(As filed with the Securities and Exchange Commission on January 14, 2002)
File No. 70-9681
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POS-AMC
(Post-Effective Amendment No. 4)
on
FORM U-1
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NiSource Inc.
Northern Indiana Public Service Company
Kokomo Gas and Fuel Company
Northern Indiana Fuel and Light Company, Inc.
EnergyUSA, Inc.
Primary Energy, Inc.
NiSource Capital Markets, Inc.
NiSource Finance Corp.
NiSource Pipeline Group, Inc.
NiSource Development Company, Inc.
NI Energy Services, Inc.
NiSource Corporate Services Company
NiSource Energy Technologies, Inc.
Columbia Energy Group
Columbia LNG Corporation
Columbia Atlantic Trading Corporation
Columbia Energy Group Capital Corporation
Columbia Pipeline Corporation
Columbia Finance Corporation
Columbia Energy Services Corporation
Columbia Remainder Corporation
801 East 86th Avenue
Merrillville, Indiana 46410-6272
Bay State Gas Company
Northern Utilities, Inc.
300 Friberg Parkway
Westborough, Massachusetts 01581-5039
IWC Resources Corporation
1220 Waterway Blvd.
Indianapolis, Indiana 46202
Columbia Gas of Kentucky, Inc.
Columbia Gas of Ohio, Inc.
Columbia Gas of Maryland, Inc.
Columbia Gas of Pennsylvania, Inc.
Columbia Gas of Virginia, Inc.
Columbia Service Partners, Inc.
200 Civic Center Drive
Columbus, Ohio 43215
Columbia Energy Resources, Inc.
c/o 900 Pennsylvania Avenue
Charleston, West Virginia 25302
Columbia Gas Transmission Corporation
Columbia Transmission Communications Corporation
12801 Fair Lakes Parkway
Fairfax, Virginia 22030-0146
Columbia Gulf Transmission Company
2603 Augusta, Suite 125
Houston, Texas 77057
Columbia Network Services Corporation
1600 Dublin Road
Columbus, Ohio 43215-1082
Columbia Insurance Corporation, Ltd.
20 Parliament Street
P.O. Box HM 649
Hamilton HM CX, Bermuda
(Names of companies filing this statement and addresses of principal
executive offices)
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NISOURCE INC.
(Name of top registered holding company parent of each applicant or declarant)
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Jeffrey W. Grossman, Paul J. Newman,
Vice President and Controller Vice President - Corporate Tax
NiSource Inc. NiSource Corporate Services Company
801 East 86th Avenue 801 East 86th Avenue
Merrillville, Indiana 46410-6272 Merrillville, Indiana 46410-6272
(Names and addresses of agents for service)
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The Commission is requested to mail copies of all orders, notices and
other communications to:
Peter V. Fazio, Jr., Esq. William T. Baker, Jr., Esq.
Schiff Hardin & Waite Thelen Reid & Priest LLP
6600 Sears Tower 40 West 57th Street
Chicago, Illinois 60606-6473 New York, New York 10019
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
1.1 Background. By order dated November 1, 2000 in this proceeding
(the "Financing Order"), the Commission authorized NiSource Inc. ("NiSource"), a
registered holding company, and its subsidiaries to engage in a program of
external financing and intrasystem financing, and other related transactions,
for the period through December 31, 2003 ("Authorization Period").1 NiSource
became a registered holding company on November 1, 2000, following its
acquisition of Columbia Energy Group ("Columbia"), which is also a registered
holding company. NiSource owns, directly or indirectly, all of the issued and
outstanding common stock of Northern Indiana Public Service Company, Kokomo Gas
and Fuel Company, Northern Indiana Fuel and Light Company, Inc., Bay State Gas
Company , and Northern Utilities, Inc., which were the pre-merger public-utility
subsidiaries of NiSource; and indirectly through Columbia, all of the issued and
outstanding common stock of Columbia Gas of Kentucky, Inc., Columbia Gas of
Maryland, Inc., Columbia Gas of Ohio, Inc., Columbia Gas of Pennsylvania, Inc.
and Columbia Gas of Virginia, Inc. (collectively, the "Utility Subsidiaries").
Together, the Utility Subsidiaries distribute gas at retail in portions of
Indiana, Ohio, Virginia, Maryland, Kentucky, Pennsylvania, Massachusetts, New
Hampshire and Maine. Northern Indiana Public Service Company also generates,
transmits and sells electricity in a portion of Indiana. NiSource also holds
directly or indirectly numerous non-utility subsidiaries and investments.
A more complete description of NiSource and Columbia and their respective
subsidiaries is contained in the Commission's order, dated October 30, 2000,
approving NiSource's acquisition of Columbia.2
1.2 Acquisition Debt Issued in Merger. NiSource organized NiSource
Finance Corp. ("NiSource Finance") to facilitate financing the cash portion of
the consideration paid to Columbia's shareholders in the merger. At the closing
of the merger, NiSource Finance issued $4,144,501,483 of commercial paper,
back-stopped by a 364-day revolving credit facility, to finance the cash portion
of the merger consideration and other related costs of the transaction.
Subsequently, between November 14, 2000 and April 6, 2001, NiSource Finance
issued and sold a total of $2.95 billion of senior unsecured notes with varying
maturities between April 15, 2003 and November 15, 2010. On November 27, 2000,
NiSource issued 11.5 million shares of common stock and used the net proceeds
thereof ($280.9 million) to reduce the outstanding amount of commercial paper
issued by NiSource Finance. NiSource Finance's commercial paper and senior
unsecured notes are guaranteed by NiSource.
In addition, in connection with the merger, NiSource also issued to
Columbia's shareholders equity-linked securities called "SAILS" that consist of
a zero-coupon debenture coupled with a forward equity contract requiring the
holder to purchase common stock of
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(1) NiSource Inc., et al., Holding Co. Act Release No. 27265. By supplemental
order, the Commission approved an increase in short-term borrowings by
NiSource. Holding Co. Act Release No. 27361 (Mar. 21, 2001).
(2) NiSource Inc., et al., Holding Co. Act Release No. 27263.
NiSource on the fourth anniversary of the closing of the merger. The aggregate
face amount of the debentures embedded in the SAILS was approximately $114.4
million at the time of issuance. Under the Internal Revenue Code, the difference
between the face amount of the debenture at maturity ($2.60 per unit) and the
fair market value of the debenture on the date of issuance is treated as
original issue discount ("OID"). The OID is reported as taxable income by the
holders of the SAILS and as a deductible interest expense by NiSource on a
yield-to-maturity basis during the four-year period that the SAILS are
outstanding.
The term "Acquisition Debt," as used herein, includes the senior unsecured
notes issued by NiSource, as described above, the debentures embedded in the
SAILS, and that portion (approximately $913 million) of the commercial paper
issued at closing that was not subsequently retired or refinanced with the
proceeds of common stock and unsecured notes. The term also includes
indebtedness incurred by NiSource or NiSource Finance for the purpose of
refinancing any of the foregoing indebtedness.
NiSource estimates that the annual interest expense on the Acquisition Debt
will be approximately $280 million. Because NiSource and its consolidated
subsidiaries will file a consolidated income tax return, the interest expense on
the Acquisition Debt will offset the group's consolidated taxable income and
therefore reduce the overall tax liability of the group. As shown on Exhibit K-1
(which uses tax year 2000 for purposes of illustration only), by applying a
hypothetical 35% tax rate to the consolidated taxable income of the group, the
interest expense on the Acquisition Debt would reduce the group's tax liability
by about $98 million per year. However, as discussed below, unless the relief
requested in this Post-Effective Amendment is granted, NiSource would not be
able to retain, or share in, the tax benefit (i.e., the reduction in the group's
income tax liability) that is associated with the interest it pays on the
Acquisition Debt. Rather, under Rule 45(c), the benefit of the interest expense
would have to be allocated to other members of the group (primarily the Utility
Subsidiaries and the large pipeline subsidiaries).
1.3 Proposed Tax Allocation Agreement. The applicants request that
the Commission authorize NiSource and its subsidiaries to enter into the Tax
Allocation Agreement that is filed herewith as Exhibit B-4. Under the proposed
Tax Allocation Agreement, the consolidated tax would be allocated among the
members of the group in proportion to the separate return tax of each member,
provided that the tax apportioned to any subsidiary company of NiSource will not
exceed the "separate return tax" of such subsidiary.3 This is the method of
allocation permitted under Rule 45(c)(2)(ii).
The agreement further provides that NiSource will retain the benefit (in
the form of the reduction in consolidated tax) that is attributable to the
interest expense on the Acquisition Debt, rather than reallocate that tax
savings to its subsidiary companies. In this respect, the proposed Tax
Allocation Agreement does not comply with all of the requirements of Rule 45(c).
The
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(3) Under Rule 45(c), the "separate return tax" is defined to mean "the tax on
the corporate taxable income of an associate company computed as though
such company were not a member of a consolidated group."
2
proposed Tax Allocation Agreement will therefore have the effect of assigning
the tax benefit associated with the interest expense on the Acquisition Debt to
the entity that is legally obligated for its payment - NiSource, as guarantor of
the Acquisition Debt. At the same time, in accordance with Rule 45(c)(2), the
portion of the consolidated tax allocated to any of NiSource's subsidiaries will
not exceed the "separate return tax" of such subsidiary (the "separate return
limitation"). Thus, the proposed Tax Allocation Agreement will not have the
effect of shifting a larger portion of the group's tax liability to any member
of the group than such company would otherwise pay on a separate return basis.
Exhibit K-1 illustrates the difference between the Rule 45(c) method and the
proposed method in the amounts of tax that would be allocated to the members of
the NiSource group.
A legal analysis of the Tax Allocation Agreement, in light of the policies
and purposes of Sections 12 and 13 of the Act and Rule 45 is contained in Item
3, below.
ITEM 2. FEES, COMMISSION AND EXPENSE.
The fees, commissions and expenses paid or incurred or to be
incurred in connection with this Post-Effective Amendment are estimated at not
more than $15,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
3.1 General Overview.Provisions in a tax allocation agreement
between a registered holding company and its subsidiaries are subject to
Section 12(b) of the Act and Rule 45 thereunder. Rule 45(a) of the Act
generally prohibits any registered holding company or subsidiary company from,
directly or indirectly, lending or in any manner extending its credit to or
indemnifying, or making any donation or capital contribution to, any company in
the same holding company system, except pursuant to a Commission order. Rule
45(c) provides, however, that approval under Rule 45(a) is not required for the
filing of a consolidated tax return pursuant to a tax allocation agreement
between eligible associate companies in a registered holding company system that
complies with the terms of the Rule 45(c). However, if a tax allocation
agreement does not comply in all respects with the provisions of Rule 45(c), it
may nonetheless be approved by the Commission under Section 12(b) and Rule
45(a).4
As previously indicated, Rule 45(c)(2) provides that the consolidated tax
may be apportioned among the members of the group in proportion to the
corporate taxable income of each member or the separate return tax of each
member, but, in either case, the amount of the tax apportioned to any subsidiary
company may not exceed the "separate return tax" of such subsidiary. Thus, the
central feature of Rule 45(c)(2) is that the amount of the consolidated tax of
the group that is apportioned to any subsidiary company cannot exceed the amount
of tax that such subsidiary would have paid computed as though it were not a
member of a consolidated group.
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(4) See The National Grid Group plc, Holding Co. Act Release No. 27154
(Mar. 15, 2000) ("National Grid").
3
Rule 45(c)(4) provides that an allocation agreement may exclude associate
companies not having positive corporate taxable income or positive separate
return tax for the year being allocated (i.e., loss companies) from a current
allocation of the benefit of their losses or tax credits, provided that the
agreement shall preserve to each subsidiary company so excluded the benefits
associated with such losses and credits for use in future years. Alternatively,
under Rule 45(c)(5), the so-called "current payment" method, a tax allocation
agreement may require that the members of the group with a positive allocation
pay the amount so allocated and that members of the group with a negative
allocation receive current payment of their corporate tax credits. Specifically,
Rule 45(c)(5) provides that:
The agreement may, instead of excluding members as provided in paragraph
(c)(4), include all members of the group in the tax allocation, recognizing
negative corporate taxable income or a negative corporate tax, according to
the allocation method chosen. An agreement under this paragraph shall
provide that those associate companies with a positive allocation will pay
the amount allocated and those subsidiary companies with a negative
allocation will receive current payment of their corporate tax credits. The
agreement shall provide a method for apportioning such payments, and for
carrying over uncompensated benefits, if the consolidated loss is too large
to be used in full. Such method may assign priorities to specified kinds of
benefits. (Emphasis added).
Thus, under Rule 45(c)(5), only "subsidiary companies," as opposed to
"associate companies" (which includes the holding company in a holding company
system, as well as all "subsidiary companies"), are entitled to be paid for any
negative allocation (i.e., losses or credits). The proposed Tax Allocation
Agreement adopts the "current payment" method, but provides for NiSource to
retain the tax savings attributable to the interest expense on the Acquisition
Debt.
In connection with the 1981 amendments to Rule 45, the Commission explained
that the distinction between "associate companies," on the one hand, and
"subsidiary companies," on the other, represented a policy decision to limit the
holding company from sharing in the consolidated return savings. The Commission
noted that "[e]xploitation of utility companies by holding companies through
asserted misallocation of consolidated tax return benefits was among the abuses
examined in the investigations underlying the enactment of the Act."5 It must be
noted, however, that the result in Rule 45(c)(5) is not dictated by the statute
and, as the Commission has recognized, there is discretion on the part of the
agency to approve tax allocation agreements that do not, by their terms, comply
with Rule 45(c) -- so long as the policies and provisions of the Act are
otherwise satisfied.6 In this matter, where NiSource is seeking only to retain
the tax benefit attributable to the interest expense on the Acquisition Debt,
for which no other company in the NiSource system has any liability, the
proposed arrangement will not give rise to the types of problems that the Act
was intended to address.
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(5) See Holding Co. Act Release No. 21767 (Oct. 29, 1980), citing Senate Doc.
92, Part 72A, 70th Congress, 1st Sess. at 477-482.
(6) See National Grid, supra n. 4.
4
Under Rule 45(c)(5), the tax benefit associated with the losses of a
holding company may in effect be reallocated to its subsidiary companies,
thereby reducing the allocated share of the consolidated tax liability that
those subsidiaries would otherwise have if their tax were determined on a
separate return basis. In the typical case, this reallocation of the holding
company's share of the tax savings would not produce a significant windfall for
its subsidiaries, because holding company expenses tend to be relatively small,
consisting mainly of allocated corporate overheads and salaries. The largest
item of holding company expense - interest on the debt that it incurs in order
to supply capital to its subsidiaries - is typically offset by the interest
income it receives from subsidiaries under the terms of mirror-image downstream
loans.7
In the instant case, however, the Acquisition Debt was not incurred to fund
investments in NiSource's subsidiaries, but instead to acquire the equity of
Columbia. The Acquisition Debt represents indebtedness that is guaranteed by
NiSource. Importantly, NiSource could not, without the approval of the
commissions having jurisdiction over rates of the Utility Subsidiaries, recover
in rates of the Utility Subsidiaries any costs, including the interest on the
Acquisition Debt, associated with the merger. Moreover, the Acquisition Debt is
and will remain unsecured. Thus, the lenders will not have any call on the
assets of NiSource's subsidiaries or any security interest in the common stock
of the subsidiaries that is held by NiSource.
Although NiSource's subsidiaries do not have any legal obligation for the
Acquisition Debt, NiSource's ability to pay interest on the Acquisition Debt, as
well as to pay common dividends, is largely dependent upon its receipt of
dividends from subsidiaries (primarily the Utility Subsidiaries and certain
pipeline subsidiaries). Currently, NiSource is not projecting any change in the
dividend policy of the Utility Subsidiaries. As shown in Exhibit K-2, the
projected net cash flow (i.e., cash flow available after operating and investing
activities) of Columbia and of NiSource's pre-merger Utility Subsidiaries will
remain sufficient to enable such companies to service their own debt and pay
dividends. Further, the capital structure of Columbia and of NiSource's
pre-merger Utility Subsidiaries does not change materially. In any event, the
projected dividends will be paid from current and retained earnings of the
Utility Subsidiaries, as allowed by Rule 46.
Finally, because the amount of tax allocated to the Utility Subsidiaries
will remain subject to the separate return limitation, the Tax Allocation
Agreement will have no impact on the rates or revenue requirements of the
Utility Subsidiaries. A basic premise of regulation followed by all of the state
commissions that regulate the Utility Subsidiaries is that utility operations
should not subsidize other operations nor should they be subsidized by other
operations. Income taxes are, therefore, calculated on a standalone basis for
jurisdictional ratemaking.
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(7) See Rule 52, which allows a holding company to charge its effective cost of
money on downstream loans to subsidiaries.
5
3.2 The Proposed Tax Allocation Method Does Not Circumvent the
Policies and Purposes of the Act. The proposed Tax Allocation Agreement is
consistent with the policies and purposes of Section 12 of the Act. That section
does not prohibit a registered holding company from retaining the benefit of the
tax attributes that it generates or require it to reallocate those tax
attributes to its subsidiaries. Section 12 merely prohibits upstream loans or
extensions of credit to a registered holding company,8 and requires approval, by
rule or by order, for any loan by a holding company, or any subsidiary thereof,
to a subsidiary company.9
Moreover, the policy underlying Rule 45(c)(5), as articulated by the
Commission in its release proposing Rule 45(c), appears to have little or
nothing to do with the circumstances presented in this case. As indicated (supra
n. 5), in its proposing release, the Commission noted that the "[e]xploitation
of utility companies by holding companies through asserted misallocation of
consolidated tax return benefits" was among the abuses that led to the passage
of the Act. The Commission then explained:
The corporate relationships required by the Act assure that the deductible
corporate expenses of the holding company itself will always create a
consolidated tax saving, since Section 13(a) of the Act precludes such
expenses being passed on to the subsidiaries, through service charge or
contract, so as to transform them into corporate deductions of the
subsidiaries. In light of the legislative history referred to, an expense
reimbursement of the holding company, in the guise of a tax allocation,
would seem incongruous with Section 13(a). The exclusion in our earlier
rule of the holding company from sharing in consolidated return savings was
intentional and will continue. These considerations do not apply to other
companies in the group that incur losses.10
As this passage seems to suggest, the prohibition in Rule 45(c) on a
registered holding company sharing in the consolidated tax savings appears to
have been founded chiefly on Section 13(a) of the Act, which prohibits a
registered holding company from entering into or performing any agreement for
the sale of goods or provision of services or construction for a charge to any
subsidiary company. In this case, however, NiSource is not seeking to recover
its
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(8) Section 12(a) of the Act provides that "[i]t shall be unlawful for any
registered holding company, by use of the mails or any means of
instrumentality of interstate commerce, or otherwise, directly or
indirectly, to borrow, or to receive any extension of credit or indemnity,
from any public-utility company in the same holding-company system or from
any subsidiary company of such holding company . . .." 9 See Section 12(b),
quoted above, pursuant to which the Commission has promulgated Rule 45(a).
10 It should be noted that the earlier rule - Rule 45(b)(6) - did not by
its terms restrict the holding company from retaining the benefit of the
tax losses it generated. Rather, as the Commission explained in its release
proposing Rule 45(c), Rule 45(b)(6) had been interpreted to require the
sharing of tax savings and liabilities exclusively among the members of the
group with actual separate return tax liability or positive income. Thus,
all loss companies, including but not limited to the parent holding
company, had been excluded from sharing in consolidated tax benefits, by
interpretation, under Rule 45(b)(6). 11 The acquisition debt was initially
borrowed by National Grid Group, the top registered holding company, and
then loaned on mirror-image terms to the U.S. sub-holding company, as a
result of which National Grid Group's interest expense and interest income
canceled each other out.
6
own corporate costs from its subsidiaries, "in the guise of a tax
allocation," by transforming them into deductible expenses of its subsidiaries.
Moreover, the subsidiaries will not be reimbursing NiSource for the interest
expense on the Acquisition Debt through the tax allocation mechanism. Instead,
the "benefit" obtained by NiSource under the Tax Allocation Agreement is
attributable entirely to the lower income tax liability of the consolidated
group that is attributable to the interest expense on the Acquisition Debt.
In fact, the policies and purposes of Section 13(a), which was intended
only to prohibit holding companies from "exacting tribute" from subsidiaries
through excessive and often illusory service charges for management services,
have no bearing on how NiSource and its subsidiaries choose to allocate the tax
savings associated with NiSource's interest expense. The interest on the
Acquisition Debt represents a true cost of capital that NiSource has incurred
for a purposes unrelated to the operations of its subsidiaries. It is important
to consider that, if NiSource were to incur interest on debt the proceeds of
which were used to fund loans to its subsidiaries, the Act and the Commission's
rules would allow NiSource to recover its cost of funds through interest charges
to its subsidiaries, and the policies and purposes of Section 13(a) would not
come into play. Where, as in this case, NiSource's subsidiaries have not assumed
any legal obligation for the Acquisition Debt, it would not be detrimental to
the subsidiaries or to consumers if NiSource were to retain the benefit
associated with its interest expense. Moreover, if NiSource were to reallocate
the tax savings attributable to the interest expense on the Acquisition Debt to
those members of the group with a positive allocation, as dictated by Rule
45(c)(5), the net effect would be the same as if NiSource made a capital
contribution to those subsidiaries.
In National Grid, the Commission authorized National Grid Group and its
subsidiaries to enter into a tax allocation agreement under which the tax
benefit of the interest expense on acquisition debt would be allocated to the
U.S. sub-holding company of National Grid Group that had incurred the debt. With
one exception, the circumstances in that case are identical to those presented
here. In National Grid, a U.S. sub-holding company of National Grid Group
incurred approximately $3.2 billion of bank debt in order to finance the
acquisition of New England Electric System ("NEES").11 National Grid Group
explained that, without the requested relief, it would suffer an increased U.K.
tax liability. This was because, under U.K. tax law, there is not a system of
consolidated tax groups similar to that under U.S law. The applicant further
explained that, under U.K. law, a loss member of a corporate group may
"surrender" the loss to another member and thereby reduce the receiving
company's taxable profits. National Grid Group stated that payment for the loss
was necessary for two reasons; first, because under U.K. law, an agreement
requiring an uncompensated surrender of tax benefits could possibly be voided
under creditor protection laws, and second, to assure that National Grid Group
would receive appropriate tax credits under U.K. tax laws for the U.S. taxes
paid by the U.S. sub-holding company.
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7
In approving the proposed tax allocation agreement, the Commission
observed:
It does not appear that approval of the Tax Allocation Agreement would lead
to the abuses that section 12 is intended to prevent, and therefore
approval will not be detrimental to the NEES Group and its consumers. The
`separate return' limitation will assure that the NEES' Utility
Subsidiaries tax liability will not be higher than it otherwise would have
been. In addition, the Financing Applicants note that the conditions
applicable to our authorization with respect to dividend payments will
provide additional protections. Consequently, the Tax Allocation Agreement
does not provide a means for a foreign parent holding company to `milk' the
U.S. - organized companies.
In addition, because the NEES Group has no obligation with respect to the
Merger-Related Debt and the debt does not affect the NEES Group's financial
position or credit, it is not inappropriate to exclude these companies from
the benefits of the tax consequences arising out of the debt. Accordingly,
we approve the use of the Tax Allocation Agreement. (footnote omitted).
NiSource's current circumstances do not involve any interplay between
foreign and U.S. tax laws, and approval or disapproval of the proposed Tax
Allocation Agreement will not have any effect on the overall amount of
consolidated income tax that NiSource will pay. Nevertheless, it is clear that
the Commission's approval of the tax allocation agreement in National Grid was
based almost entirely upon its determination that the agreement would not lead
to the abuses that Section 12 was intended to prevent; that the NEES utility
subsidiaries allocated share of the consolidated tax would be no higher than it
would otherwise be on a separate return basis; that the U.S. subsidiaries had no
obligation on the merger-related debt; and that the merger-related debt did not
affect the NEES subsidiaries' financial position or credit. The fact that the
proposed tax allocation agreement would reduce National Grid Group's overall
U.S. and U.K. tax liability and enable National Grid Group to avoid other
potential legal problems under U.K. law (associated with "surrendering" of tax
attributes by any subsidiary) appears to have been a subordinate consideration.
In all other respects, NiSource's circumstances are the same as those
presented in National Grid. The proposed Tax Allocation Agreement will not lead
to the kinds of abuses Section 12 was intended to prevent (e.g., prohibition on
upstream loans) and is not a device for transferring NiSource's expenses to its
subsidiaries. NiSource's subsidiaries' allocated share of the consolidated
return liability will be no greater than it would be if calculated on a separate
return basis, as required by Rule 45(c). NiSource's subsidiaries are not
obligated, directly or indirectly, on the Acquisition Debt, and the Tax
Allocation Agreement will not have the effect of shifting NiSource's interest
expense to its subsidiaries. Finally, the Acquisition Debt has not affected the
Utility Subsidiaries' financial position, as evidenced by their projected
capitalization ratios and cash flow.
8
ITEM 4. REGULATORY APPROVAL.
THE PROPOSED TAX ALLOCATION AGREEMENT IS SUBJECT TO APPROVAL
BY THE PUBLIC UTILITIES COMMISSIONS OF MAINE, PENNSYLVANIA AND VIRGINIA, AS
FOLLOWS:
Maine: The Maine Public Utilities Commission ("MPUC") has jurisdiction
pursuant to Title 35-A MRSA ss.707(3) and c. 820, ss.4 of the MPUC's rules over
transactions between a public utility and any affiliate that involve any credit,
loans or financial or other service provided to or by such public utility. A
copy of the application filed by Northern Utilities, Inc. ("Northern Utilities")
with the MPUC for approval of the Tax Allocation Agreement will be filed as
Exhibit D-1.
Pennsylvania: Under 66 Pa.C.S.A. ss.2202, which relates to contracts and
other arrangements between public utilities and their affiliates, approval of
the Pennsylvania Public Utility Commission ("PPUC") is required in order for
Columbia Gas of Pennsylvania, Inc. ("Columbia Pennsylvania") to become a party
to the Tax Allocation Agreement. A copy of the application filed by Columbia
Pennsylvania with the PPUC for approval of the Tax Allocation Agreement will be
filed as Exhibit D-3.
Virginia. Under Chapters 3 and 4 of Title 56 of the Code of Virginia, which
relate to financing by public service companies and contracts and other
arrangements between those companies and their affiliates, the approval of the
State Corporation Commission of Virginia ("VSCC") is required in order for
Columbia Gas of Virginia, Inc. ("Columbia Virginia") to become a party to the
Tax Allocation Agreement. A copy of the application filed by Columbia Virginia
with the VSCC for approval of the Tax Allocation Agreement will be filed as
Exhibit D-5.
In addition to the foregoing approvals, Northern Utilities must file a copy
of the Tax Allocation Agreement with the New Hampshire Public Utilities
Commission, for notice purposes, within 10 days after the date on which it is
executed, and Bay State Gas Company must file a copy of the Tax Allocation
Agreement, for notice purposes, with the Massachusetts Department of
Telecommunications and Energy. Either commission could, sua sponte, institute a
proceeding and hold hearings on the Tax Allocation Agreement.
Except as stated above, no other state commission, and no federal
commission, other than this Commission, has jurisdiction over the Tax Allocation
Agreement.
ITEM 5. PROCEDURE.
The applicants request that the Commission's supplemental order
releasing jurisdiction be issued as soon as the rules allow, and that there
should not be a 30-day waiting period between issuance of the Commission's
supplemental order and the date on which the order is to become effective. The
applicants hereby waive a recommended decision by a hearing officer or any other
responsible officer of the Commission and consent that the Division of
Investment Management may assist in the preparation of the Commission's decision
and/or order, unless the Division opposes the matters proposed herein.
9
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
A. EXHIBITS.
B-4 Form of Tax Allocation Agreement.
D-1 Application to Maine Public Utilities Commission. (To be
filed by amendment).
D-2 Order of Maine Public Utilities Commission. (To be filed
by amendment).
D-3 Application to Pennsylvania Public Utility Commission.
(To be filed by amendment).
D-4 Order of Pennsylvania Public Utility Commission. (To be
filed by amendment).
D-5 Application to Virginia State Corporation Commission.
(To be filed by amendment).
D-6 Order of Virginia State Corporation Commission. (To be
filed by amendment).
K-1 Comparison of Allocation of Federal Income Tax Liability
under Proposed Tax Allocation Agreement and Rule 45(c).
K-2 Historical and Pro Forma Capitalization and Cash Flow
Statements of NiSource (on both consolidated and
non-consolidated basis), Columbia and consolidated
subsidiaries, and pre-merger NiSource Utility Subsidiaries
for the period 1998 - 2003. (Filed confidentially pursuant
to Rule 104).
B. FINANCIAL STATEMENTS.
(No additional Financial Statements filed with the
Post-Effective Amendment)
10
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, each of the undersigned companies has duly caused this Post-Effective
Amendment to be signed on its behalf by the undersigned thereunto duly
authorized.
NISOURCE INC.
NORTHERN INDIANA PUBLIC SERVICE COMPANY
ENERGYUSA, INC.
NISOURCE CAPITAL MARKETS, INC.
NISOURCE FINANCE CORP.
NISOURCE DEVELOPMENT COMPANY, INC.
NI ENERGY SERVICES, INC.
NISOURCE CORPORATE SERVICES COMPANY
NISOURCE ENERGY TECHNOLOGIES, INC.
KOKOMO GAS AND FUEL COMPANY
NORTHERN INDIANA FUEL AND LIGHT COMPANY, INC.
NORTHERN UTILITIES, INC.
PRIMARY ENERGY, INC.
NISOURCE PIPELINE GROUP, INC.
IWC RESOURCES CORPORATION
COLUMBIA ENERGY GROUP
COLUMBIA GAS OF KENTUCKY, INC.
COLUMBIA GAS OF OHIO, INC.
COLUMBIA GAS OF MARYLAND, INC.
COLUMBIA GAS OF PENNSYLVANIA, INC.
COLUMBIA GAS OF VIRGINIA, INC.
COLUMBIA SERVICE PARTNERS, INC.
COLUMBIA NETWORK SERVICES CORPORATION
COLUMBIA ATLANTIC TRADING CORPORATION
COLUMBIA ENERGY GROUP CAPITAL CORPORATION
COLUMBIA PIPELINE CORPORATION
COLUMBIA FINANCE CORPORATION
COLUMBIA TRANSMISSION COMMUNICATIONS
CORPORATION
COLUMBIA ENERGY RESOURCES, INC.
COLUMBIA INSURANCE CORPORATION, LTD.
COLUMBIA GULF TRANSMISSION COMPANY
(signatures continued on next page)
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COLUMBIA GAS TRANSMISSION CORPORATION
COLUMBIA LNG CORPORATION
COLUMBIA ENERGY SERVICES CORPORATION
COLUMBIA REMAINDER CORPORATION
By: /s/ Gary W. Pottorff
----------------
Name: Gary W. Pottorff
Title: Secretary
BAY STATE GAS COMPANY
By: /s/ Gary W. Pottorff
----------------
Name: Gary W. Pottorff
Title: Clerk
Date: January 14, 2002
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