UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Parts 2 and 33 

(Docket No. RM05-34-001; Order No. 669-A) 

Transactions Subject to FPA Section 203 

(Issued April 24, 2006) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Final Rule; Order on Rehearing. 

SUMMARY: In this order on rehearing, the Federal Energy Regulatory Commission 

(Commission) reaffirms its determinations in part and grants rehearing in part of Order 

No. 669, 71 FR 1348 (2006) which revised 18 CFR § 2.26 and 18 CFR Part 33 to 

implement amended section 203 of the Federal Power Act (FPA). 

DATES: This order on rehearing will be effective on [Insert date 30 days after the date 

of publication in FEDERAL REGISTER]. 

FOR FURTHER INFORMATION CONTACT: 

Andrew P. Mosier, Jr. (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-6274 

Phillip Nicholson (Technical Information) 

Office of Energy, Markets, and Reliability -West 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8240 
Docket No. RM05-34-001 - 2 -

Jan Macpherson (Legal Information) 

Office of the General Counsel 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8921 

James Akers (Technical Information) 

Office of Energy, Markets, and Reliability - West 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington, D.C. 20426 

(202) 502-8101 

SUPPLEMENTARY INFORMATION: 
TABLE OF CONTENTS 

Paragraph Number 

I. Introduction .................................................................................................................... 1.

II. Background................................................................................................................... 5.

A. Pre-EPAct 2005 Standards ....................................................................................... 6.

B. EPAct Revisions to Section 203 and Order No. 669................................................ 7.

III. Discussion.................................................................................................................. 13.

A. 18 CFR Part 33 ....................................................................................................... 13.

1. Section 33.1(b)(3) - Definition of “Value” ......................................................... 13.

2. Section 33.1(b)(4) – Definitions of “Electric Utility Company” and “Holding 

Company” ................................................................................................................ 25.

3. Section 33.1(c)(1) - Blanket Authorizations: Intrastate Commerce, Local 

Distribution, and Internal Corporate Reorganizations ............................................. 55.

4. Blanket Authorizations for Cash Management Programs, Money Pools, and IntraHolding Company Financing Arrangements............................................................ 84.

5. Section 33.1(c)(2)-(c)(4) - Blanket Authorizations: Purchases of Voting and 

Non-Voting Securities Under Section 203 .............................................................. 92.

6. Other Requested Blanket Authorizations – Holding Company Purchasing Its 

Own Securities, Fiduciary Investments and Bank Underwriting/Hedging ............ 113.

7. Section 33.2(j) - General Information Requirements Regarding CrossSubsidization ......................................................................................................... 134.

8. Section 33.11(b) - Commission Procedures for Consideration of Applications 

under Section 203 of the FPA ............................................................................... 149.

B. Amendments to 18 CFR § 2.26 - The Merger Policy Statement.......................... 156.

1. Rehearing Requests ........................................................................................... 158.

2. Commission Determination............................................................................... 160.

IV. Information Collection Statement ........................................................................... 163.

V. Document Availability ............................................................................................. 168.

VI. Effective Date ......................................................................................................... 171.
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Joseph T. Kelliher, Chairman; 

 Nora Mead Brownell, and Suedeen G. Kelly. 

Transactions Subject to FPA Section 203 Docket No. RM05-34-001 

 

ORDER NO. 669-A 

ORDER ON REHEARING 

(Issued April 24, 2006) 

I. Introduction

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

 was signed into 

law. Section 1289 (Merger Review Reform) of Title XII, Subtitle G (Market 

Transparency, Enforcement, and Consumer Protection),2

 of EPAct 2005 amends 

section 203 of the Federal Power Act (FPA).3

 Amended section 203: (1) increases 

(from $50,000 to $10 million) the value threshold above which certain transactions are 

subject to section 203; (2) extends the scope of section 203 to include transactions 

involving certain transfers of generation facilities and certain public utility holding 

companies’ transactions with a value in excess of $10 million; (3) limits the Federal 

 1

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

2

 EPAct 2005 at 1281 et seq.

3

 16 U.S.C. 824b (2000). 
Docket No. RM05-34-001 - 2 - 

 

Energy Regulatory Commission’s (Commission) review of a public utility’s acquisition 

of securities of another public utility to transactions greater than $10 million; (4) requires 

that the Commission, when reviewing proposed section 203 transactions, examine crosssubsidization and pledges or encumbrances of utility assets; and (5) directs the 

Commission to adopt, by rule, procedures for the expeditious consideration of 

applications for the approval of transactions under section 203. 

2. On October 3, 2005, the Commission issued a notice of proposed rulemaking 

(NOPR) requesting comment on its proposal to amend its regulations to implement 

amended section 203.4

 As discussed below, on December 23, 2005, the Commission 

issued a final rule (Order No. 669)5

 adopting certain modifications to 18 CFR § 2.26 and 

18 CFR Part 33 to implement amended section 203. Generally, Order No. 669: 

(1) Implemented the new applicability of amended section 

203; 

4 Transactions Subject to FPA Section 203, 70 FR 58636 (Oct. 7, 2005), FERC 

Stats. & Regs. ¶ 32,589 (2005). 

5 Transactions Subject to FPA Section 203, Order No. 669, 71 FR 1348 (Jan. 6, 

2006), FERC Stats. & Regs. ¶ 31,200 (2005). On January 10, 2006, the Commission 

issued an errata notice to Order No. 669 revising parts of the regulatory text to conform to 

the version of the order that was issued in the Federal Register. Transactions Subject to 

FPA Section 203, 114 FERC ¶ 61,018 (2006). As relevant here, in instruction 7, at 

18 CFR 33.11(b)(2), a footnote was added after “(2) transactions that do not require 

Appendix A analysis,” reading: “Inquiry Concerning the Commission’s Merger Policy 

Under the FederalPower Act: Policy Statement,” Order No. 592, 61 FR 68595 (Dec. 30, 

1996), FERC Stats. & Regs. ¶ 31,044 (1996), reconsideration denied, Order No. 592-A, 

62 FR 33340 (June 19, 1997), 79 FERC ¶ 61,321 (1997) (Merger Policy Statement). 
Docket No. RM05-34-001 - 3 - 

 

(2) Granted blanket authorizations, in some instances with 

conditions, for certain types of transactions, including 

acquisitions of foreign utilities by holding companies, intraholding company system financing and cash management 

arrangements, certain internal corporate reorganizations, and 

certain acquisitions of securities of transmitting utilities and 

electric utility companies; 

(3) Defined terms, including “electric utility company,” 

“holding company,” and “non-utility associate company;” 

(4) Defined “existing generation facility;” 

(5) Adopted rules on the determination of “value” as it 

applies to various section 203 transactions; 

(6) Set forth a section 203 applicant’s obligation to 

demonstrate that a proposed transaction will not result in 

cross-subsidization of a non-utility associate company or the 

pledge or encumbrance of utility assets for the benefit of an 

associate company; and 

(7) Provided for expeditious consideration of completed 

applications for the approval of transactions that are not 

contested, do not involve mergers, and are consistent with 

Commission precedent. 

3. In Order No. 669, the Commission also announced that, at a technical conference 

on the Public Utility Holding Company Act of 2005 (PUHCA 2005),6

 to be held within 

the next year,7

 we will also address certain issues raised in this proceeding. These 

include whether the blanket authorizations granted in Order No. 669 should be revised 

6

 EPAct 2005 at 1261 et seq. Repeal of the Public Utility Holding Company Act 

of 1935 and Enactment of the Public Utility Holding Company Act of 2005, Order 

No. 667, 70 FR 55805, FERC Stats. & Regs. ¶ 31,197 (2005) (PUHCA 2005 Final Rule). 

7

 PUHCA 2005 Final Rule at P 17. The Commission stated that we intend to hold 

a technical conference no later than one year after PUHCA 2005 became effective to 

evaluate whether additional exemptions, different reporting requirements, or other 

regulatory actions need to be considered. The PUHCA 2005 Final Rule took effect on 

February 8, 2006. 
Docket No. RM05-34-001 - 4 - 

and whether additional protection against cross-subsidization and pledges or 

encumbrance of utility assets is needed.8

4. In this order, the Commission grants rehearing in part, grants clarification in 

part, and denies rehearing in part of its Order No. 669. Our actions here will 

necessitate further changes in the regulations. In light of the number of regulatory 

text changes, the Commission is including the revised regulations in their entirety. In 

addition, for the convenience of interested persons, we will include a version of the 

revised regulations in their entirety that highlights the changes from Order No. 669 as 

a separate attachment. (See Appendix B.) This attachment will not be published in 

the Federal Register. 

II. Background

5. The background to Order No. 669 is set forth in detail in that order. We will 

summarize it here. 

A. Pre-EPAct 2005 Standards

6. Prior to EPAct 2005, section 203 provided that 

no public utility shall sell, lease or otherwise dispose of the 

whole of its facilities subject to the jurisdiction of the 

Commission, or any part thereof of a value in excess of 

$50,000, or by any means whatsoever, directly or indirectly, 

merge or consolidate such facilities or any part thereof with 

those of any other person, or purchase, acquire, or take any 

security of any other public utility, without first having 

secured an order of the Commission authorizing it do so. 

 8

 Order No. 669 at P 4. 
Docket No. RM05-34-001 - 5 - 

The Commission applied the “public interest” standard in approving proposed 

transactions. The purpose of the Merger Policy Statement was to ensure that mergers are 

consistent with the public interest and to provide greater certainty and expedition in the 

Commission’s analysis of merger applications. The Merger Policy Statement sets out 

three factors the Commission generally considers when analyzing whether a proposed 

section 203 transaction is consistent with the public interest: effect on competition; effect 

on rates; and effect on regulation. The Commission later issued the Filing Requirements 

Rule,9

 a final rule updating the filing requirements under 18 CFR Part 33 of the 

Commission’s regulations for section 203 applications. The Filing Requirements Rule 

implements the Merger Policy Statement and provides detailed guidance to applicants for 

preparing applications. The revised filing requirements also assist the Commission in 

determining whether section 203 transactions are consistent with the public interest, 

provide more certainty, and provide for expedited review of such applications.

B. EPAct Revisions to Section 203 and Order No. 669

7. Amended section 203(a)(1) states that no public utility shall, without first 

having secured an order of the Commission authorizing it to do so: (A) sell, lease, or 

otherwise dispose of the whole of its facilities subject to the jurisdiction of the 

 9 Revised Filing Requirements Under Part 33 of the Commission’s Regulations, 

Order No. 642, 65 FR 70,984 (Nov. 28, 2000), FERC Stats. & Regs., July 1996-Dec. 

2000 ¶ 31,111 (2000), order on reh’g, Order No. 642-A, 66 FR 16,121 (Mar. 23, 2001), 

94 FERC ¶ 61,289 (2001) (codified at 18 CFR Part 33 (2005)) (Filing Requirements 

Rule). 
Docket No. RM05-34-001 - 6 - 

Commission, or any part thereof of a value in excess of $10 million; (B) merge or 

consolidate, directly or indirectly, such facilities or any part thereof with those of any 

other person, by any means whatsoever; (C) purchase, acquire, or take any security with a 

value in excess of $10 million of any other public utility; or (D) purchase, lease, or 

otherwise acquire an existing generation facility: (i) that has a value in excess of $10 

million; and (ii) that is used for interstate wholesale sales and over which the 

Commission has jurisdiction for ratemaking purposes. 

8. Section 203(a)(2) adds the entirely new requirement that no holding company in a 

holding company system that includes a transmitting utility or an electric utility shall 

purchase, acquire, or take any security with a value in excess of $10 million of, or, by any 

means whatsoever, directly or indirectly, merge or consolidate with, a transmitting utility, 

an electric utility company, or a holding company in a holding company system that 

includes a transmitting utility, or an electric utility company, with a value in excess of 

$10 million without prior Commission authorization. 

9. Amended section 203(a)(4) states that, after notice and opportunity for hearing, 

the Commission shall approve the proposed disposition, consolidation, acquisition, or 

change in control if it finds that the transaction will be consistent with the public interest. 

This standard was contained in the pre-EPAct 2005 section 203 as well. Amended 

section 203(a)(4) also provides a new specific requirement that the Commission must 

find that the transaction will not result in cross-subsidization of a non-utility associate 

company or pledge or encumbrance of utility assets for the benefit of an associate 
Docket No. RM05-34-001 - 7 - 

 

company, unless that cross-subsidization, pledge, or encumbrance will be consistent with 

the public interest. 

10. Section 203(a)(5) adds the entirely new requirement that the Commission shall 

adopt procedures for the expeditious consideration of applications for the approval of 

section 203 transactions. Such rules shall identify classes of transactions, or specify 

criteria for transactions, that normally meet the section 203 standards for approval. The 

Commission shall provide expedited review for such transactions. It further provides that 

the Commission must act on a proposed section 203 transaction within 180 days of filing 

but may extend the time for not more than an additional 180 days for good cause. 

11. Section 203(a)(6), which is also new, provides that for purposes of this section, 

the terms “associate company,” “holding company,” and “holding company system” have 

the meaning given those terms in PUHCA 2005.10 

12. Order No. 669 became effective on February 8, 2006. The aspects of Order No. 

669 on which rehearing were filed are described in more detail below.11

10 EPAct 2005 at 1262. 

11 The entities that filed requests for rehearing are listed in an appendix to this 

order. 
Docket No. RM05-34-001 - 8 - 

III. Discussion

A. 18 CFR Part 33

1. Section 33.1(b)(3) - Definition of “Value” 

13. Section 33.1(b)(3)(i) generally uses market value as the appropriate measure of 

value for transfers of physical facilities (transmission facilities and generation facilities) 

for purposes of determining whether the $10 million jurisdictional threshold is met.12 

The rule states that when a transaction occurs between non-affiliates, the Commission 

will rebuttably presume that market value is the transaction price. For transactions 

between affiliated companies, value means original cost undepreciated, as defined in the 

Commission’s Uniform System of Accounts, or original book cost,13 as applicable. 

14. Section 33.1(b)(3)(ii) provides that value as applied to transfers of wholesale 

contracts between non-affiliates also means the market value. The Commission will 

rebuttably presume that market value is the transaction price. For transfers of contracts 

between affiliates, value means total expected nominal revenues over the remaining life 

of the contract.14 

15. The Commission noted that a complicating factor in relying on transaction price 

as a measure of market value is that transactions will sometimes include assets whose 

 12 Order No. 669 at P 116. Section 33.1(b)(3)(iii) provides that for securities, 

value means market value, which is rebuttably presumed to be transaction price. 

13 Book cost, as used here, refers to original book cost. 

14 Order No. 669 at P 120-21. 
Docket No. RM05-34-001 - 9 - 

transfer is not subject to amended section 203 (non-jurisdictional assets) and the problem 

arises as to how to value the jurisdictional assets included in the transaction. In this 

situation, the Commission instructed applicants to rely on a valuation analysis of the 

individual jurisdictional parts in deciding whether to file for section 203 authorization. 

a. Rehearing Requests 

16. APPA/NRECA argue that the Commission should require that valuations of asset 

transactions between non-affiliates under section 203(a)(1)(A) be consistent with 

generally accepted accounting principles (GAAP), particularly when the transaction also 

includes non-jurisdictional assets. They assert that, without such a requirement, parties 

will be able to value jurisdictional assets or weight the value of non-jurisdictional assets 

to evade Commission review, while maintaining the same total purchase price for all 

assets.15

17. APPA/NRECA are concerned about a possible unintended “spillover effect” of 

using market value.16 They request that the Commission confirm that valuation for 

purposes of determining whether section 203 approval is required will not affect the 

valuation placed on the assets for purposes of applying cost-based ratemaking standards, 

 15 APPA/NRECA Rehearing Request at 24-25. 

16 Id. at 26. 
Docket No. RM05-34-001 - 10 - 

 

in particular, the Commission’s policy concerning acquisition adjustments in cost-based 

jurisdictional rates.17

18. APPA/NRECA lastly argue that the Commission should require that valuations of 

wholesale contracts being transferred between non-affiliates be based on the expected 

contract revenues rather than on market value. They contend that market value, which is 

based on expected profits, cannot be reliably determined and will be prone to abuse and 

manipulation. They suggest that “expected profit” has little meaning when the 

transaction is undertaken as much for risk mitigation purposes as for power supply. 

Using the same method to value contract transfers between non-affiliates as for affiliates, 

i.e., expected contract revenues, has the virtue of regulatory simplicity.18

19. NARUC argues that the record does not support using “original cost undepreciated” as market value in transactions between affiliates. NARUC says that net 

book value is a better way to value the assets in affiliate transactions because it represents 

the remaining monetary value of an asset that is “used and useful” at the time of the 

proposed transaction. Net book value, unlike original cost undepreciated, reflects 

changes in value caused by wear and tear during use of the asset, obsolescence, the return 

17 Id. The Commission disallows acquisition adjustments in rates absent a 

showing of ratepayer benefit. See PSEG Power Connecticut, LLC., 110 FERC ¶ 61,020 

at P 32 (2005), citing Utilicorp United, Inc., 56 FERC ¶ 61,031 at 61,120 and nn. 26-28, 

reh’g denied, 56 FERC ¶ 61,427, 62,528-29 (1991). 

18 APPA/NRECA Rehearing Request at 25. 
Docket No. RM05-34-001 - 11 - 

of capital through annual depreciation expense, and any improvements that have been 

made since the asset was originally placed in service. These factors, particularly 

deterioration and improvements, NARUC contends, are typically reflected in the prices 

negotiated by unaffiliated buyers and sellers.19 

b. Commission Determination 

20. The Commission clarifies that GAAP must be used to value jurisdictional 

physical assets for purposes of amended section 203 when they are included with nonjurisdictional assets in a transaction between non-affiliates.20 

21. Order No. 669 states that to place a value on wholesale contracts that are part of a 

transfer that also includes assets not subject to section 203, the parties should rely on 

valuation analyses consistent with the value used in audited financial statements and with 

GAAP requirements.21 A similar approach is required for the transfer of physical 

jurisdictional assets included in a transaction with non-jurisdictional facilities.22 We note 

that an entity’s decision not to seek section 203 approval for a transaction based on its 

 19 NARUC Rehearing Request at 8. 

20 As we held in Order No. 669 at P 117, if a valuation analysis is not performed, 

the standard of original cost undepreciated is to be used in determining whether section 

203 applies to the transaction. 

21 Order No. 669 at P 120. 

22 Consistent with our ruling in Order No. 669 (at P 116), if a transaction between 

non-affiliates involves only jurisdictional assets, the Commission will rebuttably presume 

that market value is the transaction price. 
Docket No. RM05-34-001 - 12 - 

 

determination of value of the assets, whether physical or paper facilities, can be reviewed 

based on a complaint or at the Commission’s discretion. 

22. The Commission also confirms that the use of the market value standard for 

section 203 purposes does not change the Commission’s ratemaking policy, including the 

Commission’s policy concerning acquisition adjustments.23

23. The Commission denies APPA/NRECA’s request that value as applied to 

transfers of wholesale contracts between non-affiliates be based on expected contract 

revenues over the remaining life of the contract, rather than market value. We 

acknowledge that using expected contract revenues for both non-affiliate transfers and 

affiliate transfers would have a superficial consistency. However, we continue to believe 

that market value is the best way to value transactions between non-affiliates generally, 

and no party has presented a persuasive basis for treating wholesale contracts differently 

from other kinds of assets. 

24. The Commission will also deny NARUC’s request that, for transactions between 

affiliates, value should be net book value rather than original cost undepreciated. We 

note that almost all generation transactions of any significant size will be jurisdictional 

under amended section 203, regardless of the measure used. We recognize that marginal 

cases may occur where the issue of jurisdiction might arise, particularly for older assets. 

We do not dispute that the deterioration or use which net book value attempts to capture 

23 See supra note 17. 
Docket No. RM05-34-001 - 13 - 

affects the price a buyer is willing to pay for an asset. However, net book value does not 

reflect any appreciation of value of assets, as evident in the fact that generation facilities 

have often sold in recent years at prices significantly above net book value. The 

Commission has long employed the use of original cost undepreciated to measure value 

for purposes of determining the need for a section 203 application and finds its continued 

use appropriate in the context of affiliate transactions. Original cost undepreciated is a 

simpler, less ambiguous measure that will avoid debate as to the life of the facility, 

method of depreciation and other factors that are reflected in net book value. 

2. Section 33.1(b)(4) – Definitions of “Electric Utility Company” 

and “Holding Company” 

25. A number of parties raised arguments about the Commission’s interpretation of 

new FPA section 203(a)(2). Section 203(a)(2) provides: 

No holding company in a holding company system that 

includes a transmitting utility or an electric utility shall 

purchase, acquire, or take any security with a value in excess 

of $10,000,000 of, or, by any means whatsoever, directly or 

indirectly, merge or consolidate with, a transmitting utility, an 

electric utility company, or a holding company in a holding 

company system that includes a transmitting utility, or an 

electric utility company, with a value in excess of 

$10,000,000 without first having secured an order of the 

Commission authorizing it to do so. 

26. In particular, parties focus on the terms “electric utility company” and “holding 

company” as used in section 203(a)(2). In Order No. 669, the Commission concluded 

that the most reasonable interpretation of the terms are the definitions contained in 
Docket No. RM05-34-001 - 14 - 

PUHCA 2005. Section 33.1(b)(4) provides that “associate company,” “electric utility 

company,” “foreign utility company,” “holding company,” and “holding company 

system” have the meaning given those terms in PUHCA 2005. It also provides that the 

term “holding company” does not include: a state, any political subdivision of a state, or 

any agency, authority or instrumentality of a state or political subdivision of a state; or an 

electric power cooperative. 

a. “Electric Utility Company”

27. Section 33.1(b)(4) provides that the term “electric utility company” has the same 

meaning given that term in PUHCA 2005, which is “any company that owns or operates 

facilities used for the generation, transmission, or distribution of electric energy for 

sale.”24 The definition thus is broader than the definition of “public utility” under the 

FPA; it is not limited to entities that engage in wholesale or interstate transactions. 

28. The Commission explained in Order No. 669 that the precise meaning of the term 

“electric utility company” is not clear because it is not defined in the FPA. We pointed 

out that amended section 203(a)(6) provides that certain other terms used in amended 

section 203 (“associate company,” “holding company,” and “holding company system”) 

are to have the same meanings given those terms in PUHCA 2005. However, section 

203(a)(6) does not address “electric utility company.” Thus, there is Congressional 

silence in the FPA as to the meaning of the term. In determining what Congress might 

 24 EPAct 2005 at 1262(5). 
Docket No. RM05-34-001 - 15 - 

 

have meant by “electric utility company,” the Commission stated that the only reference 

point we have in federal electric utility regulatory terminology is the meaning of the term 

as used in PUHCA 193525 and in PUHCA 2005. Congress, in its revisions to the FPA, 

relied on terms defined in the two PUHCA statutes. Therefore, the Commission 

concluded that the most reasonable interpretation of “electric utility company,” as used in 

section 203(a)(2) of the FPA (particularly in light of the fact that section 203(a)(2) was 

enacted as part of coordinated, comprehensive legislation with the repeal of PUHCA 

1935 and the enactment of PUHCA 2005) is the meaning in PUHCA 2005.

29. The Commission rejected requests that we explicitly exclude qualifying facilities 

(QFs)26 and exempt wholesale generators (EWGs) from the definition of “electric utility 

company.” We stated that: 

regardless of their status under PUHCA 2005, the exemptions 

set forth under PUHCA 2005 are not dispositive as to the 

scope of the Commission’s amended FPA section 203 

authority. These PUHCA 2005 exemptions are set forth in 

the context of federal access to books and records and, more 

importantly, unlike PUHCA 2005, FPA section 203 does not 

give us any express authority to exempt persons or classes of 

transactions.27

25 15 U.S.C. 79a et seq. (2000). 

26 Public Utility Regulatory Policies Act of 1978 (PURPA). 16 U.S.C. 824a-3 

(2000). 

27 Order No. 669 at P 59. The Commission also noted that while QFs themselves 

currently are exempt from section 203’s filing requirements by our regulations 

promulgated under the Public Utility Regulatory Policies Act of 1978, PURPA does not 

give us authority to exempt holding companies that own QFs. 
Docket No. RM05-34-001 - 16 - 

 

30. Further, the Commission stated that were we to interpret “electric utility 

company” for purposes of FPA section 203(a)(2) not to include EWGs or QFs, this could 

preclude review of certain acquisitions of securities of EWGs or QFs by holding 

companies whose systems contain traditional public utilities with transmission facilities 

and/or captive customers that could be affected by the acquisitions. The Commission 

stated that such transactions should not be excluded from review under section 203 and 

concluded that it was reasonable to interpret the statute not to exclude them.28 We 

recognized the arguments of some commenters that we should not apply section 

203(a)(2) to holding company acquisitions of securities of EWGs and QFs, or at a 

minimum should not apply it to such acquisitions by holding companies that are holding 

companies solely by virtue of owning or controlling one or more EWGs, QFs or foreign 

utility companies (FUCOs).29 These commenters said that applying section 203(a)(2) in 

these circumstances would impede investments in QFs and EWGs or result in 

unnecessary regulation of upstream owners of QFs and EWGs.30 In response, we stated 

that the blanket authorizations granted in Order No. 669 (for certain holding company 

acquisitions of non-voting securities and up to 9.9 percent of voting securities in electric 

utility companies) will ensure that investment will not be discouraged. The Commission 

28 Order No. 669 at P 60. 

29 Id.

30 Id. 
Docket No. RM05-34-001 - 17 - 

also noted that we would consider on a case-by-case basis granting additional blanket 

authorizations for holding company acquisitions of securities of EWGs or QFs. 

31. In Order No. 669, the Commission explained that this interpretation of “electric 

utility company” includes FUCOs, but we granted blanket authorizations for certain 

foreign acquisitions, with conditions to protect U.S. customers.31 As discussed below, 

the Commission also provided other blanket authorizations for transactions that do not 

raise concerns about wholesale markets or protection of wholesale captive customers 

served by Commission-regulated public utilities. 

b. “Holding Company”

32. As required by amended section 203(a)(6), section 33.1(b)(4) provides that the 

term “holding company” has the meaning given that term in PUHCA 2005.32 

33. The Commission rejected requests that we state that only companies that own 

traditional utilities, and not those that own solely FUCOs, EWGs and/or QFs, are 

“holding companies” under amended section 203.33 The Commission noted that “holding 

company” in PUHCA 2005 means “any company that directly or indirectly owns, 

 31 See Section 33.1(c)(5). The regulation requires a company official to verify that 

the proposed transaction will not have an adverse effect on competition, rates or 

regulation and that, now or in the future, it will not result in the transfer of public utility 

facilities to an associate company, issuance of public utility securities or pledge or 

encumbrance of public utility assets for the benefit of an associate company and will not 

result in certain new affiliate contracts. 

32 Order No. 669 at P 69 (citing EPAct 2005 at 1262(8)). 

33 Id. at P 70. 
Docket No. RM05-34-001 - 18 - 

 

controls, or holds, with the 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;...”34 PUHCA 2005 defines “public-utility company” to include an “electric 

utility company.”35 We explained that the plain words of this definition simply do not 

exclude holding companies that own or control only EWGs, FUCOs, or QFs. 

Additionally, the Commission stated that: 

even under PUHCA 2005, persons that own or control only 

EWGs, FUCOs, or QFs are considered holding companies but 

are explicitly exempted from PUHCA 2005 by section 1266. 

There is no similar exemption in amended section 203 and we 

conclude that it is reasonable to interpret section 203(a)(2) 

review to include acquisitions of generation or transmission 

facilities or companies by holding companies owning only 

FUCOs, QFs, and/or EWGs.36

34. The Commission also pointed out that amended section 203(a)(6) requires that we 

use the PUHCA 2005 definition of “holding company,” which, as explained above, 

includes the owner of an “electric utility company” that is not a public utility under the 

FPA and that is not otherwise subject to Commission ratemaking jurisdiction under Part 

II of the FPA. We noted that the definition of “electric utility company” is not limited to 

entities that engage in interstate commerce. Therefore, the Commission also concluded 

34 EPAct 2005 at 1262(8). 

35 Id. at 1262(14). 

36 Order No. 669 at P 70. 
Docket No. RM05-34-001 - 19 - 

that holding companies that own “electric utility companies” whose businesses are solely 

intrastate technically fall under section 203(a)(2).37 

c. Rehearing Requests

35. NARUC and Occidental assert that the Commission should not have used the 

PUHCA 2005 definition of “electric utility company” in its regulations under section 203. 

They say that this is contrary to Congressional intent and fundamental rules of statutory 

construction. They point out that section 203(a)(6) specifically states that certain terms 

(“associate company,” “holding company,” and “holding company system”) have the 

same meaning in both section 203 and PUHCA 2005; however, section 203(a)(6) does 

not refer to PUHCA 2005’s definition of “electric utility company.” 38 NARUC and 

Occidental argue that the Commission’s reliance on the simultaneous enactment of 

section 203 and PUHCA 2005 is invalid in the face of this statutory language. 

36. NARUC also asserts that using the PUHCA 2005 definition of “electric utility 

company” improperly extends the Commission’s authority under amended section 203 to 

include facilities used for transmission or sales of electric energy in intrastate commerce, 

facilities used for local distribution, and facilities used for making retail sales. It asserts 

 37 However, as discussed below, we agreed in Order No. 669 that reviewing 

transactions involving Hawaii, Alaska, and Electric Reliability Council of Texas 

(ERCOT) would involve matters outside our expertise and the core focus of Part II of the 

FPA, and therefore we granted certain blanket authorizations. 

38 NARUC Rehearing Request at 3-4; Occidental Rehearing Request at 8-9. 

NARUC states the maxim expressio unius est exlusio alterius (the expression of one thing 

is the exclusion of another) supports its argument. 
Docket No. RM05-34-001 - 20 - 

 

that such facilities fall under exclusive state commission jurisdiction and that the 

Commission’s regulations implementing FPA section 203 should apply to Commissionjurisdictional facilities only.39 

37. Occidental requests that the Commission reconsider its determination to subject 

parent companies of QFs to the Commission’s authority under section 203(a)(2) by 

importing the definition of “electric utility company” from PUHCA 2005. It argues that 

the Commission’s reliance solely on the “reference point” of the “electric utility 

company” definition violates the Commission’s continuing duty to encourage 

cogeneration and small power production under section 210(e) of PURPA40 and without 

addressing the statutory QF exemption in PUHCA 1935 and PUHCA 2005, is arbitrary 

and capricious.41 It argues that nothing in amended section 203 requires that QFs lose the 

long-standing exemption from section 203 that the Commission adopted in accordance 

with PURPA section 210(e). Thus, Occidental argues the Commission should adopt a 

39 NARUC Rehearing Request at 5-6 (citing New York v. FERC, 535 U.S. 1 

(2002); Detroit Edison Co. v. FERC, 334 F.3d 48 (D.C. Cir. 2003); 16 U.S.C. 824 

(2000)). 

40 16 U.S.C. 824a-3 (2000). Section 210(e) of PURPA provides that the 

Commission may grant certain exemptions for cogeneration and small power producers. 

41 Occidental also points to the PUHCA 2005 Final Rule, where the Commission 

stated that “[a]s for QFs, QFs previously received an exemption from PUHCA pursuant 

to the Commission’s regulations under [PURPA]. Nothing in PUHCA 2005 changes 

that.” Occidental Rehearing Request at 10-11. 
Docket No. RM05-34-001 - 21 - 

 

blanket authorization under section 203, instead of using a case-by-case approach, for 

companies that are holding companies solely by virtue of owning QFs.42 

38. Similarly, BofA/JPMorgan and Industrial Consumers assert that the Commission 

erred by requiring pre-acquisition approval under section 203(a)(2) of utility interests by 

companies that qualify as “holding companies” solely by virtue of their ownership 

interests in QFs and EWGs. They explain that under PUHCA 1935, a company that 

owned or controlled 10 percent or more of the outstanding voting securities of a QF or 

EWG did not, by virtue of such ownership, become a “holding company.”43 

BofA/JPMorgan and Industrial Consumers assert that, while Congress intended to impose 

section 203(a)(2) pre-approval requirements on entities that are “holding companies” in a 

“holding company system that includes a transmitting utility or an electric utility,” by a 

drafting oversight, it adopted the PUHCA 2005 definition of “holding company” (which 

includes companies that own 10 percent or more of the outstanding voting securities of 

EWGs and QFs) in section 203(a)(6). However, they state that there is no indication that 

Congress intended to apply section 203(a)(2) to QF/EWG-only holding companies or 

expand the scope of the “holding company” definition. BofA/JPMorgan and Industrial 

42 Occidental Rehearing Request at 10-11. 

43BofA/JPMorgan Rehearing Request at 26-27; and Industrial Consumers 

Rehearing Request at 2. They explain that all qualifying cogeneration facilities and 

certain small power production facilities were previously exempt from status as “electric 

utility companies” and that EWGs were exempted by section 32(e) from being classified 

as “electric utility companies” or “public-utility companies” under PUHCA 1935. 
Docket No. RM05-34-001 - 22 - 

 

Consumers argue that the Commission’s imposition of new burdens on owners of QFs 

and EWGs not associated with transmission-owning utilities misinterprets Congressional 

intent in EPAct 2005. Accordingly, BofA/JPMorgan and Industrial Consumers assert 

that the Commission should construe section 203(a)(2) as not applying in these 

circumstances. 

39. If the Commission decides to continue with that conclusion, then BofA/JPMorgan 

propose that the Commission provide blanket authorization subject to appropriate 

conditions and safeguards, such as a status report to the Commission within 30 days 

following the acquisition, where companies are only holding companies by virtue of 

owning QFs or EWGs.44 At a minimum, existing holdings in EWGs and QFs should be 

grandfathered. This would enable banks and their affiliates to adjust their future practices 

respecting EWGs and QFs to keep such acquisitions from affecting the core aspects of 

their business. 

40. Similarly, Morgan Stanley argues that the definitions in PUHCA 2005, PUHCA 

1935, and the PUHCA 2005 Final Rule demonstrate that EWGs are not “electric utility 

companies” and that EWG owners are not “holding companies” under PUHCA 2005. 

Therefore, it says that the Commission should not have found that EWGs are “electric 

utility companies” and that companies that own only EWGs are “holding companies” for 

44 BofA/JPMorgan Rehearing Request at 30; Industrial Consumers Rehearing 

Request at 8. 
Docket No. RM05-34-001 - 23 - 

purposes of section 203(a)(2).45 Morgan Stanley explains that, in PUHCA 2005, 

Congress adopted the meaning of EWG from PUHCA 1935, which it contends does not 

treat EWGs as “electric utility companies.”46 Further, Morgan Stanley states that the 

PUHCA 2005 Final Rule reflects Congress’ intent to continue to define “holding 

company” to exclude EWG owners, as well as companies that own power marketers, 

FUCOs, and QFs.47 However, it states, the Commission adopts a meaning of “electric 

utility company” for section 203(a)(2) that includes EWGs, and therefore differs from the 

meaning given in PUHCA 2005. In doing so, Morgan Stanley asserts, the Commission 

creates two different definitions and types of holding companies, thereby nullifying 

section 203(a)(6), which states that the term holding company shall have the same 

meaning given in PUHCA 2005. Thus, Morgan Stanley argues, the Commission should 

amend its regulations to state that companies owning only EWGs, or some combinations 

of EWGs, QFs, FUCOs, and/or power marketers, are not “holding companies” bound to 

obtain prior approval under section 203(a)(2). 

d. Commission Determination

41. We do not agree with those who argue that, because of the statutory language 

and/or policy concerns, the Commission may not assert jurisdiction under new section 

 45 Morgan Stanley Rehearing Request at 3-4. 

46 PUHCA 2005 at 1262(6); PUHCA 1935 at 32(e). 

47 Morgan Stanley Rehearing Request at 5 (citing PUHCA 2005 Final Rule at 

366.1 (to be codified at 18 CFR 366.1)). 
Docket No. RM05-34-001 - 24 - 

 

203(a)(2) over transactions involving matters that are not under our traditional, preEPAct 2005 jurisdiction. The Commission affirms its determination in Order No. 669 

that, in light of the ambiguity in section 203(a)(2), the most reasonable interpretation of 

the term “electric utility company” is the definition in PUHCA 2005. Several factors 

support this determination. 

42. First, the focus of new section 203(a)(2) is on acquisitions by public utility 

holding companies. The Commission did not previously have jurisdiction over holding 

companies, and this new authority was enacted as part of coordinated, comprehensive 

legislation along with the repeal of PUHCA 1935 and the enactment of PUHCA 2005.48 

Section 203(a)(6) states that the term “holding company” has the same meaning given the 

48 There is no legislative history contained in the conference report accompanying 

the legislation. However, the evolution of the various versions of section 203(a)(2) 

proposed by members supports our conclusion that Congress purposely did not limit 

section 203(a)(2) to holding companies that own “public utilities” but, rather, consciously 

used terminology that, for the most part, reflected terms used in PUHCA 2005. See

Electricity Competition and Reliability Act, H.R. 2944, 106th Cong. section 410 (1998); 

Comprehensive Electricity Competition Act, H.R. 1828, 106th Cong. section 502 (1998); 

Comprehensive Electricity Competition Act, S. 1047, 106th Cong. section 502 (1998); 

Electric Power To Choose Act of 1999, H.R. 2050, 106th Cong. section 110 (1998); 

Energy Policy Act of 2002, S. 1766 106th Cong. section 202 (2001); Energy Policy Act of 

2003, S. 14, 108th Cong. (2003); Senate Amendment No. 1412 to S. 14, 149 Cong. Rec. 

S. 10163 (July 29, 2003); Senate Amendment No. 1413 to S. 14, 149 Cong. Rec. S. 

10116-24 (July 29, 2003), 149 Cong. Rec. S. 10204-14 (July 30, 2003); Senate 

Amendment No. 1537 § 202, 149 Cong. Rec. S. 10739-40 (July 31, 2003); H.R. Rep. No. 

108-375 at 302-03 (Nov. 18, 2003), 149 Cong. Rec. S. 15,220 (Nov. 20, 2003); Energy 

Policy Act of 2005, H.R. 6; Energy Policy Act of 2005, S. 10; H. Rpt. 109-190 (2005), 

149 Cong. Rec. S. 9258 (July 28, 2005), 149 Cong. Rec. S. 9359 (July 29, 2005). 
Docket No. RM05-34-001 - 25 - 

term in PUHCA 2005. PUHCA 2005 defines a “holding company” in terms of a “publicutility company,” which, under PUHCA 2005, includes an “electric utility company.” 

43. Second, the term “electric utility company” is defined in both PUHCA 1935 and 

PUHCA 2005, but is not defined in the FPA or other statutes under which the 

Commission exercises authority. It is reasonable in the face of Congressional silence to 

adopt a definition that has been well understood in electric regulatory law for the past 70 

years, particularly when we are not aware of any other federal regulatory definition of the 

term. 

44. Third, had Congress intended to restrict section 203(a)(2) to holding company 

acquisitions involving only facilities that are traditionally jurisdictional under the FPA or 

to holding company acquisitions of companies that are “public utilities” under the FPA, it 

would have done so, just as it did in each part of section 203(a)(1). The expressio unius

principle cited by NARUC to support its position can also be cited to support Order No. 

669; the fact that Congress specifically limited section 203(a)(1) to actions taken by 

public utilities, but did not so restrict section 203(a)(2), supports the position that 

Congress intended the latter provision to have a wider scope. Moreover, NARUC’s 

application of expressio unius in this instance leads to a conclusion at odds with common 

usage. We elaborate further below. 

45. NARUC is correct that section 201(b)(1) of the FPA states that Part II applies to 

transmission in interstate commerce and the sale of electric energy at wholesale in 

interstate commerce, but (except as provided for in paragraph 2, which involves sections 
Docket No. RM05-34-001 - 26 - 

 

203(a)(2), 206(e), 210-212, and 215-222) not to other sales of electric energy. However, 

there is a qualifying phrase as well. Section 201(b)(1) states that the Commission shall 

not have jurisdiction, “except as specifically provided in this Part and the Part next 

following” over facilities used for the generation of electric energy, or over facilities 

used in local distribution or only for the transmission of electric energy in intrastate 

commerce or over facilities for the transmission of electric energy consumed wholly by 

the transmitter. 

46. NARUC ignores “except as specifically provided.” Congress, in amending 

section 203, specifically broadened the Commission’s previous section 203 jurisdiction.49 

In the new section 203(a)(6), Congress directed the Commission to use the definition of 

holding company from PUHCA 2005, and that definition includes entities that own 

“electric utility companies” as defined in PUHCA 2005. The new 203(a)(2) requires 

holding companies that include transmitting utilities (an FPA definition modified in 

EPAct 2005 to be limited to transmission in interstate commerce used for wholesale 

sales) or electric utilities (defined in the FPA as persons that sell electric energy – not 

limited to sales for resale or to sales in interstate commerce) to obtain Commission 

approval of certain securities transactions, including acquisitions of securities of an 

“electric utility company.” 

49 For example, in section 203(a)(1)(D) Congress gave the Commission new 

jurisdiction over certain acquisitions of generation facilities. The Commission under 

section 201 has no jurisdiction over generation facilities, except as specifically provided. 
Docket No. RM05-34-001 - 27 - 

47. It is reasonable to conclude that, in repealing PUHCA 1935 and importing into the 

FPA these PUHCA terms – a statute and terms not limited to companies engaging in 

interstate sales, interstate transmission or wholesale transactions – Congress intended to 

transfer to this Commission certain corporate review authority that might involve 

intrastate/retail acquisitions that could affect interstate commerce and customers of 

Commission-regulated interstate utilities. Further, as discussed above, in other provisions 

of section 203 Congress specifically limited the Commission’s review to transactions 

involving “facilities subject to the jurisdiction of the Commission.” It did not place this 

limitation in section 203(a)(2).50 

48. NARUC cites the principle of expressio unius and argues that Congress’ specific 

statement in section 203(a)(6) that three other terms have the same meaning as in 

PUHCA 2005 shows that Congress did not intend “electric utility company” to have the 

 50 We note that, in PUHCA 1935, which was not limited to facilities or companies 

operating in interstate commerce, Congress directed the Securities and Exchange 

Commission (SEC) in section 3 to exempt predominantly intrastate holding companies 

and holding companies whose operations are confined to one state or contiguous states 

(because the states could adequately regulate these types of holding companies and their 

activities) unless the SEC found it detrimental to the public interest or the interests of 

investors or consumers. Although Congress did not give the Commission authority under 

section 203(a)(2) to actually exempt companies from the provision, our blanket waivers 

serve a similar purpose of deferring to the states, as the SEC did under the 1935 Act. If, 

however, we find harm to wholesale competition or customers, the Commission can take 

an appropriate action. 
Docket No. RM05-34-001 - 28 - 

 

same meaning as in PUHCA 2005.51 One can just as convincingly argue that Congress 

inadvertently omitted the term from section 203(a)(6) or that if Congress had intended to 

require us to adopt a particular definition, it would have done so. The fact is that 

Congress left us with no express definition of the term and that we have exercised 

reasonable discretion in interpreting it. 

49. Several parties argue that the policy behind EPAct 2005 requires us to define 

“electric utility company” to exclude companies that own only EWGs or QFs. We 

disagree. Congress specifically required, in section 203(a)(6) of the FPA, that the term 

“holding company” be given the same meaning that was given the term in PUHCA 2005. 

Under PUHCA 2005, as explained above, a company is a holding company if it acquires 

10 percent or more of an electric utility company. EWGs, FUCOs52 and QFs fall within 

the definition of “electric utility company” under section 1262(5) of PUHCA 2005 

because they own or operate facilities used for the generation, transmission or distribution 

of electric energy for sale. Moreover, including EWGs, FUCOs and QFs as electric 

utility companies is consistent with common usage, which supports defining 

51 The three other terms are: associate company, holding company and holding 

company system. 

52 The Commission explained in Order No. 669 that it interpreted section 203(a)(2) 

of the FPA as applying to foreign acquisitions and therefore interpreted “electric utility 

company” to include FUCOs. 
Docket No. RM05-34-001 - 29 - 

electric utility companies as companies owning facilities (generation, transmission or 

distribution) for the sale of electric energy. 

50. Further, as discussed in Order No. 669 and Order No. 667-A (the PUHCA 2005 

rehearing order), while Congress expressly excluded from the definition of holding 

company certain banks and other institutions, it did not similarly exclude from the 

definition of holding company entities that only own QFs, EWGs or FUCOs. Rather, 

section 1266(a) of PUHCA 2005 specifically directs the Commission to exempt 

QF/EWG/FUCO holding companies from the federal access to books and records 

provision; thus, the very language of the provision recognizes that such entities are 

holding companies. It directs the Commission to issue a final rule to exempt “any person 

that is a holding company, solely with respect to one or more [QFs, EWGs, or FUCOs].” 

51. Therefore, consistent with our determination in the PUHCA 2005 rehearing order, 

we are giving full effect to the statutory language when we conclude that companies that 

acquire 10 percent or more of an EWG, FUCO or QF are holding companies as that term 

is used in PUHCA 2005 as well as FPA section 203(a)(2). 

52. However, we also have provided an exemption from the PUHCA section 1264 

books and records requirements, as required by section 1266 of PUHCA 2005. Further, 

based on consideration of the rehearing comments filed, we will grant a blanket 

authorization under section 203(a)(2) for holding companies that own or control only

EWGs, QFs or FUCOs to acquire the securities of additional EWGs, FUCOs or QFs. 

Thus, our definition allows us to ensure that, for example, cross-subsidization that affects 
Docket No. RM05-34-001 - 30 - 

 

matters under our traditional jurisdiction does not occur, while at the same time ensuring 

(through blanket authorizations) that investment in the electric industry is not hampered 

and that encouragement of QFs is not undermined. 

53. We recognize, however, parties’ claims that there were inconsistencies because of 

certain statements in Order No. 667 that EWGs would not be considered “electric utility 

companies.” A similar statement was included with respect to QFs in our recent QF final 

rule.53 On rehearing of the Order No. 667, we are eliminating these statements with 

respect to EWGs and clarifying that we intend to eliminate a similar statement in the QF 

final rule rehearing.54 Thus, our interpretation under section 203(a)(2) is consistent with 

our interpretation under PUHCA 2005, and Morgan Stanley’s claim that we are creating 

two different definitions is not correct. 

54. We also reject Morgan Stanley’s argument as it relates to power marketers, but 

for a different reason. We decided in the PUHCA 2005 Final Rule to treat power 

marketers in a manner consistent with SEC precedent for purposes of interpreting 

PUHCA 2005, and therefore, decided not to treat power marketers as “electric utility 

53 Revised Regulations Governing Cogneration and Small Power Production,

Order No. 671, 71 FR 7852 (Feb. 15, 2006), FERC Stats. & Regs. ¶ 31,203 (2006). 

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

the Public Utility Holding Company Act of 2005, Order No. 667-A, 71 FR [insert page, 

date of publication in the Federal Register], FERC Stats. & Regs. ¶ 31,213 at P 14 

& n. 32 (2006). 
Docket No. RM05-34-001 - 31 - 

companies.”55 By extension, therefore, a company owning only a power marketer is not 

holding an “electric utility company” and is not a holding company. However, power 

marketers remain public utilities under the FPA. 

3. Section 33.1(c)(1) - Blanket Authorizations: Intrastate 

Commerce, Local Distribution, and Internal Corporate 

Reorganizations

55. Section 33.1(c)(1) provides that any holding company in a holding company 

system that includes a transmitting utility or an electric utility is granted a blanket 

authorization under section 203(a)(2) of the FPA to purchase, acquire, or take any 

security of: (i) a transmitting utility or company that owns, operates, or controls only 

facilities used solely for transmission in intrastate commerce and/or sales of electric 

energy in intrastate commerce; (ii) a transmitting utility or company that owns, operates, 

or controls only facilities used solely for local distribution and/or sales of electric energy 

at retail regulated by a state commission; or (iii) a transmitting utility or company if the 

transaction involves an internal corporate reorganization that does not present crosssubsidization issues and does not involve a traditional public utility with captive 

customers. 

a. Section 33.1(c)(1)(i) and (ii) - Blanket Authorizations for 

Intrastate Commerce and Local Distribution

56. In Order No. 669, the Commission stated that it was not reasonable to interpret 

section 203(a)(2) as being limited solely to holding company acquisitions and mergers 

 55 Order No. 667 at P 123. 
Docket No. RM05-34-001 - 32 - 

involving wholesale sales or transmission in interstate commerce. However, we 

concluded that there would be no benefit from the Commission’s case-by-case evaluation 

of certain transactions under section 203(a)(2).56 

57. The Commission explained that our core jurisdiction under Part II of the FPA 

continues to be transmission and sales for resale of electric energy in interstate 

commerce. A major impetus behind section 203(a)(2) was to clarify the Commission’s 

jurisdiction over mergers of holding companies that own public utilities as defined in the 

FPA.57 Accordingly, we concluded that it is consistent with the public interest to grant 

blanket authorizations for the following: (1) section 203(a)(2) purchases or acquisitions 

by holding companies of companies that own, operate, or control facilities used solely for 

transmission or sales of electric energy in intrastate commerce; and (2) section 203(a)(2) 

purchases or acquisitions by holding companies of facilities used solely for local 

distribution and/or sales at retail regulated by a state commission.58

 56 An acquisition or merger involving “any company that owns or operates 

facilities used for the generation, transmission, or distribution of electric energy for sale” 

is not on its face limited to interstate facilities. 

57 Illinois Power Co., 67 FERC ¶ 61,136 (1994) (noting that the Commission does 

not have jurisdiction over public holding company mergers or consolidations, but 

concluding that, ordinarily, when public utility holding companies merge, an indirect 

merger involving their public utility subsidiaries also takes place, and that Commission 

approval under section 203 would be required). 

58 Order No. 669 at P 56. 
Docket No. RM05-34-001 - 33 - 

58. The Commission concluded that these blanket authorizations are consistent with 

the public interest because: (1) the identified categories do not raise concerns with 

respect to competitive wholesale markets for sales in interstate commerce or protection of 

wholesale captive customers served by Commission-regulated public utilities – matters 

within this Commission’s core responsibility and expertise; (2) if these categories raise 

competitive issues in intrastate commerce, i.e., in ERCOT, Hawaii, and Alaska,59 those 

issues are within the expertise of, and more appropriately addressed by, state 

commissions; and (3) if competition and retail ratepayer protection issues are raised by a 

holding company’s acquisition of local distribution or other retail facilities, these issues 

also are within the expertise of, and more appropriately addressed by, state 

commissions.60 

i. Rehearing Requests

59. APPA/NRECA assert that the Commission erred in granting blanket authorization 

of acquisitions of “intrastate” utilities by holding companies. They state that in order for 

the Commission’s justification to be true, i.e., that these transactions do not affect 

Commission-regulated wholesale sales in interstate commerce or Commission-regulated 

public utilities, the blanket authorization would have to be confined to acquisitions of 

 59 Similarly, although not raised by the parties, the blanket authorization would 

apply to any organized Territory of the United States. 

60 For these blanket authorizations, the Commission did not impose any type of 

filing requirement. 
Docket No. RM05-34-001 - 34 - 

such intrastate utilities by intrastate holding companies. However, APPA/NRECA argue 

that the regulation allows any holding company (including a holding company that owns 

a Commission-jurisdictional public utility operating in interstate commerce) to acquire an 

intrastate utility.61 They state that the regulation is overbroad, authorizes transactions 

that on their face would affect interstate commerce in electricity, and raises the possibility 

of cross-subsidization and pledge or encumbrance of utility assets for the benefit of the 

holding company at the expense of captive customers. However, APPA/NRECA assert 

that if the blanket authorization were limited to wholly intrastate transactions in 

accordance with the Commission’s rationale, then the Commission would lack FPA 

jurisdiction over these transactions in the first place, so no blanket authorization should 

be required. Therefore, they state that the Commission should delete the section 

33.1(c)(1)(i) blanket authorization from its regulations. 

60. APPA/NRECA also assert that the Commission erred in granting blanket 

authorization of acquisitions of “local-distribution-only” or “retail-only” utilities. They 

assert that the blanket authorization is broader than the Commission’s rationale (which is 

that these transactions do not affect Commission-regulated wholesale sales in interstate 

commerce or Commission-regulated public utilities), authorizes transactions that would 

affect Commission-jurisdictional interstate commerce in electricity and creates 

 61 APPA/NRECA Rehearing Request at 27. 
Docket No. RM05-34-001 - 35 - 

 

opportunities for cross-subsidization or pledge or encumbrance of utility assets for the 

benefit of the holding company and at the expense of captive customers.62 

APPA/NRECA assert that, if, on the other hand, the holding company does not own any 

Commission-jurisdictional public utilities before the transaction, and it is acquiring a 

retail-only or local-distribution-only utility that also is not Commission-jurisdictional, 

then the Commission would have no jurisdiction to act on the transaction in the first 

place. They argue that, if the Commission’s rationale for this blanket authorization holds, 

the Commission’s authority to grant the blanket authorization evaporates. Thus, 

APPA/NRECA state that section 33.1(c)(1)(ii) should be deleted from the regulations. 

61. APPA/NRECA further argue that the Commission’s own reasoning in Order No. 

669 relating to distinctions between the uses of generating facilities for wholesale sales 

and retail sales undermines the basis for granting blanket authorizations for acquisition of 

securities of “retail-only” utilities. They note that in connection with defining “existing 

generation facility,” the Commission stated that utilities do not ordinarily separate the 

dispatch of their plants for retail sales and wholesale sales and thus adopted the rebuttable 

presumption that existing generation facilities are used for both wholesale sales and retail 

sales.63 APPA/NRECA assert that this premise also leads to the rebuttable presumption 

that a holding company that acquires a utility that owns generation is not acquiring a 

62 Id. at 28-29. 

63 Order No. 669 at P 86. 
Docket No. RM05-34-001 - 36 - 

“retail-only” utility, thus eliminating the basis for granting a blanket authorization of such 

a transaction without evidence of that fact. In addition, they note that any “retail-only” 

utility that does not own any generation but meets its power needs through a portfolio of 

power contracts and ancillary services is likely to be selling excess wholesale power 

during some periods. As a consequence, they believe that there is no basis to presume 

that retail-only utilities exist or to provide a blanket authorization for such acquisitions. 

ii. Commission Determination

62. We reaffirm our decision to grant blanket authorization under section 203(a)(2) 

for acquisitions of companies that own, operate or control only facilities used solely for 

intrastate transmission or intrastate energy sales or for local distribution or retail energy 

sales regulated by a state commission. The energy sales or transmission transactions by 

electric utility companies that fall within this blanket authorization are relatively small 

compared to such transactions by other electric utility companies. These transactions are 

unlikely to adversely affect wholesale competition. With respect to possible adverse 

effects on rates of retail captive customers, this can be addressed by the state 

commissions with jurisdiction over and expertise with these types of transactions. 

Adverse effects on rates of wholesale captive customers or customers receiving 

transmission service over jurisdictional transmission facilities are unlikely but, if they 

occur, we believe we can adequately address any concerns using our rate authority under 

FPA sections 205 and 206. Thus, while APPA/NRECA are correct that there may be 

some interstate effects as a result of such transactions, at this time we believe that such 
Docket No. RM05-34-001 - 37 - 

effects would not be significant and thus that individual pre-approval by this Commission 

under section 203 is not necessary. We disagree with APPA/NRECA’s argument that the 

blanket authorization for acquisitions of “retail-only” utility securities is inconsistent with 

the Commission’s rebuttable presumption in Order No. 669 that all generating facilities 

are used for at least some wholesale sales. If a company engages in other than de

minimis wholesale transactions, the blanket authorization will not apply. However, in 

response to APPA/NRECA’s concern, we will require that if any public utility within the 

holding company system has captive customers or owns or provides transmission service 

over jurisdictional transmission facilities, the holding company must report the 

acquisition to the Commission, including any state actions and conditions related to the 

transaction, and provide an explanation of why the transaction does not result in crosssubsidization.64

63. We clarify that the Commission is not asserting jurisdiction over intrastate 

facilities, local distribution facilities, or retail-only companies under the blanket 

 64 In response to APPA’s concerns regarding the protection of transmission 

customers, we believe it is appropriate, as discussed infra, at P 147, to apply this 

reporting requirement to holding companies that include public utilities that own or 

provide transmission service over jurisdictional transmission facilities. Similarly, where 

relevant for conditions or requirements applicable to blanket authorizations granted 

herein or to implementing standards for review of section 203 applications not receiving 

blanket authorizations, certain conditions and requirements will apply to holding 

company acquisitions where the holding company includes a public utility that has 

captive customers or owns or provides transmission service over jurisdictional 

transmission facilities. 
Docket No. RM05-34-001 - 38 - 

authorizations. Rather, we are asserting jurisdiction over holding company acquisitions 

of such companies or facilities for the purpose of ensuring that interstate interests are not 

adversely affected and we may consider eliminating these blanket authorizations if 

necessary to protect customers.65 

b. Section 33.1(c)(1)(iii) - Blanket Authorizations for 

Internal Corporate Reorganizations

64. Section 33.1(c)(1)(iii) provides that 

Any holding company in a holding company system that 

includes a transmitting utility or an electric utility is granted a 

blanket authorization under section 203(a)(2) of the Federal 

Power Act to purchase, acquire, or take any security of ... 

(iii) a transmitting utility or company if the transaction 

involves an internal corporate reorganization that does not 

present cross-subsidization issues and does not involve a 

traditional public utility with captive customers. 

65. In Order No. 669’s preamble, the Commission explained that internal corporate 

reorganizations that do not present cross-subsidization issues and do not involve captive 

customers are unlikely to cause anticompetitive effects.66

i. Rehearing Requests

66. EEI, Entergy, and Duke/Cinergy request that the Commission grant blanket 

authorization for internal corporate reorganizations under section 203(a)(1) (which 

addresses public utilities) as well as under 203(a)(2) (which addresses holding 

 65 See our response to NARUC, supra PP 45-47. 

66 Order No. 669 at P 192. 
Docket No. RM05-34-001 - 39 - 

 

companies).67 They note that, in the preamble of Order No. 669, the Commission stated 

that it “is granting blanket authorization for internal corporate reorganizations that do not 

present cross-subsidization issues and that do not involve a traditional public utility with 

captive customers,” 68 without drawing any distinction between section 203(a)(1) and 

section 203(a)(2). However, the actual regulatory text grants blanket authorization for 

internal corporate reorganizations only under section 203(a)(2). 

67. National Grid requests that the Commission grant blanket authorization for 

internal reorganizations involving intermediate holding companies and other non-utility 

associate companies (i.e. the consolidation or dissolution of such companies and the 

purchase of securities of one such company by another such company).69 

68. EEI, Entergy, Duke/Cinergy, and National Grid request that the Commission 

explain what it meant by a reorganization that does not “involve” a traditional public 

utility with captive customers.70 They state that a broad reading could deny blanket 

67 EEI Rehearing Request at 6-7; Entergy Rehearing Request at 4; and 

Duke/Cinergy Rehearing Request at 4. 

68 Order No. 669 at P 192. 

69 National Grid Rehearing Request at 7-8 (citing National Grid Transco, Order 

Authorizing Various Financing Transactions, Money Pool; Reservation of Jurisdiction,

Holding Company Act Release No. 35-27898; 83 S.E.C. Docket 2653 (Sept. 30, 2004)). 

70 EEI previously provided an example of such an internal corporate 

reorganization: “...if a holding company that owns one or more traditional public 

utilities with captive customers also owns several EWGs, FUCOs, or other utilities 

without captive customers but seeks only to reorganize some of these non-traditional 

companies (e.g., by moving them under other intermediate holding companies), this 

(continued) 
Docket No. RM05-34-001 - 40 - 

 

authorizations for a reorganization of an intermediate holding company between the 

public utility and the ultimate parent holding company even in cases where the 

transaction does not affect the organization of the public utility itself. These parties 

suggest that the Commission revise the regulation to grant blanket authorization for 

internal reorganizations that do not “result in the reorganization of a traditional public 

utility with captive customers.”71 

69. In addition, EEI, Entergy, and Duke/Cinergy recommend that the Commission 

consider granting blanket authorization for certain internal corporate reorganizations that 

result in the reorganization of a traditional public utility company with captive customers, 

as long as an authorized corporate official verifies that the transaction will have no 

adverse effect on competition, rates, or regulation and makes additional verifications 

(similar to the verifications required for the blanket authorization in section 33.1(c)(5)(ii) 

for FUCOs with captive customers in the U.S.).72 They explain that the verifications 

would ensure that this automatic approval would apply only when the transaction cannot 

harm a traditional utility company with captive customers. 

transaction would not involve or affect the traditional utilities. . .” November 7, 2005 

rulemaking comment of EEI (at fn. 17) in Docket No. RM05-34-000. 

71 EEI Rehearing Request at 7, and Attachment A at 1; Entergy Rehearing Request 

at 5; Duke/Cinergy Rehearing Request at 4; and National Grid Rehearing Request at 9. 

72 EEI Rehearing Request at 7-8; Entergy Rehearing Request at 5; and 

Duke/Cinergy Rehearing Request at 5. See also EEI Comments, Docket No. RM05-34-

000, at 25. 
Docket No. RM05-34-001 - 41 - 

 

70. Similarly, Coral Power requests that the Commission grant a blanket authorization 

under section 203(a)(1) for internal corporate reorganizations that do not present crosssubsidization concerns and do not involve a traditional public utility with captive 

customers, provided that the reorganization is for a lawful objective within the company’s 

corporate purposes, compatible with the public interest, and reasonably necessary or 

appropriate for such purposes.73 

71. If the Commission will not grant this blanket authority, EEI, Entergy, and 

Duke/Cinergy alternatively request that the Commission revise section 33.11(b) to 

provide for expeditious consideration of “internal corporate reorganizations that result in 

the reorganization of a traditional public utility with captive customers but do not present 

cross-subsidization issues.” 

72. APPA/NRECA note that Order No. 669 discussed the adoption of safeguards to 

prevent cross-subsidization involving certain cash-management programs and intraholding company financing arrangements. However, the Commission erred in granting 

blanket authorizations of holding company acquisitions involving internal corporate 

reorganizations without protective conditions similar to those imposed on blanket 

73 Coral Power Rehearing Request at 6. Coral Power explains that the 

Commission does not currently require a competitive analysis under pre-EPAct 2005 

section 203 for such internal corporate reorganizations because there are no competitive 

concerns or changes in the control of jurisdictional assets where the ultimate parent 

company remains the same and all intermediary holding companies remain under the 

same parent company. 
Docket No. RM05-34-001 - 42 - 

authorizations in section 33.1(c)(2) for certain securities purchases by holding 

companies.74 

ii. Commission Determination

73. The Commission finds no basis for distinguishing between section 203(a)(1) and 

section 203(a)(2) in determining that “internal corporate reorganizations that do not 

present cross-subsidization issues are unlikely to cause anticompetitive effects.” In 

contrast to other types of transactions, we see no need to require case-by-case filings 

under section 203(a)(1) for such transactions since, by their very nature, internal 

corporate reorganizations that do not affect the organization of the public utility itself 

cannot involve changes of ownership and ultimate control of the jurisdictional or 

generation facilities. Such transactions would not ordinarily result in a change in direct 

ownership or control of jurisdictional facilities. However, we emphasize that any internal 

reorganization that would result in a change of direct ownership of or control over 

jurisdictional facilities will require a filing under section 203(a)(1). Accordingly, we will 

grant blanket authorization under section 203(a)(1) for internal corporate reorganizations 

that do not present cross-subsidization issues and that do not involve (i.e, do not result in 

the reorganization of, as explained below) a traditional public utility with captive 

 74 APPA/NRECA Rehearing Request at 30-31. These blanket authorizations 

pertain to acquisitions of non-voting securities, voting securities of less than 10 percent 

and securities of a subsidiary company within the holding company system. 
Docket No. RM05-34-001 - 43 - 

 

customers or that owns or provides transmission service over jurisdictional transmission 

facilities . 

74. EEI, Entergy, Duke/Cinergy, and National Grid are correct that the phrase “does 

not involve a traditional public utility with captive customers” could be interpreted to 

deny blanket authority in situations where the transaction does not affect the organization 

of the traditional public utility itself. Their suggestion to substitute the phrase “result in 

the reorganization of a traditional public utility with captive customers” is reasonable and 

we will modify the regulation accordingly. We also will expand the blanket authorization 

to cover reorganizations of intermediate holding companies, non-utility associate 

companies, and public utilities that are not traditional public utilities that have captive 

customers or that own or provide transmission service over jurisdictional transmission 

facilities, so long as the reorganization does not present cross-subsidization issues. As a 

result, we are revising section 33.1(c)(1)(iii) to address a different issue, as noted below 

and adding a new section 33.1(c)(6) to incorporate the blanket authorizations for internal 

corporate reorganizations, as discussed here.75 

75. We will not grant herein a blanket authorization for internal corporate 

reorganizations that result in the reorganization of a traditional public utility with captive 

customers. To ensure that captive customers and customers receiving transmission 

75 Internal corporate reorganizations, as discussed here, are provided blanket 

authorization whether they are accomplished through the acquisition of securities or 

through a merger or consolidation. 
Docket No. RM05-34-001 - 44 - 

service over jurisdictional transmission facilities are protected, we will continue to 

evaluate such internal corporate reorganizations on a case-by-case basis. However, we 

are revising section 33.11(b) to separately provide in new section 33.11(c)(3) for 

expeditious consideration of internal corporate reorganizations that result in the 

reorganization of a traditional public utility with captive customers or customers 

receiving transmission service over jurisdictional transmission facilities but that do not 

present cross-subsidization issues. 

76. We are not convinced by APPA/NRECA’s argument that Order No. 669 granted 

blanket authorizations involving internal corporate reorganizations without adequate 

protective conditions. The blanket authorization applies only if no cross-subsidization 

issues are present and only if there are no affected captive customers or customers 

receiving transmission service over jurisdictional transmission facilities. APPA/NRECA 

does not explain why additional conditions or requirements are necessary. 

c. Requests for Additional Blanket Authorizations

i. Rehearing Request

77. GS Group recommends that the Commission give blanket authorization under 

section 203(a)(2) for a holding company in a holding company system that includes a 

transmitting utility or electric utility to acquire securities of industrial self-generators. An 

industrial self-generator would be “any company that owns generating facilities that total 
Docket No. RM05-34-001 - 45 - 

 

100 MW or less in size and are used fundamentally for its own load or for sales to 

affiliated end-users.”76 

78. GS Group explains that its various non-utility subsidiaries engage in proprietary 

trading and merchant banking activities and, in the ordinary course of these business 

activities, regularly acquire utility securities. They acquire these securities for the 

purpose of distribution or resale, as broker/dealers in a fiduciary capacity, or for their 

own accounts (proprietary holdings). GS Group states it has requested blanket 

authorization under section 203(a)(2) for acquisitions of securities in excess of the $10 

million threshold. Even if such authorizations were granted, GS Group states that its 

non-utility subsidiaries would not be allowed to acquire in a proprietary capacity 10 

percent or more of the voting securities of any electric utility company or holding 

company that includes an electric utility company without obtaining separate approval 

from the Commission.77 

79. Furthermore, GS Group says that the blanket authorizations under section 

33.1(c)(1)(i) and section 33.1(c)(1)(ii) do not allow its non-utility subsidiaries to acquire 

10 percent or more of the voting securities of an electric utility company. While GS 

76 GS Group Rehearing Request at 4. 

77 The Commission granted blanket authorizations to GS Group that allow its nonutility subsidiaries to hold, in a proprietary capacity, up to 10 percent of the voting 

securities of electric utility companies, subject to certain reporting requirements. See The 

Goldman Sachs Group, Inc., 114 FERC ¶ 61,118 at P 22, 27 (2006). 
Docket No. RM05-34-001 - 46 - 

Group acknowledges that this may be reasonable for acquiring securities of a traditional 

utility with captive customers, it contends that such a limitation is unnecessary as applied 

to the acquisition of securities of an industrial company or manufacturer that generates 

power itself and consumes most of the generated power. GS Group notes that many 

industrial self-generators sell only a small amount of surplus power at wholesale to the 

local interconnected utility. The same public policy considerations (the lack of effects on 

competitive wholesale markets for sale in interstate commerce or on wholesale captive 

customers) that underlie a blanket authorization covering acquisitions of such companies’ 

securities (in section 33.1(c)(1)(i)) apply to acquisitions of securities of industrial selfgenerators. GS Group argues that the 100 MW size limit will assure that transactions 

involving the acquisition of securities of industrial self-generators will not have an effect 

on competition in wholesale power markets. 

80. Furthermore, GS Group argues that this modification would be consistent with 

the PUHCA 2005 Final Rule, 18 CFR § 366.3(c), which waives the accounting, recordretention and filing requirements in Part 366 for holding companies that own 100 MW of 

generation or less that is used “fundamentally for their own load or for sales to affiliated 

end-users.” GS Group notes that the SEC exempted industrial self-generators and their 

parent holding companies from regulation as electric utility companies or holding 

companies. It says that the SEC also exempted acquisitions of voting securities of such 

companies from the pre-approval requirements of PUHCA 1935. 
Docket No. RM05-34-001 - 47 - 

81. Coral Power requests that the Commission grant a blanket authorization under 

section 203(a)(1) (which regulates transactions involving public utilities) for transfers of 

wholesale market-based rate contracts between affiliates that have the same ultimate 

upstream ownership and that are not affiliated with traditional public utilities with captive 

ratepayers. It states that this would be consistent with the public interest because such 

transfers have no adverse effect on competition, rates, or regulation. Such transfers will 

not harm competition because they will not result in any change in ultimate control over 

the wholesale contracts, over any other electric generation, transmission, or distribution 

facilities, or over inputs to generation. Coral Power explains that following such 

transfers, the Commission will continue to have jurisdiction over the contracts. It states 

that such transfers have no effect on captive ratepayers (since customers under marketbase rate contracts are not captive), and therefore will not raise any cross-subsidization 

issues. 

ii. Commission Determination

82. The Commission will grant a blanket authorization to allow any company in a 

holding company system that includes a transmitting utility or an electric utility to 

acquire the securities of an electric utility company that owns generating facilities that 

total 100 MW or less and are used fundamentally for the acquired company’s own 

individual load or for sales to affiliated end-users (industrial self-generators). Such 

transactions meet the standards of section 203. They are consistent with the public 

interest (because they will not harm competition, ratepayers, or regulation) and will not 
Docket No. RM05-34-001 - 48 - 

result in the cross-subsidization of a non-utility associate company or the pledge or 

encumbrance of utility assets for the benefit of an associate company. This blanket 

authorization will be reflected in section 33.1(c)(1)(iii). 

83. The Commission also is persuaded by the rationale provided by Coral Power and 

will grant a blanket authorization for transfers of wholesale market-based rate contracts 

between affiliates that have the same ultimate upstream ownership and that are not 

affiliated with a traditional public utility with captive customers. Such transactions meet 

the standards of section 203. They will not harm competition because even if a contract 

confers control over a generating resource, the transfer of the contract does not result in a 

change in ultimate control. There also will be no effect on cost-based rates to captive 

customers or to customers that receive transmission service over jurisdictional 

transmission facilities, or on regulation. Further, since the affiliates are not affiliated with 

a public utility with captive ratepayers, the transaction will not result in the crosssubsidization of a non-utility associate company or the pledge or encumbrance of utility 

assets for the benefit of an associate company. We note that the assignment or transfer of 

wholesale contracts is subject to section 205 filing requirements, which include, among 

other things, designation of the jurisdictional entity that will be the supplier under the 

contract. 
Docket No. RM05-34-001 - 49 - 

4. Blanket Authorizations for Cash Management Programs, Money 

Pools, and Intra-Holding Company Financing Arrangements

84. In Order No. 669, the Commission stated that cash management programs, money 

pools, and other intra-holding company financing arrangements78 are a routine and 

important tool used by many large companies to lower the cost of capital for their 

regulated subsidiaries and to improve the rate of return the holding company and its 

subsidiaries can receive on their money.79 These transactions often involve issuances and 

acquisitions of securities that are subject to FPA sections 204 and 203.80 The 

Commission stated that it did not intend to make it more difficult for companies to take 

advantage of these types of transactions. Transfers of funds between such companies do 

not generally present competitive problems. Thus, we found that it was consistent with 

 78 While there are several different types of cash management programs, a cash 

management program generally involves pooling the cash resources of several affiliated 

companies into a “money pool.” Affiliates can then borrow against the funds in the pool, 

often at below market rates. Additionally, the parent company is often able to achieve a 

higher rate of return on its money pool investments than any single affiliate could on its 

own. For a more detailed discussion of cash management programs, see Regulation of 

Cash Management Practices, Order No. 634, 68 FR 40500 (July 8, 2003), III FERC Stats. 

& Regs. ¶ 31,145 (June 26, 2003), Order No. 634-A, 68 FR 61993 (Oct. 31, 2003), FERC 

Stats. & Regs. ¶ 31,152 (Oct. 23, 2003) (Cash Management Rule). 

79 Order No. 669 at P 142. 

80 The Commission’s authority under section 204 governing the issuance of 

securities by a public utility was often superseded by the authority of the SEC under 

section 318 of the FPA. Section 318 of the FPA resolved conflicts of jurisdiction 

between the FPA and PUHCA 1935 regarding, among other things, the issuance of 

securities in favor of the SEC. Section 318 was repealed under section 1277 of PUHCA 

2005. 
Docket No. RM05-34-001 - 50 - 

the public interest to grant blanket authorization under section 203(a)(2)for holding 

companies and their subsidiaries to take part in intra-system cash management-type 

programs. 

a. Rehearing Requests

85. EEI, Entergy, and Duke/Cinergy request that the Commission modify the 

regulatory text to also grant blanket authorization under FPA section 203(a)(1) for intrasystem financial transactions between public utility affiliates. They point out that, while 

intra-system financings may be jurisdictional under section 203(a)(1) (which applies to 

acquisitions of securities by public utilities) and/or section 203(a)(2) (which applies to 

acquisitions of securities by holding companies), section 33.1(c)(2) grants blanket 

authorization under section 203(a)(2) only. They explain that intra-system cash 

management or financing programs typically involve both: (i) “horizontal” transactions 

between two public utility subsidiaries (e.g., one public utility lending money to an 

affiliated public utility), which may be jurisdictional under section 203(a)(1); and (ii) 

transactions between a holding company and its subsidiaries (e.g., a holding company 

lending money “downward” to a subsidiary public utility), which may be jurisdictional 

under section 203(a)(2). 

86. EEI, Entergy, and Duke/Cinergy assert that, based on the preamble discussion, the 

Commission apparently intended to cover both types of transactions, but the regulatory 

text did not incorporate them. In the preamble, we stated that “it is consistent with the 

public interest to grant a blanket authorization to allow holding companies and their 
Docket No. RM05-34-001 - 51 - 

subsidiaries to take part in intra-system cash management-type programs.”81 EEI, 

Entergy, and Duke/Cinergy state that because these transactions among public utility 

affiliates are very frequent, it is impractical for them to file for section 203 approval for 

such transactions. Thus, blanket authorization for intra-system financings between public 

utility affiliates is necessary to allow companies to effectively manage their financial 

needs.82 

87. Similarly, National Grid asserts that, while the Commission explicitly stated in the 

preamble of Order No. 669 its intent to grant blanket pre-authorization under FPA section 

203 for public utility participation in cash management programs, the Commission 

provided no regulatory text to allow for utilities and their associate companies (other than 

holding companies) to participate in cash management programs. It asserts that to ensure 

that the blanket authority granted by the Commission in paragraph 142 of Order No. 669 

enables cash management programs to continue, the Commission should expand the 

regulatory text to allow all associate companies that participate as borrowers in cash 

management programs to continue to “acquire securities” in all other program 

participants. Specifically, it states that the Commission should revise section 33.1(c)(2) 

 81 EEI Rehearing Request at 4 (citing Order No. 669 at P 142 (emphasis added); 

Entergy Rehearing Request at 2; and Duke/Cinergy Rehearing Request at 2. 

82 See EEI Rehearing Request at Attachment A at 1-2, section 33.1(c)(3). 

Attachment A contains a black-lined version of regulation 33.1(c), revised to include a 

blanket authorization for intra-system financial transactions between public utility 

affiliates under section 203(a)(1). 
Docket No. RM05-34-001 - 52 - 

to cover both holding companies and any transmitting utility, electric utility company, or 

public utility within the holding company system.83 National Grid states that the 

provision should also be revised to incorporate requisite blanket authority under FPA 

section 203(a)(1) for public utilities to participate in cash management programs. 

88. APPA/NRECA assert that the Commission granted blanket authorization for 

intra-holding company financing transactions without adequate safeguards against crosssubsidization or pledges or encumbrances of utility assets. In discussing the blanket 

approval of these arrangements, Order No. 669 states that applicants “must adopt 

sufficient safeguards, including any necessary cash management controls (such as 

restrictions on upstream transfers of funds, ring fencing, etc.) to prevent any crosssubsidization between holding companies and their new subsidiaries before receiving 

section 203 approval.”84 However, APPA/NRECA point out that these requirements do 

not appear in the Commission’s accompanying regulations. 

b. Commission Determination

89. First, we clarify that the blanket authorization granted for money pool transactions 

is intended to authorize “horizontal” transactions between public utility company 

subsidiaries as well as “downward” loans from the holding company to its public utility 

company subsidiaries and we will add new regulatory text to reflect this. However, the 

 83 National Grid Rehearing Request at 5. 

84 APPA/NRECA Rehearing Request at 30 (citing Order No. 669 at P 143). 
Docket No. RM05-34-001 - 53 - 

blanket authorization does not extend to acquisition of securities issued by entities 

outside the money pool. 

90. Rather than modify the regulatory text in the Final Rule, which addressed only 

“vertical” transactions between public utility holding companies and their subsidiaries, in 

section 33.1(c)(7), we have adopted stand-alone regulatory text addressing “horizontal” 

public utility money pool transactions subject to FPA section 203(a)(1)(C). We note that 

section 203(a)(1)(C) jurisdiction applies only to public utility acquisitions of securities of 

other public utilities. Such authorization is not required under section 203(a)(1) for a 

public utility to acquire securities of a non-public utility. Therefore, there is no need to 

broaden the regulatory text as requested by National Grid to cover public utility 

acquisitions of securities of non-public utilities. 

91. In response to APPA/NRECA, we note that the blanket authorizations under 

section 203(a)(2) for holding company acquisitions of non-voting securities, voting 

securities of less than 10 percent of a company, and securities of subsidiaries are all 

subject to the requirement that the holding company provide the Commission with copies 

of certain information required to be filed with the SEC. Further, the new blanket 

authorization in section 33.1(c)(7), which applies to public utility participation in intrasystem cash management programs, is subject to safeguards to prevent crosssubsidization or encumbrances of utility assets. We also note that public utilities have 

filing requirements under the Commission’s Cash Management Rule. With respect to 

whether the Commission should codify specific safeguards that must be adopted for 
Docket No. RM05-34-001 - 54 - 

money pool transactions, we will consider this issue at the technical conference to be held 

later this year regarding PUHCA and certain FPA section 203 issues. 

5. Section 33.1(c)(2)-(c)(4) - Blanket Authorizations: Purchases of 

Voting and Non-Voting Securities Under Section 203 

92. Section 33.1(c)(2) provides that any holding company in a holding company 

system that includes a transmitting utility or an electric utility is granted a blanket 

authorization under section 203(a)(2) of the FPA to purchase, acquire, or take: (i) any 

non-voting security (that does not convey sufficient veto rights over management actions 

so as to convey control) in a transmitting utility, an electric utility company, or a holding 

company in a holding company system that includes a transmitting utility or an electric 

utility company; or (ii) any voting security in a transmitting utility, an electric utility 

company, or a holding company in a holding company system that includes a transmitting 

utility or an electric utility company if, after the acquisition, the holding company will 

own less than 10 percent of the outstanding voting securities; or (iii) any security of a 

subsidiary company within the holding company system. 

93. Section 33.1(c)(3) provides that the blanket authorizations granted under section 

(c)(2) are subject to the conditions that the holding company shall not: (i) borrow from 

any electric utility company subsidiary in connection with such acquisition; or (ii) pledge 

or encumber the assets of any electric utility company subsidiary in connection with such 

acquisition. 
Docket No. RM05-34-001 - 55 - 

94. Section 33.1(c)(4) provides that a holding company granted blanket authorizations 

in section (c)(2) shall provide the Commission with the same information, on the same 

basis, that the holding company provides to the SEC in connection with any securities 

purchased, acquired or taken pursuant to this section. 

a. Section 33.1(c)(2)(i) - Purchases of Non-Voting Securities 

by a Holding Company 

95. In Order No. 669, the Commission found that there is no need for case-by-case 

examination of a holding company’s purchase of non-voting securities. Such securities 

generally do not convey control and hence do not give the holding company additional 

market power, harm competitive markets, or otherwise harm captive customers.85 We 

did not impose any type of filing requirement with respect to such transactions.86

i. Rehearing Request

96. APPA/NRECA assert that the Commission should not have granted this blanket 

authorization. They state that the Commission cites no basis in the record for its finding 

that such transactions generally do not harm competition or otherwise disadvantage 

captive customers.87 According to APPA/NRECA, non-voting securities may take many 

different forms, limited only by the imagination of creative deal-makers and lawyers. 

 85 See Cash Management Rule at 29 (discussing exception for non-voting interests 

that convey significant veto rights). 

86 Order No. 669 at P 144. 

87 APPA/NRECA Rehearing Request at 31 (citing Order No. 669 at P 144). 
Docket No. RM05-34-001 - 56 - 

APPA/NRECA assert, for instance, that securities that are non-voting can be important in 

the overall financial structure of many corporations or may, in the future, accrue voting 

rights, such as in the case of convertible debt. Therefore, they argue, the Commission 

should review such transactions on a case-by-case basis. If a party is uncertain whether a 

particular acquisition is a transfer of control that warrants a section 203 application, it can 

seek a declaratory order. 

ii. Commission Determination

97. APPA/NRECA has not persuaded us that customers will be harmed by the blanket 

authority to acquire non-voting securities. An acquisition of non-voting securities 

generally does not result in a change of control because such securities generally lack 

mechanisms like voting or veto rights necessary to influence or control management of 

the company. Moreover, section 33.1(c)(3) specifically prohibits holding companies that 

use the blanket authorization from borrowing from any electric utility company 

subsidiary in connection with the transaction or from pledging or encumbering assets of 

an electric utility company subsidiary. In those instances where the security is nonvoting when issued or acquired but can be converted to voting at a later date, we will treat 

the security as a voting security when it is converted. This blanket authorization for 

acquisition of non-voting securities by a holding company only relieves the holding 

company of the requirement to file an application under section 203(a)(2) to obtain prior 

authorization from the Commission in a specific situation and with certain conditions. 
Docket No. RM05-34-001 - 57 - 

b. Section 33.1(c)(2) – Holding Company Purchases of Less 

than 10 Percent of Outstanding Voting Securities

98. The Commission granted blanket authorization for a holding company in a 

holding company system to purchase less than 10 percent of the outstanding voting 

securities of a public utility or a holding company covered by section 203(a)(2). We 

conditioned the blanket authorization “by requiring the purchaser of such securities to 

provide the Commission, not more than 45 days after the purchase, with the same 

information on the same basis that the holding company now provides to the SEC.”88 

The Commission stated that it would issue notices of these filings for informational 

purposes only. 

i. Rehearing Requests

99. APPA/NRECA assert that the Commission should not have granted this blanket 

authorization. They assert that the Commission should set the ownership threshold at less 

than 5 percent, as with the safe harbor provisions of the RTO Rule89 governing active 

ownership interests by market participants in regional transmission organizations (RTOs). 

 88 Order No. 669 at P 145. This could include Schedules 13D or 13G and Forms 

8-K or 10-Q. 

89 Regional Transmission Organizations, Order No. 2000, 65 FR 809, 855 (Jan. 6, 

2000), FERC Stats. & Regs. ¶ 31,089, at 31,108 (1999), order on reh’g, Order No. 2000-

A, 65 FR 12088 (Mar. 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000), aff’d sub nom.

Public Utility District No. 1 of Snohomish County, Washington v. FERC, 272 F.3d 607 

(D.C. Cir. 2001) (RTO Rule). 
Docket No. RM05-34-001 - 58 - 

APPA/NRECA assert that the Commission provides no justification for using a higher 

percentage threshold for blanket authorization here than it did in its RTO rule. 

100. Coral Power asserts that the Commission should grant a blanket authorization 

under FPA section 203(a)(1) for dispositions of less than 10 percent of the outstanding 

voting securities by a public utility to match the blanket authorization granted to holding 

companies to acquire such securities. It states that the Commission has long interpreted 

section 203 to apply to changes in control over jurisdictional facilities.90 New FPA 

section 203(a)(4) codifies this precedent and gives the Commission express authority to 

review changes in control under section 203. Coral Power asserts that the disposition of 

up to 10 percent of the outstanding voting securities of a public utility or any of its 

upstream owners is not a change in control for purposes of FPA section 203(a)(1), as long 

as the acquiring entity does not hold a direct or indirect managing interest in the public 

utility. It states that, where there is no change in control, there can be no harm to 

competition or captive ratepayers as a result of such a transaction. 

ii. Commission Determination

101. APPA/NRECA advocate a reduction, from 10 percent to 5 percent, in the level of 

outstanding voting securities in a public utility or a public utility holding company that 

another holding company may acquire under the blanket authorization the Commission 

granted in Order No. 669. They cite to the Commission’s conclusion in the RTO Rule 

 90 Coral Power Rehearing Request at 7. 
Docket No. RM05-34-001 - 59 - 

 

that limited market participants to no more than a 5 percent active ownership interest in 

an RTO. We will deny APPA/NRECA’s request for rehearing. In the RTO Rule, we 

reviewed various thresholds for presuming a lack of independence, including those found 

in the decisions of other agencies. We concluded that, because of particular concerns 

with the independence of RTOs, a limitation of 5 percent was appropriate. However, we 

noted that, in other contexts, we had determined that holding 10 percent of a company’s 

voting stock was the level at which a rebuttable presumption of control applied for 

purposes of determining whether a company was an affiliate.91

102. The fact that the Commission adopted a 5 percent ownership interest as a measure 

of control for purposes of determining an RTO’s independence from market participants 

does not dictate the maximum threshold for a blanket authorization under section 

203(a)(2). The two situations are quite different. For Order No. 2000, the Commission 

was faced with the task of building confidence that the RTOs would not be subject even 

to influences or the appearance of influences that would favor one market participant over 

another. As a result, the Commission set the threshold relatively low, prohibiting an 

ownership interest of no more than 5 percent. Our decision here reflects a reasonable 

balance in determining what is consistent with the public interest under section 203, 

taking into account Congress’ intent in EPAct 2005 to remove obstacles to much-needed 

investment in the electric utility industry and to protect ratepayers. Nothing in the request 

91 RTO Rule, FERC Stats. & Regs ¶ 31,089 at 31,070. 
Docket No. RM05-34-001 - 60 - 

for rehearing has convinced us that allowing blanket approval for a holding company to 

acquire less than 10 percent of the securities in a public utility or another holding 

company will harm customers. Setting the level at the higher end of the rather short 

spectrum (the low considered by the Commission of 5 percent and the high of 10 percent) 

described by the Commission in the RTO Rule will encourage increased investment 

because it lifts the burden of obtaining pre-authorization under FPA section 203(2). 

103. Coral Power suggests that the Commission give essentially the same blanket 

authorization to public utilities under section 203(a)(1) that we gave to public utility 

holding companies under section 203(a)(2). The Commission declines to do so and will 

continue to review dispositions of jurisdictional facilities by public utilities under FPA 

section 203(a)(1) on a case-by-case basis. Concerns with control, markets and protection 

of captive customers or customers receiving transmission service over jurisdictional 

transmission facilities are closely linked with assets directly controlled by the public 

utilities. 

c. Section 33.1(c)(4) – SEC Information Provided to the 

Commission

104. As noted above, the Commission conditioned the blanket authorization for 

holding companies under section 33.1(c)(2) “by requiring the purchaser of such securities 

to provide the Commission, not more than 45 days after the purchase, with the same 
Docket No. RM05-34-001 - 61 - 

information on the same basis that the holding company now provides to the SEC.”92 

The Commission stated that it would issue notices of these filings for informational 

purposes only. 

i. Rehearing Requests

105. EEI, Entergy, Duke/Cinergy, and GS Group request that the Commission revise 

section 33.1(c)(4) to list the specific SEC schedules and forms that the Commission 

directed companies to file with the Commission, rather than just making the more general 

reference to the “same information” provided to the SEC.93 They state that this change 

would make the text of the rule consistent with the Commission’s discussion in the 

 92 Accordingly, the Commission directed that the purchaser of such securities file 

with the Commission copies of SEC Schedules 13D, 13G, and Form 13F. The 

Commission explained that SEC Schedule 13D is required to be filed by any entity 

acquiring beneficial ownership of more than 5 percent of a class of a company’s 

securities. The Schedule 13D filing requires, among other things, a statement of the 

purpose(s) of the acquisition of the securities of the issuer and a description of any plans 

or proposals the reporting person may have that relate to or would result in the acquisition 

of additional securities of the issuer; any extraordinary corporate transactions, such as a 

merger, reorganization or liquidation of the issuer or its affiliates; and any changes in the 

board of directors or management of the issuer. Schedule 13G is the same form, but is 

used when the person or entity is making the purchase for investment only. Institutional 

investment managers who exercise investment discretion over $100 million or more must 

report their holdings on SEC Form 13F. We noted that requiring this information should 

impose only a de minimis burden on the holding company, since we are merely requiring 

the same information that was filed with the SEC. Further, the Commission stated that, 

should the SEC change its reporting requirements, this information must continue to be 

filed with the Commission. 

93 See, e.g., EEI Rehearing Request at 6, and Attachment A at 2-3, section 

33.1(c)(5); Entergy Rehearing Request at 3; Duke/Cinergy Rehearing Request at 3-4; and 

GS Group Rehearing Request at 7. 
Docket No. RM05-34-001 - 62 - 

 

preamble and in footnote 107, which refers specifically to SEC Schedules 13D and 13G 

and Form 13F. GS Group is concerned that the general directive to provide the “same 

information” is overly broad, creates uncertainty regarding the type of information that 

must be filed with the Commission, and could be construed to include oral 

communications with the SEC, correspondence, documents produced in response to a 

data request, and other investor disclosure documents that are only tangentially related to 

an acquisition of securities pursuant to section 33.1(c)(4). 

106. Further, GS Group and MidAmerican explain that, while the preamble indicates 

that the SEC filings must be provided to the Commission not later than 45 days after the 

purchase of securities being reported, the text of the rule merely indicates that copies of 

SEC filings must be provided to the Commission “on the same basis” provided to the 

SEC.94 They state that the 45-day deadline is inconsistent with the filing deadlines for 

Schedule 13D, Schedule 13G and Form 13F. 

107. MidAmerican states that should the SEC eliminate such reporting requirements, 

the acquirer of any securities under the blanket authorization should continue to provide 

the information that had been required under the rescinded SEC rule to the Commission 

no later than the time that would have been required under the rescinded SEC rule. 

94 Id. at 8; MidAmerican Rehearing Request at 5. 
Docket No. RM05-34-001 - 63 - 

108. MidAmerican seeks clarification of the rule as it pertains to Schedule 13G only to 

the extent a Schedule 13G is to be filed with respect to the reporting of beneficial 

ownership interests of less than 10 percent of voting equity securities 

109. MidAmerican and GS Group also request that the Commission clarify that, if the 

submission to the SEC qualifies for confidential treatment, the Commission also should 

give it confidential treatment. MidAmerican explains that the investment strategies of 

banks, brokers, investment managers, pension funds, and other investors often involve 

proprietary and confidential information and that release of this information could harm 

these entities. 

ii. Commission Determination

110. In response to the many industry requests on rehearing, we will specify that it is 

SEC Schedule 13D, Schedule 13G and Form 13F that the companies are directed to file. 

To ensure that this filing requirement imposes only a de minimis burden, copies of these 

SEC Schedules 13D and 13G and Form 13F must be filed with the Commission under the 

same filing deadlines provided in the SEC rules. We are revising section 33.1(c)(4) 

accordingly. 

111. We clarify that, if the SEC eliminates such reporting requirements, the acquirer of 

securities under the blanket authorization must continue to provide the information 

required under the rescinded SEC rule to the Commission no later when it would have 

been required under the rescinded SEC rule. MidAmerican’s request for clarification of 

the reporting requirement as it pertains to Schedule 13G is unclear, as is the specific 
Docket No. RM05-34-001 - 64 - 

 

change, if any, that it proposes. As noted above, however, the Commission is revising 

the reporting requirement as it relates to the SEC schedules and form to make filing 

deadlines and content commensurate with SEC requirements.

112. Further, we clarify that requests for confidential treatment of copies of the 

schedules must follow the established procedures for requests for special treatment of 

documents submitted to the Commission.95 Under those procedures, any person 

submitting a document may request privileged treatment by claiming that some or all of 

the information is exempt from the mandatory public disclosure requirements of the 

Freedom of Information Act (FOIA),96 and should be withheld from public disclosure. 

The Commission places documents for which privileged treatment is requested in a nonpublic files. When a FOIA requester seeks a document for which privileged treatment 

has been claimed or when the Commission itself is considering release of such 

information, the Commission official who will decide whether to release the information 

will notify the person who submitted the document and give that person at least five 

calendar days in which to comment. Notice of a decision to deny a claim of privilege 

will be given to any person claiming that the information is privileged no less than five 

calendar days before disclosure. In addition, when a FOIA requester brings suit in 

95 18 CFR 388.112 (2005). 

96 5 U.S.C. 552 (2000). 
Docket No. RM05-34-001 - 65 - 

Federal court to compel disclosure of information for which a person has claimed 

privileged treatment, the Commission will notify the person who submitted the document.

6. Other Requested Blanket Authorizations – Holding Company 

Purchasing Its Own Securities, Fiduciary Investments and Bank 

Underwriting/Hedging

a. Holding Company Purchasing Its Own Securities

i. Rehearing Requests

113. EEI, Entergy, and Duke/Cinergy request that the Commission clarify that a 

holding company may buy its own securities under blanket authority and need not make a 

filing under section 203. They state that, while it may seem obvious that a holding 

company can acquire its own securities without section 203 authorization, there is some 

confusion created by the differing statutory language of 203(a)(1)(C) and 203(a)(2). 

Before EPAct 2005, section 203(a) required prior approval for a public utility to acquire 

the security “of any other public utility.” In contrast, new section 203(a)(2), requires 

prior approval for a holding company to acquire “any security with a value in excess of 

$10,000,000 of . . . a holding company in a holding company system that includes a 

transmitting utility or an electric utility company.” 

114. National Grid raises similar arguments and adds that repurchase transactions are 

routine and serve a variety of business needs, including facilitating stock issuances under 

legitimate stock plans and managing capital structure. 
Docket No. RM05-34-001 - 66 - 

ii. Commission Determination

115. In an order issued after the final rule, the Commission ruled that the most 

reasonable interpretation of section 203(a)(2) is that a holding company is not required to 

obtain Commission authorization to repurchase its own stock.97

b. Fiduciary Investments and Bank Underwriting and 

Hedging Activities

i. Rehearing Requests

116. BofA/JPMorgan ask that the Commission clarify that section 203(a)(2) does not 

apply to fiduciary investments by non-bank financial institutions in a Regulated Banking 

Group.98 They explain that it would not be feasible for non-bank fiduciaries to obtain 

section 203(a)(2) approval before making such investments because many Regulated 

Banking Groups have non-bank subsidiaries that routinely acquire and dispose of equity 

and debt positions in utility securities in fiduciary capacities. These fiduciary 

relationships include the function of trustee, agent, executor, administrator, guardian, 

 97 National Grid plc and National Grid USA, 114 FERC ¶ 61,115 at P 11 (2006). 

98 By use of the term “Regulated Banking Group,” BofA/JPMorgan means: (i) 

banks chartered and regulated under the laws of the United States or a U.S. state, and (ii) 

bank holding companies registered as such with (and subject to supervision and 

regulation by) the Federal Reserve Board under the Bank Holding Company Act of 1956 

(as amended by the Gramm-Leach-Bliley Act of 1999, in each case together with their 

subsidiaries. BofA/JPMorgan also explain that the Commission’s blanket authorization 

of the acquisition of up to 10 percent of voting equity of utilities does not provide 

adequate relief, since on an aggregate basis all holdings in a fiduciary and/or proprietary 

capacity under a large banking group may in the ordinary course of business exceed the 

10 percent threshold. BofA/JPMorgan Rehearing Request at 13-14. 
Docket No. RM05-34-001 - 67 - 

 

asset manager, and discretionary investment adviser.99 BofA/JPMorgan assert that these 

passive investments are not made to permit the Regulated Banking Group to exercise 

control over the operations of the issuer. Further, they state that such investments are 

already comprehensively regulated under federal and state regimes applicable to financial 

institutions. These regulatory regimes are designed to assure that the holdings by a 

Regulated Banking Group in a fiduciary capacity are not used to impermissibly support 

investments in a public utility as principal, and do not provide a basis to exercise 

impermissible control over a public utility issuer. For these reasons, BofA/JPMorgan 

seek a determination that fiduciary investments by their non-bank financial institutions do 

not require approval under section 203(a)(2). In the alternative, they request blanket 

authorization for such fiduciary investments. 

117. BofA/JPMorgan request that the Commission confirm that relief from the 

“acquisition of securities” clause under section 203(a)(1) applies under section 203(a)(2).

Specifically, they assert that the Commission has granted banks that function as power 

marketers relief from the “acquisition of securities” clause in section 203(a)(1).100 Such 

banks need not seek prior approval from the Commission when they acquire utility 

99 Id. at 13. 

100 See UBS AG and Bank of America, N.A., 101 FERC ¶ 61,312 (2002), reh’g 

granted in part and denied in part, 103 FERC ¶ 61,284 (2003), reh’g granted, 105 FERC 

¶ 61,078 (2003) (UBS/Bank of America); JPMorgan Chase Bank, N.A., Docket No. 

ER05-283 (unpublished letter order dated March 18, 2005). 
Docket No. RM05-34-001 - 68 - 

 

securities in debt, fiduciary, trading, or hedging capacities. However, BofA/JPMorgan 

explain that a number of banks have recently become power marketers and when that 

happens, the bank becomes a public utility for purposes of FPA section 203. They assert 

that, under EPAct 2005, many banks that are public utilities are now also “holding 

companies.” Congress provided that certain holdings of banks, bank operating 

subsidiaries, and broker-dealers do not make them “holding companies” in section 

1262(8) of EPAct 2005. BofA/JP Morgan state that the statutory exemption also 

specifically covers loan collateral, loan liquidation, and fiduciary holdings. 

118. However, BofA/JPMorgan explain that when banks act as underwriters, they will 

not know at the outset whether they will be successful in disposing of a sufficient number 

of shares to assure that their holdings do not exceed 5 percent of the issuer after 45 

days.101 To comply with section 203, however, they would have to seek the 

Commission’s approval immediately to retain the shares or risk noncompliance. Thus, 

BofA/JPMorgan ask that the Commission issue blanket authorization under section 

203(a)(2) for failed underwritings and hedging holdings on the same terms and conditions 

imposed in the Commission’s orders granting blanket authorization to bank power 

101 BofA/JPMorgan Rehearing Request at 19. They explain that in a successful 

underwriting, the underwriter purchases shares from the issuer and immediately resells 

those shares in the market. In a failed underwriting, the underwriter is not able to resell 

those shares immediately and will attempt to sell the unsold shares in an orderly manner 

over a period of time following the closing of the initial purchase. 
Docket No. RM05-34-001 - 69 - 

 

marketers under section 203(a)(1).102 Further, they request that Order No. 669 be 

clarified to authorize: (i) underwriting holdings to exceed 45 days and (ii) equity 

derivative hedging holdings, to the extent permitted under the Commission’s orders 

applicable to bank power marketers. 

119. Similarly, Morgan Stanley requests that the Commission revise the blanket 

authorizations adopted in Order No. 669 to permit certain additional securities 

acquisitions and to differentiate between the acquisition of securities by a public utility 

and by non-utility affiliates. It requests that the Commission grant blanket authorizations 

to allow holding companies and their affiliates to hold: (1) voting and non-voting 

securities, without limitation, on behalf of customers as fiduciaries; (2) voting and nonvoting securities, without limitation, in the ordinary course of their business as 

underwriters or dealers;103 (3) up to the less than 10 percent limit in section 33.1(c)(2)(ii) 

of voting securities as principal of each class of voting securities issued by a utility or 

holding company, provided that such ownership interest does not include a right to 

control the jurisdictional activities of the issuer; (4) utility securities in connection with 

underwriting activities so that underwriting activities are not subject to the 10 percent 

102 BofA/JPMorgan Rehearing Request at 20 (citing UBS/Bank of America, 103 

FERC ¶ 61,284). 

103 Morgan Stanley explains that any utility securities held as part of underwriting 

or dealer/trader activities are transitory, so the underwriter or dealer/trader does not have 

the ability or incentive to exercise control over the issuer. Id. at 13. 
Docket No. RM05-34-001 - 70 - 

 

limit in section 33.1(c)(2), provided that the holding company or its affiliates file an 

application for section 203(a) approval within 45 days of any failed underwriting to retain 

the securities and commits while the applications remains pending not to vote the utility 

securities held as a result of the failed underwriting; (5) utility securities in connection 

with their trading activities so that the dealer/trader activities are not subject to the 10 

percent limit in section 203(c)(2); (6) utility securities as lenders so that the acquisitions 

of debt securities are not subject to the 10 percent limit in section 33.1(c)(2), except that 

application under section 203 would be required before the holding company or its 

affiliate could take control by foreclosure, bankruptcy, or otherwise; (7) utility securities 

of any entity formed to acquire, finance, and lease utility assets to any public utility, 

electric utility company, or transmitting utility under a long-term net lease; and (8) utility 

securities in the course of routine dealing and trading as principals for their own account 

so that utility securities acquired as principal for hedging purposes are excluded from the 

10 percent limit in section 33.1(c)(2), if the holding company or its affiliate commits not 

to vote such securities.104 

120. Morgan Stanley explains that fiduciary holdings by holding companies or their 

affiliates will not result in control over a public utility because the fiduciary has an 

obligation to manage those holdings in the interest of the persons on whose behalf such 

104 Morgan Stanley Rehearing Request at 7-9. 
Docket No. RM05-34-001 - 71 - 

 

securities are held.105 It also explains that any utility securities held as part of 

underwriting or dealer/trader activities are transitory, so the underwriter or dealer/trader 

does not have the ability or incentive to exercise control over the issuer.106 With respect 

to hedging activities, Morgan Stanley asserts that, if the acquiring entity agrees not to 

vote an interest held as principal beyond the authorized 10 percent limit, it will not 

exercise control over the public utility. Finally, if the acquiring entity engages in passive 

lease financing for public utilities, the Commission has held that it does not need to 

regulate such activity.107 

121. Morgan Stanley argues that its requested blanket authorizations do not give the 

acquiring entity additional market power or enable it to undermine competition or 

disadvantage captive customers. Instead, the blanket authority would promote the public 

interest by bringing more capital investment to the utility industry. If the Commission 

finds that blanket authorizations should not apply to all holding companies, Morgan 

Stanley requests that they apply to the activities of non-utility affiliates of financial 

institutions. 

105 Id. at 9 (citing UBS/Bank of America, 103 FERC ¶ 61,284, at P 11). 

106 Id. (citing UBS/Bank of America, 103 FERC ¶ 61,284, at P 13). 

107 Id. (citing Alliant Energy Corp., 111 FERC ¶ 61,458 (2005)). 
Docket No. RM05-34-001 - 72 - 

ii. Commission Determination

122. Section 1262(8)(B) of PUHCA 2005 excludes from classification as “holding 

companies” certain entities that hold the securities of public utilities or public utility 

holding companies under certain conditions. Among these entities are banks, savings 

associations and trust companies, or the operating subsidiaries of these institutions, 

holding, as fiduciaries, these securities in the ordinary course of their respective 

businesses, and broker-dealers holding these securities under certain conditions. The 

Commission recognizes that Order No. 669 does not apply in these situations. 

123. BofA/JPMorgan request clarification that entities that are not banks or operating 

subsidiaries of banks, but are subject to regulation as banks,108 either qualify for the 

statutory exclusions in section 1262(8)(B) or have a blanket authorization to acquire and 

hold covered securities in any amount as fiduciaries in the normal course of their 

business. We cannot find that these entities qualify for the statutory exclusion. The 

statutory exclusion is specific only to certain entities under certain conditions. 

124. However, we agree that entities holding covered securities in any amount as 

fiduciaries in the normal course of their business or as collateral for loans or in 

 108 Such regulation applies to: (i) banks, and their subsidiaries, chartered and 

regulated under the laws of the United States or a U.S. state, and (ii) bank holding 

companies registered as such with the Federal Reserve Board, together with the 

subsidiaries of those holding companies, and subject to the supervision and regulation of 

the Federal Reserve Board under the Bank Holding Company Act of 1956 (as amended 

by the Gramm-Leach-Bliley Act of 1999). 12 U.S.C 1843 (2000). 
Docket No. RM05-34-001 - 73 - 

connection with loan liquidation and that are, in the course of that business, subject to the 

regulatory oversight of the Board of Governors of the Federal Reserve Bank, or the 

Office of Comptroller of the Currency are likely to be significantly constrained in their 

use of those securities so as to not affect regulation, rates or competition under the FPA. 

Therefore, subject to certain conditions and reporting requirements, the Commission will 

grant to entities that are subject to the regulatory oversight of the Federal Reserve Bank 

or the Comptroller of the Currency because they are affiliated with banks or bank holding 

companies regulated by the Federal Reserve Bank under the Bank Holding Company Act 

of 1956, as amended by the Gramm-Leach-Bliley Act of 1999, a blanket authorization 

under section 203(a)(2) to acquire and hold as fiduciaries in the normal course of their 

business or as collateral for loans or in connection with loan liquidation an unlimited 

amount of covered securities of public utilities or public utility holding companies. The 

conditions and reporting requirements are: (1) the holding does not confer a right to 

control, positively or negatively, the operations through debt covenants or any other 

means, the operation or management of the public utility or public utility holding 

company, except as to customary creditor’s rights or as provided under the United States 

Bankruptcy Code; and (2) the parent holding company files with the Commission on a 

public basis and within 45 days of the close of each calendar quarter, both its total 

holdings and its holdings as principal, each by class, unless the holdings within a class are 

less than one percent of outstanding shares, irrespective of the capacity in which they 

were held. 
Docket No. RM05-34-001 - 74 - 

125. Morgan Stanley requests a blanket authorization under section 203(a)(2) of the 

FPA and section 33.1(c)(2) of the Commission’s regulations to acquire and hold up to the 

percentage limit under section 33.1(c)(2)(ii) on holdings of voting securities. There is no 

need to grant the requested authorization. Section 33.1(c)(2)(ii) grants blanket 

authorization to acquire voting securities under the condition stated in the regulation 

notwithstanding that the acquisition may exceed $10 million. 

126. Morgan Stanley requests blanket authorization under section 203(a)(2) of the FPA 

and section 33.1(c)(2) of the Commission’s regulations to acquire and hold securities in 

connection with passive lease financing of public utilities. Such authority is already 

granted under section 33.1(c)(2)(i). Similarly, Morgan Stanley requests blanket 

authorization to acquire and hold as a lender without regard to the percentage limitation 

under section 33.1(c)(2)(ii). Authority to hold debt instruments, which normally do not 

convey a right to control the public utility and which Morgan Stanley implies is the case 

in its request, is already provided under section 33.1(c)(2)(i). 

127. Morgan Stanley requests reconsideration of Order No. 669 or, in the alternative, 

blanket authorization under section 203(a)(2) of the FPA so that it may, without the 10 

percent or more limitation on outstanding securities, acquire and hold as a fiduciary any 

amount of covered securities. Morgan Stanley does not claim exemption under section 

1262(8)(B) of PUHCA 2005, nor does it claim that its holdings as a fiduciary would be 

subject to regulatory oversight, such as that provided by the Federal Reserve Bank. 
Docket No. RM05-34-001 - 75 - 

Finally, while Morgan Stanley cites to UBS AG and Bank of America, N.A,

109 it does not 

explain how the safeguards of banking regulation relied upon by the Commission in those 

cases regarding holdings as a fiduciary apply to Morgan Stanley’s situation. Therefore 

the Commission will not grant Morgan Stanley’s request to provide a blanket 

authorization in our regulations. However, we will not preclude companies from seeking 

a blanket authorization on a case-by-case basis. 

128. BofA/JPMorgan request confirmation that banks that are power marketers and 

that have blanket authorizations under section 203(a)(1) of the FPA also have blanket 

authorizations under section 203(a)(2) of the FPA as holding companies acquiring and 

holding public utility securities for the acquisition and holding of an unlimited amount of 

covered securities as a result of failed underwritings, if they are classified as holding 

companies because they own EWGs or QFs. The Commission in individual cases has 

granted conditional blanket authorizations to certain banks and their subsidiaries to 

acquire and hold an unlimited amount of covered securities in connection with failed 

underwritings. These authorizations contained two conditions. First, the authorization 

ends 45 days after acquisition unless the entity has, within that period, filed an 

application for approval under section 203 to keep the securities. Second, the bank or 

subsidiary must commit, during the pendency of that application, not to vote the 

 109 Morgan Stanley Rehearing Request at 9 (citing UBS/Bank of America, 

103 FERC ¶ 61,284 at P11). 
Docket No. RM05-34-001 - 76 - 

securities. The Commission’s regulatory interests under section 203(a)(2) in holdings as 

a result of failed underwritings are similar to its interests in such holdings under section 

203(a)(1). Therefore, with the two conditions above, we will grant blanket authorization 

under section 203(a)(2) to banks and their subsidiaries to acquire and hold an unlimited 

amount of covered securities in connection with failed underwritings. 

129. Morgan Stanley also requests blanket authorization to acquire and hold an 

unlimited amount of covered securities in connection with underwriting activities. It is 

unclear whether Morgan Stanley is requesting authority only for failed underwritings. Of 

course, if Morgan Stanley or other entities are excluded entities under PUHCA section 

1262(8)(B), then they are not holding companies; in that case, blanket authorizations to 

hold covered securities in connection with a failed underwriting is not necessary. 

130. The blanket authorization that the Commission has granted in connection with 

failed underwritings relies more heavily on the two conditions described above than it 

does on the oversight of an alternative regulatory body, such as the Comptroller of 

Currency or the Federal Reserve System in the Bank of America/UBS AG series of 

decisions, to ensure that holdings resulting from failed underwritings are not used to exert 

control.110 Therefore, the Commission will grant a blanket authorization under section 

203(a)(2) for a holding company to acquire and hold an unlimited amount of covered 

 110 UBA AG and Bank of Amercia, N.A., 101 FERC ¶61,312 (2002); 103 FERC 

¶ 61,284 (2003); 105 FERC ¶ 61,078 (2003). 
Docket No. RM05-34-001 - 77 - 

 

securities in connection with a failed underwriting subject to the same conditions 

imposed in the Bank of America/UBS AG cases. We will add regulatory text to reflect 

this. 

131. BofA/JPMorgan request clarification that the same blanket authorization 

previously granted for banks to hold equity securities of public utilities and public utility 

holding companies as principal for derivatives hedging purposes continues to apply under 

section 203(a)(2). The Commission has, for several years, granted blanket authority to 

certain banks to hold covered securities for hedging purposes incidental to the business of 

banking.111 This has been based in part on the fact that the banks are subject to a 

supervisory standard that generally limits such holdings so that they typically do not 

exceed 5 percent of the outstanding shares. The Commission, however, has specifically 

conditioned the blanket authorizations on a limitation of the banks’ authorization to vote 

the equity shares to 5 percent of the outstanding shares. Under PUHCA 2005, a company 

is a holding company if it owns 10 percent or more of the securities of a public-utility 

company or of a holding company of any public-utility company. The Commission 

agrees that the holding by banks of covered securities for hedging purposes that are 

incidental to the business of banking are an important part of the transactions necessary to 

the financing of the utility business. Therefore, the Commission will grant blanket 

111 See supra note 110. 
Docket No. RM05-34-001 - 78 - 

authorization under section 203(a)(2), subject to the condition that the bank not vote more 

than 10 percent of the outstanding shares. We will add regulatory text to reflect this. 

132. Morgan Stanley requests clarification that holding covered securities in 

connection with hedging transactions is not subject to the limitation of up to 10 percent of 

outstanding securities provided under Order No. 669. It proposes that the Commission 

condition the grant on the commitment of the entity holding the securities, as well as its 

affiliates, not to vote securities held in connection with hedging transactions, to the extent 

that its holdings are 10 percent or more of the outstanding securities in that class. A 

condition removing the holder’s power to vote the securities held for hedging purposes to 

the extent they are 10 percent or more of the securities in the class outstanding, even 

though the amount held for hedging is not limited, will address the Commission’s 

concerns with control. Therefore, the Commission will grant the blanket authorization 

under section 203(a)(2) for companies to hold an unlimited amount of covered securities 

for hedging purposes on the condition that they do not vote the securities held to the 

extent they are 10 percent or more of the outstanding securities in the class. We will add 

regulatory text to reflect this. 

133. We have granted above certain blanket authorizations for holding public utility 

securities as a fiduciary, for hedging purposes or for purposes of loan collateralization or 

liquidation. All these blanket authorizations require that such holdings occur in the 

normal course of business of the company holding the securities. In response to BofA/JP 

Morgan, we clarify that holdings that are exempt by virtue of section 1262(8)(B) of 
Docket No. RM05-34-001 - 79 - 

PUHCA 2005 will not be counted for purposes of determining whether the company 

holding such securities is a holding company under section 1262(8) of PUHCA 2005; in 

other words, holdings exempt by statute will not be aggregated with securities held in 

other capacities. Holdings by companies as principal for derivatives hedging purposes 

are not exempt under section 1262(8)(B) and, therefore, will be counted for purposes of 

determining whether the company is a holding company. 

7. Section 33.2(j) - General Information Requirements Regarding 

Cross-Subsidization 

134. Section 33.2(j) provides that a section 203 applicant must provide an explanation, 

with appropriate evidentiary support (Exhibit M to the application): (1) of how it is 

providing assurance that the proposed transaction will not result in cross-subsidization of 

a non-utility associate company or the pledge or encumbrance of utility assets for the 

benefit of an associate company; or (2) if no such assurance can be provided, an 

explanation of how such cross-subsidization, pledge, or encumbrance will be consistent 

with the public interest. 

135. In Order No. 669, the Commission also stated that certain protections may be 

necessary, on a case-by-case basis, in order to protect against cross-subsidization, pledge 

or encumbrance of utility assets, and affiliate abuse. The Commission stated that 

applicants should proffer ratepayer protection mechanisms to assure that captive 
Docket No. RM05-34-001 - 80 - 

 

customers are protected from the effects of cross-subsidization.112 Among the types of 

protection mechanisms that can be proposed by are: a general hold harmless provision, 

which must be enforceable and administratively manageable, where the applicant 

commits that it will protect wholesale customers from any adverse rate effects resulting 

from the transaction for a significant period of time following the transaction; a 

moratorium on increases in base rates (rate freeze), where the applicant commits to 

freezing its rates for wholesale customers under a certain tariff for a significant period of 

time.113 The Commission stated that it will address the adequacy of the proposed 

mechanisms on a case-by-case basis. 

136. Order No. 669 also stated that certain verifications provided in an application 

could streamline the approval process by avoiding a detailed examination of crosssubsidization and encumbrance concerns.114 We stated that we may accept, along with 

112 The Commission also stated that the applicant bears the burden of proof to 

demonstrate that customers will be protected. See Central Vermont Pub. Serv. Corp., 39 

FERC ¶ 61,295, at 61,960 (1987) (finding of a potential for abuse, the Commission may 

disapprove the transaction or place conditions on it). 

113 Order No. 669 at P 167. These protection mechanisms are offered only as 

examples. Whether these types of protection mechanisms are sufficient in a particular 

case will depend on the circumstances. See, e.g., Merger Policy Statement at 30,121-24. 

114 Order No. 669 at P 169. The Commission stated that such verifications, 

considered on a case-by-case basis in light of the given transaction, and explanations 

relating to those verifications, as well as other explanations of how the transaction will 

not result in cross-subsidization, pledge, or encumbrance of utility assets for the benefit 

of an associate company – or if it does result in such, an explanation of how such cross-

(continued) 
Docket No. RM05-34-001 - 81 - 

any protection mechanisms (discussed above), on a case-by-case basis, in lieu of or in 

addition to any other explanation, the following four verifications that the proposed 

transaction does not result in, at the time of the transaction or in the future: (1) transfers 

of facilities between a traditional utility associate company with wholesale or retail 

customers served under cost-based regulation and an associate company; (2) new 

issuances of securities by traditional utility associate companies with wholesale or retail 

customers served under cost-based regulation for the benefit of an associate company; (3) 

new pledges or encumbrances of assets of a traditional utility associate company with 

wholesale or retail customers served under cost-based regulation for the benefit of an 

associate company; and (4) new affiliate contracts between non-utility associate 

companies and traditional utility associate companies with wholesale or retail customers 

served under cost-based regulation, other than non-power goods and services agreements 

subject to review under sections 205 and 206 of the FPA. 

a. Rehearing Requests

137. APPA/NRECA argue that the Commission should have required substantive 

structural protections to ensure that section 203 transactions do not result in crosssubsidization or pledges or encumbrances of utility assets. They request that the 

Commission describe the specific issues a section 203 application must address and the 

 

subsidization, pledge, or encumbrance will be consistent with the public interest – is to be 

included as Exhibit M to the application. 
Docket No. RM05-34-001 - 82 - 

 

specific assurances and protective conditions that must be included to demonstrate that 

the proposed transaction meet the standards of amended FPA section 203(a)(4).115 

138. More fundamentally, however, APPA/NRECA argue that the Commission 

improperly narrowed the scope of statutory concerns to be addressed under amended 

section 203. They say that ratepayer protection conditions such as temporary hold 

harmless commitments are not sufficient because Congress was concerned about more 

than simply ratepayer protection. APPA/NRECA assert that the ratepayer protection 

conditions discussed in Order No. 669 would be relevant, at most, to how crosssubsidization might affect rates; the conditions do not address the more structural 

financial problems of asset pledges or encumbrances.116 APPA/NRECA contend that the 

statute focuses not just on rate issues, but more broadly on preventing the erosion of the 

financial viability of regulated utilities by draining off their resources into non-utility 

businesses. They assert that Order No. 669 elsewhere acknowledges this broader focus 

when it permits applicants seeking to avoid a hearing to make the four verifications 

described above, which concern the financial viability of the regulated utility and crosssubsidization, asset pledges and encumbrance issues.117 APPA/NRECA also note that the 

Commission conditioned its grant of blanket authorization for intra-holding company 

115 APPA/NRECA Rehearing Request at 13. 

116 Id. at 17. 

117 Id. at 18 (citing Order No. 669 at P 169). 
Docket No. RM05-34-001 - 83 - 

financing arrangements, including cash management programs, by requiring applicants to 

adopt safeguards to prevent any cross-subsidization between holding companies and their 

new subsidiaries. They urge the Commission to impose a similar requirement on all 

section 203 applicants, not just those seeking blanket approval of intra-holding company 

financing arrangements.118 

139. Rather than allowing applicants to avoid a hearing by using the four verifications, 

APPA/NRECA assert that the Commission should require all section 203 applicants to 

demonstrate that cross-subsidization and encumbrance of utility assets cannot occur or to 

adopt safeguards against such cross-subsidization or asset encumbrance. All section 203 

applicants should be required to make a detailed showing that the four conditions 

discussed in paragraph 169 of Order No. 669 are satisfied or that a transaction that fails 

any of these tests is nonetheless “consistent with the public interest.”119 This would add 

substance to 18 CFR. § 33.2(j). 

140. APPA/NRECA also argue that the Commission erred by not requiring section 203 

applications to demonstrate compliance with the Westar Energy120 conditions on public 

utility debt or to explain why such requirement is unnecessary. They explain that, in 

Westar Energy, the Commission announced restrictions on all future issuances of secured 

 118 Id. (citing Order No. 669 at P 143). 

119 Id. at 20. 

120 Westar Energy, 102 FERC ¶ 61,186, clarified, 104 FERC ¶ 61,018 (2003). 
Docket No. RM05-34-001 - 84 - 

 

and unsecured debt by public utilities under section 204 of the FPA. These conditions 

“were designed to prevent investor-owned utilities’ shareholders and management, whose 

interests may be different than the interests of utility customers, from taking actions 

which might jeopardize the utility’s ability to perform its utility function and adversely 

affect its customers.”121 APPA/NRECA contend that the same cross-subsidization 

concerns underlie the express finding that the Commission is now required to make under 

amended section 203(a)(4) before approving any section 203 application. 

141. In addition, APPA/NRECA assert that the Commission should have required 

section 203 applicants to disclose all existing pledges and encumbrances of utility assets. 

In the same vein, TAPSG contends that the Commission should have imposed an ongoing 

requirement that applicants disclose future pledges, encumbrances, or cross-subsidization 

involving the assets or businesses that are the subject of a section 203 application. 

142. APPA/NRECA further request that the Commission clarify the meaning of the 

term “traditional utility with captive customers” in paragraphs 169, 192, and 193 of Order 

No. 669. They believe that, at a minimum, this term should include any public utility: 

(1) selling electricity at wholesale under cost-based rates; (2) selling electricity at retail 

under cost-based rates; or (3) owning or providing transmission service over 

jurisdictional transmission facilities (which, at least today, also implies cost-based 

121 APPA/NRECA Rehearing Request at 23. 
Docket No. RM05-34-001 - 85 - 

 

rates).122 APPA/NRECA also would include transmission customers, as well as retail 

customers and wholesale customers, as “captive customers.” Furthermore, 

APPA/NRECA say that even a utility with market-based rates can have captive 

customers and, therefore, can be a traditional utility. The Commission should not assume 

that a utility with market-based rates does not have captive customers, in light of 

impediments to wholesale competition generally in the industry and the Commission’s 

own actions in revising the tests for market power and then withdrawing market-based 

rate authority in some cases. 

143. Finally, TAPSG requests that the Commission clarify that it will consider adverse 

competitive effects associated with cross-subsidization.123 TAPS argues that crosssubsidization not only harms the ratepayers who bear its expense, but also can injure 

competition in the market where the cross-subsidized company sells. TAPSG contends 

that a commitment by a utility to hold captive customers harmless from increased costs 

associated with a section 203 transaction will not address this concern.124 

122 Id. at 20-21. 

123 TAPSG Request for Rehearing at 3. 

124 APPA/NRECA, in response to footnote 118 in Order No. 669, appear to share 

the same concern. They argue that a utility charging market-based rates can subsidize 

those rates by inflating its retail and transmission rates, thereby unfairly eliminating 

wholesale competitors and, in the long run, lessening wholesale competition and raising 

wholesale rates. APPA/NRECA Rehearing Request at 21, n. 25. 
Docket No. RM05-34-001 - 86 - 

b. Commission Determination

144. On further consideration, the Commission will grant APPA/NRECA’s request for 

rehearing and will require all section 203 applicants (which do not include those who 

have blanket authorization) to include, as part of Exhibit M of the application, a detailed 

showing that either: (1) all four tests of the four-part framework set forth in Order No. 

669 (at P 169), as modified herein, are met, thus demonstrating that the transaction will 

not result in cross-subsidization of a non-utility associate company or the pledge or 

encumbrance of utility assets for the benefit of an associate company; or (2) if crosssubsidization or pledges or encumbrances of utility assets were to occur, how such crosssubsidization, pledges or encumbrances would nonetheless be consistent with the public 

interest.125 We believe this will assure better customer protection and we will amend the 

regulatory text to require this demonstration. We do not believe that requiring a detailed 

showing that all four conditions are met imposes an unreasonable burden on section 203 

applicants. 

145. However, not withstanding APPA/NRECA’s request, we do not find it necessary 

to generally require, except as noted below, section 203 applicants to demonstrate that the 

 125 We will continue to require verifications, rather than a showing or 

demonstration, as a condition of the blanket authorization for holding company 

acquisitions of FUCOs, if the holding company or its affiliates, subsidiaries, or associate 

companies within the holding company have captive customers or own or provide 

transmission service over jurisdictional transmission facilities in the United States, as 

provided in section 33.1(c)(5). The Commission’s verification requirements are set forth 

in 18 CFR 385.2005(b). 
Docket No. RM05-34-001 - 87 - 

transaction satisfies the Westar Energy conditions relating to the future issuance of 

secured and unsecured debt or to certify that they will comply with such conditions in the 

future. However, if a public utility were to issue secured or unsecured debt pursuant to a 

Commission section 204 authorization to finance a section 203 transaction undertaken 

either by itself or its parent or affiliate, the public utility would have to comply with the 

Westar Energy conditions as a consequence of receiving section 204 authorization for the 

issuance of debt. 

146. The Commission also will require that applicants disclose all existing pledges or 

encumbrances of utility assets as part of the application. However, contrary to TAPSG’ 

request, we will not generally require the continuing disclosure of future pledges or 

encumbrances of utility assets as a condition of authorization. On a case-by-case basis, 

the Commission may determine that such a condition is necessary to ensure that the 

transaction is consistent with the public interest. Moreover, section 203(b) authority will 

allow the Commission to revisit its authorization to determine if a further condition 

requiring continuing disclosure is necessary. 

147. In response to APPA/NRECA’s request for clarification regarding the meaning of 

“traditional utility with captive customers,” although we will retain and clarify our 

original definition of the term “captive customer,” as discussed below, we will also 

separately include APPA’s language to cover public utilities that own or provide 

transmission service over Commission-jurisdictional transmission facilities. Thus, 

various conditions or restrictions will apply where a traditional public utility has captive 
Docket No. RM05-34-001 - 88 - 

customers (defined as wholesale or retail electric energy customers served under costbased regulation) and also where the public utility owns or provides transmission service 

over Commission-jurisdictional transmission facilities. However, contrary to 

APPA/NRECA’s proposed interpretation, a public utility selling power only pursuant to 

market-based regulation will not be regarded as a “traditional public utility with captive 

customers” and, hence, customers served at market-based rates will not be regarded as 

“captive customers.” The fact that the Commission is revisiting its tests for granting 

market-based rate authority or that the authority of some utilities to sell at market-based 

rates has been withdrawn does not undermine a conclusion that customers of utilities with 

legitimate market-based rate authority are not “captive customers.” We do not approve 

market-based rates unless we find that the utility does not have market power. 

148. TAPSG requests that the Commission clarify that we will consider the effect of 

cross-subsidization on competition. Intervenors can always argue that a particular 

transaction may result in cross-subsidization and that this may affect competition. We 

will address such arguments based on the facts in a particular case. 

8. Section 33.11(b) - Commission Procedures for Consideration of 

Applications under Section 203 of the FPA 

149. Section 33.11(b) states that the Commission will expeditiously consider 

completed section 203 applications that are not contested, do not involve mergers, and are 
Docket No. RM05-34-001 - 89 - 

consistent with Commission precedent.126 It provides that dispositions of only 

transmission facilities, “particularly” those that both before and after the transaction are 

under the functional control of a Commission-approved RTO or ISO, will generally 

receive expedited treatment.127 In Order No. 669, the Commission explained that ISOs 

and RTOs are pro-competitive and are effective at preventing market power abuse 

because they have market monitoring and mitigation measures. 

a. Rehearing Requests

150. APPA/NRECA assert that the Commission provides no plausible justification for 

providing expedited review for dispositions of only transmission facilities. They argue 

that because owning transmission facilities is one of the major means of exercising 

market power, consolidations of control over transmission facilities should be carefully 

evaluated. They also argue that the Commission’s regulation of transmission service 

does not mean that transactions involving only transmission should be accomplished with 

minimal Commission scrutiny. 

151. Alternatively, APPA/NRECA state that if the Commission retains section 

33.11(b)(1), it should be clarified and revised. They state that the word “particularly” in 

section 33.11(b)(1) either makes the regulation superfluous or makes its meaning unclear. 

If the Commission intended for this clause to be restrictive (in other words, a disposition 

 126 Order No. 669 at P 188. 

127 Id. at P 190-91. 
Docket No. RM05-34-001 - 90 - 

of only transmission facilities does not generally warrant expedited review unless the 

condition in the clause is met), then it should omit the word “particularly.”128 

152. Further, they say that the regulation should provide for expedited review only if 

the transmission facilities will remain in the same RTO or ISO. They state that such 

transactions should receive special scrutiny, not expedited review. 

b. Commission Determination

153. We will delete the word “particularly,” as it is confusing, from section 

33.11(b)(1), newly restated as section 33.11(c)(1). However, we will not require that to 

warrant expedited review, the transaction must maintain the transmission facilities in the 

same RTO or ISO. As we stated in Order No. 669:

the standards set forth in Order No. 2000 require extensive 

information from RTO applicants that we believe will 

demonstrate whether the proposal is in the public interest. It 

also has been our experience that anticompetitive effects are 

unlikely to arise with regard to internal corporate 

reorganizations or transactions that only involve the 

disposition of transmission facilities129 

154. Participation in any Commission-approved RTO or ISO is pro-competitive. We 

note that the regulation does not provide that such transactions will always qualify for 

expedited review. Intervenors may inform us in a particular case if switching RTOs may 

 128 APPA/NRECA Rehearing Request at 34. 

129 Order No. 669 at 190 (citing Filing Requirements Rule at 31,902). 
Docket No. RM05-34-001 - 91 - 

 

cause problems, and the Commission will perform its review on an unexpedited basis if 

justified. 

155. The Commission will also take this opportunity to generally address requests 

for expedited review. We often receive section 203 filings in which an applicant requests 

that the Commission expedite its review process and act on the filing within a specified 

time period, occasionally thirty days or less. In some of these instances, applicants also 

ask us to give a notice period of less than 21 days. Sometimes, applicants offer no reason 

for seeking expedited action, or when they do, the reason is simply that they wish to close 

the transaction as soon as possible. The Commission notes that applicants themselves are 

in the best position to influence the timing of Commission action. In order to have the 

authorization they require at the time they seek to close the transaction, they should file 

an application at the earliest possible time. The Commission (and its staff, for 

transactions that are acted on under delegated authority) will try to act as quickly as 

possible on all applications, but particularly on those that warrant expedited review.130

However, the Commission and its staff take seriously the regulation that provides for a 

21-day notice period for applications that we deem qualify for expedited review. We 

believe that, in most circumstances, 21 days is the minimum period necessary for 

interested persons to conduct an adequate review of the application. Applicants that seek 

130 By law, the Commission is required to take initial action on an application no 

later than 180 days after filing. 
Docket No. RM05-34-001 - 92 - 

a lesser notice period or that request action within a specified time period must clearly 

identify a significant harm to the public interest, as opposed to a private commercial 

interest, that justifies action within that time period. We remind applicants that they must 

also provide a fully completed application, responsive to all of the regulations, to avoid 

the need for a deficiency letter, which creates delay.131 

B. Amendments to 18 CFR § 2.26 - The Merger Policy Statement

156. In response to the NOPR, APPA/NRECA and TAPSG recommended that the 

Commission rethink our current merger policy and what “consistent with the public 

interest” means in light of amended section 203 and the repeal of PUHCA 1935. In 

particular, they suggested that the Commission’s Appendix A analysis, which focuses on 

the effect on competition in “common” markets in which applicants operate, will not be 

well suited to address the effects on competition from the “cross-country” mergers that 

the repeal of PUHCA 1935 will likely encourage. 

157. In response, in Order No. 669, the Commission stated that we are not persuaded to 

change our current policies now. We said that our standard of review is sufficiently 

flexible to consider changes in market structure that might result from EPAct 2005 and 

 131 On occasion, applicants have not identified all of the entities that must have 

approval for the transaction, have not adequately identified or described the facilities, the 

ownership, control or operation of which may be affected directly or indirectly by the 

transaction, or have not provided the underlying transaction agreement and offered little, 

if any, reason, for failing to do so. As a consequence, unnecessary additional time is 

consumed in obtaining the information from applicants and in providing an opportunity 

for others to comment on the information. 
Docket No. RM05-34-001 - 93 - 

the repeal of PUHCA 1935. However, we also stated that, as we gain experience in 

evaluating mergers under the new statute, we may reevaluate our merger policy.132 

1. Rehearing Requests

158. APPA/NRECA continue to assert that the Commission should reevaluate its 

criteria for analyzing mergers in order to address the likely market response to the 

changed regulatory environment. They expect significant merger activity, consolidation 

and restructuring of the industry in the wake of the repeal of PUHCA 1935. The 

Commission should reconsider whether its existing merger policy, crafted when PUHCA 

1935’s ownership restrictions were in place, addresses the dangers to competition and 

consumers presented by new section 203 transactions. The Commission should consider 

new approaches to analyzing the effect on competition beyond those in the current 

Appendix A approach. APPA/NRECA state that they do not expect the Commission to 

develop a new policy for evaluating mergers on rehearing of Order No. 669. However, 

they urge the Commission to set out the procedures and timetable for a reexamination of 

its merger policy.133

159. TAPSG concurs with APPA/NRECA’s thoughts on the need to revise merger 

policy and also asserts that the Commission should not wait to revise its merger policy.134 

 132 Order No. 669 at P 202. 

133 APPA/NRECA Rehearing Request at 38. 

134 TAPSG Rehearing Request at 2-3 and 18-30. 
Docket No. RM05-34-001 - 94 - 

TAPSG notes that the Commission adopted its current merger policy almost ten years ago 

and that much has changed since then, including the development of RTOs with their 

complicated markets and locational marginal pricing, repeal of PUHCA 1935, and new 

time constraints on Commission merger review. At a minimum, TAPSG asserts that the 

Commission should commit to review its current merger policy as part of the technical 

conference that the Commission will hold within a year to address issues raised in this 

proceeding and the PUHCA 2005 Final Rule proceeding.135

2. Commission Determination

160. We will not reevaluate our criteria for analyzing the competitive effects of 

mergers as part of this rulemaking. In Order No. 669, we explained that, after the 

Commission has gained more experience in evaluating section 203 applications under the 

new statute, we may reevaluate our merger policy.136 We continue to believe that more 

experience with the new section 203 will provide us with better guidance as to whether to 

reevaluate our merger policy. 

161. We also note that, consistent with amended section 203(a)(4), we added new 

section 2.26(f) to our regulations. It provides that the Commission will not approve a 

transaction that will result in cross-subsidization of a non-utility associate company or 

pledge or encumbrance of utility assets for the benefit of an associate company unless 

 135 Order No. 669 at P 4. 

136 Id. at P 202. 
Docket No. RM05-34-001 - 95 - 

that cross-subsidization, pledge, or encumbrance will be consistent with the public 

interest. Thus, in Order No. 669, the Commission properly updated its merger policy to 

address Congress’ specific concerns with respect to new section 203. 

162. However, the Commission commits to consider whether our current merger policy 

should be revised as part of the technical conference to be held within one year.137 That 

technical conference will address issues raised both in this proceeding and the PUHCA 

2005 Final Rule proceeding implementing PUHCA 2005. 

IV. Information Collection Statement

163. The regulations of the Office of Management and Budget (OMB)138 require that 

OMB approve certain information requirements imposed by an agency. OMB has 

approved the information requirements contained in Order No. 669. Specifically, OMB 

approved the following information collection and assigned the corresponding OMB 

control numbers: “Application under Federal Power Act Section 203” (FERC-519). 

164. This order on rehearing adopts a number of changes in response to the requests 

for rehearing of Order No. 669. Four of these are important with respect to information 

collection. First, as noted above, we will require that for holding company acquisitions of 

securities of intrastate utilities or utilities that own or control facilities used solely for 

local distribution or retail sales of electric energy regulated by a state commission, if any 

 137 PUHCA 2005 Final Rule at P 17. 

138 5 CFR § 1320.12. 
Docket No. RM05-34-001 - 96 - 

public utility within the holding company system has captive customers, the holding 

company must report the acquisition to the Commission, including any state actions and 

conditions related to the acquisition and provide an explanation why the transaction does 

not result in cross-subsidization. Second, we will require that for certain holding 

company acquisitions of securities of electric utility companies or transmitting utilities, or 

of holding companies that include such entities, the parent company file with the 

Commission, on a public basis and within 45 days of the close of each calendar quarter, 

both its total holdings and its holdings as principal of the securities, each by class, unless 

the holdings within a class are less than one percent of outstanding shares. Third, with 

regard to the submission of Exhibit M of the application, all section 203 applicants 

(excluding those whose transactions fall under blanket authorizations) must demonstrate 

that they have met all four tests of a four-part framework, as elaborated herein and in 

Order No.669, showing that the transaction will not result in cross-subsidization of a nonutility associate company or the pledge or encumbrances of utility assets for the benefit of 

an associate company, or if cross-subsidization or pledges or encumbrances of utility 

assets were to occur, that such results are nonetheless consistent with the public interest. 

Fourth, also as part of Exhibit M to the application, applicants are required to disclose all 

existing pledges or encumbrances as part of utility assets. We do not believe that this 

information requirement will impose an unreasonable burden on section 203 applicants. 

165. Any increases in burden will be offset by the additional blanket authorizations 

that the Commission is granting in this proceeding. Specifically, the Commission will 
Docket No. RM05-34-001 - 97 - 

grant a blanket authorization under section 203(a)(1) of the Federal Power Act for certain 

internal corporate reorganizations, provided that the public utility does not have captive 

customers and the transaction does not present cross-subsidization issues. The 

Commission will also grant a blanket authorization for holding companies that own or 

control only EWGs, QFs or FUCOs to acquire the securities of additional EWGs, FUCOs 

or QFs. In addition, the Commission will grant a blanket authorization allowing any 

company in the holding company system to acquire the securities of an electric company 

that owns generating facilities that total 100 MW or less and are primarily used for the 

acquired company’s own load or for sales to affiliated end-users. The Commission will 

also grant a blanket authorization for transfers of wholesale market-based rate contracts 

between public utility affiliates that have the same upstream ownership and are not 

affiliated with a traditional public utility with captive ratepayers. For those entities that 

are subject to regulatory oversight of the Federal Reserve Bank or the Comptroller of the 

Currency because of their affiliation with banks or bank holding companies that are 

regulated by the agencies identified above, the Commission will grant a blanket 

authorization to acquire and hold an unlimited amount of covered securities for 

fiduciaries, collateral for loans or for loan liquidation, subject to certain reporting 

requirements. Further, the Commission will grant a blanket authorization to the banks 

and their subsidiaries to acquire and hold an unlimited amount of covered securities in 

connection with failed underwritings, subject to certain conditions. The Commission will 

also grant a blanket authorization for certain non-banking financial institutions to acquire 
Docket No. RM05-34-001 - 98 - 

covered securities in a fiduciary capacity or for hedging purposes, subject to certain 

conditions and reporting requirements. In sum, taking into account both the additional 

requirements and the additional blanket authorizations, we believe that one offsets the 

other and will allow the original projected burden estimates expressed in Order No. 669 

to stand. We will, however, adjust these burden estimates accordingly as we receive 

filings and we will notify OMB of any changes that may be necessary. The Commission 

did not receive any comments on burden estimates in response to Order No. 669. 

166. Interested persons may obtain information on the information requirements by 

contacting the following: The Federal Energy Regulatory Commission, 888 First Street, 

NE, Washington, DC 20426 [Attention: Michael Miller, Office of the Executive 

Director, ED-34, Phone: (202)502-8415, Fax: (202) 273-0873, e-mail: 

michael.miller@ferc.gov. 

167. To submit comments concerning the collection(s) of information and provide 

estimates on the associated burden of these requirements, please send your comments to 

the contact listed above and to the Office of Management and Budget, Office of 

Information and Regulatory Affairs, Washington, DC 20503 {Attention: Desk Officer for 

the Federal Energy Regulatory Commission, phone: (202)395-4650. Comments should 

be e-mailed to oira_submission@omb.eop.gov and reference the OMB Control number 

listed above. 
Docket No. RM05-34-001 - 99 - 

V. Document Availability

168. 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 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. 

169. 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 “RM05-34” in 

the docket number field. 

170. 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). 

VI. Effective Date 

171. Changes to Order No. 669 made in this order on rehearing will become effective 

on [insert 30 days after publication in the FEDERAL REGISTER]. 
Docket No. RM05-34-001 - 100 - 

List of subjects in 18 CFR Part 2

Administrative practice and procedure, Electric power, Natural gas, Pipelines, Reporting 

and recordkeeping requirements 

List of subjects in 18 CFR Part 33

Electric utilities; Reporting and recordkeeping requirements; Securities 

By the Commission. 

( S E A L ) 

Magalie R. Salas, 

 Secretary. 
Docket No. RM05-34-001 - 101 - 

In consideration of the foregoing, under the authority of EPAct 2005, the Commission is 

amending Parts 2 and 33 of Chapter I, Title 18, Code of Federal Regulations, as set forth: 

PART 2 – GENERAL POLICY AND INTERPRETATIONS. 

1. The authority citation for Part 2 is revised to read as follows: 

Authority: 5 U.S.C. 601; 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 792-825y, 

2601-2645; 42 U.S.C. 4321-4361, 7101-7352; Pub. L. No. 109-58, 119 Stat. 594.2.

2. Section 2.26 is amended by revising paragraph (e) and adding paragraph (f) to read 

as follows: 

§ 2.26. Policies concerning review of applications under section 203. 

* * * * * 

(e) Effect on regulation. (1) Where the affected state commissions have authority 

to act on the transaction, the Commission will not set for hearing whether the transaction 

would impair effective regulation by the state commissions. The application should state 

whether the state commissions have this authority. 

(2) Where the affected state commissions do not have authority to act on the 

transaction, the Commission may set for hearing the issue of whether the transaction 

would impair effective state regulation. 

(f) Under section 203(a)(4) of the Federal Power Act (16 U.S.C. 824b), in 

reviewing a proposed transaction subject to section 203, the Commission will also 

consider whether the proposed transaction will result in cross-subsidization of a nonutility associate company or pledge or encumbrance of utility assets for the benefit of an 
Docket No. RM05-34-001 - 102 - 

associate company, unless that cross-subsidization, pledge, or encumbrance will be 

consistent with the public interest. 

PART 33 – APPLICATIONS UNDER FEDERAL POWER ACT 

SECTION 203. 

3. The authority citation for Part 33 is revised to read as follows: 

Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 7101-7352; Pub. 

L. No. 109-58, 119 Stat. 594. 

4. The heading of Part 33 is revised to read as set forth above. 

5. Section 33.1 is revised to read as follows: 

§ 33.1. Applicability, definitions, and blanket authorizations. 

(a) Applicability. 

(1) The requirements of this part will apply to any public utility seeking 

authorization under section 203 of the Federal Power Act to: 

(i) Sell, lease, or otherwise dispose of the whole of its facilities subject to the 

jurisdiction of the Commission, or any part thereof of a value in excess of $10 million; 

(ii) Merge or consolidate, directly or indirectly, such facilities or any part thereof 

with those of any other person, by any means whatsoever; 

(iii) Purchase, acquire, or take any security with a value in excess of $10 million of 

any other public utility; or 
Docket No. RM05-34-001 - 103 - 

(iv) Purchase, lease, or otherwise acquire an existing generation facility: 

(A) That has a value in excess of $10 million; and 

(B) That is used in whole or in part for wholesale sales in interstate commerce by a 

public utility. 

(2) The requirements of this part shall also apply to any holding company in a 

holding company system that includes a transmitting utility or an electric utility if such 

holding company seeks to purchase, acquire, or take any security with a value in excess 

of $10 million of, or, by any means whatsoever, directly or indirectly, merge or 

consolidate with, a transmitting utility, an electric utility company, or a holding company 

in a holding company system that includes a transmitting utility, or an electric utility 

company, with a value in excess of $10 million. 

(b) Definitions. For the purposes of this part, as used in section 203 of the Federal 

Power Act (16 U.S.C. 824b) 

(1) Existing generation facility means a generation facility that is operational at or 

before the time the section 203 transaction is consummated. “The time the transaction is 

consummated” means the point in time when the transaction actually closes and control 

of the facility changes hands. “Operational” means a generation facility for which 

construction is complete (i.e., it is capable of producing power). The Commission will 

rebuttably presume that section 203(a) applies to the transfer of any existing generation 

facility unless the utility can demonstrate with substantial evidence that the generator is 

used exclusively for retail sales. 
Docket No. RM05-34-001 - 104 - 

(2) Non-utility associate company means any associate company in a holding 

company system other than a public utility or electric utility company that has wholesale 

or retail customers served under cost-based regulation. 

(3) Value when applied to: 

(i) Transmission facilities, generation facilities, transmitting utilities, electric 

utility companies, and holding companies, means the market value of the facilities or 

companies for transactions between non-affiliated companies; the Commission will 

rebuttably presume that the market value is the transaction price. For transactions 

between affiliated companies, value means original cost undepreciated, as defined in the 

Commission’s Uniform System of Accounts prescribed for public utilities and licensees 

in part 101 of this chapter, or original book cost, as applicable; 

(ii) Wholesale contracts, means the market value for transactions between nonaffiliated companies; the Commission will rebuttably presume that the market value is the 

transaction price. For transactions between affiliated companies, value means total 

expected nominal contract revenues over the remaining life of the contract; and 

(iii) Securities, means market value for transactions between non-affiliated 

companies; the Commission will rebuttably presume that the market value is the agreedupon transaction price. For transactions between affiliated companies, value means 

market value if the securities are widely traded, in which case the Commission will 

rebuttably presume that market value is the market price at which the securities are being 
Docket No. RM05-34-001 - 105 - 

traded at the time the transaction occurs; if the securities are not widely traded, market 

value is determined by: 

(A) Determining the value of the company that is the issuer of the equity 

securities based on the total undepreciated book value of the company’s assets; 

(B) Determining the fraction of the securities at issue by dividing the number of 

equity securities involved in the transaction by the total number of outstanding equity 

securities for the company; and 

(C) Multiplying the value determined in paragraph (b)(3)(iii)(A) of this section by 

the value determined in paragraph (b)(3)(iii)(B) of this section (i.e., the value of the 

company multiplied by the fraction of the equity securities at issue). 

(4) The terms associate company, electric utility company, foreign utility 

company, holding company, and holding company system have the meaning given those 

terms in the Public Utility Holding Company Act of 2005. The term holding company 

does not include: a State, any political subdivision of a State, or any agency, authority or 

instrumentality of a State or political subdivision of a State; or an electric power 

cooperative. 

(5) For purposes of this Part, the term captive customers means any wholesale or 

retail electric energy customers served under cost-based regulation. 

(c) Blanket Authorizations. 
Docket No. RM05-34-001 - 106 - 

(1) Any holding company in a holding company system that includes a 

transmitting utility or an electric utility is granted a blanket authorization under section 

203(a)(2) of the Federal Power Act to purchase, acquire, or take any security of: 

(i) A transmitting utility or company that owns, operates, or controls only facilities 

used solely for transmission in intrastate commerce and/or sales of electric energy in 

intrastate commerce, provided that if any public utility within the holding company 

system has captive customers, or owns or provides transmission service over 

jurisdictional transmission facilities, the holding company must report the acquisition to 

the Commission, including any state actions or conditions related to the transaction, and 

shall provide an explanation of why the transaction does not result in cross-subsidization; 

(ii) A transmitting utility or company that owns, operates, or controls only 

facilities used solely for local distribution and/or sales of electric energy at retail 

regulated by a state commission, provided that if any public utility within the holding 

company system has captive customers, or owns or provides transmission service over 

jurisdictional transmission facilities, the holding company must report the acquisition to 

the Commission, including any state actions or conditions related to the transaction, and 

shall provide an explanation of why the transaction does not result in cross-subsidization; 

or 

(iii) An electric utility company that owns generating facilities that total 100 MW 

or less and are fundamentally used for its own individual load or for sales to affiliated 

end-users. 
Docket No. RM05-34-001 - 107 - 

(2) Any holding company in a holding company system that includes a 

transmitting utility or an electric utility is granted a blanket authorization under section 

203(a)(2) of the Federal Power Act to purchase, acquire, or take: 

(i) Any non-voting security (that does not convey sufficient veto rights over 

management actions so as to convey control) in a transmitting utility, an electric utility 

company, or a holding company in a holding company system that includes a transmitting 

utility or an electric utility company; or 

(ii) Any voting security in a transmitting utility, an electric utility company, or a 

holding company in a holding company system that includes a transmitting utility or an 

electric utility company if, after the acquisition, the holding company will own less than 

10 percent of the outstanding voting securities; or 

(iii) Any security of a subsidiary company within the holding company system. 

(3) The blanket authorizations granted under paragraph (c)(2) of this section are 

subject to the conditions that the holding company shall not: 

(i) Borrow from any electric utility company subsidiary in connection with such 

acquisition; or 

(ii) Pledge or encumber the assets of any electric utility company subsidiary in 

connection with such acquisition. 

(4) A holding company granted blanket authorizations in paragraph (c)(2) of this 

section shall provide the Commission copies of any Schedule 13D, Schedule 13G and 

Form 13F, at the same time and on the same basis, as filed with the Securities and 
Docket No. RM05-34-001 - 108 - 

Exchange Commission in connection with any securities purchased, acquired or taken 

pursuant to this section. 

(5) Any holding company in a holding company system that includes a 

transmitting utility or an electric utility is granted a blanket authorization under section 

203(a)(2) of the Federal Power Act to acquire a foreign utility company. However, if 

such holding company or any of its affiliates, its subsidiaries, or associate companies 

within the holding company system has captive customers in the United States, or owns 

or provides transmission service over jurisdictional transmission facilities in the United 

States, the authorization is conditioned on the holding company, consistent with 18 

C.F.R. 385.2005(b), verifying by a duly authorized corporate official of the holding 

company that the proposed transaction: 

(i) Will not have any adverse effect on competition, rates, or regulation; and 

 (ii) Will not result in, at the time of the transaction or in the future: 

(A) Any transfer of facilities between a traditional public utility associate company 

that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, and an associate company; 

(B) Any new issuance of securities by a traditional public utility associate company 

that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, for the benefit of an associate company; 

(C) Any new pledge or encumbrance of assets of a traditional public utility 

associate company that has captive customers or that owns or provides transmission 
Docket No. RM05-34-001 - 109 - 

service over jurisdictional transmission facilities, for the benefit of an associate company; 

or 

(D) Any new affiliate contracts between a non-utility associate company and a 

traditional public utility associate company that has captive customers or that owns or 

provides transmission service over jurisdictional transmission facilities, other than nonpower goods and services agreements subject to review under sections 205 and 206 of the 

Federal Power Act. 

(iii) A transaction by a holding company subject to the conditions in paragraphs 

(c)(5)(i) and (ii) of this section will be deemed approved only upon filing the information 

required in paragraphs (c)(5)(i) and (ii) of this section. 

(6) Any public utility or any holding company in a holding company system that 

includes a transmitting utility or an electric utility is granted a blanket authorization under 

sections 203(a)(1) or 203(a)(2) of the Federal Power Act, as relevant, for internal 

corporate reorganizations that do not result in the reorganization of a traditional public 

utility that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, and that do not present cross-subsidization issues. 

(7) Any public utility in a holding company system that includes a transmitting 

utility or an electric utility is granted a blanket authorization under section 203(a)(1) of 

the Federal Power Act to purchase, acquire, or take any security of a public utility in 

connection with an intra-system cash management program, subject to safeguards to 

prevent cross-subsidization or pledges or encumbrances of utility assets. 
Docket No. RM05-34-001 - 110 - 

(8) A person that is a holding company solely with respect to one or more exempt 

wholesale generators (EWGs), foreign utility companies (FUCOs), or qualifying facilities 

(QFs) is granted a blanket authorization under section 203(a)(2) of the Federal Power Act 

to acquire the securities of additional EWGs, FUCOs, or QFs. 

(9) A holding company, or a subsidiary of that company, that is regulated by the 

Board of Governors of the Federal Reserve Bank or by the Office of the Comptroller of 

the Currency, under the Bank Holding Company Act of 1956 as amended by the GrammLeach-Bliley Act of 1999, is granted a blanket authorization under section 203(a)(2) of 

the Federal Power Act to acquire and hold an unlimited amount of the securities of 

holding companies that include a transmitting utility or an electric utility company if such 

acquisitions and holdings are in the normal course of its business and the securities are 

held: 

(i) As a fiduciary; 

(ii) As principal for derivatives hedging purposes incidental to the business of 

banking and it commits not to vote such securities to the extent they exceed 10 percent of 

the outstanding shares; 

(iii) As collateral for a loan; or 

(iv) 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, with the 

following conditions and reporting requirement: the holding does not confer a right to 

control, positively or negatively, through debt covenants or any other means, the 
Docket No. RM05-34-001 - 111 - 

operation or management of the public utility or public utility holding company, except 

as to customary creditors’ rights or as provided under the United States Bankruptcy Code; 

and the parent holding company files with the Commission on a public basis and within 

45 days of the close of each calendar quarter, both its total holdings and its holdings as 

principal, each by class, unless the holdings within a class are less than one percent of 

outstanding shares, irrespective of the capacity in which they were held. 

(10) Any holding company, or a subsidiary of that company, is granted a blanket 

authorization under section 203(a)(2) of the Federal Power Act to acquire any security of 

a public utility or a holding company that includes a public utility: 

(i) For purposes of conducting underwriting activities, subject to the condition that 

holdings that the holding company or its subsidiary are unable to sell or otherwise 

dispose of within 45 days are to be treated as holdings as principal and thus subject to a 

limitation of 10 percent of the stock of any class unless the holding company or its 

subsidiary has within that period filed an application under section 203 of the Federal 

Power Act to retain the securities and has undertaken not to vote the securities during the 

pendency of such application; and the parent holding company files with the Commission 

on a public basis and within 45 days of the close of each calendar quarter, both its total 

holdings and its holdings as principal, each by class, unless the holdings within a class are 

less than one percent of outstanding shares, irrespective of the capacity in which they 

were held; 
Docket No. RM05-34-001 - 112 - 

(ii) For purposes of engaging in hedging transactions, subject to the condition that 

if such holdings are 10 percent or more of the voting securities of a given class, the 

holding company or its subsidiary shall not vote such holdings to the extent that they are 

10 percent or more. 

(11) Any public utility is granted a blanket authorization under section 203(a)(1) 

of the Federal Power Act to transfer a wholesale market-based rate contract to any other 

public utility affiliate that has the same ultimate upstream ownership, provided that 

neither affiliate is affiliated with a traditional public utility with captive customers. 

6. Section 33.2 is amended to add paragraph (j) to read as follows: 

§ 33.2. Contents of application – general information requirements. 

* * * * * 

(j) An explanation, with appropriate evidentiary support for such explanation (to 

be identified as Exhibit M to this application): 

(1) Of how applicants are providing assurance that the proposed transaction will 

not result in cross-subsidization of a non-utility associate company or pledge or 

encumbrance of utility assets for the benefit of an associate company, including: 

(i) Disclosure of existing pledges and/or encumbrances of utility assets; and 

(ii) A detailed showing that the transaction will not result in: 

(A) Any transfer of facilities between a traditional public utility associate company 

that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, and an associate company; 
Docket No. RM05-34-001 - 113 - 

(B) Any new issuance of securities by a traditional public utility associate 

company that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, for the benefit of an associate company; 

(C) Any new pledge or encumbrance of assets of a traditional public utility 

associate company that has captive customers or that owns or provides transmission 

service over jurisdictional transmission facilities, for the benefit of an associate company; 

or 

(D) Any new affiliate contract between a non-utility associate company and a 

traditional public utility associate company that has captive customers or that owns or 

provides transmission service over jurisdictional transmission facilities, other than nonpower goods and services agreements subject to review under sections 205 and 206 of the 

Federal Power Act; or 

(2) If no such assurance can be provided, an explanation of how such crosssubsidization, pledge, or encumbrance will be consistent with the public interest. 

7. Section 33.11 is added to read as follows: 

§ 33.11. Commission procedures for the consideration of applications under 

section 203 of the FPA. 

(a) The Commission will act on a completed application for approval of a 

transaction (i.e., one that is consistent with the requirements of this part) not later than 

180 days after the completed application is filed. If the Commission does not act within 

180 days, such application shall be deemed granted unless the Commission finds, based 
Docket No. RM05-34-001 - 114 - 

 

on good cause, that further consideration is required to determine whether the proposed 

transaction meets the standards of section 203(a)(4) of the FPA and issues, by the 180th

day, an order tolling the time for acting on the application for not more than 180 days, at 

the end of which additional period the Commission shall grant or deny the application. 

(b) The Commission will provide for the expeditious consideration of completed 

applications for the approval of transactions that are not contested, do not involve 

mergers, and are consistent with Commission precedent. 

(c) Transactions, provided that they are not contested, do not involve mergers and 

are consistent with Commission precedent, that will generally be subject to expedited 

review include: 

(1) A disposition of only transmission facilities, including, but not limited to, those 

that both before and after the transaction remain under the functional control of a 

Commission-approved regional transmission organization or independent system 

operator; and 

(2) Transactions that do not require an Appendix A analysis;139 and 

(3) Internal corporate reorganizations that result in the reorganization of a 

traditional public utility that has captive customers or owns or provides transmission 

139 Inquiry Concerning the Commission’s Merger Policy Under the Federal Power 

Act: Policy Statement, Order No. 592, 61 FR 68,595 (Dec. 30, 1996), FERC Stats. & 

Regs. ¶ 31,044 (1996), reconsideration denied, Order No. 592-A, 62 FR 33,340 

(June 19, 1977), 79 FERC ¶ 61,321 (1997) (Merger Policy Statement). 
Docket No. RM05-34-001 - 115 - 

service over jurisdictional transmission facilities, but do not present cross-subsidization 

issues. 
Docket No. RM05-34-001 - 116 - 

APPENDIX A 

NOTE: The following Appendix will not be published in the Code of Federal 

Regulations. 

Petitioner Acronyms 

Acronym Name

APPA/NRECA American Public Power Association and the National 

Rural Electric Cooperative Association 

BofA/JPMorgan Bank of America, N.A. and JPMorgan Chase Bank, 

N.A. 

Coral Power Coral Power, L.L.C. 

Duke/Cinergy Duke Energy Corporation and Cinergy Corporation 

EEI Edison Electric Institute 

Entergy Entergy Services, Inc. 

GS Group The Goldman Sachs Group, Inc. 

Industrial Consumers Electricity Consumers Resource Council, the 

American Iron and Steel Institute, and the American 

Chemistry Council 

MidAmerican MidAmerican Energy Holdings Company 

Morgan Stanley Morgan Stanley Capital Group, Inc. 

NARUC National Association of Regulatory Utility 

Commissioners 

National Grid National Grid USA 

Occidental Occidental Chemical Corporation 

TAPSG Transmission Access Policy Study Group 

 
APPENDIX B 

NOTE: The following Appendix (red-lined version of the regulatory text showing 

changes from Order 669 to 669-A) is for information purposes only. It will not be 

published in the Federal Register. 

In consideration of the foregoing, under the authority of EPAct 2005, the Commission is 

amendings Parts 2 and 33 of Chapter I, Title 18, Code of Federal Regulations, as set 

forthfollows: 

PART 2 – GENERAL POLICY AND INTERPRETATIONS. 

1. The authority citation for Part 2 is revised to read as follows: 

Authority: 5 U.S.C. 601; 15 U.S.C. 717-717w, 3301-3432; 16 U.S.C. 792-825y, 

2601-2645; 42 U.S.C. 4321-4361, 7101-7352; Pub. L. No. 109-58, 119 Stat. 594.2. 

2. Section 2.26 is amended by revising paragraphs (e) and (f) to read as follows: 

§ 2.26. Policies concerning review of applications under section 203. 

* * * * * 

(e) Effect on regulation. (1) Where the affected state commissions have authority 

to act on the transaction, the Commission will not set for hearing whether the transaction 

would impair effective regulation by the state commissions. The application should state 

whether the state commissions have this authority. 

(2) Where the affected state commissions do not have authority to act on the 

transaction, the Commission may set for hearing the issue of whether the transaction 

would impair effective state regulation. 
Docket No. RM05-34-001 - 2 - 

(f) Under section 203(a)(4) of the Federal Power Act (16 U.S.C. 824b), in 

reviewing a proposed transaction subject to section 203, the Commission will also 

consider whether the proposed transaction will result in cross-subsidization of a nonutility associate company or pledge or encumbrance of utility assets for the benefit of an 

associate company, unless that cross-subsidization, pledge, or encumbrance will be 

consistent with the public interest. 

PART 33 – APPLICATIONS UNDER FEDERAL POWER ACT 

SECTION 203. 

3. The authority citation for Part 33 continues to read as follows: 

Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-

7352; Pub. L. No. 109-58, 119 Stat. 594. 

4. The heading of Part 33 is revised to read as set forth above. 

5. Section 33.1 is revised to read as follows: 

§ 33.1. Applicability, definitions, and blanket authorizations. 

(a) Applicability. 

(1) The requirements of this part will apply to any public utility seeking 

authorization under section 203 of the Federal Power Act to: 

(i) Sell, lease, or otherwise dispose of the whole of its facilities subject to the 

jurisdiction of the Commission, or any part thereof of a value in excess of $10 million; 

(ii) Merge or consolidate, directly or indirectly, such facilities or any part thereof 
Docket No. RM05-34-001 - 3 - 

with those of any other person, by any means whatsoever; 

(iii) Purchase, acquire, or take any security with a value in excess of $10 million 

of any other public utility; or 

(iv) Purchase, lease, or otherwise acquire an existing generation facility: 

(A) That has a value in excess of $10 million; and 

(B) That is used in whole or in part for wholesale sales in interstate commerce by 

a public utility. 

(2) The requirements of this part shall also apply to any holding company in a 

holding company system that includes a transmitting utility or an electric utility if such 

holding company seeks to purchase, acquire, or take any security with a value in excess 

of $10 million of, or, by any means whatsoever, directly or indirectly, merge or 

consolidate with, a transmitting utility, an electric utility company, or a holding company 

in a holding company system that includes a transmitting utility, or an electric utility 

company, with a value in excess of $10 million. 

(b) Definitions. For the purposes of this part, as used in section 203 of the Federal 

Power Act (16 U.S.C. 824b) 

(1) Existing generation facility means a generation facility that is operational at or 

before the time the section 203 transaction is consummated. “The time the transaction is 

consummated” means the point in time when the transaction actually closes and control 

of the facility changes hands. “Operational” means a generation facility for which 

construction is complete (i.e., it is capable of producing power). The Commission will 
Docket No. RM05-34-001 - 4 - 

rebuttably presume that section 203(a) applies to the transfer of any existing generation 

facility unless the utility can demonstrate with substantial evidence that the generator is 

used exclusively for retail sales. 

(2) Non-utility associate company means any associate company in a holding 

company system other than a public utility or electric utility company that has wholesale 

or retail customers served under cost-based regulation. 

(3) Value when applied to: 

(i) Transmission facilities, generation facilities, transmitting utilities, electric 

utility companies, and holding companies, means the market value of the facilities or 

companies for transactions between non-affiliated companies; the Commission will 

rebuttably presume that the market value is the transaction price. For transactions 

between affiliated companies, value means original cost undepreciated, as defined in the 

Commission’s Uniform System of Accounts prescribed for public utilities and licensees 

in part 101 of this chapter, or original book cost, as applicable; 

(ii) Wholesale contracts, means the market value for transactions between nonaffiliated companies; the Commission will rebuttably presume that the market value is the 

transaction price. For transactions between affiliated companies, value means total 

expected nominal contract revenues over the remaining life of the contract; and 

(iii) Securities, means market value for transactions between non-affiliated 

companies; the Commission will rebuttably presume that the market value is the agreedupon transaction price. For transactions between affiliated companies, value means 
Docket No. RM05-34-001 - 5 - 

market value if the securities are widely traded, in which case the Commission will 

rebuttably presume that market value is the market price at which the securities are being 

traded at the time the transaction occurs; if the securities are not widely traded, market 

value is determined by: 

(A) Determining the value of the company that is the issuer of the equity securities 

based on the total undepreciated book value of the company’s assets; 

(B) Determining the fraction of the securities at issue by dividing the number of 

equity securities involved in the transaction by the total number of outstanding equity 

securities for the company; and 

(C) Multiplying the value determined in paragraph (b)(3)(iii)(A) of this section by 

the value determined in paragraph (b)(3)(iii)(B) of this section (i.e., the value of the 

company multiplied by the fraction of the equity securities at issue). 

(4) The terms associate company, electric utility company, foreign utility 

company, holding company, and holding company system have the meaning given those 

terms in the Public Utility Holding Company Act of 2005. The term holding company 

does not include: a State, any political subdivision of a State, or any agency, authority or 

instrumentality of a State or political subdivision of a State; or an electric power 

cooperative. 

(5) For purposes of this Part, the term captive customers means any wholesale or 

retail electric energy customers served under cost-based regulation.

(c) Blanket Authorizations. 
Docket No. RM05-34-001 - 6 - 

(1) Any holding company in a holding company system that includes a 

transmitting utility or an electric utility is granted a blanket authorization under 

section 203(a)(2) of the Federal Power Act to purchase, acquire, or take any security of: 

(i) A transmitting utility or company that owns, operates, or controls only facilities 

used solely for transmission in intrastate commerce and/or sales of electric energy in 

intrastate commerce, provided that if any public utility within the holding company 

system has captive customers, or owns or provides transmission service over 

jurisdictional transmission facilities, the holding company must report the acquisition to 

the Commission, including any state actions or conditions related to the transaction, and

shall provide an explanation of why the transaction does not result in cross-subsidization; 

(ii) A transmitting utility or company that owns, operates, or controls only 

facilities used solely for local distribution and/or sales of electric energy at retail 

regulated by a state commission, provided that if any public utility within the holding 

company system has captive customers, or owns or provides transmission service over 

jurisdictional transmission facilities, the holding company must report the acquisition to 

the Commission, including any state actions or conditions related to the transaction, and

shall provide an explanation of why the transaction does not result in cross-subsidization; 

or 

(iii) An electric utility company that owns generating facilities that total 100 MW 

or less and are fundamentally used for its own individual load or for sales to affiliated 

end-users. a transmitting utility or company if the transaction involves an internal 
Docket No. RM05-34-001 - 7 - 

corporate reorganization that does not present cross-subsidization issues and does not 

involve a traditional public utility with captive customers. 

(2) Any holding company in a holding company system that includes a 

transmitting utility or an electric utility is granted a blanket authorization under 

section 203(a)(2) of the Federal Power Act to purchase, acquire, or take: 

(i) Any non-voting security (that does not convey sufficient veto rights over 

management actions so as to convey control) in a transmitting utility, an electric utility 

company, or a holding company in a holding company system that includes a transmitting 

utility or an electric utility company; or 

(ii) Any voting security in a transmitting utility, an electric utility company, or a 

holding company in a holding company system that includes a transmitting utility or an 

electric utility company if, after the acquisition, the holding company will own less than 

10 percent of the outstanding voting securities; or 

(iii) Any security of a subsidiary company within the holding company system. 

(3) The blanket authorizations granted under paragraphsection (c)(2) of this 

section are subject to the conditions that the holding company shall not: 

(i) Borrow from any electric utility company subsidiary in connection with such 

acquisition; or 

(ii) Pledge or encumber the assets of any electric utility company subsidiary in 

connection with such acquisition; 

(4) A holding company granted blanket authorizations in paragraphsection (c)(2) 
Docket No. RM05-34-001 - 8 - 

of this section shall provide the Commission copies of any Schedule 13D, Schedule 13G 

and Form 13F, at the same time and with the same information, on the same basis, as 

filed with that the holding company provides to the Securities and Exchange Commission 

in connection with any securities purchased, acquired or taken pursuant to this section. 

(5) Any holding company in a holding company system that includes a 

transmitting utility or an electric utility is granted a blanket authorization under section 

203(a)(2) of the Federal Power Act to acquire a foreign utility company. However, if 

such holding company or any of its affiliates, its subsidiaries, or associate companies 

within the holding company system hasve captive customers in the United States, or 

owns or provides transmission service over jurisdictional transmission facilities in the 

United States, the authorization is conditioned on the holding company, consistent with 

18 C.F.R. 385.2005(b), verifying by a duly authorized corporate official of the holding 

company that the proposed transaction: 

(i) Will not have any adverse effect on competition, rates, or regulation; and 

 (ii) Will not result in, at the time of the transaction or in the future: 

(A) Any transfer of facilities between a traditional public utility associate 

company that haswith wholesale or retail captive customers served under cost-based 

regulation or that owns or provides transmission service over jurisdictional transmission 

facilities, and an associate company; 

(B) any new issuance of securities by a traditional public utility associate 

companies that has with wholesale or retailcaptive customers or that owns or provides 
Docket No. RM05-34-001 - 9 - 

transmission service over jurisdictional transmission facilities, served under cost-based 

regulation for the benefit of an associate company; 

(C) Any new pledge or encumbrance of assets of a traditional public utility 

associate company that has with wholesale or retailcaptive customers served under costbased regulation or that owns or provides transmission service over jurisdictional 

transmission facilities, for the benefit of an associate company; or 

(D) Any new affiliate contracts between a non-utility associate companyies and a 

traditional public utility associate companyies that has with wholesale or retailcaptive

customers, served under cost-based regulation or that owns or provides transmission 

service over jurisdictional transmission facilities, other than non-power goods and 

services agreements subject to review under sections 205 and 206 of the Federal Power 

Act. 

(iii) A transaction by a holding company subject to the conditions in sections

paragraphs (c)(5)(i) and (ii) of this section will be deemed approved only upon filing the 

information required in sectionsparagraphs (c)(5)(i) and (ii) of this section. 

(6) Any public utility or any holding company in a holding company system that 

includes a transmitting utility or an electric utility is granted a blanket authorization under 

sections 203(a)(1) or 203(a)(2) of the Federal Power Act, as relevant, for internal 

corporate reorganizations that do not result in the reorganization of a traditional public 

utility that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, and that do not present cross-subsidization issues.
Docket No. RM05-34-001 - 10 - 

(7) Any public utility in a holding company system that includes a transmitting 

utility or an electric utility is granted a blanket authorization under section 203(a)(1) of 

the Federal Power Act to purchase, acquire, or take any security of a public utility in 

connection with an intra-system cash management program, subject to safeguards to 

prevent cross-subsidization or pledges or encumbrances of utility assets. 

(8) A person that is a holding company solely with respect to one or more exempt 

wholesale generators (EWGs), foreign utility companies (FUCOs), or qualifying facilities 

(QFs) is granted a blanket authorization under section 203(a)(2) of the Federal Power Act 

to acquire the securities of additional EWGs, FUCOs, or QFs.

(9) A holding company, or a subsidiary of that company, that is regulated by the 

Board of Governors of the Federal Reserve Bank or by the Office of the Comptroller of 

the Currency, under the Bank Holding Company Act of 1956 as amended by the GrammLeach-Bliley Act of 1999, is granted a blanket authorization under section 203(a)(2) of 

the Federal Power Act to acquire and hold an unlimited amount of the securities of 

holding companies that include a transmitting utility or an electric utility company if such 

acquisitions and holdings are in the normal course of its business and the securities are 

held:

(i) As a fiduciary;

(ii) As principal for derivatives hedging purposes incidental to the business of 

banking and it commits not to vote such securities to the extent they exceed 10 percent of 

the outstanding shares;
Docket No. RM05-34-001 - 11 - 

(iii) As collateral for a loan; or

(iv) 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, with the 

following conditions and reporting requirement: the holding does not confer a right to 

control, positively or negatively, through debt covenants or any other means, the 

operation or management of the public utility or public utility holding company, except 

as to customary creditors’ rights or as provided under the United States Bankruptcy 

Code; and the parent holding company files with the Commission on a public basis and 

within 45 days of the close of each calendar quarter, both its total holdings and its 

holdings as principal, each by class, unless the holdings within a class are less than one 

percent of outstanding shares, irrespective of the capacity in which they were held.

(10) Any holding company, or a subsidiary of that company, is granted a blanket 

authorization under section 203(a)(2) of the Federal Power Act to acquire any security of 

a public utility or a holding company that includes a public utility: 

(i) For purposes of conducting underwriting activities, subject to the condition that 

holdings that the holding company or its subsidiary are unable to sell or otherwise 

dispose of within 45 days are to be treated as holdings as principal and thus subject to a 

limitation of 10 percent of the stock of any class unless the holding company or its 

subsidiary has within that period filed an application under section 203 of the Federal 

Power Act to retain the securities and has undertaken not to vote the securities during the 

pendency of such application; and the parent holding company files with the Commission 
Docket No. RM05-34-001 - 12 - 

on a public basis and within 45 days of the close of each calendar quarter, both its total 

holdings and its holdings as principal, each by class, unless the holdings within a class 

are less than one percent of outstanding shares, irrespective of the capacity in which they 

were held;

(ii) For purposes of engaging in hedging transactions, subject to the condition that 

if such holdings are 10 percent or more of the voting securities of a given class, the 

holding company or its subsidiary shall not vote such holdings to the extent that they are 

10 percent or more.

(11) Any public utility is granted a blanket authorization under section 203(a)(1) 

of the Federal Power Act to transfer a wholesale market-based rate contract to any other 

public utility affiliate that has the same ultimate upstream ownership, provided that 

neither affiliate is affiliated with a traditional public utility with captive customers.

6. Section 33.2 is amended to add paragraph (j) to read as follows: 

§ 33.2. Contents of application – general information requirements. 

* * * * * 

(j) An explanation, with appropriate evidentiary support for such explanation (to 

be identified as Exhibit M to this application): 

(1) Of how applicants are providing assurance that the proposed transaction will 

not result in cross-subsidization of a non-utility associate company or pledge or 

encumbrance of utility assets for the benefit of an associate company; including: 
Docket No. RM05-34-001 - 13 - 

(i) Disclosure of existing pledges and/or encumbrances of utility assets; and 

(ii) A detailed showing that the transaction will not result in: 

(A) Any transfer of facilities between a traditional public utility associate 

company that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, and an associate company;

(B) Any new issuance of securities by a traditional public utility associate 

company that has captive customers or that owns or provides transmission service over 

jurisdictional transmission facilities, for the benefit of an associate company; 

(C) Any new pledge or encumbrance of assets of a traditional public utility 

associate company that has captive customers or that owns or provides transmission 

service over jurisdictional transmission facilities, for the benefit of an associate company; 

or

(D) Any new affiliate contract between a non-utility associate company and a

traditional public utility associate company that has captive customers or that owns or 

provides transmission service over jurisdictional transmission facilities, other than nonpower goods and services agreements subject to review under sections 205 and 206 of the 

Federal Power Act; or 

(2) If no such assurance can be provided, an explanation of how such crosssubsidization, pledge, or encumbrance will be consistent with the public interest. 

7. Section 33.11 is added to read as follows: 
Docket No. RM05-34-001 - 14 - 

§ 33.11. Commission procedures for the consideration of applications under 

section 203 of the FPA. 

(a) The Commission will act on a completed application for approval of a 

transaction (i.e., one that is consistent with the requirements of this part) not later than 

180 days after the completed application is filed. If the Commission does not act within 

180 days, such application shall be deemed granted unless the Commission finds, based 

on good cause, that further consideration is required to determine whether the proposed 

transaction meets the standards of section 203(a)(4) of the FPA and issues, by the 180th

day, an order tolling the time for acting on the application for not more than 180 days, at 

the end of which additional period the Commission shall grant or deny the application. 

(b) The Commission will provide for the expeditious consideration of completed 

applications for the approval of transactions that are not contested, do not involve 

mergers, and are consistent with Commission precedent. The transactions that would 

generally warrant expedited review include: 

(c) Transactions, provided that they are not contested, do not involve mergers and 

are consistent with Commission precedent, that will generally be subject to expedited 

review include:

(1) A disposition of only transmission facilities, particularly including, but not 

limited to, those that both before and after the transaction remain under the functional 

control of a Commission-approved regional transmission organization or independent 

system operator; and 
Docket No. RM05-34-001 - 15 - 

(2) Transactions that do not require an Appendix A analysis.;

1

 and

(3) Internal corporate reorganizations that result in the reorganization of a 

traditional public utility that has captive customers or owns or provides transmission 

service over jurisdictional transmission facilities, but do not present cross-subsidization 

issues.

 1

 Inquiry Concerning the Commission’s Merger Policy Under the Federal Power 

Act: Policy Statement, Order No. 592, 61 FR 68,595 (Dec. 30, 1996), FERC Stats. & 

Regs. ¶ 31,044 (1996), reconsideration denied, Order No. 592-A, 62 FR 33,340 

(June 19, 1977), 79 FERC ¶ 61,321 (1997) (Merger Policy Statement).