Id. at 10-11. See also Missouri PSC Comments at 15-16. 
Docket No. RM05-32-000 - 102 -

incurred costs), thereby facilitating oversight by the Commission and by outside 

auditors.156

160. NARUC supports a lower of cost or market standard, noting that the NARUC 

Guidelines state that: “Generally, the price for services, products and the use of assets 

provided by a non-regulated affiliate to a regulated affiliate should be at the lower of 

fully allocated cost or prevailing market prices. Under appropriate circumstances, prices 

could be based on incremental cost, or other pricing mechanisms as determined by the 

regulator.” Although the NARUC Guidelines call for more flexibility than was reflected 

in the NOPR, NARUC asserts that its position and the Commission’s standard for the 

allocation of costs for non-power goods and services are consistent.157

161. In their reply comments, Xcel and Progress Energy submit that there are a number 

of fallacies to the arguments in favor of the market standard. Xcel states that, first, if the 

affiliated service company charges for its services at cost, it does not and cannot profit 

from its activities. Second, the notion that at cost pricing could cause a utility to pay a 

service company more for services than it would otherwise incur is, as a practical matter, 

also wrong. Third, the underlying premise of service company formation is that such 

administrative and general activities can be performed more efficiently and at a less 

costly rate by a service company on behalf of a utility than a utility could perform the 

 156 APPA/NRECA Comments at 29. 

157 NARUC Comments at 20. 
Docket No. RM05-32-000 - 103 -

service for itself.158 Progress Energy contends that, typically, service companies provide 

administrative services such as tax, accounting, human resources, legal, information 

technology, finance and shareholder relations, which are materially different from other 

products or services needed by a utility such as fuel, vehicles, poles, transformers, etc. 

Specifically, the services provided by a service company are not fungible, and there is no 

market for such specialized services.159 

162. On the other hand, the majority of commenters favor the continued use of the 

SEC’s at-cost standard. Dominion and EEI argue that the Commission has not 

demonstrated the need to revise the current standards. They assert that the cost-allocation 

factors found in registered holding company system service agreements have been 

worked out in cooperation with both the SEC and the relevant state commissions, and 

that there is no evidence that the application of this standard has led to cross subsidization 

or other forms of abuse.160 MidAmerican emphasizes that public utilities have relied on 

the at cost standard as the basis for assigning the costs of non-power goods and services 

and that these costs may be subject to the provisions of an intercompany services 

agreement which has received state regulatory approval and have proven to work well.161 

 158 Xcel Reply Comments at 3-4. 

159 Progress Energy Reply Comments at 2. 

160 Dominion Comments at 17, EEI Comments at 22-23. See also Cinergy 

Comments at 21-22, Entergy Comments 9, E.ON/LG&E Energy Comments at 14, 

FirstEnergy Comments at 14, Keyspan Comments at 4, Progress Energy Comments at 3, 

Southern Company Services Comments at 4. 

161 MidAmerican Comments at 13-14. 
Docket No. RM05-32-000 - 104 -

In addition, Entergy argues that its existing retail rates are based on the at-cost standard 

and any changes will disrupt existing agreements and retail rate structures.162 MBIA 

Insurance, however, also asserts that many utilities have already committed to using a 

lower-of-cost or market standard as part of various mergers. It contends that holding 

companies already applying the lower of-cost-or-market standard for non-power goods 

and services should continue meeting this requirement and not disrupt pre-existing 

arrangements.163 

163. Dominion and EEI further argue that there is no need to revise these standards 

because the Commission can address this issue in ratemaking proceedings. Given the 

repeal of PUHCA 1935 and section 318 of the FPA, they assert that there is no longer an 

impediment to the exercise of the Commission’s powers under sections 205 and 206 of 

the FPA to disallow particular expenditures made at cost that the Commission finds to be 

imprudent.164 AEP adds that cost-based standards also have the benefit of being 

verifiable and easy to audit.165 

164. EEI further asserts that a market test can be difficult to apply for highlyspecialized goods or services because there is no market for the services supplied by a 

system service company and, thus, it can be extremely difficult to calculate a market 

 162 Entergy Comments at 9. See also Alliant Comments at 5-6, Keyspan 

Comments at 4, Progress Comments at 4. 

163 MBIA Comments at 17. 

164 Dominion Comments at 18, EEI Comments at 23-24. See also Cinergy 

Comments at 23, E.ON/LG&E Energy Comments at 14, Xcel Comments at 6. 

165 AEP Comments at 5. See also Cinergy at 23. 
Docket No. RM05-32-000 - 105 -

price for such services. None of these difficulties accompany the at-cost standard.166 

Similarly, MidAmerican argues that, by using cost, the public utility company or affiliate 

is not required to undertake a potentially lengthy and subjective process to ascertain what 

a market price would be for the non-power goods or service, which in many instances, 

such as the allocation of employee labor, is not readily available due to the variation in 

pay scales across the industry and the country.167 Moreover, EEI argues that there is a 

significant danger of under-recovery of costs under the Commission’s market standard 

where the service company's cost to provide a service is higher than market. Thus, while 

the at-cost standard keeps the service company whole, a lower of cost or market standard 

can lead only to under-recovery and an increase in the regulated utilities’ cost of 

capital.168 Finally, Oklahoma Corporation Commission opposes the adoption of the 

Commission’s market basis because it might impose additional costs on such entities due 

to potential requirements that companies enter into a competitive bidding processes, hire 

consultants, enter into special contracts, and use variable pricing structures based on the 

 166 EEI Comments at 23. See also Alliant Energy Corporation (Alliant) Comments 

at 5-6, Ameren Comments at 16, AEP Comments at 6, Cinergy Comments at 22, Energy 

East Comments at 13, Entergy Comments at 10, E.ON/LG&E Energy Comments at 14, 

FirstEnergy Comments at 15, Keyspan Comments at 4, Progress Energy Comments at 4, 

Southern Company Services Comments at 4, Xcel Comments at 6. 

167 MidAmerican Comments at 13. 

168 EEI Comments at 23. See also Ameren Comments at 15, AEP Comments at 6, 

Duke Comments at 4, Entergy Comments at 10, Energy East Comments at 13-14, 

FirstEnergy Comments at 14. 
Docket No. RM05-32-000 - 106 -

different services that are provided.169 Santa Clara responds that the at-cost standard 

allows the holding company to bill its utility affiliate for the total cost of the non-power 

goods or services, no matter how unnecessarily high the costs might be. Thus, the 

holding company has no incentive to minimize its costs.170 

165. Energy East and EPSA contend that the Commission lacks the authority to impose 

its pricing standard. Energy East asserts that the plain language of section 1275(b) 

indicates Congress’ intent that the Commission should retroactively review costs and 

then properly allocate them. Nothing in section 1275(b), argues Energy East, indicates 

that Congress intended that the Commission pre-approve the cost of non-power goods 

and services rendered to associated public utilities under a lower of cost or market pricing 

standard.171 EPSA argues that the Commission does not have authority under the FPA, 

NGA or PUHCA 2005 to approve the formation and corporate structure of any company 

in a holding company system, let alone companies that propose to provide services to 

holding company system companies. Thus, while the Commission has the authority to 

disallow a utility’s recovery in its jurisdictional rates of improper affiliate charges, the 

Commission does not have the authority to regulate transactions among non-utility 

affiliates by requiring at-cost pricing, and, therefore, has no authority to impose financial 

 169 Oklahoma Corporation Commission Comments at 5-6. 

170 Santa Clara Comments at 12. 

171 Energy East Comments at 12. 
Docket No. RM05-32-000 - 107 -

and complex accounting and reporting requirements to implement at-cost pricing.172 

166. Finally, some commenters suggest alternatives to switching to the SEC’s at-cost 

standard. Dominion argues that service companies that have been subject to the SEC atcost standard under PUHCA 1935 should be permitted to continue using that standard if 

they so elect.173 American Transmission Company recommends that the Commission 

establish a rebuttable presumption that cost equals market for those companies that can 

demonstrate that they have appropriate purchasing practices in force for those goods or 

services above a certain dollar amount.174 Entergy states that the Commission should not 

preclude holding company systems from deviating from the at-cost standard to the extent 

that such alternative pricing proposals are demonstrated to not result in inappropriate 

cross-subsidization of non-utility associate companies.175 IURC states that, while in most 

cases, the SEC’s fully-distributed cost may be appropriate, there will be instances where 

the market standard will be appropriate; specifically, where there is reasonable 

confidence that the market is sufficiently competitive to produce an unbiased competitive 

price. In the absence of a competitive market to determine the appropriate arm’s-length 

 172 EPSA Comments at 10-11. 

173 Dominion Comments at 17, EEI Comments at 22-23. See also Black Hills 

Comments at 4, Energy East Comments at 13, FirstEnergy Comments at 13, NiSource 

Comments at 14, Northeast Utilities Comments at 5, Southern Company Services 

Comments at 4. 

174 American Transmission Company Comments at 4. 

175 Entergy Comments at 10-11. 
Docket No. RM05-32-000 - 108 -

value for a specific transaction, incremental costs might be appropriate.176

Commission Determination

167. As an initial matter, some commenters appear to misconstrue the purposes of the 

Commission’s request for comments on the use of the SEC’s “at-cost” standard. 

Contrary to EPSA’s implication that the Commission seeks to approve the formation and 

corporate structure of companies within a holding company system, this was not the 

subject of the Commission’s proposal or request for comments. Rather, there are two 

circumstances in which the “at-cost” or “market” standard may arise in the context of the 

Commission’s jurisdictional responsibilities. First, the Commission has a responsibility 

to ensure that the costs of non-power goods and services provided by a traditional, 

centralized service company to public utilities within the holding company system are 

just, reasonable, and not unduly discriminatory or preferential. This can arise in the 

context of a review of the prudence of costs incurred when a public utility seeks to flow 

through the costs in jurisdictional rates or a general review of the justness and 

reasonableness of the public utility’s costs. It can arise in the context of an individual 

public utility within the holding company system or in the context of the appropriate nondiscriminatory allocation among multiple public utilities within the same holding 

company system.177 In reviewing centralized service company cost allocations, the 

 176 IURC Comments at 11. 

177 While the Commission would have authority to require pre-approval of nonpower goods and services cost allocations to public utilities that want recovery of such 

costs in Commission-jurisdictional rates, the Commission historically has not taken such 

an approach, and instead typically reviews such matters at the time the public utility files 
Docket No. RM05-32-000 - 109 -

Commission’s focus would be on the costs allocated to the jurisdictional public utilities, 

whether the jurisdictional public utilities are bearing their fair share of costs vis-à-vis the 

non-regulated affiliates (i.e., whether the non-regulated affiliates are receiving an undue 

preference), and whether costs are fairly allocated among public utilities. If the 

Commission disallowed costs to be allocated to public utilities or changed the allocation 

among multiple public utilities, this would not directly affect allocations to the nonjurisdictional, non-regulated companies. Our concern and jurisdictional responsibilities 

relate to how the costs are allocated to and among Commission-jurisdictional companies, 

not how remaining costs are allocated among the non-regulated affiliates. 

168. The second context in which the “at-cost” or “market” standard is likely to arise is 

when a service company that is a special-purpose company within a holding company 

(e.g., a fuel supply company or construction company), provides non-power goods or 

services to one or more public utilities in the same holding company system. The same 

potential issues arise: whether the public utility’s costs incurred in purchasing from the 

affiliate are prudently incurred and just and reasonable, and whether non-regulated 

affiliates purchasing non-power goods and services from the same special-purpose 

company are receiving preferential treatment vis-à-vis the public utility. The 

Commission in this context also, if it found costs were imprudent, unjust and 

unreasonable, or unduly discriminatory vis-à-vis the public utility, would develop a rate 

or remedy applicable to the jurisdictional public utility. 

 

for rate recovery. 
Docket No. RM05-32-000 - 110 -

169. With these two types of situations in mind – traditional, centralized service 

companies and service companies that are special-purpose companies – we reach the 

following conclusions based on the comments. The Commission will not require 

traditional, centralized service companies currently using the SEC’s at-cost standard to 

comply with the Commission’s market standard for their sales of non-fuel, non-power 

goods and services to regulated affiliates. Fundamentally, we agree with commenters 

such as American Transmission Company and Progress Energy that centralized provision 

of accounting, human resources, legal, tax and other such services benefits ratepayers 

through increased efficiency and economies of scale. Further, we recognize that it is 

frequently difficult to define the market value of the specialized services provided by 

centralized service companies. Accordingly, the Commission will apply a rebuttable 

presumption that costs incurred under “at cost” pricing of such services are reasonable. 

However, we will entertain complaints that “at cost” pricing for such services exceeds the 

market price, but complainants will have the burden of demonstrating that that is the case. 

170. We also agree with commenters such as Dominion and EEI that the Commission 

has the power to disallow any expenditures that it finds to be imprudent under 

sections 205 and 206 of the FPA, and sections 4 and 5 of the NGA. Additionally, the 
Docket No. RM05-32-000 - 111 -

audit function can be used to identify and protect against any cross-subsidization between 

regulated public utilities and non-regulated affiliates. 

171. With respect to non-power goods and services transactions between holding 

company affiliates other than traditional, centralized service companies, i.e., service 

companies that are non-regulated, special-purpose affiliates such as a fuel supply 

company or a construction company, we will continue our prior policies.178 First, with 

respect to sales from a public utility to a non-regulated, affiliated special-purpose 

company, we agree with APPA/NRECA that the price should be no less than cost, i.e., 

the higher of cost or market; otherwise, a public utility could attempt to game the system 

and forego profits it could otherwise obtain by selling to a non-affiliate, to the benefit of 

its non-regulated affiliate who receives a good or service at a below-market price. When 

the situation is reversed, i.e., the non-regulated, affiliated special-purpose company is 

providing non-power goods and services to the public utility affiliate, the Commission 

will continue to apply its market standard. The non-regulated, affiliated special-purpose 

company may not sell to its public utility affiliate at a price above the market price. We 

believe that such transactions involving such non-regulated, affiliated special-purpose 

 178 Our adoption of different policies for traditional, centralized service companies 

compared to special-purpose companies could make the distinction between the two more 

important than it has been previously. We view the former as performing generally 

corporate administration functions and the latter as providing generally a single input to 

utility operations, such as fuel supply, construction, or real estate. If holding companies 

are unclear about whether a subsidiary is a traditional, centralized service company or a 

special-purpose company, they may seek a determination in an appropriate proceeding. 

We will also monitor the issue through the auditing process. 
Docket No. RM05-32-000 - 112 -

companies pose a greater risk of inappropriate cross-subsidization and adverse effects on 

jurisdictional rates. 

172. APPA/NRECA note that section 12(c) of PUHCA 1935 prohibits a public utility 

from providing financial support to affiliated non-utility ventures, and they suggest that 

the Commission continue this prohibition through its regulations. Congress did not 

reenact this provision of PUHCA 1935 in PUHCA 2005, and, although we believe we 

have authority under the FPA and NGA to impose such a restriction, we do not believe 

such a restriction is necessary at this time. 

173. We find that APPA/NRECA raise some valid points concerning service company 

billings and how those amounts should be reflected in the accounts of a public utility 

company. However, resolution of this issue may have policy implications as well as 

practical accounting system implementation issues that should be explored more broadly 

than the record in this proceeding allows. Therefore, we decline to adopt at this time 

APPA/NRECA's recommendations on this issue. 

174. We disagree with Energy East and EPSA that section 1275 of PUHCA 2005 in 

any way restricts this Commission’s authority to impose either the market standard or the 

at-cost standard. By remaining silent on the standard to be employed, Congress has 

placed the matter squarely within the Commission’s discretion. Contrary to assertions by 

EPSA and others, the Commission is not exceeding its authority by establishing policies 

governing the sale or provision of non-power goods and services by a non-regulated 

company to an affiliated public utility. The standard used affects jurisdictional rates, and 

the Commission has the authority to establish a standard insofar as it pertains to 
Docket No. RM05-32-000 - 113 -

jurisdictional rates pursuant to its ratemaking authority under sections 205 and 206 of the 

FPA and section 4 and 5 of the NGA, as well as pursuant to the additional authority to 

review and authorize cost allocations requested under section 1275 of EPAct 2005. 

d. Other Issues Regarding Cost-Allocation Agreements

 Comments

175. APPA/NRECA assert that the language of proposed section 366.5(b) could be 

misinterpreted to mean that a company “organized specifically” for one purpose (say, 

providing legal services to the system’s utility members) and that later takes on other 

responsibilities (like providing accounting services to the system’s utility members) can 

escape review under this section (for example, at the request of a state commission). 

Such “after-acquired” functions should not preclude Commission review.179 Similarly, 

MBIA Insurance contends that, even if the non-utility associate exists primarily for 

another purpose, such as providing services to companies outside of the system, its intrasystem costs to regulated utilities should still be subject to the Commission’s review, if a 

state or holding company opts for Commission review. To the extent that the 

Commission believes it may lack the authority to adopt such a regulation, MBIA 

Insurance urges the Commission to ask Congress to clarify or grant the Commission this 

authority to protect customers and prevent regulatory gaps.180

 179 APPA/NRECA Comments at 8. See also Missouri PSC at 9. 

180 MBIA Insurance Comments at 18. 
Docket No. RM05-32-000 - 114 -

176. A number of commenters expressed concern about the potential preemptive effect 

of Commission review of cost-allocation agreements. In order to avoid any preemption 

issue, NARUC suggests that the filing of such agreements occur under section 304 of the 

FPA and section 10 of the NGA, instead of under section 205 of the FPA and section 4 of 

the NGA.181 Missouri PSC states that a Commission-approved allocation should bind 

Commission ratemaking but not state ratemaking, except in limited circumstances, and 

urges the Commission to make clear that a state commission is not preempted by any 

Commission-determined service cost allocation, whether the initiating entity is a holding 

company system or another state commission.182 In addition, Missouri PSC urges the 

Commission not to interpret section 1275(b) to permit gaming of the state commission 

retail ratemaking process by holding companies or state commissions, i.e., to permit state 

commissions or holding companies to petition the Commission to review and authorize a 

holding company system-wide cost-allocation methodology that would be imposed on all 

state commissions. Finally, Missouri PSC contends that an interpretation of section 

1275(b) giving Commission-approved cost allocations preemptive effect would also be 

contrary to the clear language contained within section 1275(c), which provides that: 

“Nothing in this section shall affect the authority of the Commission or a state 

commission under other applicable law.” Since state commissions have state law 

 181 NARUC Comments at 2. 

182 Missouri PSC Comments at 9. 
Docket No. RM05-32-000 - 115 -

authority to set retail rates, including authority to disallow purchase costs or sales prices 

deemed unreasonable or imprudent, section 1275(c) on its face protects the state 

commissions from any asserted preemptive effect of a Commission allocation under 

section 1275(b).183 

177. By contrast, Xcel and NiSource contend that any Commission-approved cost 

allocations under section 1275 will necessarily preempt state determinations. Xcel argues 

that it would negate the intent of Congress to give the Commission the authority to 

review these allocations if state commissions could undertake their own cost allocations 

and urges the Commission to avoid any kind of actions or statements that would support 

the argument that the preemptive effect of section 1275 is dependent on the form of filing 

of service agreements with the Commission.184 NiSource states that it fails to see how 

the Commission can approve service company cost allocations that will apply to entities 

across multiple states if one of these state commissions can then simply refuse to accept 

the Commission’s cost allocation as binding. For this reason, NiSource requests that the 

Commission needs to provide certainty in the final rule that a Commission-approved cost 

allocation is binding on the states.185

178. Dominion and EEI contend that the primary situation in which the Commission 

would need to impose a specific methodology would be a situation in which a multi-state 

 183 Id. at 11-12. See also Progress Energy Comments at 9. 

184 Xcel Reply Comments at 5-6. 

185 NiSource Reply Comments at 7. 
Docket No. RM05-32-000 - 116 -

holding company system finds that all state commissions do not approve a single 

allocation agreement. In such cases, the multi-state holding company system would 

apply to the Commission to impose consistent requirements that would eliminate the 

possibility of trapped costs.186 

Commission Determination

179. In response to APPA/NRECA’s concerns regarding the “organized specifically” 

language, we clarify that we do not interpret this to allow a cost allocation to escape 

review if the associate company later takes on additional responsibilities. In response to 

the comments from MBIA Insurance, the Commission has authority to review any intrasystem costs to any jurisdictional company under FPA and NGA authority. 

180. In response to the requests for clarification of the potential preemptive effect of 

section 1264 and the Commission’s regulations thereunder, we believe that issues related 

to preemption are more appropriately addressed on a case-by-case basis to give the 

Commission the opportunity to consider the potential preemptive effect of section 1264 

in specific circumstances. However, we anticipate that such issues would arise only in 

unusual circumstances. 

5. Single-State Holding Company Systems and Other Classes of Transactions

181. Section 1275(d) of EPAct 2005 directs the Commission to issue rules no later than 

four months after the date of enactment of EPAct 2005 to exempt from the requirements 

of section 1275 (service allocation requests by holding company systems or state 

 186 Dominion Comments at 18-19, EEI Comments at 25-26. 
Docket No. RM05-32-000 - 117 -

commission) “any company in a holding company system whose public utility operations 

are confined substantially to a single state” and any other class of transactions that the 

Commission finds are not relevant to the jurisdictional rates of a public utility. We 

interpreted this to exempt single-state holding companies and sought comments on how 

the Commission should define “confined substantially to a single state.” 

182. While section 1275(d) states that companies in single-state holding company 

systems are exempt from the “requirements” of section 1275, section 1275 does not 

impose any requirements on holding company systems or companies within these 

systems, but rather grants holding company systems and relevant state commissions the 

right to obtain Commission review and authorization of cost allocations. Instead, the 

only requirements in section 1275 are directed toward the Commission, in particular that 

“the Commission shall review and authorize” cost allocations if asked to do so by the 

holding company system or the relevant state commission. Based on the structure of 

section 1275, we suggested that the most reasonable interpretation of the exemption in 

section 1275(d) is that Congress intended to deny single-state holding company systems 

and state commissions having jurisdiction over a public utility in such systems the right 

to obtain Commission review of cost allocations pursuant to section 1275. Accordingly, 

we proposed to reflect this limitation by excluding single-state holding company systems 

from the scope of Commission review under section 366.5(b) of the Commission’s 

regulations. The Commission invited comments on this interpretation of section 1275(d). 
Docket No. RM05-32-000 - 118 -

a. Definition of Single-State Holding Company System Exemption

Comments

183. Some commenters agree with the Commission’s interpretation that 

section 1275(d) exempts single-state holding company systems whose public utilities 

operations are confined substantially to a single state (i.e., all of the holding companies’ 

public utility affiliates or subsidiaries operate principally in a single state), whereas other 

commenters (as discussed below) interpret the exemption to apply only to individual 

“companies” within the holding company system, i.e., where the individual public utility, 

operating primarily in a single state. 

184. A number of commenters who agree with the Commission’s interpretation also 

suggest various modifications to the scope of the single-state holding company 

exemption and propose definitions of the phrase “confined substantially to a single state.” 

EEI suggests that the Commission follow SEC practice and precedent in interpreting this 

exemption, in particular, section 3(a)(1) of PUHCA 1935 which provides an exemption 

for intrastate holding companies. According to EEI, under current SEC practice, a 

holding company will qualify for the intrastate exemption if it derives no more than 

approximately 13 percent of its utility revenues from out-of-state public utility company 

operations. EEI further suggests that, in administering this exemption, the Commission 

should follow current SEC practice and require the annual submission of information in 

Part 3 of Form U-3A-2 by companies seeking an exemption under section 1275(d).187 

 187 EEI Comments at 27-28. See also MidAmerican Comments at 11. 
Docket No. RM05-32-000 - 119 -

Scottish Power also agrees that Congress intended to deny single-state holding company 

systems and relevant state commissions the right to obtain Commission review of cost 

allocations pursuant to section 1275 and urges the Commission to clearly reflect this 

limitation by excluding single-state holding company systems from the scope of 

Commission review under section 366.5(b) of the Commission’s regulations.188

185. NARUC submits that the exemption should apply to any company in a holding 

company system whose public utility operations are confined substantially to a single 

state, rather than applying the exemption to the holding company system that is confined 

substantially to a single state. Thus, the relevant inquiry should involve an analysis of the 

extent to which the individual company operates in a single state rather than the extent to 

which the holding company system is predominately single-state in nature.189 NARUC 

further asserts that the Commission should follow the SEC’s interpretation of this singlestate holding company exemption under PUHCA 1935. Consistent with this precedent, 

NARUC proposes that, if a company in a holding company system whose public utility 

operation derives 70 percent or more of its gross utility operating revenues from within a 

single state, that individual company should be considered exempt from section 1275 and 

any related Commission regulations.190 NiSource supports the 70 percent threshold 

 188 Scottish Power Comments at 11. 

189 NARUC Comments at 12-13. 

190 Id. See also E.ON/LG&E Energy Comments at 18-19 (the standard should be 

whether 80 percent or more of the retail customers served by the public utilities in the 

holding company system are located within a single state). 
Docket No. RM05-32-000 - 120 -

because, first, it would be unusual for a traditional public utility that has its physical 

operations in one state to derive more than 30 percent of its gross utility operating 

revenues from outside that state. Second, NARUC’s proposed standard correctly captures 

the statutory language of section 1275(d); whereas the Commission’s proposed language 

in proposed section 366.5(c) of the NOPR is, at best, ambiguous.191 

186. Commenters also suggested revisions to the Commission’s proposed regulatory 

text in section 366.5. NiSource notes that the current language can be read so that a 

holding company with operations in multiple states falls under section 1275(b) even if its 

public utility is confined substantially (or entirely) to a single state. NiSource urges the 

Commission to modify the first sentence in section 366.5(c) to read that “any company in 

a holding company system whose public utility operations are confined substantially to a 

single state, as defined herein, is exempt from paragraph (b) of this section.”192 Santa 

Clara and TANC state that, in light of the complexities of effective state oversight and 

regulations of holding companies, the Commission should interpret the definition of 

single-state strictly and narrowly to prevent creeping variations from the letter and spirit 

of the exemption, and avoid a gap in effective regulation of multi-state utility holding 

company systems. Santa Clara and TANC therefore urge the Commission to reevaluate 

its interpretation of the single-state holding company exemption from Commission 

 191 NiSource Comments at 9. 

192 Id. NiSource further states that the final rule should make clear that section 

1275 applies only to traditional public utilities. In addition, if a traditional public utility 

engages in wholesale sales beyond its service territory, such sales should not render the 

utility subject to section 1275. 
Docket No. RM05-32-000 - 121 -

review under section 1275.193 Ameren argues that the focus of the term “confined 

substantially to a single state” should be on the state or states in which a holding 

company system is subject to retail rate regulation since there are no “captive” customers 

who could be harmed in a state where the public utility does not have cost-based rates.194 

Finally, Public Citizen contends that the single-state exemption requires that both a 

public utility and its holding company primarily operate in a single state, so that the state 

is capable of regulating the holding company, as well as the public utility, under state 

law.195

Commission Determination

187. Despite the ambiguous language of section 1275(d), we believe that the most 

reasonable interpretation of section 1275(b) and (d) together is that section 1275(b) is 

designed to offer this Commission as a forum for holding company systems and state 

commissions to obtain cost allocations within holding companies whose public utility 

operations are not confined substantially to a single state. Specifically, section 1275(b) is 

designed to allow multi-state holding companies, or the regulatory agencies of states in 

which the holding company’s public utility subsidiaries operate, to obtain Commission 

review and authorization of cost allocations. However, Congress in section 1275(d) does 

not permit single-state holding companies to take advantage of the procedures in 

 193 Santa Clara Comments at 14-15, TANC Comments at 14-15. 

194 Ameren Comments at 18. 

195 Public Citizen Comments at 13. 
Docket No. RM05-32-000 - 122 -

section 1275(b).196 This means that, if a holding company has several public utility 

subsidiaries operating in different states, even if the individual subsidiaries’ businesses 

are each confined substantially to a single state, the holding company itself does not 

confine its public utility operations to a single state, and therefore, the exemption does 

not apply. On the other hand, if the holding company has multiple non-utility 

subsidiaries operating in more than one state, but one or more public utility subsidiaries 

that all operate primarily in the same state, the exemption would apply. 

188. Several commenters agree that a holding company should be considered to be a 

single-state holding company if it complies with current SEC practice on granting a 

similar exemption under PUHCA 1935, which requires that a certain percentage of 

public-utility revenues be derived from operations within a single state. We believe it is 

reasonable to adopt a standard that is consistent with SEC rules and will define a singlestate holding company as one that does not derive more than 13 percent of its publicutility revenues from outside a single state. 

189. We agree with several commenters that the relevant analysis should be whether a 

holding company’s regulated public utility operations are confined substantially to a 

single state, not whether the holding company itself is confined substantially to a single 

state. As discussed above, we interpret the single-state holding company exemption in 

 196 With respect to NARUC’s alternative interpretation of the scope of this 

exemption, we note that the phrase “whose public utility operations are confined 

substantially to a single state” directly follows, and thus modifies, “holding company 

system” rather than “company.” This interpretation is consistent with the structure of 

section 1275(b) which provides the election to the holding company system, rather than 

individual companies within it. 
Docket No. RM05-32-000 - 123 -

section 1275(d) to apply in cases where a holding company has multiple non-utility 

subsidiaries operating in more than one state, but one public utility subsidiary that 

operates primarily in a single state. In such a case, the holding companies’ public utility 

operations would be subject to the jurisdiction of a single state commission, while the 

holding companies’ operations would not. Accordingly, we find that Public Citizen’s 

interpretation is inconsistent with the text of section 1275(d). 

b. Other Classes of Transactions That Should Be Exempted

190. In the NOPR, we concluded that an exemption under section 1275(d) forecloses 

Commission review under section 1275(b). In section 366.5(c) of the Commission’s 

regulations, we proposed to establish a procedure by which the Commission, either upon 

petition for declaratory order or upon its own motion, may exclude from the scope of 

Commission review and authorization under section 366.5(b) any class of transactions 

that we determine are not relevant to the jurisdictional rates of a public utility. The 

Commission invited comments as to other classes of transactions that, pursuant to 

section 1275(d), should be exempted from the requirements of section 1275. 

Comments

191. No comments were received on this subject. Accordingly, we will not at this time 

establish any blanket exemptions for certain classes of transactions. 

6. Previously Authorized Activities

192. Section 1271 of EPAct 2005 states essentially that a person may continue to 

engage in activities or transactions authorized by rule or order as of the date of enactment 

of EPAct 2005 if that person continues to comply with the terms of the authorization. In 
Docket No. RM05-32-000 - 124 -

the NOPR, the Commission proposed to reflect this statutory provision in section 366.6 

of the Commission’s regulations. The Commission also proposed to require that, if any 

such activities are challenged in a formal Commission proceeding, the person claiming 

prior authorization shall be required to provide the full text of any such authorization 

(whether by rule, order, or letter) and the application(s) or pleading(s) underlying such 

authorization (whether by rule, order, or letter). 

193. A number of commenters have noted that proposed section 366.6 states that 

persons will be able to continue to engage in activities or transactions authorized under 

PUHCA 2005, and that it should instead refer to PUHCA 1935. In response to the 

comments, we have corrected this error in the regulations adopted here. 

 Comments

194. The majority of the comments supported the Commission’s proposal to allow 

entities to rely on SEC orders, in particular, SEC financing authorizations.197 For 

example, Dominion and EEI note that, with the repeal of section 318 of the FPA, many 

additional public utilities will become subject to Commission jurisdiction under 

section 204 and that, unless registered holding company public utility subsidiaries can 

rely on their current SEC orders, it will be necessary for them to apply immediately for 

Commission authorization under section 204 of the FPA. According to Dominion and 

EEI, this would create a substantial burden for the holding companies and their public 

utility subsidiaries and could also lead to a surge in section 204 applications at precisely 

 197 See, e.g., Cinergy Comments at 25-27, FirstEnergy Comments at 16-17, 

National Grid Comments at 7-8, Scottish Power Comments at 12, Xcel Comments at 6. 
Docket No. RM05-32-000 - 125 -

the time that the Commission is burdened with implementing its new duties under EPAct 

2005. Dominion and EEI thus recommend that the Commission in its rulemaking make 

a finding under section 204 of the FPA authorizing holding company public utility 

subsidiaries, at their option, to issue securities and assume liabilities following the 

effective date of PUHCA 2005, provided that they comply with the terms of their SEC 

financing authorization. Dominion and EEI further recommend that this authorization 

continue through the later of December 31, 2007 or the date on which the SEC order is 

set to expire.198 

195. EEI further suggests that, to the degree it deems necessary, the Commission could 

condition its acceptance of SEC financing authorizations on specific requirements related 

to the provisions of FPA section 204, such as the restrictions on secured and unsecured 

debt set forth in Westar Energy, Inc.199 However, if the Westar or other conditions are 

imposed, EEI contends that they should apply prospectively only and not to securities 

issued prior to February 8, 2006.200 

196. Entergy supports the Commission’s proposed interpretation of the savings 

provision in section 1271, but asserts that there are several technical concerns regarding 

the manner in which the proposed rule is drafted that, if not corrected, may prevent the 

rule from achieving its intended purpose. Entergy urges the Commission to clarify the 

 198 Dominion Comments at 20-21, EEI Comments at 29-30. 

199 102 FERC ¶ 61,186 (2003), order rescinding authorization, 104 FERC ¶ 61,018 

(Westar). 

200 EEI Comments at 30. 
Docket No. RM05-32-000 - 126 -

condition in the proposed rules insofar as it provides authority to continue to engage in 

“activities or transactions” approved by the SEC “[u]nless, otherwise provided by 

Commission rule or order.” Entergy inquires if, for example, a Commission section 204 

financing order imposes a condition that is not present in an existing SEC financing order 

issued to another public utility under PUHCA 1935, can the other public utility continue 

to rely on its PUHCA 1935 order or is the applicability of the saving provision negated 

by the referenced condition? Similarly, Entergy asserts that there may be a question 

whether the “unless otherwise provided language” will necessitate compliance with the 

requirements of Part 34 of the Commission’s regulations or other regulatory conditions or 

requirements adopted by the Commission, to the extent that such requirements are absent 

from an existing PUHCA 1935 financing order (which otherwise would continue in effect 

beyond the PUHCA 1935 repeal date as a result of the saving provision).201 

197. Entergy also seeks clarification as to the statement in the NOPR that existing 

PUHCA 1935 authorizations are to remain “in effect for the period of time provided in 

such authorization” with respect to authorizations that do not contain a specified 

expiration date, in particular, orders authorizing creation of service companies, which 

typically do not reference any expiration date. Entergy recommends that authorizations 

granted by the SEC under PUHCA 1935 should remain in effect after repeal, unless and 

until such time as such authorization would otherwise expire under the applicable 

PUHCA 1935 order, rule or statutory provision, or until such time as the Commission 

 201 Entergy Comments at 12-13. 
Docket No. RM05-32-000 - 127 -

issues a new order expressly modifying the authorization previously granted to the 

applicable company by the SEC under PUHCA 1935.202 

198. Finally, Entergy requests clarification of the statement in the NOPR that such 

authorizations will remain effective only “so long as that person continues to comply 

with the terms of such authorization.” According to Entergy, many orders issued by the 

SEC require periodic reporting to the SEC of financing transactions that are 

consummated pursuant to the authorization set forth in the order, so the question arises as 

to whether such reporting requirements will be considered “terms” of the PUHCA 1935 

authorization that must be satisfied in order to continue to engage in the SEC-approved 

financing transactions subsequent to the February 8, 2006. Entergy requests that the 

Commission clarify that following February 8, 2006, such reports (originally required to 

be filed with the SEC pursuant to Rule 24, adopted under PUHCA 1935) are to be filed 

with the Commission, rather than with the SEC.203

199. PacifiCorp requests that the Commission clarify that SEC financing authorizations 

will be preserved for a sufficient period of time to permit a reasonable transition period 

(through December 31, 2007) to the requirements of section 204 for both utilities and the 

Commission. PacifiCorp further requests that the Commission provide a mechanism for 

such further approvals until February 8, 2006, and to preserve tax treatment by retaining 

 202 Id. at 13-14. 

203 Id. See also NiSource Comments at 14-15 (the Commission should clarify that 

only the SEC’s conditions and terms apply, unless the Commission states otherwise in a 

specific order).
Docket No. RM05-32-000 - 128 -

the right of holding companies to avail themselves of Internal Revenue Code section 

1081, which section 1271 also preserves.204 

200. MGTC requests that the Commission clarify that prior status determinations by the 

SEC remain valid and are grandfathered by the operation of section 1271, so that, for 

example, if a person was declared not to be a “gas utility company” by the SEC, and the 

facts on which that determination was made have not materially changed, that person will 

not be a “natural gas company” under PUHCA 2005 and implementing regulations. 

MGTC further contends that, if the Commission is not willing at this time to issue a 

broad declaration that prior SEC status determinations are grandfathered by section 1271, 

the Commission should nonetheless hold that a person that the SEC found was not a “gas 

utility company” under PUHCA 1935 will not be required to comply with the 

Commission’s new regulations until the Commission makes an affirmative finding that 

the person is a “natural gas utility” under PUHCA 2005.205 

201. Northeast Utilities Service Company (Northeast Utilities) notes that some 

registered holding companies may have obtained amendments to existing SEC orders or 

new orders after August 8, 2005, i.e., date of enactment of EPAct 2005, and thus urges 

the Commission to make clear that such modified and/or new orders should also be 

grandfathered, if possible.206

 204 PacifiCorp Comments at 7-8. 

205 MGTC Reply Comments at 1, 4. See also Mittal Steel Reply Comments at 2-5. 

206 Northeast Utilities Comments at 6. 
Docket No. RM05-32-000 - 129 -

202. Some commenters, however, emphasized that section 1271 of EPAct 2005 does 

not insulate activities previously approved by the SEC from Commission review under 

the FPA or NGA.207 According to APPA/NRECA, the savings provision in section 

1271(a) of EPAct 2005, which allows entities with SEC approvals to continue engaging 

in the transactions so approved, does not diminish the Commission’s authority to 

establish conditions that ensure just and reasonable rates under the FPA or NGA.208 

APPA/NRECA further emphasize that any interpretation of section 1271(a) that would 

limit the Commission’s ability to review the effect of particular activities or transactions 

on Commission-jurisdictional rates would be inconsistent with section 1271(b), which 

makes clear that section 1271(a) does not circumscribe in any way the Commission’s 

regulatory authority under the FPA and the NGA.209 Similarly, Santa Clara notes that it 

might be argued that a conflict between section 1271(a) and 1271(b) arises when SEC 

rules under PUHCA 1935 require different or less rigorous standards than the 

Commission’s rules under the FPA, e.g. SEC at-cost standard vs. the Commission’s 

market standard. Santa Clara urges the Commission to clarify that all activities, 

including those previously authorized by the SEC and the Commission itself, are subject 

 207 See, e.g., Arkansas PSC Comments at 7, Missouri PSC Comments at 14-15. 

208 APPA/NRECA Comments at 4. See also Santa Clara Comments at 17, TANC 

Comments at 17. 

209 Id. at 13-14. 
Docket No. RM05-32-000 - 130 -

to review, rules, regulations and policy administered independently by the Commission 

under the FPA.210

203. Finally, Oklahoma Corporation Commission suggests that the Commission should 

amend proposed section 366.6 to include language that clearly articulates that said person 

or entity should also bear the burden of proof that that person or entity has complied with 

the rule, order, or letter.211

Commission Determination

204. In the NOPR, we noted that the repeal of PUHCA 1935 and section 318 of the 

FPA would give the Commission jurisdiction under section 204 of the FPA over certain 

issuances of securities and assumptions of liabilities by companies within holding 

company systems that are currently subject to the jurisdiction of the SEC. Furthermore, 

Congress expanded the Commission’s jurisdiction over holding company acquisitions of 

securities through its amendments to section 203 of the FPA in section 1289 of EPAct 

2005. Finally, Congress explicitly stated in section 1271(b) that nothing in PUHCA 2005 

limits the Commission’s authority under the FPA and the NGA. Thus, it is clear that in 

EPAct 2005 Congress intended to preserve, and in some ways expand, the Commission’s 

authority over issuances of securities, assumptions of liabilities by companies within 

holding company systems, and holding company acquisitions of securities. However, 

Congress also included in PUHCA 2005 a transition provision, which allows persons to 

 210 Santa Clara Comments at 18-19. 

211 Oklahoma Corporation Commission Comments at 7. 
Docket No. RM05-32-000 - 131 -

continue to rely on previously-granted SEC authorizations. 

205. We will adopt section 366.6 as proposed in the NOPR and allow entities to 

continue to rely on SEC orders, including SEC financing authorizations. We will also 

grant a number of the clarifications with respect to SEC financing authorizations 

requested by commenters. However, the Commission will require all holding companies 

that intend to rely on their SEC financing authorizations to issue securities, assume 

liabilities, or engage in securities transactions that would otherwise be reportable under 

section 203 of the FPA, as amended by EPAct 2005, or section 204 of the FPA to file 

with the Commission a copy of these SEC orders by the effective date of PUHCA 2005. 

The filing of these orders will permit the Commission to maintain effective oversight of 

the previously-authorized activities and transactions that, due to the repeal of PUHCA 

1935, are now subject to the Commission’s jurisdiction under the FPA. 

206. Section 1271(a) states that nothing in PUHCA 2005 or PUHCA 1935 and the 

rules, regulations, and orders thereunder, prohibits a person from engaging in or 

continuing to engage in activities or transactions in which it is legally engaged or 

authorized to engage on the date of enactment of PUHCA 2005, if that person continues 

to comply with the terms (other than an expiration date or termination date) of any such 

authorization. This provision, and section 366.6 of our regulations that we adopt herein, 

permit persons to rely on the SEC multi-year financing authorizations for the period of 

time provided in that authorization. Accordingly, we clarify that, to the extent companies 

in a holding company system engage in authorized financing transactions, in compliance 

with the terms of that authorization, we will not require those entities to seek additional 
Docket No. RM05-32-000 - 132 -

authorization under sections 203 or 204 at this time. 

207. We find that EEI’s concerns regarding Westar are beyond the scope of this 

rulemaking and, therefore, we will not address them here. Instead, the Commission will 

consider whether to place Westar conditions upon future applications on a case-by-case 

basis.

208. Section 1271(a) permits a person to engage in previously-authorized activities if 

that person continues to comply with the terms of that authorization, other than an 

expiration date or termination date. We agree that it is necessary to provide a reasonable 

transition period for entities subject to the requirements of PUHCA 2005 and, therefore, 

we agree with Dominion and EEI that these authorizations should continue through the 

later of December 31, 2007 or the date on which the SEC order is set to expire and with 

PacifiCorp that section 204 authorizations should not be required until December 31, 

2007, without regard to the duration of the SEC authorization. We conclude that it is 

reasonable to permit entities to rely on their SEC financing authorizations for the period 

of their duration or through December 31, 2007, whichever is later. Similarly, with 

respect to Entergy’s request for clarification regarding authorizations for the formation of 

service companies, which do not have a termination date, we conclude that PUHCA 2005 

does not grant the Commission authority over service company formation and thus 

Commission authorization is not required. 

209. We will also grant Entergy’s clarification that, after the effective date of PUHCA 

2005 (i.e., February 8, 2006), for SEC orders that require periodic reporting to the SEC of 

financing transactions that are consummated pursuant to the authorization set forth in the 
Docket No. RM05-32-000 - 133 -

order, such reports are to be filed with the Commission, rather than with the SEC, so long 

as the company continues to rely on such authorization. We do not think it is reasonable 

to assume that Congress intended to carry forward the SEC’s financing authorizations 

without the specific reports required to be submitted as a condition of those 

authorizations. More importantly, the receipt of such reports will allow the Commission 

to perform its oversight duties, while allowing the entities to continue to rely on these 

SEC financing authorizations for a reasonable transition period.

210. PacifiCorp appears to be requesting that the Commission grant further financing 

approvals under PUHCA 1935 until February 8, 2006, since it could not do so under 

PUHCA 2005, which does not take effect before that date. While the Commission has no 

authority to take any action under PUHCA 1935, which was entrusted to the SEC, to the 

extent necessary to permit continuity of financing authorizations or to preserve tax 

treatment referenced in section 1271(c) of PUHCA 2005,212 the Commission will 

entertain requests for financing approvals prior to February 8, 2006, but will be able to 

make any such approvals effective only upon the effective date of PUHCA 2005, 

February 8, 2006. 

211. As noted, section 1271(c) explicitly states that tax treatment under section 1081 of 

the Internal Revenue Code of 1986 as a result of transactions ordered in compliance with 

PUHCA 1935 shall not be affected in any manner due to the repeal of PUHCA 1935 and 

 212 Section 1271(c) of PUHCA 2005 states that such tax treatment shall not be 

affected in any manner due to the repeal of PUHCA 1935 and enactment of PUHCA 

2005. 
Docket No. RM05-32-000 - 134 -

the enactment of PUHCA 2005, and we will comply with this provision insofar as such 

tax treatment is reflected in jurisdictional rates or in the Commission’s Uniform System 

of Accounts and the SEC’s Uniform System of Accounts, as they exist on the day before 

the date of enactment of PUHCA 2005. 

212. We will also grant Northeast Utilities’ request that section 1271 will apply to 

modifications of SEC orders made between the date of enactment and the effective date 

of PUHCA 2005. 

213. We will also grant the clarification requested by APPA/NRECA and others that 

transactions entered into pursuant to prior SEC authorizations are not insulated from 

Commission review under the FPA and the NGA. Previously, certain securities 

transactions were exempted from Commission jurisdiction due to section 318 of the FPA, 

which Congress has repealed. While we agree that section 1271(a) permits companies 

within holding company systems to continue to rely on SEC financing authorizations, this 

authorization simply permits them to engage in such transactions without prior 

Commission approval under sections 203 and 204 of the FPA, but does not insulate them 

from our review of jurisdictional rates under sections 205 and 206 of the FPA and 

sections 4 and 5 of the NGA.

214. We will not adopt Oklahoma Corporation Commission’s suggestion that we 

amend section 366.6 to include language that clearly articulates that said person or entity 

should also bear the burden of proof that that person or entity has complied with the rule, 

order, or letter. We find that such an amendment is unnecessary at this time. 
Docket No. RM05-32-000 - 135 -

7. Exempt Wholesale Generators and Foreign Utility Companies

215. EPAct 2005 repeals PUHCA 1935 in its entirety, including section 32, which 

requires the Commission to make EWG determinations on a case-by-case basis, upon 

application. Although the definitional section of PUHCA 2005 references section 32 of 

PUHCA 1935, the Congress nevertheless repealed section 32 in its entirety and did not 

re-enact that provision in the new PUHCA 2005. The Commission stated in the NOPR 

that it believed that the most reasonable interpretation of EPAct 2005, given the omission 

of section 32 in the new PUHCA 2005, is that Congress did not intend the Commission to 

continue to make case-by-case determinations of EWG status in the future (i.e., after the 

effective date of PUHCA 2005). Rather, we stated in the NOPR that the most reasonable 

interpretation of the statute is that only those entities that are holding companies with 

respect to persons granted EWG status before the repeal of PUHCA 1935 would qualify 

for an exemption from the new federal books and records access requirements under 

proposed section 366.3(a)(2) of the Commission’s regulations. Accordingly, we 

proposed to remove Part 365 of the Commission’s regulations, which set forth the filing 

requirements and ministerial procedures for persons seeking EWG status under 

section 32 of PUHCA 1935, and we invited comments on whether we should do so. 

216. We further noted that the benefit of EWG status under PUHCA 1935 was that 

entities that the Commission determined to have met the definition of EWG were 

exempted from the myriad requirements of PUHCA 1935. The principal benefit of being 

an EWG under PUHCA 2005 is exemption from the new federal books and records 

access requirements. To the extent that these new federal books and records access 
Docket No. RM05-32-000 - 136 -

requirements add to the Commission’s existing very broad books and records access 

authority under FPA section 301 and NGA section 8, we concluded that our interpretation 

served to err on the side of greater customer protection. 

217. We also noted that, in any event, entities that qualified as EWGs under PUHCA 

1935 were not exempted from the Commission’s authority under the FPA if they met the 

FPA definition of “public utility,” including the very broad access to books and records 

provisions of FPA section 301. Nor will they be exempt from these FPA provisions as a 

result of PUHCA 2005. 

218. In addition, we noted that Congress repealed section 33 of PUHCA 1935, which 

addresses FUCOs. As with EWGs, we stated our belief that Congress intended to limit 

the exemption for persons that are holding companies with respect to FUCOs to those 

attaining FUCO status before repeal of PUHCA 1935. The Commission invited 

comments as to this interpretation of EPAct 2005. 

Comments

219. Some commenters expressed support for the Commission’s decision to no longer 

make determinations of EWG status. These commenters note that, while Congress 

repealed the section of PUHCA 1935 addressing EWGs, the exemption in subsection 

1266(a)(2) refers to these repealed designations, they have to apply to something, and 

they agree with the Commission’s position that the exemptions must apply only to the 

existing EWGs and FUCOs.213 Public Citizen agrees that grandfathered EWGs have a 

 213 APPA/NRECA Comments at 21, Georgia PSC Comments at 3, Santa Clara 

Comments at 18, TANC Comments at 18. 
Docket No. RM05-32-000 - 137 -

reliance argument for maintaining their status, but disagrees with extending such 

grandfathering to new entities that are now aware that the distinction no longer exists. 

Furthermore, Public Citizen states that grandfathered EWGs must continue to comply 

with EWG requirements to maintain their grandfathered EWG status and that they should 

be required to make an annual filing with the Commission stating how each continues to 

comply with the original terms of its EWG or FUCO exemptions.214

220. The majority of commenters, however, opposed the Commission’s proposal to 

stop making determinations of EWG status as contrary to Congress’ intent and the plain 

meaning of the statute.215 According to Calpine, by incorporating the definition of EWG 

into PUHCA 2005 and relying on that definition to permit holding companies with 

respect to only EWGs, QFs, and/or FUCOs to be exempt from the federal books and 

records access requirement, Congress recognized the continuing need for EWG 

determinations after the repeal of PUHCA 1935 takes effect; nowhere in EPAct 2005 is 

the exemption limited to holding companies with EWGs prior to the repeal of PUHCA 

1935 takes effect. Calpine thus contends that, if Congress wanted to restrict EWG 

determinations to a certain time period, it knew how to do so, but chose not to.216 

Similarly, Dominion and EEI argue that, by preserving the meaning of the term “exempt 

 214 Public Citizen Comments at 5. 

215 See, e.g., Coral Power/Shell Windenergy Comments at 8, EPSA Comments at 

16-17, Goldman Sachs Comments at 5, PPM Energy Comments at 3-4. 

216 Calpine Comments at 5-6 (quoting section 1253(a) of EPAct 2005 defining 

“existing qualifying cogeneration facility”). 
Docket No. RM05-32-000 - 138 -

wholesale generator” found in PUHCA 1935, Congress in essence preserved 

section 32(a) of PUHCA 1935, which defines an EWG, in part, as a company that the 

Commission determines to be an EWG. Thus, according to Dominion and EEI, the 

Commission’s case-by-case determination process is incorporated directly in the 

definition.217 Morgan Stanley argues that the Commission’s interpretation effectively 

renders superfluous the EWG exemption contained in EPAct 2005.218

221. Other commenters believe that the Commission’s interpretation is not a 

permissible one because the decision to eliminate Part 365 and future EWG 

determinations would produce unreasonable or unduly discriminatory results. Calpine 

argues that, under the Commission’s interpretation of the statute, if Calpine added one 

more wholesale generator that would have been an EWG under Part 365, Calpine and its 

subsidiaries will lose the exemption and thus it is not reasonable for the addition of one 

wholesale generator that is identical to Calpine’s EWG affiliates in every respect but one 

(i.e., EWG status), to result in all of these companies and their affiliates being subject to 

the books and records access requirements and SEC rules, particularly when these 

companies were exempt from regulation under PUHCA 1935 and have no captive 

customers in need of protection.219 Further, Calpine asserts that the use of proposed 

section 366.3(b), which would provide for entities to file for a petition for a declaratory 

 217 Dominion Comments at 22-23, EEI Comments at 32. 

218 Morgan Stanley Comments at 7. 

219 Calpine Comments at 6. See also Coral Power/Shell WindEnergy Comments at 

8. 
Docket No. RM05-32-000 - 139 -

order that they are exempt from the Commission’s books and records requirements, is not 

an adequate alternative for Calpine due to the high costs of filing such petitions.220 

Morgan Stanley further argues that comments supporting the Commission’s proposed 

deletion of Part 365 offer no substantive basis for why such a course of action comports 

with legislative intent, nor do they explain how it will not chill investor confidence or 

dissuade capital from entering the wholesale generation sector.221 Finally, Dominion and 

EEI note that a number of states provide exemptions from state laws based on EWG 

status and that failure to make additional EWG determinations would also deprive those 

companies of the benefits of those laws.222

222. With respect to determinations of FUCO status, Calpine disagrees with the 

Commission’s proposal in the NOPR. Calpine asserts that, by incorporating the 

definition of FUCO into PUHCA 2005 and relying on that definition to permit holding 

companies with respect to only EWGs, QFs, and/or FUCOs to be exempt from the federal 

books and records access requirement, Congress recognized the continuing need for 

FUCOs after the repeal of PUHCA 1935 takes effect. As with EWGs, Calpine contends 

that it is not reasonable for the addition of a single foreign subsidiary having no potential 

to impact the operations of its domestic affiliates to subject such affiliates to the books 

 220 Id. at 10-11. 

221 Morgan Stanley Reply Comments at 2-3. 

222 Dominion Comments at 23, EEI Comments at 33. 
Docket No. RM05-32-000 - 140 -

and records access requirement and the SEC rules when they were not subject to such 

rules under PUHCA 1935.223

223. EEI proposes that the Commission should exempt FUCOs from the requirement 

that they maintain their books and records under proposed Rule 366.2(e), but that they 

otherwise should be subject to the books and records access provisions of section 366.2 

of the Commission’s proposed regulations. According to EEI, the Commission should 

continue to have access to FUCO records to the extent that such records are relevant to 

the costs incurred by a public utility or natural gas company that is an associate of a 

holding company and necessary and appropriate for the proper exercise of the 

Commission’s statutory charge under the FPA and NGA with respect to jurisdictional 

rates.224 

224. Some commenters suggested that the Commission should adopt a self-certification 

process similar process to that used by the SEC. For example, Scottish Power argues that 

FUCOs that operate exclusively outside of the US should not be subject to Commission 

oversight. The Commission should continue the SEC’s practice of allowing for the 

creation of FUCOs by submittal of a notice filing. FUCOs and their subsidiary 

operations are generally separate from that of the domestic utility operations and 

 223 Calpine Comments at 8-9. See also EPSA Comments at 16-17, PPM 

Comments at 3. 

224 EEI Comments at 34. See also National Grid Comments at 5-8. National Grid 

also argues that extending the Commission’s books and records mandates to FUCOs 

would subject them to conflicting mandates resulting in maintaining separate duplicative 

books and inappropriately expand the extraterritorial impact of PUHCA 2005 without 

any benefit to U.S. consumers. 
Docket No. RM05-32-000 - 141 -

therefore would not bear in any way on the jurisdiction rates of such utility company.225

Commission Determination

225. Having again reviewed the ambiguities in statutory construction, and balancing the 

facts that Congress repealed section 32 of PUHCA 1935 in its entirety, yet referred to 

section 32 in the definitional sections of PUHCA 2005, we conclude that it is reasonable 

to interpret PUHCA 2005 to allow entities to obtain EWG status under PUHCA 2005. 

However, we will reject the requests from various commenters that we retain part 365 of 

our regulations, which permit only case-by-case applications for EWG status. 

226. Instead, in line with the comments received from Scottish Power and others, we 

will establish a self-certification process for companies that believe they satisfy the 

criteria for EWG or FUCO status. This process is similar to that used for selfcertifications for QFs under the Public Utility Regulatory Policies Act of 1978, and is set 

forth in section 366.7. Section 366.7(a) provides that the owner or operator of an EWG 

or FUCO, or its representative, may file with the Commission a notice of selfcertification demonstrating that it satisfies the definition of EWG or FUCO. In the case 

of EWGs, the owner or operator must also file a copy of the notice with the state 

regulatory authority of each state in which the facility is located. Notices of selfcertification or self-recertification will be published in the Federal Register. An entity 

filing a good faith notice of self-certification of EWG or FUCO status will be deemed to 

have temporary status upon filing. If no action is taken by the Commission within 60 

 225 Scottish Power Comments at 14. See also EEI Comments at 34, Public Citizen 

Comments at 6. 
Docket No. RM05-32-000 - 142 -

days after the date of filing of a self-certification notice, the exempt wholesale generator 

status or foreign utility company status shall be deemed to have been granted. The Office 

of the Secretary will periodically issue notices listing the entities whose self-certification 

of EWG or FUCO status is deemed to have been granted in the absence of Commission 

action to the contrary within 60 days after the date of filing. We believe that such a selfcertification of EWG and FUCO status will be adequate in the vast majority of cases. 

227. For entities that require a higher degree of legal certainty as to their status, we will 

permit them to seek a Commission determination of their EWG and FUCO status as 

defined under section 366.1 of the Commission’s regulations. Specifically, section 

366.7(b) provides that they may seek such a determination by filing a petition for 

declaratory order pursuant to Rule 207(a) of the Commission’s Rules of Practice and 

Procedure justifying the request for EWG or FUCO status. These petitions will be 

noticed in the Federal Register. A person filing a petition for declaratory order in good 

faith will be deemed to have temporary EWG or FUCO status until the Commission takes 

action to grant or deny the petition. 

228. The self-certification procedure established herein, along with the continued 

availability of Commission determinations of EWG and FUCO status, ensures that the 

EWG and FUCO exemptions will continue to be available to any persons who satisfy the 

statutory criteria. Moreover, we note that the self-certification procedures established 

herein, and advocated by various commenters, are less burdensome than the procedures 

established under section 32 of PUHCA 1935. 

229. We disagree with commenters such as Calpine and EEI who argue that Congress, 
Docket No. RM05-32-000 - 143 -

by incorporating the definition of EWGs and FUCOs into PUHCA 2005, carried over the 

requirement from PUHCA 1935 that the Commission make case-by-case determinations 

of EWG status. This argument appears to rest on the erroneous assumption that Congress 

effectively reenacted (only) section 32(a) of PUHCA 1935. Had Congress meant to do 

so, it could have simply so stated in PUHCA 2005; alternatively, it could have imported 

the text from section 32(a) of PUHCA 1935, with appropriate modifications, into section 

1262(6) of EPAct 2005, as it did for many of the other definitions carried over from 

PUHCA 1935. Instead, however, Congress directed that “[t]he terms ‘exempt wholesale 

generator’ and ‘foreign utility company’ have the same meanings as in section 32 and 33” 

of PUHCA 1935 as they existed on the day prior to the date of enactment of EPAct 2005. 

We believe it is a reasonable interpretation that, even if Congress preserved the option of 

EWG status determinations going forward, it did not prescribe the procedural mechanics 

requiring a case-specific Commission ruling on what it means for a person “to be 

engaged directly, or indirectly through one more affiliates ..., and exclusively in the 

business of owning or operating, all or part of one more eligible facilities and selling 

electric energy at wholesale.” Thus, we conclude that, by repealing section 32 of 

PUHCA 1935, Congress left to the Commission the discretion to prescribe the procedures 

for obtaining EWG status. 

230. As noted earlier, with respect to FUCOs, section 33 of PUHCA 1935, as amended 

by EPAct 1992 provided that FUCOs would be exempt from PUHCA 1935 and not 

deemed an electric utility company, but the exemption would not apply or be effective 

unless relevant state commission(s) certified that they had the authority and resources to 
Docket No. RM05-32-000 - 144 -

protect ratepayers of public utility companies associated or affiliated with the FUCO. 

Given that PUHCA 2005 is largely a books and records statute, we will waive our 

accounting and reporting requirements for FUCOs. However, we will not exempt them 

from section 366.2 of our regulations, which allows us to obtain access as necessary with 

respect to jurisdictional rates. The case-by-case approach that we adopt here is consistent 

with our precedent concerning the treatment of FUCOs under the FPA and will allow us 

to ensure adequate protection of captive customers in the United States. 

8. Cross-Subsidization and Encumbrances of Utility Assets 

231. In the NOPR, we noted that PUHCA 2005 is primarily a “books and records 

access” statute and does not give the Commission any new substantive authorities, other 

than the requirement in section 1275 of EPAct 2005 that the Commission review and 

authorize certain non-power goods and services cost allocations among holding company 

members upon request. Nor does it give the Commission authority to pre-approve 

holding company activities. Accordingly, outside the context of reviewing a holding 

company transaction requiring approval under section 203 of the FPA or a proposed 

issuance of securities under section 204 of the FPA, the Commission will continue to rely 

primarily on its ratemaking authorities under sections 205 and 206 of the FPA and 

sections 4 and 5 of the NGA to protect jurisdictional customers against inappropriate 

cross-subsidization or encumbrances of utility assets on an ongoing basis. 

232. In the NOPR, we also noted that the Commission already has in place, pursuant 

to the FPA and NGA, certain reporting requirements regarding money pools and cash 
Docket No. RM05-32-000 - 145 -

management activities that affect jurisdictional companies.226 Further, in the electric 

area, we have policies that protect against cross-subsidization occurring as a result of 

wholesale power sales between affiliates in a holding company system as well as sales of 

non-power goods and services between such affiliates.227 In the NOPR, we invited 

comment on whether, in light of the repeal of PUHCA 1935, the Commission needs to 

promulgate additional rules or to adopt additional policies to protect against inappropriate 

cross-subsidization or encumbrances of utility assets, pursuant to our authorities under 

the FPA and NGA. For example, we asked whether, if it has the authority to do so, the 

Commission should issue rules regarding public utility holding company diversification 

into non-utility businesses. Would the Commission have authority to promulgate such 

rules under its FPA or NGA ratemaking authority? Should the Commission modify its 

existing cash management rules to apply not only to public utilities, natural gas 

companies, and oil pipelines, but also to include public utility holding companies? We 

sought comment on these and any other related issues in order to determine whether, in 

addition to the regulations being proposed herein under PUHCA 2005, the Commission 

may need to consider promulgating separate, additional rules under the FPA or the NGA. 

 226 Regulation of Cash Management Practices, Order No. 634, 68 FR 40500 (Jul. 

8, 2003), III FERC Stats. & Regs. ¶ 31,145 (June 26, 2003), Order No. 634-A, 68 FR 

61993 (Oct. 31, 2003), III FERC Stats. & Regs. ¶ 31,152 (2003). 

227 See Merger Policy Statement, FERC Stats. & Regs. ¶ 31,044 at 30,124-25. See

also Heartland Energy Services, Inc., 68 FERC ¶ 61,223 at 62,062-65 (1994); LG&E 

Power Marketing Inc., 68 FERC ¶ 61,247 at 62,121-24 (1994). 
Docket No. RM05-32-000 - 146 -

Comments

233. Commenters were largely opposed to the adoption of any new rules on crosssubsidization, encumbrances of utility assets, diversification into non-utility businesses, 

or the extension of existing cash management rules.228 With respect to rules on crosssubsidization and encumbrances of utility assets, several commenters emphasize that 

additional Commission rules are unnecessary because existing Commission and state 

oversight is adequate.229 For example, E.ON and LG&E Energy assert that it is not 

necessary or appropriate for the Commission to promulgate additional rules or adopt 

additional policies with respect to cross-subsidization or encumbrances of utility assets 

because, with the repeal of PUHCA 1935, Congress expressed the clear intent to 

eliminate the comprehensive regulation of holding company systems which had been 

characterized by PUHCA 1935. In addition, E.ON and LG&E Energy assert that current 

Commission and state regulation of affiliate transactions is sufficient, emphasizing that: 

(i) affiliate transactions also are controlled and/or monitored on an ongoing basis through 

codes of conduct in many states; (ii) the Commission regulates wholesale power sales 

between affiliates, which is often the largest portion of affiliate transactions activity; (iii) 

 228 See, e.g., Alliant Comments at 6, AEP Comments at 9-10, Ameren Comments 

at 20, AGL Resources Comments at 8-9, Cinergy Comments at 30-31, Emera Comments 

at 12, Entergy Comments at 14-16, International Transmission Company Comments at 

11, KeySpan Comments at 7-8, MidAmerican Comments at 14, National Grid Comments 

at 31-32, PacifiCorp Comments at 7-8, Progress Energy Comments at 8, Questar 

Comments at 5-6, Southern Company Services Comments at 8, Washington Gas & Light 

Comments at 5, Xcel Comments at 7, Scottish Power Comments at 14-15. 

229 See, e.g., EPSA Comments at 25, FirstEnergy Comments at 17-19. 
Docket No. RM05-32-000 - 147 -

under section 1275 of EPAct 2005, the Commission has additional authority to review the 

allocation of non-power goods and service transactions between service companies and 

public utilities; (iv) the terms of affiliate financing transactions also are closely monitored 

by the Commission and state commissions to make sure that public utility capital costs 

are not inflated; (v) where state commissions do not have jurisdiction over such 

issuances, Commission authorization would be required under section 204 of the FPA; 

and (vi) the Commission has jurisdiction under section 203 of the FPA over the sale, 

lease or disposal of public utility facilities subject to Commission jurisdiction and under 

section 204 of the FPA, the Commission must authorize the assumption of any obligation 

or liability as guarantor, indorser, surety, or otherwise in respect of any security of 

another person.230 FirstEnergy argues that the routine review of each of the FirstEnergy 

Operating Companies by independent financial rating agencies also acts as a deterrent to 

inappropriate cross-subsidization or establishment of unreasonable encumbrances on 

utility assets.231 Finally, Energy East agrees that no new rules are required, but contends 

that some benefit could be gained from a single, uniform set of federal rules on crosssubsidization and affiliate abuse and federal code of conduct to avoid potentially 

conflicting state-imposed standards.232

234. With respect to rules on diversification, several commenters argued that the 

 230 E.ON/LG&E Energy Comments at 21. 

231 FirstEnergy Comments at 19. 

232 Energy East Comments at 14-15. 
Docket No. RM05-32-000 - 148 -

Commission lacks the statutory authority to adopt such rules.233 For example, 

commenters argue that the SEC had authority under section 10 and 11 of PUHCA 

1935 to regulate such diversification, but that these sections were repealed and 

Congress did not provide the Commission with authority to issues these or similar 

rules and that the cross-subsidization language in the PUHCA Repeal Subtitle is only 

a reference to the Commission’s existing authorities under the FPA, not a new grant 

of authority and that the Commission already has ample authority under sections 

203, 205 and 206 of that statue to address whether inappropriate cross-subsidization 

or other forms of affiliate abuse have occurred. 

235. With respect to the Commission’s cash management rules, Dominion and EEI 

contend that there is no need to extend the Commission’s current cash management 

rules to apply to holding companies. According to Dominion and EEI, the rules 

already effectively apply to holding companies because, where a jurisdictional utility 

is a participant in a cash management arrangement with a holding company, that 

arrangement must comply with Commission cash management rules and the 

agreement must be filed. The only “extension” of the rules would be to require a 

holding company to comply with the rule in a cash management arrangement that 

involved only non-utility companies. That would be an inappropriate expansion of 

 233 See, e.g., Chairman Barton Reply Comments at 10-11, Dominion Comments at 

25, EEI Comments at 36, E.ON/LG&E Energy Comments at 22, EPSA Comments at 25. 

234 Dominion Comments at 24, EEI Comments at 35. 
Docket No. RM05-32-000 - 149 -

the Commission’s authority.234

236. A number of commenters, however, argued that the Commission should adopt 

additional rules to protect against the dangers of cross-subsidization and diversification 

into non-utility businesses,235 in particular, structural separation requirements regarding 

transactions between utility and non-utility affiliates. APPA/NRECA argue that the 

Commission must ensure complete structural protection, so that the public utility’s 

affiliation with a non-utility business causes no additional, non-utility risk, including the 

following requirements: (i) public utility business must be conducted through 

corporations legally distinct (and financially insulated) from non-utility affiliates; (ii) 

public utilities must maintain books and records that are separate from the books and 

records of non-utility affiliates, and must prepare separate financial statements; (iii) 

public utilities must not commingle their assets or liabilities with the assets or liabilities 

of a non-utility affiliate, or pledge or encumber their assets on behalf of a non-utility 

affiliate; and (iv) service or management fees charged by a public utility’s holding 

company parent or affiliated service company to the public utility must not include 

allocations of financing costs for entities other than the public utility, charges against 

equity in other subsidiaries of the parent holding company, or operating losses of the 

parent holding company or other affiliated companies.236 MBIA Insurance argues that 

the Commission should impose financial and corporate separation requirements regarding 

 235 See, e.g., CEOB Comments at 3, Missouri PSC Comments at 30-32, Santa 

Clara Comments at 21-22, TANC Comments at 21-22, Utility Workers Comments at 3. 

236 APPA/NRECA Comments at 34-35. 
Docket No. RM05-32-000 - 150 -

transactions between utility and non-utility affiliates to adequately protect utilities and 

their customers: (i) a utility company must not declare or pay any dividend on any 

security of the utility if such action would threaten the financial integrity of the utility; 

(ii) utilities should have at least one independent director on their boards of directors; (iii) 

non-utility affiliates should not have recourse against the tangible or intangible assets of 

utility affiliates; (iv) a utility must not cross-subsidize or shift costs from a non-utility 

affiliate of the utility to the utility, and must fully disclose and fully value any assets or 

services by the utility that are provided for the benefit of a non-utility affiliate; (v) 

electricity and natural gas customers must not be subject to the financial risks of nonutility diversification, and must not be subject to rates or charges that are not reasonably 

related to the provision of electricity or natural gas service.237 NARUC urges the 

Commission to prohibit holding companies from encumbering the assets of its public 

utility in order to fund a diversification program and from issuing debt or preferred 

securities to pay dividends to a holding company or to making unduly risky loans to any 

organization within the holding company system. Specifically, the Commission should 

guard against a situation where the relationship between a financially strong public utility 

and relatively weaker affiliates has the effect of increasing the utility’s cost of capital to 

the detriment of customers. In the event that a public utility became over-leveraged as a 

result of subsidization of the holding company, Commission should consider taking 

appropriate action, including limitations of the payment of common stock dividends from 

 237 MBIA Insurance Comments at 20-24. But see EEI Reply Comments at 3. 
Docket No. RM05-32-000 - 151 -

the utility to a parent.238 

237. NASUCA argues that, in the case of captive customers, the proper structural 

protection would be to prohibit a utility’s affiliation with non-utility businesses, unless 

there is no risk involved. If a customer has power supply options, dealings between 

utilities and their non-utility affiliates could be approved if: (a) the information on the 

risk is fully disclosed; (b) the potential gains to the customer are commensurate with the 

risk; and (c) there can be no possible level of harm so large as to render the utility unable 

to comply with its duty to provide service reliably and economically.239 Finally, Ohio 

PUC recommends that the Commission adopt rules similar to those found in its transition 

plan administrative rules, which prevent electric utilities from issuing any security for the 

acquisition, ownership, or operation of an affiliate, assuming liabilities with respect to 

any security of an affiliate, or pledge, mortgage, or use as collateral any of its assets for 

the benefit of an affiliate. In addition, Ohio PUC recommends the Commission utilize 

the newly-established joint federal/state board to develop “ring-fencing” rules to insulate 

regulated assets from being the subject of cross-collateralization with unregulated 

assets.240

 238 NARUC Comments at 13-14. National Grid and NiSource assert that NARUC 

has not shown that the existing protections are ineffective and that NARUC’s proposed 

additional reporting requirements are unnecessary. National Grid Reply Comments at 7-

8, NiSource Reply Comments at 5. 

239 NASUCA Comments at 11-12. 

240 Ohio PUC Comments at 6-8. AGL Resources argues that Ohio PUC’s ringfencing proposals are unnecessary, but that if the Commission decides to impose 

additional rules, it should do so through a collaborative process including the 
Docket No. RM05-32-000 - 152 -

238. With respect to the procedure for implementing these structural measures to 

protect customers against the risks of diversification into non-utility businesses, 

APPA/NRECA urge the Commission to create a procedure for evaluating a public 

utility’s acquisition of, or acquisition by, a non-utility business to ensure: (a) compliance 

with aforementioned limits; (b) non-interference by the non-utility side in the 

management of the public utility side; and (c) that holders of the public utility’s debt, and 

credit rating agencies which rate that debt, have confirmed that there is no risk of adverse 

effect on their position.241 

239. These commenters argue that the Commission has sufficient authority to issue 

additional rules on cross-subsidization and diversification. For example, Arkansas PSC 

contends that the Commission has authority under sections 203, 205, and 206 of the FPA 

to issue such rules.242 Emera argues that the Commission should use its current authority 

under sections 203 and 204 of the FPA to address international diversification. Emera 

thus urges the Commission to explain in its orders authorizing public utility financing 

under FPA section 204 that no public utility shall use the proceeds of any such financing 

to finance the acquisition or operation of a FUCO, while pledges of utility assets to 

support FUCO financings would similarly be restricted under FPA section 203.243

 

Commission, state commissions, and industry participants. AGL Resources Reply 

Comments at 2. See also National Grid Reply Comments at 7-8. 

241 APPA/NRECA Comments at 35-36. See also NASUCA Comments at 12. 

242 Arkansas PSC Comments at 24-32. 

243 Emera Comments at 7. 
Docket No. RM05-32-000 - 153 -

240. A number of entities also supported the extension of the Commission’s cash 

management rules to public utility holding companies.244 According to MBIA Insurance, 

the Commission’s cash management rules are insufficient to adequately protect regulated 

utilities, and it urges the Commission to broaden the application of the rules beyond 

utilities and to apply them to holding companies.245

Commission Determination

241. We interpret section 1275(c) of EPAct 2005 to be a savings clause, which does not 

give the Commission the authority to issue additional Commission rules regarding crosssubsidization, encumbrances of utility assets, diversification into non-utility businesses, 

or the extension of existing cash management rules. Rather, any such authority resides in 

the FPA and NGA. In addition, as noted by E.ON and LG&E Energy, current 

Commission and state regulations already provide oversight regarding cross-subsidization 

and encumbrances of utility assets. Accordingly, we will monitor industry activities, and 

we will adopt new regulations on cross-subsidization or encumbrances of utility assets, 

pursuant to our FPA and NGA authorities, only at such time as our current regulations 

appear to be insufficient. However, these matters will be further addressed at the 

technical conference that we will be holding within the next year. 

 244 See, e.g., Georgia PSC Comments at 4, Santa Clara Comments at 22, TANC 

Comments at 22. AGL Resources opposes comments to expand cash management rule, 

noting that some holding companies such as AGL have two cash management programs 

to address concerns regarding cross-subsidization and encumbrances, i.e., separate utility 

and non-utility money pools and that the Commission’s current rules allow it to review 

the utility money pool. AGL Resources Reply Comments at 4-5. 

245 MBIA Insurance Comments at 25. 
Docket No. RM05-32-000 - 154 -

242. The Commission finds persuasive Dominion’s argument that Congress repealed 

the investment diversification limitations that have been applicable to registered holding 

companies, and therefore we will not propose additional rules regarding diversification 

into non-utility businesses at this time. Moreover, we note that, if the Commission were 

to propose such rules, we would have to do so under our FPA and NGA authorities, as we 

lack the authority to do so under PUHCA 2005. 

243. Finally, we will not propose to extend our cash management rules to holding 

companies. As noted by Dominion and EEI, the cash management rules adopted under 

the FPA and NGA already effectively apply to holding companies because, where a 

jurisdictional utility is a participant in a cash management arrangement with a holding 

company, that arrangement must comply with Commission cash management rules and 

the agreement must be filed. Therefore, the Commission will not propose to extend 

existing cash management rules. 

9. Additional Conforming or Technical Amendments

244. Section 1272(2) of EPAct 2005 directs the Commission to submit to Congress 

detailed recommendations on technical and conforming amendments to federal law 

necessary to carry out PUHCA 2005 within four months after the date of enactment. In 

the NOPR, the Commission invited comments as to what technical and conforming 

amendments the Commission should include in this submission to Congress. 

245. We received comments on recommendations we should make to Congress, as well 

as comments on how we should interpret certain terms in PUHCA 2005 or modifications 

we should make to our proposed regulatory text. 
Docket No. RM05-32-000 - 155 -

a. Amendments of Definitions

 Comments

246. Oklahoma Corporation Commission requests that the definitions of “affiliate” and 

“subsidiary” in PUHCA 2005 be amended. Oklahoma Corporation Commission 

contends that the difference in the two percentages, i.e., five percent for affiliates and ten 

percent for subsidiaries, would cause an affiliate company that is five percent owned by a 

holding company to be subject to Commission rules while a subsidiary that is also owned 

five percent by a holding company would avoid the Commission rules. Thus, it urges 

the Commission to consider definitions that would cause both the terms “affiliate” and 

“subsidiary” to have the same requirements and treatment.246 

247. A number of entities requested amendments to the definition of “electric utility 

company.” Morgan Stanley contends that the definition of “electric utility company” is 

not in accord with other definitions in PUHCA 2005 and that Congress intended that the 

two types of “public-utility companies,” i.e. “electric utility company” and “gas utility 

company” should relate to retail activities only. Accordingly, Morgan Stanley 

recommends that the words “and not for resale” be placed at the end of the PUHCA 2005 

definition of “electric utility company” to conform this definition with “public utility 

company” and “gas utility company.”247

248. Morgan Stanley also urges the Commission to recommend to Congress that at 

 246 Oklahoma Corporation Commission Comments at 7. 

247 Morgan Stanley Comments at 10. 
Docket No. RM05-32-000 - 156 -

least the entire definition of “exempt wholesale generator” from PUHCA 1935 be 

incorporated into PUHCA 2005, including other terms that appear within that defined 

term, namely, “eligible facility” from 15 U.S.C. § 79z-5(a)(2), and “affiliate” from 

15 U.S.C. § 79b(a)(11)(B).248 

249. Emera and National Grid recommend that the Commission adopt a definition of 

“foreign utility company” clarifying that a FUCO is not a “public-utility company”, an 

“electric utility company,” or a “gas utility company.” Emera contends that such a 

definition would be consistent with section 33 of PUHCA 1935 which provides that 

FUCOs are not “public-utility companies.”249

 248 Id.

249 Emera proposes the following definition: 

Foreign utility company. The term “foreign utility company” means 

any company that – 

(A) Owns or operates facilities that are not located in any state and 

that are used for the generation, transmission, or distribution of 

electric energy for sale or the distribution at retail of natural or 

manufactured gas for heat, light, or power, if such company-- 

(i) derives no part of its income, directly or indirectly, from the 

generation, transmission, or distribution of electric energy for sale or 

the distribution at retail of natural or manufactured gas for heat, 

light, or power, within the United States; and 

(ii) neither the company nor any of its subsidiary companies is a 

public utility company operating in the United States. 

A foreign utility company shall not be deemed a public utility 

company, electric utility company or gas utility company under this 

part. 

Emera Comments 3-4. See also National Grid Comments at 4-11. 
Docket No. RM05-32-000 - 157 -

250. Emera and National Grid argue that the Commission should implement the 

exemption for passive investors by seeking an amendment the definition of “holding 

company” to exclude passive investors in a public-utility company or holding company 

securities, such as investment companies.250

251. Some commenters have requested that local distribution companies be exempted 

from the requirements of PUHCA 2005 and suggest that the Commission exclude them 

from the definition of “natural gas company.” For example, American Gas Association 

requests that the Commission clarify that local gas distribution companies that are not 

regulated by the Commission are not embraced within the phrase “natural-gas company,” 

noting that EPAct 2005 defines the separate term “gas utility” as a local distribution 

company. AGA asserts that, while many local distribution companies are technically 

“natural-gas companies” under the NGA because the natural gas in their systems flows in 

interstate commerce, the Commission does not regulate local distribution companies that 

are exempted under section 1(b) of the NGA, Hinshaw pipelines exempted under section 

 250 Emera proposes following definition: 

Holding company. 

* * * 

(2) Exclusions. The term “holding company” shall not include – 

 * * * 

(iii) A person who directly or indirectly owns, controls, or holds, with power to 

vote, less than 50% of the outstanding voting securities of a public utility company 

or of a holding company, if such person has acquired such securities for 

investment purposes and does not have the intention of exercising a controlling 

influence over the management or policies of a public utility company or holding 

company. 

Emera Comments at 9. See also National Grid Comments at 11-15. 
Docket No. RM05-32-000 - 158 -

1(c) of the NGA, entities subject to service-area determinations under section 7(f) of the 

NGA, and local distribution companies with blanket certificates.251 Dominion requests 

that the Commission clarify that this same pattern of exemption from Commission 

regulation will be carried over with the respect to the rules that the Commission proposes 

to issue here.252 Finally, Washington Gas & Light urges the Commission to clarify that 

the proposed rules do not apply to local distribution companies and section 7(f) 

companies that have previously been exempt from regulation by the Commission. 

Washington Gas & Light emphasizes that no regulatory gap would result because these 

local distribution companies and section 7(f) companies are subject to oversight of their 

rates and terms and conditions of service by relevant local regulatory commissions. 

Washington Gas & Light further contends that failure to grant this exemption could cause 

federal rules, especially for rate setting purposes, to become inconsistent with the 

regulations promulgated by state commissions, creating compliance issues that might 

have to be litigated in order to find resolution.253 

Commission Determination

252. We will reject Oklahoma Corporation Commission’s request to modify the 

definitions of “affiliate” and “subsidiary.” Congress chose to carry over these longstanding definitions from PUHCA 1935 to PUHCA 2005 and thus clearly expressed its 

 251 American Gas Association Comments at 3-4. See also Keyspan Comments at 

6. 

252 Dominion Comments at 26-27. 

253 Washington Gas & Light Comments at 3-4. 
Docket No. RM05-32-000 - 159 -

intent to retain these statutory thresholds. However, we emphasize that section 

1262(16)(B) gives the Commission the authority to deem someone a “subsidiary” if 

necessary for the rate protection of utility customers, even for ownership interests of less 

than ten percent. Further, section 1264 gives the Commission the authority to examine 

the books and records of any company in a holding company system, including affiliates 

and subsidiaries. Thus, we believe that the Commission has sufficient authority to 

protect customers without seeking a modification of these definitions. 

253. We will reject the requests of Morgan Stanley and others to amend the definitions 

of “electric utility company.” The definitions of “electric utility company” and “gas 

utility company” in PUHCA 1935 similarly differed in that the definition of “electric 

utility company” was not limited to retail activities. By carrying over this distinction into 

PUHCA 2005, it is clear that Congress did not intend that these two definitions should be 

consistent. Moreover, if adopted, Morgan Stanley’s proposal would deprive the 

Commission of jurisdiction over holding companies that own public utilities, and Morgan 

Stanley has not provided any evidence that Congress meant to do so. With respect to the 

definition of “exempt wholesale generator,” we will grant Morgan Stanley’s request to 

carry over the definition of “eligible facility” since that term is used within the definition 

of EWG. The definition of eligible facility and other relevant provisions are crossreferenced in the regulatory text of this Final Rule. 

254. We deny Emera and National Grid’s requests that we change the definition of 

FUCO to state that a FUCO shall “not be deemed a public utility company, electric utility 

company or gas company under this part.” However, we clarify the definition of FUCO 
Docket No. RM05-32-000 - 160 -

to state that these companies shall not be subject to any of the requirements of this 

subchapter other than section 366.2. Therefore, FUCOs are not required to follow 

PUHCA 2005 accounting and reporting requirements, but must continue to grant the 

Commission access to their accounts, books, memoranda, and other records. 

255. We will reject Emera’s and National Grid’s request that we recommend an 

amendment to the definition of “holding company” to reflect the exemption for passive 

investors. We have already adopted this exemption in our regulations, and thus it is 

unnecessary to amend the statutory definition. 

256. With respect to the requests by various commenters on an amendment concerning 

local distribution companies that are not regulated by the Commission as natural gas 

companies under the NGA, we find that such a statutory amendment is unnecessary, as 

we have exempted local distribution companies from the books and records requirements 

of PUHCA 2005 in section 366(c) of our regulations, pursuant to our exemption authority 

under section 1266(b). 

b. Other Proposed Amendments

 Comments

257. EEI suggests that Commission recommend a technical amendment to section 

3(c)(8) of the Investment Company Act of 1940 (ICA). According to EEI, section 3(c)(8) 

currently provides that, notwithstanding the definition of “investment company” found in 

section 3(a) of the ICA, a company subject to regulation under PUHCA 1935 shall not be 

an investment company. By the date repeal of PUHCA 1935 becomes effective, many 

holding companies will need to assert their exempt status under section 3(b)(1) of the 
Docket No. RM05-32-000 - 161 -

ICA, or seek an order of exemption from the SEC under section 3(b)(2) of the ICA; if 

section 3(c)(8) is not amended, holding companies may be expected to seek the certainty 

provided by an SEC order under section 3(b)(2), rather than to rely on “self-certification” 

under section 3(b)(1). EEI asserts that an amendment to section 3(c)(8) would, by 

continuing the exemption from investment company status that holding companies have 

enjoyed to date, make sure that holding company financing may proceed without 

disruption after the date repeal of PUHCA 1935 becomes effective.254

258. NARUC notes that section 1270 of EPAct 2005 indicates that the Commission has 

the same powers to enforce the provisions of PUHCA 2005 available under Sections 306 

through 317 of the FPA. NARUC recommends that the Commission request an 

amendment clarifying that the Commission is able to enforce the provisions of PUHCA 

2005 concerning natural gas companies using the equivalent powers granted under the 

NGA.255

259. EEI submits that the Commission should recommend that section 1274(a) of 

EPAct 2005 be amended to specify that the savings provisions of section 1271 are 

effective as of the date EPAct 2005 was enacted.256 Similarly, PacifiCorp suggests that, 

in order to avoid any gaps, the Commission propose a correction to the savings provision 

 254 EEI Comments at 37. See also Energy East Comments at 18-19, National Grid 

Comments at 34-35. 

255 NARUC Comments at 14. See also NASUCA Comments at 3. 

256 EEI Comments at 36. See also Cinergy Comments at 31, Dominion Comments 

at 25. 
Docket No. RM05-32-000 - 162 -

in section 1271 of EPAct 2005 that allows activities and transactions authorized under 

PUHCA 1935 or other law until February 8, 2006, when PUHCA 2005 takes effect, to 

continue under the terms of the authorization notwithstanding any provision of PUHCA 

2005 or related Commission regulations to the contrary.257

260. EEI submits that the Commission should provide a procedure similar to the SEC’s 

general procedural rules, for submitting information on a confidential basis.258 

FirstEnergy states that certain information is contained in Form U-5S is proprietary 

information and that, although the Commission has rejected requests by regulated public 

utilities to protect the confidentiality of certain information contained in their FERC 

Forms 1, the SEC has permitted information reported in Form U-5S to be so protected. 

FirstEnergy argues that the Commission should therefore make clear that it will similarly 

protect the confidentiality of such information.259

261. FirstEnergy further contends that, because of the very limited time available to the 

Commission to adopt rules needed to implement PUHCA 2005, the Commission should 

make clear that any rules that may be adopted in this proceeding are only interim rules 

that will be in effect for no longer than one year. Such a procedure would enable the 

Commission to meet its obligation to adopt rules required for implementation of PUHCA 

2005 within four months after its enactment, but would provide assurance that such 

 257 PacifiCorp Comments at 6. 

258 EEI Comments at 37-38, FirstEnergy Comments at 

259 FirstEnergy Comments at 8. 
Docket No. RM05-32-000 - 163 -

hastily-crafted rules would not be in effect indefinitely. FirstEnergy contends that this 

approach would give the Commission and interested parties additional time in which to 

learn from their experience under the final rules that are adopted in this proceeding, to 

give further consideration to the many issues that have been raised by the Commission in 

the NOPR, and to work toward development of final rules that are properly designed to 

protect the public interest.260

Commission Determination

262. EEI recommends an amendment to section 3(c)(8) of the Investment Company 

Act of 1940, which provides that a company subject to regulation under PUHCA 1935 

shall not be an “investment company” as defined in and regulated under the Investment 

Company Act of 1940.261 While such companies can file with the SEC and seek 

exemption from the Investment Company Act of 1940 by claiming that they fall within 

other exemptions, EEI notes that an amendment to section 3(c)(8) would allow such 

companies to avoid having to make such filings with the SEC. The Investment Company 

Act of 1940, however, is not a statute with which the Commission has experience, and 

the amendment is not essential for the Commission to carry out its responsibilities under 

PUHCA 2005 or any other statute the Commission administers. Consequently, the 

Commission will bring this issue to the attention of Congress, but will not make any 

recommendation. 

 260 Id. at 21-22. 

261 15 U.S.C. § 80a-3(c)(8) (2000). 
Docket No. RM05-32-000 - 164 -

263. We agree with the comments of NARUC and will recommend an amendment to 

section 1270 clarifying that the Commission is able to enforce the provisions of PUHCA 

2005 concerning natural gas companies using the equivalent powers granted under the 

NGA. 

264. We also agree with the suggestions of EEI and others regarding the effective date 

of the savings provisions in section 1271, and we will recommend that section 1274(a) of 

EPAct 2005 be amended to specify that the savings provisions of section 1271 are 

effective as of the date EPAct 2005 was enacted. 

265. In response to the requests of EEI and others concerning the protection of 

confidential information, we note that section section 1264(d) provides that no member, 

officer, or employee of the Commission shall divulge any fact or information that may 

come to his or her knowledge during the course of examination of books and records as 

provided in this section, except as may be directed by the Commission or by a court of 

competent jurisdiction. Furthermore, the Commission already has in place procedures 

governing the treatment of confidential and other non-public information in Part 388 of 

its regulations. Commenters have not demonstrated that the Commission’s current rules 

are inadequate, and we conclude that it is unnecessary to adopt further rules at this time. 

266. We will also reject FirstEnergy’s request that the Commission clarify that any 

rules adopted in this Final Rule are of an interim nature. Nevertheless, the Commission 

will evaluate the rules it adopts here on an ongoing basis based on its own experience and 

the submissions received from parties in individual proceedings and the technical 

conference. 
Docket No. RM05-32-000 - 165 -

Information Collection Statement 

267. Office of Management and Budget (OMB) regulations require OMB to approve 

certain information collection requirements imposed by agency rule.262 However, the 

Commission is carrying out an express statutory mandate spelled out in EPAct 2005. 

Moreover, to the extent that the Commission is carrying over and applying requirements 

that the SEC previously has applied, we note that the proposed regulations assume 

responsibility for already approved information collections and reduce their reporting 

burdens. Indeed, insofar as the regulations adopted herein eliminate certain SEC 

regulations concerning accounting, cost-allocation, recordkeeping, and related rules, they 

reduce the information collection burden on regulated entities. 

268. In particular, we are adopting a FERC Form No. 60 (annual reports for service 

companies), a substantially streamlined version of what had previously been SEC Form 

U13-60 implemented by the SEC. In addition, we will require entities that are or become 

holding companies within the meaning of PUHCA 2005 to submit a simple one-time 

filing, FERC-65 (Notification of Holding Company Status), as compared to the more 

substantial filings and forms previously required by SEC Form U-5A. We establish a 

similar, simplified filing, as compared to the SEC’s existing filings and forms, for 

exemptions and waivers, namely FERC-65A (Exemption Notification) and FERC-65B 

(Waiver Notification). 

269. The Commission also eliminates the requirements contained in its own regulations 

 262 5 CFR 1320.11 (2005). 
Docket No. RM05-32-000 - 166 -

in 18 C.F.R. Part 365; the corresponding information collection is FERC-598 

“Determinations for Entities Seeking Wholesale Generator Status.” In its place, we are 

allowing a much simpler self-certification. 

Public Reporting Burden: (The table below reflects both SEC reporting burden estimates 

and the Commission’s projections.) 

Data Collection No. of 

Respondents 

No. of 

Responses 

No. of Hours 

Per Response 

Total Annual 

Hours 

SEC U-5A 

(current) 

4 1 80 320 

SEC U-13-60 65 1 13.5 878 

FERC Form 60 65 1 8 520 

FERC-65 110 1 3 330 

FERC-65A 35 1 1 35 

FERC-65B 20 1 1 20 

FERC-568 

(current) 

112 1 6 672 

FERC-598 

(proposed) 

27 1 3 51 

Action: Revision and adoption by Commission of currently approved SEC collections of 

information 
Docket No. RM05-32-000 - 167 -

OMB Control Nos.: Currently the relevant SEC and Commission information collections 

have the following control numbers- SEC: 3235-0153, 3235-0164, 3235-0182, 3235-

0183, 3235-0306 and Commission: 1902-0166. 

Frequency of Responses: The FERC Form No. 60 information collection has annual 

submissions while FERC Form Nos. 65, 65A, and 65B involve one-time submittals. 

FERC-598 certifications will be submitted on occasion.

Necessity of the Information: The proposed rule implements new rules under part 366 of 

the Commission’s regulations and deletes requirements contained in part 365 of its 

regulations. These revisions are to implement the repeal of PUHCA 1935 and the 

implementation of certain provisions of the EPAct 2005. 

270. For information on the requirements, submitting comments on these collection of 

information including ways to reduce the burden imposed by these requirements, please 

send your comments to the Federal Energy Regulatory Commission, 888 First Street, 

N.E., Washington, D.C. 20426 (Attention: Michael Miller, Office of the Executive 

Director, (202-502-8415)) or send comments to the Office of Management and Budget 

(Attention: Desk Officer for the Federal Energy Regulatory Commission, fax: 

202-395-7285, e-mail: oira_submission@omb.eop.gov.) 

Environmental Analysis

271. The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse effect 
Docket No. RM05-32-000 - 168 -

on the human environment.263 The Commission has categorically excluded certain 

actions from this requirement as not having a significant effect on the human 

environment. Included in the exclusion are rules that carry out legislation, involve 

information gathering, analyses and dissemination, and involve accounting.264 Thus, we 

affirm the finding made in the NOPR that this Final Rule carries out EPAct 2005 and 

involve information gathering and analysis and accounting and therefore falls under this 

exception; consequently, no environmental consideration is necessary. 

Regulatory Flexibility Act Certification

272. The Regulatory Flexibility Act of 1980 (RFA) requires rulemakings to contain 

either a description and analysis of the effect that the rule will have on small entities or to 

contain a certification that the rule will not have a significant economic impact on a 

substantial number of small entities. 265 The Commission concludes that the Final Rule 

would not have such an impact on small entities. Most companies to which the Final 

Rule applies do not fall within the RFA’s definition of small entity.266 Therefore, the 

 263 Regulations Implementing the National Environmental Policy Act, Order 

No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. Preambles 1986-1990 

¶ 30,783 (1987). 

264 18 C.F.R. 380.4(a)(3), (5), (16) (2005). 

265 5 U.S.C. § 603 (2000). 

266 5 U.S.C. § 601(3) (2000), citing to section 3 of the Small Business Act, 15 

U.S.C. § 632 (2000). Section 3 of the Small Business Act defines a “small business 

concern” as a business that is independently owned and operated and that is not dominant 

in its field of operation. 15 U.S.C. § 632 (2000). The Small Business Size Standards 

component of the North American Industry Classification System, for example, defines a 

small electric utility as one that, including its affiliates, is primarily engaged in the 
Docket No. RM05-32-000 - 169 -

Commission certifies that this Final Rule will not have a significant economic impact on 

a substantial number of small entities. Moreover, PUHCA 2005 exempts certain persons, 

and allows the Commission to exempt other persons and classes of transactions. The 

various exemptions and waivers adopted herein further minimize the effect of the Final 

Rule on small entities, as many of the entities that should be able to take advantage of 

these exemptions and waivers are small entities. 

Document Availability

273. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through the Commission’s Home Page 

(http://www.ferc.gov) and in the Commission’s Public Reference Room during normal 

business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, N.E., Room 2A, 

Washington, D.C. 20426. 

274. From the Commission’s Home Page on the Internet, this information is available 

in the Commission’s document management system, eLibrary. The full text of this 

document is available on eLibrary in PDF and Microsoft Word format for viewing, 

printing, and/or downloading. To access this document in eLibrary, type the docket 

number excluding the last three digits of this document in the docket number field. 

 

generation, transmission, and/or distribution of electric energy for sale and whose total 

electric output for the preceding fiscal year did not exceed four million MWh. 13 C.F.R. 

121.201 (2005). 
Docket No. RM05-32-000 - 170 -

275. User assistance is available for eLibrary and the Commission’s website during 

normal business hours. For assistance, please contact FERC Online Support at 1-866-

208-3676 (toll free) or 202-502-6652 (e-mail at FERCOnlineSupport@FERC.gov), or the 

Public Reference Room at 202-502-8371, TTY 202-502-8659 (e-mail at 

public.referenceroom@ferc.gov). 

Effective Date and Congressional Notification

This Final Rule will take effect February 8, 2006. The Commission has 

determined with the concurrence of the Administrator of the Office of Information and 

Regulatory Affairs of the Office of Management and Budget, that this rule is not a major 

rule within the meaning of section 251 of the Small Business Regulatory Enforcement 

Fairness Act of 1996.267 The Commission will submit the Final Rule to both houses of 

Congress and the General Accounting Office.268 

List of subjects in 18 C.F.R. Parts 365 and 366

 Electric power, Natural gas, Public utility holding companies and service 

companies, Reporting and recordkeeping requirements, and Cost allocations. 

By the Commission. 

( S E A L ) 

 Magalie R. Salas, 

 Secretary. 

 267 See 5 U.S.C. 804(2) (2000). 

268 See 5 U.S.C. 801(a)(1)(A) (2000). 
Docket No. RM05-32-000 - 171 -

 In consideration of the foregoing, under the authority of EPAct 2005, the 

Commission is amending Chapter I of Title 18 of the Code of Federal Regulations, as set 

forth below: 

SUBCHAPTER T - - [Removed and Reserved]

Part 365 - - [Removed]

 1. Subchapter T, consisting of Part 365, is removed and reserved. 

 2. Subchapter U, consisting of Part 366, is added to read as follows: 

Subchapter U - - Regulations Under The Public Utility Holding Company Act Of 

2005

Part 366 - - Public Utility Holding Company Act Of 2005

Subpart A – PUHCA 2005 Definitions and Provisions

366.1 Definitions.

366.2 Commission access to books and records.

366.3 Exemption from Commission access to books and records; waivers of 

accounting, record-retention, and reporting requirements.

366.4 FERC-65, notification of holding company status, FERC-65A, exemption 

notification, and FERC-65B, waiver notification.

366.5 Allocation of costs for non-power goods and services.

366.6 Previously authorized activities.

366.7 Procedures for obtaining exempt wholesale generator and foreign utility 

company status.

Subpart B – PUHCA 2005 Accounting and Recordkeeping
Docket No. RM05-32-000 - 172 -

366.21 Accounts and records of holding companies.

366.22 Accounts and records of service companies.

366.23 FERC Form No. 60, annual reports by service companies.

Subpart A – PUHCA 2005 Definitions and Provisions

§ 366.1 Definitions.

For purposes of this part: 

Affiliate. The term “affiliate” of a company means any company, 5 percent or 

more of the outstanding voting securities of which are owned, controlled, or held with 

power to vote, directly or indirectly, by such company. 

Associate company. The term “associate company” of a company means any 

company in the same holding company system with such company. 

Commission. The term “Commission” means the Federal Energy Regulatory 

Commission. 

Company. The term “company” means a corporation, partnership, association, 

joint stock company, business trust, or any organized group of persons, whether 

incorporated or not, or a receiver, trustee, or other liquidating agent of any of the 

foregoing. 

Construction. The term “construction” means any construction, extension, 

improvement, maintenance, or repair of the facilities or any part thereof of a company, 

which is performed for a charge. 

Electric utility company. The term “electric utility company” means any company 
Docket No. RM05-32-000 - 173 -

that owns or operates facilities used for the generation, transmission, or distribution of 

electric energy for sale. For the purposes of this subchapter, “electric utility company” 

shall not include entities that engage only in marketing of electric energy or “exempt 

wholesale generators.” 

Exempt wholesale generator. The term “exempt wholesale generator” means any 

person engaged directly, or indirectly through one or more affiliates as defined in this 

subchapter, and exclusively in the business of owning or operating, or both owning and 

operating, all or part of one or more eligible facilities and selling electric energy at 

wholesale. For purposes of establishing or determining whether an entity qualifies for 

exempt wholesale generator status, sections 32(a)(2) through (4), and sections 32(b) 

through (d) of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79z-5a(a)(2)-

(4), 79z-5b(b)-(d)) shall apply. An exempt wholesale generator shall not be considered 

an electric utility company under this subchapter.

Foreign utility company. The term “foreign utility company” means any company 

that: 

(i) Owns or operates facilities that are not located in any state and that are used for 

the generation, transmission, or distribution of electric energy for sale or the distribution 

at retail of natural or manufactured gas for heat, light, or power, if such company: 

(A) Derives no part of its income, directly or indirectly, from the generation, 

transmission, or distribution of electric energy for sale or the distribution at retail of 

natural or manufactured gas for heat, light, or power, within the United States; and 

(B) Neither the company nor any of its subsidiary companies is a public utility 
Docket No. RM05-32-000 - 174 -

company operating in the United States. 

A foreign utility company shall not be subject to any requirements of this subchapter 

other than § 366.2. 

Gas utility company. The term “gas utility company” means any company that 

owns or operates facilities used for distribution at retail (other than the distribution only 

in enclosed portable containers or distribution to tenants or employees of the company 

operating such facilities for their own use and not for resale) of natural or manufactured 

gas for heat, light, or power. For the purposes of this subchapter, “gas utility company” 

shall not include entities that engage only in marketing of natural and manufactured gas. 

Goods. The term “goods” means any goods, equipment (including machinery), 

materials, supplies, appliances, or similar property (including coal, oil, or steam, but not 

including electric energy, natural or manufactured gas, or utility assets) which is sold, 

leased, or furnished, for a charge. 

Holding company.

(1) In general. The term “holding company” means-- 

(i) Any company that directly or indirectly owns, controls, or holds, with power to 

vote, 10 percent or more of the outstanding voting securities of a public-utility company 

or of a holding company of any public-utility company; and 

(ii) Any person, determined by the Commission, after notice and opportunity for 

hearing, to exercise directly or indirectly (either alone or pursuant to an arrangement or 

understanding with one or more persons) such a controlling influence over the 
Docket No. RM05-32-000 - 175 -

management or policies of any public-utility company or holding company as to make it 

necessary or appropriate for the rate protection of utility customers with respect to rates 

that such person be subject to the obligations, duties, and liabilities imposed by this 

subtitle upon holding companies. 

(2) Exclusions. The term “holding company” shall not include-- 

(i) A bank, savings association, or trust company, or their operating subsidiaries 

that own, control, or hold, with the power to vote, public utility or public utility holding 

company securities so long as the securities are— 

(A) Held as collateral for a loan; 

(B) Held in the ordinary course of business as a fiduciary; or 

(C) Acquired solely for purposes of liquidation and in connection with a loan 

previously contracted for and owned beneficially for a period of not more than two years; 

or 

(ii) A broker or dealer that owns, controls, or holds with the power to vote public 

utility or public utility holding company securities so long as the securities are— 

(A) Not beneficially owned by the broker or dealer and are subject to any voting 

instructions which may be given by customers or their assigns; or 

(B) Acquired in the ordinary course of business as a broker, dealer, or underwriter 

with the bona fide intention of effecting distribution within 12 months of the specific 

securities so acquired. 

Holding company system. The term “holding company system” means a holding 

company, together with its subsidiary companies. 
Docket No. RM05-32-000 - 176 -

Jurisdictional rates. The term “jurisdictional rates” means rates accepted, 

established or permitted by the Commission for the transmission of electric energy in 

interstate commerce, the sale of electric energy at wholesale in interstate commerce, the 

transportation of natural gas in interstate commerce, and the sale in interstate commerce 

of natural gas for resale for ultimate public consumption for domestic, commercial, 

industrial, or any other use. 

Natural gas company. The term “natural gas company” means a person engaged 

in the transportation of natural gas in interstate commerce or the sale of such gas in 

interstate commerce for resale. 

Person. The term “person” means an individual or company. 

Public utility. The term “public utility” means any person who owns or operates 

facilities used for transmission of electric energy in interstate commerce or sales of 

electric energy at wholesale in interstate commerce. 

Public-utility company. The term “public-utility company” means an electric 

utility company or a gas utility company. For the purposes of this subchapter, the ownerlessors and owner participants in lease financing transactions involving utility assets shall 

not be treated as “public-utility companies.” 

Service. The term “service” means any managerial, financial, legal, engineering, 

purchasing, marketing, auditing, statistical, advertising, publicity, tax, research, or any 

other service (including supervision or negotiation of construction or of sales), 

information or data, which is sold or furnished for a charge. 
Docket No. RM05-32-000 - 177 -

Service company. The term “service company” means any associate company 

within a holding company system organized specifically for the purpose of providing 

non-power goods or services or the sale of goods or construction work to any public 

utility in the same holding company system. 

Single-state holding company system. The term “single-state holding company 

system” means a holding company system whose public utility operations are confined 

substantially to a single state. 

State commission. The term “state commission” means any commission, board, 

agency, or officer, by whatever name designated, of a state, municipality, or other 

political subdivision of a state that, under the laws of such state, has jurisdiction to 

regulate public utility companies. 

Subsidiary company. The term “subsidiary company” of a holding company 

means— 

(1) Any company, 10 percent or more of the outstanding voting securities of which 

are directly or indirectly owned, controlled, or held with power to vote, by such holding 

company; and 

(2) Any person, the management or policies of which the Commission, after notice 

and opportunity for hearing, determines to be subject to a controlling influence, directly 

or indirectly, by such holding company (either alone or pursuant to an arrangement or 

understanding with one or more other persons) so as to make it necessary for the rate 

protection of utility customers with respect to rates that such person be subject to the 

obligations, duties, and liabilities imposed by this subtitle upon subsidiary companies of 
Docket No. RM05-32-000 - 178 -

holding companies. 

Voting security. The term “voting security” means any security presently entitling 

the owner or holder thereof to vote in the direction or management of the affairs of a 

company. For the purposes of this subchapter, the term “voting security” shall not 

include member interests in electric power cooperatives. 

§ 366.2 Commission access to books and records.

(a) In general. Unless otherwise exempted by Commission rule or order, each 

holding company and each associate company thereof shall maintain, and shall make 

available to the Commission, such books, accounts, memoranda, and other records as the 

Commission determines are relevant to costs incurred by a public utility or natural gas 

company that is an associate company of such holding company and necessary or 

appropriate for the protection of utility customers with respect to jurisdictional rates. 

However, for purposes of this subchapter, no provision in the subchapter shall apply to or 

be deemed to include: 

(1) the United States; 

(2) A state or political subdivision of a state; 

(3) Any foreign governmental authority not operating in the United States; 

(4) Any agency, authority, or instrumentality of any entity referred to in 

subparagraphs (1), (2), or (3) of this section; or 

(5) Any officer, agent, or employee of any entity referred to in subparagraphs (1), 

(2), (3), or (4) of this section as such in the course of his or her official duty. 

(b) Affiliate companies. Unless otherwise exempted by Commission rule or order, 
Docket No. RM05-32-000 - 179 -

each affiliate of a holding company or of any subsidiary company of a holding company 

shall maintain, and shall make available to the Commission, such books, accounts, 

memoranda, and other records with respect to any transaction with another affiliate, as 

the Commission determines are relevant to costs incurred by a public utility or natural gas 

company that is an associate company of such holding company and necessary or 

appropriate for the protection of utility customers with respect to jurisdictional rates. 

(c) Holding company systems. The Commission may examine the books, 

accounts, memoranda, and other records of any company in a holding company system, 

or any affiliate thereof, as the Commission determines are relevant to costs incurred by a 

public utility or natural gas company within such holding company system and necessary 

or appropriate for the protection of utility customers with respect to jurisdictional rates. 

(d) Confidentiality. No member, officer, or employee of the Commission shall 

divulge any fact or information that may come to his or her knowledge during the course 

of examination of books, accounts, memoranda, or other records as provided in this 

section, except as may be directed by the Commission or by a court of competent 

jurisdiction. 

§ 366.3 Exemption from Commission access to books and records; waivers of 

accounting, record-retention, and reporting requirements. 

(a) Exempt classes of entities. Any person that is a holding company, solely with 

respect to one or more of the following, is exempt from the requirements of § 366.2 and 

any accounting, record-retention, or reporting requirements in this subchapter: 

(1) Qualifying facilities under the Public Utility Regulatory Policies Act of 1978 
Docket No. RM05-32-000 - 180 -

(16 U.S.C. 2601 et seq.); 

(2) Exempt wholesale generators; or 

(3) Foreign utility companies. 

(b) Exemptions of additional persons and classes of transactions. The 

Commission has determined that the following persons and classes of transactions satisfy 

the requirements of paragraph (d) of this section and may file to obtain an exemption 

from the requirements this subchapter pursuant to the notification procedure contained in 

§ 366.4(b)(1): 

(1) Passive investors, so long as the ownership remains passive, including: 

(i) Mutual funds, 

(ii) Collective investment vehicles whose assets are managed by banks, savings 

and loan associations and their operating subsidiaries, or brokers/dealers; and 

(iii) Persons that directly, or indirectly through their subsidiaries or affiliates, buy 

and sell the securities of public utilities in the ordinary course of business as a 

broker/dealer, underwriter or fiduciary, and not exercising operational control over the 

utility; 

(2) Commission-jurisdictional utilities that have no captive customers and that are 

not affiliated with any jurisdictional utility that has captive customers, and holding 

companies that own or control only such utilities; 

(3) Transactions where the holding company affirmatively certifies on behalf of 

itself and its subsidiaries, as applicable, that it will not charge, bill or allocate to the 

public utility or natural gas company in its holding company system any costs or 
Docket No. RM05-32-000 - 181 -

expenses in connection with goods and services transactions, and will not engage in 

financing transactions with any such public utility or natural gas company, except as 

authorized by a state commission or the Commission; 

(4) Transactions between or among affiliates that are independent of and do not 

include a public utility or natural gas company; 

(5) Electric power cooperatives; 

(6) Local distribution companies that are not regulated as “natural gas companies” 

pursuant to sections 1(b) or 1(c) of the Natural Gas Act, 15 U.S.C. 717(b), (c)). 

(c) Waivers. The following persons may file to obtain a waiver of the accounting, 

record-retention, and filing requirements of § 366.21, 366.22, and 366.23 pursuant to the 

notification procedures contained in § 366.4(c)(1): 

(1) Single-state holding company systems as defined in § 366.1; 

(2) Holding companies that own generating facilities that total 100 MW or less in 

size and are used fundamentally for their own load or for sales to affiliated end-users; or 

(3) Investors in independent transmission-only companies. 

(d) Commission authority to exempt additional persons and classes of transactions. 

The Commission shall exempt a person or classes of transaction from the requirements of 

§ 366.2 if, upon individual application as described in paragraph (e) of this section or 

upon the motion of the Commission-- 

(1) The Commission finds that the books, accounts, memoranda, and other records 

of any person are not relevant to the jurisdictional rates of a public utility or natural gas 

company; or 
Docket No. RM05-32-000 - 182 -

(2) The Commission finds that any class of transactions is not relevant to the 

jurisdictional rates of a public utility or natural gas company. 

(e) Other requests for exemptions and waivers. Any person seeking an exemption 

or waiver that is not covered by paragraphs (b) or (c) of this section, shall file a petition 

for declaratory order pursuant to § 385.207(a) justifying its request for exemption. Any 

person seeking such an exemption or waiver shall bear the burden of demonstrating that 

such an exemption is warranted. 

§ 366.4 FERC-65, notification of holding company status, FERC-65A, exemption 

notification, and FERC-65B, waiver notification. 

(a) Notification of holding company status. Companies that meet the definition of 

a holding company as provided by § 366.1 as of February 8, 2006, shall notify the 

Commission of their status as a holding company no later than March 10, 2006. Holding 

companies formed after February 8, 2006, shall notify the Commission of their status as a 

holding company, no later than 30 days after their formation. Notifications shall be made 

by submitting FERC-65 (notification of holding company status), which contains the 

following: the identify of the holding company and of the public utilities and natural gas 

companies in the holding company system; the identity of service companies or specialpurpose subsidiaries providing non-power goods and services; the identity of all affiliates 

and subsidiaries; and their corporate relationship to each other. This filing will be for 

informational purposes and will not be noticed in the Federal Register, but will be 

available on the Commission’s website. 

(b) FERC-65A (exemption notification) and petitions for exemption. 
Docket No. RM05-32-000 - 183 -

(1) Persons or companies seeking exemption from the requirements of PUHCA 

2005 and the Commission’s regulations thereunder under § 366.3(a), or one of the class 

exemptions adopted under § 366.3(b), may do so by filing FERC-65A (exemption 

notification). These filings will be noticed in the Federal Register; persons or companies 

that file FERC-65A must include a form of notice suitable for publication in the Federal 

Register in accordance with the specifications in § 385.203(d). Persons or companies 

that file FERC-65A in good faith shall be deemed to have a temporary exemption upon 

filing. If the Commission has taken no action within 60 days after the date of filing 

FERC-65A, the exemption shall be deemed to have been granted. The Commission may 

toll the 60-day period to request additional information or for further consideration of the 

request; in such case, the claim for exemption will remain temporary until such time as 

the Commission has determined whether to grant or deny the exemption. Authority to 

toll the 60-day period is delegated to the Secretary or the Secretary’s designee, and 

authority to act on uncontested FERC-65A filings is delegated to the Director of the 

Office of Markets, Tariffs and Rates or to the Director of the Office of Markets, Tariffs 

and Rates’ designee. 

(2) Persons or companies that do not qualify for exemption pursuant to § 366.3(a) 

or § 366.3(b) may seek an individual exemption from this subchapter. They may not do 

so by means of filing FERC-65A and instead must file a petition for declaratory order as 

required under § 366.3(e). Such petitions will be noticed in the Federal Register; persons 

or companies that file a petition must include a form of notice suitable for publication in 

the Federal Register in accordance with the specifications in § 385.203(d). No temporary 
Docket No. RM05-32-000 - 184 -

exemption will attach upon filing and the requested exemption will be effective only if 

approved by the Commission. Persons or companies may also seek exemptions for 

classes of transactions by filing a petition for declaratory order. 

(c) FERC-65B (waiver notification) and petitions for waiver. 

(1) Persons or companies seeking a waiver of the Commission’s regulations under 

PUHCA 2005 pursuant to § 366.3(c) may do so by filing FERC-65B (waiver 

notification). FERC-65B will be noticed in the Federal Register; persons or companies 

that file FERC-65B must include a form of notice suitable for publication in the Federal 

Register in accordance with the specifications in § 385.203(d). Companies that file 

FERC-65B in good faith shall be deemed to have a temporary exemption upon filing. If 

the Commission has taken no action within 60 days after the date of filing of FERC-65B, 

the waiver shall be deemed to have been granted. The Commission may toll the 60-day 

period to request additional information or for further consideration of the request; in 

such case, the waiver will remain temporary until such time as the Commission has 

determined whether to grant or deny the waiver. Authority to toll the 60-day period is 

delegated to the Secretary or the Secretary’s designee, and authority to act on uncontested 

FERC-65B filings is delegated to the Director of the Office of Markets, Tariffs and Rates 

or the Director of the Office of Markets, Tariffs and Rates’ designee. 

(2) Persons or companies that do not qualify for waiver pursuant to § 366.3(c) may 

seek an individual waiver from this subchapter. They may not do so by means of filing 

FERC-65B and instead must file a petition for declaratory order pursuant as required 

under § 366.3(e). Such petitions will be noticed in the Federal Register; persons or 
Docket No. RM05-32-000 - 185 -

companies that file a petition must include a form of notice suitable for publication in the 

Federal Register in accordance with the specifications in § 385.203(d). No temporary 

waiver will attach upon filing and the requested exemption will be effective only if 

approved by the Commission. Persons or companies may also seek waivers for classes of 

transactions by filing a petition for declaratory order. 

 (d) Revocation of exemption or waiver. 

 (1) If a person or company that has been granted an exemption or waiver under 

paragraphs (b) or (c) of this section fails to conform with any material facts or 

representations presented in its submittals to the Commission, such company or company 

may no longer rely upon FERC-65A, FERC-65B, or a Commission determination 

granting the exemption or waiver. 

 (2) The Commission may, on its own motion or on the motion of any person, 

revoke the exemption or waiver granted under paragraphs (b) or (c) of this section, if the 

person or company fails to conform to any of the Commission’s criteria under this part 

for obtaining the exemption or waiver. 

§ 366.5 Allocation of costs for non-power goods and services.

 (a) Commission review. In the case of non-power goods or administrative or 

management services provided by an associate company organized specifically for the 

purpose of providing such goods or services to any public utility in the same holding 

company system, at the election of the system (the public utility holding company, 

together with its subsidiary companies) or a state commission having jurisdiction over the 

public utility, the Commission shall review and authorize the allocation of the costs for 
Docket No. RM05-32-000 - 186 -

such goods or services to the extent relevant to that associate company. Such election to 

have the Commission review and authorize cost allocations shall remain in effect until 

further Commission order. 

(b) Exemptions. Any holding company system whose public utility operations are 

confined substantially to a single state is exempt from the requirements of paragraph (a) 

of this section. A holding company system’s public utility operations will be deemed 

confined substantially to a single state if the holding company system does not derive 

more than 13 percent of its public-utility revenues from outside a single state. A holding 

company system or state commission may, pursuant to this subsection, seek a 

Commission determination that a holding company’s public utility operations are 

confined substantially to a single state by filing a petition for declaratory order pursuant 

to Rule 207(a) of the Commission’s Rules of Practice and Procedure (§ 385.207(a)). Any 

holding company system or state commission seeking such a determination shall bear the 

burden of demonstrating that such determination is warranted. 

(c) Other classes of transactions. Either upon petition for declaratory order or 

upon its own motion, the Commission may exclude from the scope of Commission 

review and authorization under paragraph (a) of this section any class of transactions that 

the Commission finds is not relevant to the jurisdictional rates of a public utility. Any 

holding company system or state commission seeking to obtain such a determination 

under this subsection shall file a petition for declaratory order pursuant to Rule 207(a) of 

the Commission’s Rules of Practice and Procedure justifying its request for exemption 

(§ 385.207(a)). Any holding company system or state commission seeking such an 
Docket No. RM05-32-000 - 187 -

exemption shall bear the burden of demonstrating that such determination is warranted. 

(d) Nothing in paragraphs (a)-(c) of this section shall affect the authority of the 

Commission under the Federal Power Act (16 U.S.C. 791 et seq.), the Natural Gas Act 

(15 U.S.C. 717 et seq.), or other applicable law, including the authority of the 

Commission with respect to rates, charges, classifications, rules, regulations, practices, 

contracts, facilities, and services. 

§ 366.6 Previously authorized activities. 

(a) General. Unless otherwise provided by Commission rule or order, a person 

may continue to engage in activities or transactions authorized under the Public Utility 

Holding Company Act of 1935 prior to the effective date of the Public Utility Holding 

Company Act of 2005, February 8, 2006, until the later of the date such authorization 

expires or December 31, 2007, so long as that person continues to comply with the terms 

of such authorization. If any such activities or transactions are challenged in a formal 

Commission proceeding, the person claiming prior authorization shall be required to 

provide at that time the full text of any such authorization (whether by rule, order, or 

letter) and the application(s) or pleading(s) underlying such authorization (whether by 

rule, order, or letter). 

(b) Financing Authorizations. Holding companies that intend to rely on financing 

authorization orders or letters issued by the Securities and Exchange Commission must 

file these orders or letters with the Commission within 30 days after the effective date of 

the Public Utility Holding Company Act of 2005, February 8, 2006; any reports or other 

submissions that, pursuant to such financing authorizations, previously were filed with 
Docket No. RM05-32-000 - 188 -

the Securities and Exchange Commission must instead be filed with the Commission, 

effective February 8, 2006. For the purposes of this section, compliance with the terms 

of such financing authorizations includes the requirement to notify the Commission of 

any financing transactions that a holding company engages in pursuant to such financing 

authorization. 

§ 366.7 Procedures for obtaining exempt wholesale generator and foreign 

utility company status. (a) Self-certification notice procedure. An exempt wholesale 

generator or a foreign utility company, or their representative, may file with the 

Commission a notice of self-certification demonstrating that it satisfies the definition of 

exempt wholesale generator or foreign utility company. In the case of exempt wholesale 

generators, the person filing a notice of self-certification under this section must also file 

a copy of the notice with the state regulatory authority of the state in which the facility is 

located. Notices of self-certification will be published in the Federal Register. Persons 

that file such notices must include a form of notice suitable for publication in the Federal 

Register in accordance with the specifications in § 385.203(d). A person filing a notice 

of self-certification in good faith will be deemed to have temporary exempt wholesale 

generator or foreign utility company status. If the Commission takes no action within 60 

days from the date of filing of the notice of self-certification, the self-certification shall 

be deemed to have been granted. The Commission may toll the 60-day period to request 

additional information, or for further consideration of the request; in such cases, the 

person’s exempt wholesale generator or foreign utility company status will remain 

temporary until such time as the Commission has determined whether to grant or deny 
Docket No. RM05-32-000 - 189 -

exempt wholesale generator or foreign utility company status. Authority to toll the 60-

day period is delegated to the Secretary or the Secretary’s designee, and authority to act 

on uncontested notices of self-certification is delegated to the General Counsel or the 

General Counsel’s designee. 

 (b) Optional procedure for Commission determination of exempt wholesale 

generator status or foreign utility company status. A person may file for a Commission 

determination of exempt wholesale generator status or foreign utility company status 

under § 366.1 by filing a petition for declaratory order pursuant to Rule 207(a) of the 

Commission’s Rules of Practice and Procedure (§ 385.207(a)), justifying its request for 

exemption. Persons that file petitions must include a form of notice suitable for 

publication in the Federal Register in accordance with the specifications in § 385.203(d). 

Authority to act on uncontested notices of self-certification is delegated to the General 

Counsel or the General Counsel’s designee. 

 (c) Revocation of status. 

 (1) If an exempt wholesale generating facility or a foreign utility company fails 

to conform with any material facts or representations presented by the applicant in its 

submittals to the Commission, the notice of self-certification of the status of the facility 

or Commission order certifying the status of the facility may no longer be relied upon. 

(2) The Commission may, on its own motion or on the application of any person, 

revoke the status of a facility or company, if the facility or company fails to conform to 

any of the Commission’s criteria under this part. 
Docket No. RM05-32-000 - 190 -

Subpart B – Accounting and Recordkeeping

§ 366.21 Accounts and records for holding companies. 

(a) General. Unless otherwise exempted or granted a waiver by Commission rule 

or order, every holding company shall maintain and make available to the Commission 

books, accounts, memoranda, and other records of all of its transactions in sufficient 

detail to permit examination, audit and verification, as necessary and appropriate for the 

protection of utility customers with respect to jurisdictional rates, of the financial 

statements, schedules and reports required to be filed with the Commission or issued to 

stockholders. 

(b) Unless otherwise exempted or granted a waiver by Commission rule or order, 

beginning January 1, 2007, all holding companies must comply with the Commission’s 

record-retention requirements for public utilities and licensees or for natural gas 

companies, as appropriate (Parts 125 and 225). Until December 31, 2006, holding 

companies registered under the Public Utility Holding Company Act of 1935 (16 U.S.C. 

79a et seq.) may follow either the Commission’s record-retention rules for public utilities 

and licensees or for natural gas companies, as appropriate (Parts 125 and 225), or the 

Security and Exchange Commission’s record-retention rules in 17 C.F.R. Part 257. 

 (c) Nothing in this section shall relieve any company subject thereto from 

compliance with the requirements as to recordkeeping and record-retention that may be 

prescribed by any other regulatory agency. 
Docket No. RM05-32-000 - 191 -

 § 366.22 Accounts and records of service companies.

(a) Record-retention requirements. 

(1) General. Unless otherwise exempted or granted a waiver by Commission rule 

or order, beginning January 1, 2007, every service company shall maintain and make 

available to the Commission such books, accounts, memoranda, and other records in such 

manner and preserve them for such periods, as the Commission prescribes in Parts 125 

and 225 in sufficient detail to permit examination, audit, and verification, as necessary 

and appropriate for the protection of utility customers with respect to jurisdictional rates. 

(2) Transition period. Until December 31, 2006, service companies in holding 

company systems registered under the Public Utility Holding Company Act of 1935 (16 

U.S.C. §§ 79a et seq. (2000)) may follow either the Commission’s record-retention 

requirements in Parts 125 and 225 or the Securities and Exchange Commission’s recordretention rules in 17 C.F.R. Part 257. 

 (3) Nothing in this section shall relieve any service company subject thereto from 

compliance with requirements as torecord-retention that may be prescribed by any other 

regulatory agency. 

(b) Accounting requirements. 

(1) General. Unless otherwise exempted or granted a waiver by Commission rule 

or order, beginning January 1, 2007, every service company that is not a special-purpose 

company (e.g., a fuel supply company or a construction company) shall maintain and 

make available to the Commission such books, accounts, memoranda, and other records 
Docket No. RM05-32-000 - 192 -

as the Commission prescribes in Parts 101 and 201, in sufficient detail to permit 

examination, audit, and verification, as necessary and appropriate for the protection of 

utility customers with respect to jurisdictional rates. Every such service company shall 

maintain and make available such books, accounts, memoranda, and other records in such 

manner as are prescribed in Parts 101 and 201, and shall keep no other records with 

respect to the same subject matter except: 

(i) records other than accounts; 

(ii) records required by federal or state law; 

(iii) subaccounts or supporting accounts which are not inconsistent with the 

accounts required either by the Uniform System of Accounts in Parts 101 and 201 ; and 

(iv) such other accounts as may be authorized by the Commission. 

(2) Transition period. Until December 31, 2006, service companies in holding 

company systems registered under the Public Utility Holding Company Act of 1935 (16 

U.S.C. 79a et seq.), as described in subparagraph (1), may follow either the 

Commission’s Uniform System of Accounts in Parts 101 and 201 or the Securities and 

Exchange Commission’s Uniform System of Accounts in 17 C.F.R. Part 256. 

 (3) Nothing in this section shall relieve any service company subject thereto from 

compliance with requirements as to accounting that may be prescribed by any other 

regulatory agency. 
Docket No. RM05-32-000 - 193 -

§ 366.23 FERC Form No. 60, annual reports by service companies.

(a) General. Unless otherwise exempted or granted a waiver by Commission rule 

or order, every service company in a holding company system that is not a specialpurpose company (e.g., a fuel supply company or a construction company) that provides 

non-power goods or services to a Commission-jurisdictional public utility or natural gas 

company shall file with the Commission by May 1, 2006 and by May 1each year 

thereafter, a report, FERC Form No. 60, for the prior calendar year.. Every such report 

shall be submitted on the FERC Form No. 60 then in effect and shall be prepared in 

accordance with the instructions incorporated in such form. For good cause shown, the 

Commission may extend the time within which any such report is to be filed or waive the 

requirements applicable to any such report. The authority to act on motions for 

extensions of time to file any such reports or to waive the requirements applicable to any 

such reports, including granting or denying such motions, in whole or in part, is delegated 

to the Chief Accountant or the Chief Accountant’s designee. 

(b) Transition period. Service companies in holding company systems exempted 

from the requirements of the Public Utility Holding Company Act of 1935 (16 U.S.C. 

79a et seq.) need not file an annual report, FERC Form No. 60, for calendar years 2005 

and 2006. 

. 
Docket No. RM05-32-000 - 194 -

Appendix 1 List of commenters

Acronym Name

AGL Resources AGL Resources Inc. 

Alcoa Alcoa Inc. 

Allegheny Energy Inc. 

Alliant Alliant Energy Corporation 

Ameren Ameren Services Company 

AEP American Electric Power Service Corporation 

AGA American Gas Association 

American 

National Power 

American National Power, Inc. 

APGA American Public Gas Association 

APPA/NRECA American Public Power Association/National Rural Electric 

Cooperative Association 

American Transmission Company LLC 

Cooperatives Arizona Electric Power Cooperative, Inc./Southwest Transmission 

Cooperative, Inc./Sierra Southwest Cooperative Services, Inc. 

Arkansas PSC Arkansas Public Service Commission 

Barclays Barclays Global Investors, N.A. 

Barrick Barrick Goldstrike Mines Inc. 

Black Hills Black Hills Corporation 

CEOB California Electricity Oversight Board 

Calpine Calpine Corporation 

Capital Research and Management Company 

Cinergy Cinergy Corporation 

City of Redding, California 

Santa Clara City Santa Clara, California 

Chairman Barton Congressman Joe Barton 

ConEd Consolidated Edison Company of New York, Inc. 

Coral Power and 

Shell WindEnergy 

Coral Power, LLC and Shell WindEnergy Inc. 

Detroit Edison Detroit Edison Company 

Dominion Dominion Resources, Inc. 

Duke Energy Duke Energy Corporation 

EEI Edison Electric Institute 

EPSA Electric Power Supply Association 

ELCON Electricity Consumers Resource Council/American Iron and Steel 

Institute/American Chemistry Council/Portland Cement Association 

Emera Emera Incorporated 

Energy East Energy East Corporation 

Entergy Entergy Services, Inc. 

E.ON/LG&E E.ON AG and LG&E Energy LLC 
Docket No. RM05-32-000 - 195 -

Energy 

Exelon Exelon Corporation 

FirstEnergy FirstEnergy Service Company 

FPL Group FPL Group, Inc. 

Georgia PSC Georgia Public Service Commission 

Goldman Sachs The Goldman Sachs Group, Inc. 

IURC Indiana Utility Regulatory Commission 

International Transmission Company 

Investment Advisor Association 

Investment Company Institute 

Kentucky PSC Kentucky Public Service Commission 

Keyspan Keyspan Corporation 

MBIA MBIA Insurance Corporation 

MGTC MGTC Inc. 

MidAmerican MidAmerican Energy Holdings Company 

Missouri PSC Missouri Public Service Commission 

Mittal Steel Mittal Steel USA ISG, Inc. 

Morgan Stanley Morgan Stanley Capital Group Inc. 

NARUC National Association of Regulatory Utility Commissioners 

NASUCA National Association of State Utility Consumer Advocates 

National Fuel National Fuel Gas Company 

National Grid National Grid USA 

NiSource NiSource Inc. 

Northeast Utilities Northeast Utilities Service Company 

PG&E Corporation 

Ohio PUC Public Utilities Commission of Ohio 

Oklahoma 

Corporation 

Oklahoma Corporation Commission 

Pacificorp 

Pepco Holding, Inc./Potomac Electric Power Company/Atlantic City 

Electric Company/Delmarva Power & Light Company/Conectiv 

Energy Supply, Inc./PEPCO Energy Services Inc./PHI Service 

Company and other system companies. 

Portland General Electric Company 

PPL PPL Companies 

PPM Energy, Inc. 

Progress Energy Progress Energy, Inc. 

Public Citizen Public Citizen Inc. 

Wisconsin PSC Public Service Commission of Wisconsin 

Questar Corporation 

Scottish Power 

Southern Company Services, Inc. 

TANC Transmission Agency of Northern California 
Docket No. RM05-32-000 - 196 -

Tri-State Generation/Transmission Association, Inc. 

Utility Workers Utility Workers Union of American 

WGL Holdings, Inc. and Washington Gas & Light Company 

Xcel Xcel Energy Services Inc. 
Docket No. RM05-32-000 - 197 -

Appendix 2 FERC Form No. 60

UNITED STATES 

FEDERAL ENERGY REGULATORY COMMISSION 

Washington, D.C. 20426 

 

FORM 60

 

ANNUAL REPORT

 

FOR THE PERIOD

 

Beginning and Ending 

 

 

 

TO THE

FEDERAL ENERGY REGULATORY COMMISSION

 

OF

 

 (Exact Name of Reporting Company) 

 

A Service Company

("Mutual" or "Subsidiary") 

 

 

Date of Incorporation If not Incorporated, Date of Organization . 

 

State or Sovereign Power under which Incorporated or Organized 

 

Location of Principal Executive Offices of Reporting Company 

 

Name, title, and address of officer to whom correspondence concerning this report should be addressed: 

 

 

(Name) (Title) (Address) 

 

Name of Principal Holding Company under which Reporting Company is organized:

 

 
Docket No. RM05-32-000 - 198 -

INSTRUCTIONS FOR USE OF FORM 60 

1. Timing of Filing 

On or before the first day of May in each calendar year, each mutual service company and each subsidiary 

service company shall file with Commission an annual report on Form 60 and in accordance with the 

Instructions for that form. 

2. Number of Copies 

Each annual report shall be filed in duplicate. The company should prepare and retain at least one extra 

copy for itself in case correspondence with reference to the report becomes necessary. 

 

3. Period Covered by Report 

The first report filed by the company shall cover the period from the date the Uniform System of Accounts 

was required to be made effective as to that company to the end of that calendar year. Subsequent reports 

should cover a calendar year 

4. Report Format 

Reports shall be submitted on the forms prepared by the Commission. If the space provided on any sheet 

of such form is inadequate, additional sheets may be inserted of the same size as a sheet of the form or 

folded to each size. 

5. Money Amounts Displayed 

All money amounts required to be shown in financial statements may be expressed in whole dollars, in 

thousands of dollars or in hundred thousands of dollars, as appropriate and subject to provisions of 

Regulation S-X (210.3-01) 

6. Deficits Displayed 

Deficits and other like entries shall be indicated by the use of either brackets or a parenthesis with 

corresponding reference in footnotes (Regulation S-X, 210.3-01(c)) 

7. Major Amendments or Corrections 

Any company desiring to amend or correct a major omission or error in a report after it has been filed with 

the Commission shall submit an amended report including only those pages, schedules and entries that are 

to be amended or corrected. A cover letter shall be submitted requesting the Commission to incorporate 

the amended report changes and shall be signed by a duly authorized officer of the company. 

 

8. Definitions 

Definitions contained in Instruction 01-8 to the Uniform System of Accounts for Mutual Service 

Companies and Subsidiary Service Companies, Public Utility Holding Act of 2005, shall be applicable to 

words or terms used specifically within this Form 60. 

9. Organization Chart 

The Service Company shall submit with each annual report a copy of its current organization chart. 

10. Methods of Allocation 
Docket No. RM05-32-000 - 199 -

The Service Company shall submit with each annual report a listing of the currently effective methods of 

allocation being used by the service company and on file and approved previously by the Securities and 

Exchange Commission pursuant to the Public Utility Holding Company Act of 19355. 

11. Annual Statement of Compensation for Use of Capital Billed 

The service company shall submit with each annual report a copy of the annual statement supplied to each 

associate company in support of the amount of compensation for use of capital billed during the calendar 

year. 

12. Collection of Information 

The information requested by this form is being collected under authority of the Public Utility Holding Act 

of 2005. The Commission estimates that it will take each respondent thirteen and one-half (13.5) hours to 

respond to this collection of information. A response to this form is mandatory. The information on this 

form will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to 

respond to, a collection of information unless a currently valid OMB control number is displayed. 

13. Where to File 

File Form 60 at the following address: 

Federal Energy Regulatory Commission 

888 First Street N.E. 

Washington, DC 20426 

 
Docket No. RM05-32-000 - 200 -

LISTING OF SCHEDULES AND ANALYSIS OF ACCOUNTS

 

Schedule or Page 

Account Number Number 

Description of Schedules and Accounts 

 

Comparative Balance Sheet Schedule I 5 

 Service Company Property Schedule II 7 

Accumulated Provision for Depreciation 

 and Amortization of Service Company Property Schedule III 8 

Investments Schedule IV 9 

Accounts Receivable from Associate Companies Schedule V 9 

Fuel Stock Expenses Undistributed Schedule VI 10 

Stores Expense Undistributed Schedule VII 10 

Miscellaneous Current and Accrued Assets Schedule VIII 11 

Miscellaneous Deferred Debits Schedule IX 11 

Research, Development, or Demonstration 

 Expenditures Schedule X 12 

 Proprietary Capital Schedule XI 12 

 Long-Term Debt Schedule XII 13 

 Current and Accrued Liabilities Schedule XIII 14 

 Notes to Financial Statements Schedule XIV 14 

 Comparative Income Statement Schedule XV 15 

 Analysis of Billing - Associate Companies Account 457 16 

 Analysis of Billing - Nonassociate Companies Account 458 17 

 Analysis of Charges for Service - Associate 

 and Nonassociate Companies Schedule XVI 18 

 Schedule of Expense Distribution by Department or 

 Service Function Schedule XVII 19 

 Departmental Analysis of Salaries Account 920 20 

Miscellaneous General Expenses Account 930.2 20 

Notes to Statement of Income Schedule XVIII 21 

Organization Chart 22 

Methods of Allocation 22 

Annual Statement of Compensation for Use of Capital Billed 22

4 
Docket No. RM05-32-000 - 201 -

ANNUAL REPORT OF 

 

SCHEDULE I - COMPARATIVE BALANCE SHEET 

 Give balance sheet of the Company as of December 31 of the current and prior year. 

As of December 31, 

 Account Assets and Other Debits Current Prior 

101 

107 

108 

123 

124 

131 

134 

135 

136 

141 

143 

144 

146 

152 

154 

163 

 

165 

174 

181 

184 

186 

188 

190 

 

Service Company Property

Service company property (Schedule II) 

Construction work in progress (Schedule II) 

 Total Property 

Less: Accumulated provision for depreciation and 

amortization of service company property (Schedule III) 

 Net Service Company Property 

Investments 

Investments in associate companies (Schedule IV) 

Other investments (Schedule IV) 

 Total Investments 

Current and Accrued Assets 

Cash 

Special deposits 

Working funds 

Temporary cash investments (Schedule IV) 

Notes receivable 

Accounts receivable 

Accumulated provision for uncollectible accounts 

Accounts receivable from associate companies (Schedule V) 

Fuel stock expenses undistributed (Schedule VI) 

Materials and supplies 

Stores expense undistributed (Schedule VII) 

Prepayments 

Miscellaneous current and accrued assets (Schedule VIII) 

 Total Current and Accrued Assets 

Deferred Debits

 

Unamortized debt expense 

Clearing accounts 

Miscellaneous deferred debits (Schedule IX) 

Research, development, or demonstration expenditures (Sch. X) 

Accumulated deferred income taxes 

 Total Deferred Debits 

 TOTAL ASSETS AND OTHER DEBITS 
Docket No. RM05-32-000 - 202 -

ANNUAL REPORT OF 

 

SCHEDULE I - COMPARATIVE BALANCE SHEET 

As of December 31, 

 Account Liabilities and Proprietary Capital Current Prior 

201 

211 

215 

216 

223 

224 

225 

226 

228 

231 

232 

233 

234 

236 

237 

241 

242 

243 

253 

255 

282 

 

Proprietary Capital

Common stock issued (Schedule XI) 

Miscellaneous paid-in-capital (Schedule XI)

Appropriated retained earnings (Schedule XI)

Unappropriated retained earnings (Schedule XI)

 Total Proprietary Capital 

Long-Term Debt 

 

Advances from associate companies (Schedule XII)

Other long-term debt (Schedule XII)

Unamortized premium on long-term debt

Unamortized discount on long-term debt-debit

 Total Long-Term Debt 

Current and Accrued Liabilities 

 

Accumulated provision for pensions and benefits

Notes payable 

Accounts payable 

Notes payable to associate companies (Schedule XIII)

Accounts payable to associate companies (Schedule XIII)

Taxes accrued 

Interest accrued 

Tax collections payable 

Miscellaneous current and accrued liabilities (Schedule XIII)

Obligations under capital leases - Current

 Total Current and Accrued Liabilities 

Deferred Credits

 

Other deferred credits 

Accumulated deferred investment tax credits 

 Total Deferred Credits

 

Accumulated Deferred Income Taxes

 TOTAL LIABILITIES AND PROPRIETARY CAPITAL 
Docket No. RM05-32-000 - 203 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE II - SERVICE COMPANY PROPERTY 

ACCOUNT DESCRIPTION Balance at 

Beginning 

of Year 

Additions Retirements 

or 

Sales 

Other 269

Changes 

Balance 

At Close 

Of Year 

301 

303 

304 

305 

306 

307 

308 

309 

310 

311 

Organization 

Miscellaneous Intangible Plant 

Land and Land Rights 

Structures and Improvements 

Leasehold Improvements 

Equipment 270

Office Furniture and Equipment 

Automobiles, Other Vehicles 

and Related Garage Equipment 

Aircraft and Airport Equipment 

Other Property: 271

 SUB-TOTALS 

107 Construction Work in Progress 272 

 

TOTAL 

Subaccount Description Additions Balance 

at Close 

of Year 

 

269 Provide an explanation of those changes considered material: 

270 Subaccounts are required for each class of equipment owned. The service company shall 

provide a listing by subaccount of equipment additions during the year and balance at the close 

of the year. 

271 Describe other service company property: 

272 Describe construction work in progress: 
Docket No. RM05-32-000 - 204 -

ANNUAL REPORT OF 

For the Year Ended 

 

SCHEDULE III - ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION 

OF SERVICE COMPANY PROPERTY 

ACCOUNT DESCRIPTION Balance 

at 

Beginning 

Of Year 

Additions 

Charged 

to 

Account 

403 

Retirements Other 

Changes 

Additions 

(Deductions)* 

Balance 

at 

Close 

of 

Year 

301 

303 

304 

305 

306 

307 

308 

309 

310 

311 

Organization

Miscellaneous Intangible Plant

Land and Land Rights 

Structures and Improvements

Leasehold Improvements 

Equipment 

Office Furniture and Equipment

Automobiles, Other Vehicles and 

Related Garage Equipment 

Aircraft and Airport Equipment

Other Service Company Property: 

* Provide an explanation of those changes considered material: 
Docket No. RM05-32-000 - 205 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE IV - INVESTMENTS

 

Instructions: Complete the following schedule concerning investments. 

 

Under Account 124 "Other Investments", state each investment separately, with description, including the name of 

issuing company, number of shares or principal amount, etc. 

 

Under Account 136, "Temporary Cash Investments", list each investment separately. 

 

 

Description Balance at 

Beginning 

of Year 

Balance at 

Close 

of Year 

Account 123 - Investment in Associate Companies 

 

Account 124 - Other Investments 

 

Account 136 - Temporary Cash Investments

 

 TOTAL 

 ANNUAL REPORT OF 

 

For the Year Ended 

SCHEDULE V - ACCOUNTS RECEIVABLE FROM ASSOCIATE COMPANIES

 

 Instructions: Complete the following schedule listing accounts receivable from each associate company. Where the 

service company has provided accommodation or convenience payments for associate companies, a separate listing 

of total payments for each associate company by subaccount should be provided. 

Description Balance at 

Beginning 

of Year 

Balance at 

Close 

of Year 

Account 146 – Accounts Receivable from Associate Companies 

 TOTAL 

Analysis of Convenience or Accommodation Payments: Total Payments for each 

associate 

 TOTAL PAYMENTS 
Docket No. RM05-32-000 - 206 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE VI - FUEL STOCK EXPENSES UNDISTRIBUTED

Instructions: Report the amount of labor and expenses incurred with respect to fuel stock expenses during the year 

and indicate amount attributable to each associate company. Under the section headed "Summary" listed below give 

and overall report of the fuel functions performed by the service company. 

Description Labor Expenses Total 

Account 152 - Fuel Stock Expenses Undistributed 

TOTAL 

Summary: 

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE VII - STORES EXPENSE UNDISTRIBUTED

Instructions: Report the amount of labor and expenses incurred with respect to stores expense during the year and 

indicate amount attributable to each associate company. 

Description Labor Expenses Total 

Account 163 -Stores Expense Undistributed 

TOTAL 
Docket No. RM05-32-000 - 207 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE VIII - MISCELLANEOUS CURRENT AND ACCRUED ASSETS

Instructions: Provide detail of items in this account. Items less than $10,000 may be grouped, showing the number of 

items in each group. 

Description Balance 

at 

Beginning 

of Year 

Balance 

at 

Close 

of Year 

Account 174 - Miscellaneous Current and Accrued Assets 

 

 TOTAL 

ANNUAL REPORT OF 

 

For the Year Ended 

 

 SCHEDULE IX - MISCELLANEOUS DEFERRED DEBITS

Instructions: Provide detail of items in this account. Items less than $10,000 may be grouped, showing the number of 

items in each group. 

Description Balance 

at 

Beginning 

of Year 

Balance 

at 

Close 

of Year 

Account 186 - Miscellaneous Deferred Debits 

 TOTAL 
Docket No. RM05-32-000 - 208 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE X - RESEARCH, DEVELOPMENT OR DEMONSTRATION EXPENDITURES

Instructions: Provide a description of each material research, development, or demonstration project which incurred costs by 

the service corporation during the year. 

Description Amount 

Account 188 - Research, Development, or Demonstration Expenditures 

 

TOTAL 

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE XI - PROPRIETARY CAPITAL 

Account 

Number 

Class of 

Stock 

Number of Shares 

Authorized 

Par or Stated 

Value per Share 

Outstanding No. 

of Shares 

Close of 

Period 

Total Amount 

201 Common Stock 

Issued 

Instructions: Classify amounts in each account with brief explanation, disclosing the general nature of transactions 

which give rise to the reported amounts. 

 

Description Amount 

Account 211 - Miscellaneous Paid-In Capital 

 

Account 215 - Appropriated Retained Earnings 

 - 

 TOTAL 
Docket No. RM05-32-000 - 209 -

Instructions: 

Give particulars concerning net income or (loss) during the year, distinguishing between compensation for the use of 

capital owed or net loss remaining from servicing nonassociates per the General Instructions of the Uniform System 

of Accounts. For dividends paid during the year in cash or otherwise, provide rate percentage, amount of dividend, 

date declared and date paid. 

Description Balance at 

Beginning of 

Year 

Net Income 

Or (Loss) 

Dividend Paid Balance at 

Close of Year 

Account 216 – 

Unappropriated Retained Earnings 

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE XII - LONG-TERM DEBT 

Instructions: Advances from associate companies should be reported separately for advances on notes, and advances 

on open accounts. Names of associate companies from which advances were received shall be shown under the class 

and series of obligation column. For Account 224 - Other long-term debt, provide the name of creditor company or 

organization, terms of the obligation, date of maturity, interest rate, and the amount authorized and outstanding. 

Name of 

Creditor 

Tem of 

Obligation 

Class & 

Series of 

Obligation 

Date of 

Maturity 

Interest 

Rate 

Amount 

Authorized 

Balance at 

Beginning 

of Year 

Additions 

Deductions 

* 

Balance 

at Close 

of Year 

Account 223 - 

 

Advances From 

 Associate 

Companies 

 

Account 224 - 

Other Long-Term 

Debt: 

 

 TOTAL 

 

 

* Give an 

explanation of 

deductions: 
Docket No. RM05-32-000 - 210 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE XIII - CURRENT AND ACCRUED LIABILITIES

Instructions: Provide balance of notes and accounts payable to each associate company. Give description and 

amount of miscellaneous current and accrued liabilites. Items less than $10,000 may be grouped, showing the 

number of items in each group.

Description Balance 

at 

Beginning 

of Year 

Balance 

at 

Close 

of Year 

Account 233 - Notes Payable to Associate Companies 

 

 TOTAL 

 

Account 234 - Accounts Payable to Associate Companies 

 

 TOTAL 

Account 242 – Miscellaneous and Accrued Liabilities 

 TOTAL 

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE XIV - NOTES TO FINANCIAL STATEMENTS

 

 Instructions: The space below is provided for important notes regarding the financial statements or any account 

thereof. Furnish particulars as to any significant contingent assets or liabilities existing at the end of the year. Notes 

relating to financial statements shown elsewhere in this report may be indicated here by reference. 
Docket No. RM05-32-000 - 211 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

SCHEDULE XV - COMPARATIVE INCOME STATEMENT 

Account Description Current 

Year 

Prior 

Year 

457 

458 

421 

920 

921 

922 

923 

924 

925 

926 

928 

930.1 

930.2 

931 

403 

408 

409 

410 

411 

411.5 

426.1 

426.5 

427 

430 

431 

INCOME 

 

Services rendered to associate companies

Services rendered to non associate companies

Miscellaneous income or loss

 

 TOTAL INCOME

 

 EXPENSE 

 

Salaries and wages 

Office supplies and expenses 

Administrative expense transferred - credit

Outside services employed 

Property insurance 

Injuries and damages 

Employee pensions and benefits

Regulatory commission expense

General advertising expenses 

Miscellaneous general expenses 

Rents 

Depreciation and amortization expense

Taxes other than income taxes

Income taxes 

Provision for deferred income taxes

Provision for deferred income taxes - credit

Investment Tax Credit 

Donations 

Other deductions 

Interest on long-term debt 

Interest on debt to associate companies

Other interest expense 

 TOTAL EXPENSE 

 

 NET INCOME OR (LOSS) 
Docket No. RM05-32-000 - 212 -

ANNUAL REPORT OF 

 

For the Year Ended 

 

ANALYSIS OF BILLING ASSOCIATE COMPANIES - ACCOUNT 457

 

Name of 

Associate Company 

Direct Costs 

Charged 

Indirect Costs 

Charged 

Compensation 

For Use 

Of Captital 

Total Amount 

Billed 

457-1 457-2 457-3 

TOTAL 
Docket No. RM05-32-000 - 213 -

ANNUAL REPORT OF 

 

For the Year Ended 

ANALYSIS OF BILLING NONASSOCIATE COMPANIES - ACCOUNT 458

Instruction: Provide a brief description of the services rendered to each nonassociate company: 

Name of 

Associate Company 

Direct Costs 

Charged 

Indirect Costs 

Charged 

Compensation 

For Use 

Of Captital 

Total Amount 

Billed 

458-1 458-2 458-3 
Docket No. RM05-32-000 - 214 -

ANNUAL REPORT OF 

 

For the Year Ended 

SCHEDULE XVI - ANALYSIS OF CHARGES FOR SERVICE - ASSOCIATE AND NONASSOCIATE COMPANIES 

Instruction: Total cost of service will equal for associate and nonassociate companies the total amount billed under their separate analysis of 

billing schedules. 

Acct. Description of Items Associate 

Company 

Nonassociate 

Company 

Total Charges 

For Services 

Direct 

Cost 

Indirect 

Cost 

Total 

Cost 

Direct 

Cost 

Indirect 

Cost 

Direct 

Cost 

Direct 

Cost 

Indirect 

Cost 

Total 

Cost 

920 

921 

922 

923 

924 

925 

926 

928 

930.1 

930.2 

931 

403 

408 

409 

410 

411 

411.5 

426.1 

426,5 

427 

430 

431 

Salaries and wages 

Office supplies and 

expenses 

Administrative expense 

transferred - credit 

Outside services employed 

Property insurance 

Injuries and damages 

Employee pensions and 

benefits 

Regulatory commission 

expense 

General advertising expenses 

Miscellaneous general 

expenses 

Rents 

Depreciation and 

amortization expense 

Taxes other than income 

taxes 

Income taxes 

Provision for deferred income 

taxes 

Provision for deferred income 

taxes - credit 

Investment Tax Credit 

Donations 

Other deductions 

Interest on long-term debt 

Interest on debt to associate 

companies 

Other interest expense 

TOTAL EXPENSE 

Compensation for Use of 

 Equity Capital 

Interest on Debt to Associate 

Companies 

 TOTAL COST OF 

SERVICE 

 
Docket No. RM05-32-000 - 215 -

ANNUAL REPORT OF 

 

For the Year Ended 

SCHEDULE XVII - SCHEDULE OF EXPENSE DISTRIBUTION BY DEPARTMENT OR SERVICE 

FUNCTION

Instruction: 

Indicate each department or service function. (See Instruction 01-3 General Structure of Accounting System: 

Uniform System of Accounts). 

Account Description of Items Total 

Amount 

Overhead Department or 

Service Function 

920 

921 

922 

923 

924 

925 

926 

928 

930.1 

930.2 

931 

403 

408 

409 

410 

411 

411.5 

426.1 

426.5 

427 

430 

431 

Salaries and wages 

Office supplies and expenses 

Administrative expense 

transferred – credit 

Outside services employed 

Property insurance 

Injuries and damages 

Employees pensions and 

benefits 

Regulatory commission 

expenses 

General advertising expenses 

Miscellaneous general expenses 

Rents 

Depreciation and amortization 

expenses 

Taxes other than income taxes 

Income taxes 

Provision for deferred taxes 

Provision for deferred taxes – 

credit 

Investment tax credit 

Donations 

Other deductions 

Interest on long-term debt 

Interest on debt to associated 

companies 

Other interest expense 
Docket No. RM05-32-000 - 216 -

ANNUAL REPORT OF 

 

For the Year Ended 

DEPARTMENTAL ANALYSIS OF SALARIES

Name of Department 

Indicate each department 

or service function 

Departmental Salary Expense 

Included in Amounts Billed to Others 

Number of 

Personnel 

End of Year 

Total 

Amount 

Parent 

Company 

Other 

Associates 

Nonassociates 

TOTAL 

ANNUAL REPORT OF 

 

For the Year Ended 

MISCELLANEOUS GENERAL EXPENSES - ACCOUNT 930.2

Instructions: 

Provide a listing of the amount included in Account 930.2, "Miscellaneous General Expenses" classifying such 

expenses according to their nature. Payments and expenses permitted by Section 321 (b)(2) of the Federal Election 

Campaign Act, as amended by Public Law 94-283 in 1976 (2 U.S.C. 441(b)(2)) shall be separately classified. 

Description Amount 

TOTAL 
Docket No. RM05-32-000 - 217 -

ANNUAL REPORT OF 

 

For the Year Ended 

SCHEDULE XVIII - NOTES TO STATEMENT OF INCOME

Instructions: 

The space below is provided for important notes regarding the statement of income or any account thereof. Furnish 

particulars as to any significant increase in services rendered or expenses incurred during the year. Notes related to 

financial statements shown elsewhere in this report may be indicated here by reference. 

ANNUAL REPORT OF 

 

For the Year Ended 

ORGANIZATION CHART

ANNUAL REPORT OF 

 

For the Year Ended 

METHODS OF ALLOCATION 

ANNUAL REPORT OF 

 

For the Year Ended 

ANNUAL STATEMENT OF COMPENSATION FOR USE OF CAPITAL BILLED
Docket No. RM05-32-000 - 218 -

ANNUAL REPORT OF 

 

For the Year Ended 

SIGNATURE CLAUSE

Pursuant to the requirements of the Public Utility Holding Company Act of 2005 and the rules and regulations of the 

Federal Energy Regulatory Commission issued thereunder, the undersigned company has duly caused this report to 

be signed on its behalf by the undersigned officer thereunto duly authorized. 

(Name of Reporting Company) 

(Signature of Signing Officer) 

(Printed Name and Title of Signing Officer) 

Date: