EXHIBIT 2.1
DOCKET NO. ____________
APPLICATION OF CENTRAL POWER BEFORE THE
AND LIGHT COMPANY, WEST TEXAS
UTILITIES COMPANY, AND PUBLIC UTILITY COMMISSION
SOUTHWESTERN ELECTRIC POWER
COMPANY FOR APPROVAL OF
PROPOSED BUSINESS SEPARATION PLAN OF TEXAS
PETITION OF CENTRAL POWER AND LIGHT COMPANY,
WEST TEXAS UTILITIES COMPANY, AND
SOUTHWESTERN ELECTRIC POWER COMPANY
AND REQUEST FOR THE TIMELY ENTRY OF A PRELIMINARY ORDER
-------------------------------------------------------
Central Power and Light Company, West Texas Utilities Company, and
Southwestern Electric Power Company (the Companies) jointly file the attached
Business Separation Plan-Filing Package pursuant to Section 39.051 of the Public
Utility Regulatory Act (PURA) and P.U.C. SUBST. R. 25.342. The Companies seek
approval of the plan by the Public Utility Commission of Texas (Commission) as
well as the more specific relief requested below.
I. THE APPLICANTS
Each of the Companies is a wholly owned subsidiary of Central and South
West Corporation (CSW), a public utility holding company registered under the
Public Utility Holding Company Act of 1935 with utility subsidiaries that
provide electric service to approximately 1.7 million customers in four states.
Central Power and Light Company is headquartered in Corpus Christi,
Texas, and provides electric service in south Texas. West Texas Utilities
Company is headquartered in Abilene, Texas, and provides electric service in
west Texas. Southwestern Electric Power Company is headquartered in Shreveport,
Louisiana, and provides electric service in east Texas and in portions of
Louisiana and Arkansas.
II. DESIGNATED REPRESENTATIVES
Philip F. Ricketts Joe N. Pratt
Bracewell & Patterson, L.L.P. Pratt and Grant, P.C.
Suite 2300 Suite 250, One Northpoint Centre
111 Congress Avenue 6836 Austin Center Boulevard
Austin, Texas 78701 Austin, Texas 78731
(512) 472-7800 (512) 794-2100
(512) 472-9123 (FAX) (512) 794-2111 (FAX)
III. SERVICE
Pursuant to P.U.C. PROC. R. 22.74(b), the Companies designate their
authorized representative for purpose of service of pleadings as follows:
Ron Ford
CSW Services, Inc.
Norwest Bank Building
400 West 15th Street, Suite No. 650
Austin, Texas 78701
(512) 481-4564
(512) 481-4588 (FAX)
IV. PERSONS AFFECTED
All customers and classes of customers of the Companies will be affected
by this filing.
V. JURISDICTION
The Commission has jurisdiction over this filing pursuant to Section
39.051 of PURA.
VI. THE PROPOSED BUSINESS SEPARATION PLAN
The proposed business separation plan is set forth in detail in the
attached Business Separation Plan-Filing Package, which includes supporting
testimony.
The plan proposes that full legal entity or structural separation of the
Companies occur in two stages in order to minimize refinancing costs that must
be incurred to address existing contractual requirements related to existing
securities issued by the Companies. The first stage would occur on January 1,
2002, and would last up to six years. By January 1, 2002, separate legal
entities with separate management would be established to conduct energy
delivery, power generation, and retail electric provider businesses. During the
first-stage period, the electric delivery and generation assets, as well as
certain operating employees, will remain with the Companies, although those
assets and employees will be managed and controlled by the electric delivery and
power generation businesses. The primary purpose of the Companies after January
1, 2002, will be to hold legal ownership of the electric delivery and generation
assets. All employees and assets needed by the retail electric provider will be
transferred to it by January 1, 2002. No later than January 1, 2008, all assets
and employees of the Companies will have been transferred to the energy delivery
company and power generation company as the existing contractual requirements
that affect the transfer of legal ownership of assets are eliminated through
refinancing in a cost efficient manner. Further details of the Companies' plan
are contained in the testimony of Mark D. Roberson and Wendy D. Hargus that is a
part of this filing.
The plan also requests certain approvals, to the extent the Commission
deems them necessary, for the Companies to continue offering certain services
from September 1, 2000, to January 1, 2002.
VII. REQUEST FOR A PRELIMINARY ORDER
The Companies believe that the above-described two-stage process
complies with the letter and intent of the industry restructuring provisions of
PURA. However, in the event that the Commission decides to require transfers of
employees and the legal ownership of all assets by January 1, 2002, it will be
necessary for the Companies to immediately begin implementing a number of
federal and other state filings to accomplish such a transfer. If the Companies
first learn of this request in late 2000 or early 2001, when a final order is
issued in this proceeding, it will be very difficult, if not impossible, to
obtain the necessary federal and state approvals for the asset transfers by
January 1, 2002. Accordingly, the Companies respectfully request that the
Commission timely issue a preliminary order in this case which addresses the
issue of whether the Companies' proposed two-step plan complies with PURA.
VIII. PROTECTIVE ORDER
While no confidential information is being filed in the Business
Separation Plan-Filing Package, the Companies anticipate that during the course
of this proceeding they may be asked to furnish confidential information, the
disclosure of which to third parties would place the Companies at a severe
competitive disadvantage or cause the Companies to violate contractual
confidentiality obligations. Therefore, the Companies may later request that a
protective order be entered in this case.
IX. NOTICE
The Companies propose that notice of this case consist of published
newspaper notice in the service areas of each of the Companies once a week for
two consecutive weeks. The companies further propose that individual notice be
provided to each participant in Project No. 20970; to each intervenor in Docket
No. 19265, the proceeding involving the merger of CSW and American Electric
Power Company; and to each municipality served by the Companies. A copy of a
proposed public notice for newspaper publication is attached as Exhibit 1. The
Companies propose that the individual notice to the above persons and entities
consist of a copy of the proposed public notice sent by electronic mail or first
class mail.
X. REQUESTED COMMISSION ACTIONS
1. The Companies request that the proposed business separation
plan be approved, including any necessary waivers to continue to provide
certain competitive energy services until January 1, 2002.
2. The Companies request that the Commission timely issue a
preliminary order declaring that the Companies' proposed two-stage
restructuring plan complies with PURA and the Commission's rules.
3. The Companies further request that the Commission approve the
proposed form of notice.
Respectfully submitted,
BRACEWELL & PATTERSON, L.L.P. PRATT AND GRANT, P. C.
Suite 2300 Suite 250, One Northpoint Centre
1 I 1 Congress Avenue 6836 Austin Center Boulevard
Austin, Texas 78701 Austin, Texas 78731
(512)472-7800 (512)794-2100
(512)472-9123 (fax) (512)794-2111 (fax)
BY: /s/ Philip F. Ricketts By: /s/Joe N. Pratt
Philip F. Ricketts Joe N. Pratt
State Bar 16882500 State Bar No. 16240100
ATTORNEYS FOR APPLICANTS
EXHIBIT 1
Page 1 of 2
PUBLIC NOTICE
On January 10, 2000, Central Power and Light Company, West Texas
Utilities Company, and Southwestern Electric Power Company (the Companies) filed
with the Public Utility Commission of Texas (the Commission) a business
separation plan as required by Section 39.051 of the Public Utility Regulatory
Act (PURA) and Section 25.342 of the Commission's substantive rules. As required
by Section 39.051 of PURA, the plan proposes that each of the companies, subject
to certain actions by other federal and state regulatory authorities, be
separated into three new businesses, one of which will provide transmission and
distribution or electric delivery services to competitive retail electric
providers, one of which will be a competitive retail electric provider, and one
of which will provide competitive wholesale generation services. The plan
further provides that each newly created business will operate independently of
each other pursuant to a code of conduct which will govern transactions between
the businesses and their affiliates, after the introduction of electric
competition, to recognize federal and state code of conduct requirements and
appropriate business practices.
The three new businesses will be managed by three new separate legal
entities which will be created by January 1, 2002, at which time all functions
now provided by the Companies will be separated into the new businesses. All
assets and employees of the Companies will be transferred to the new legal
entities by January 1, 2008.
The plan also contains a proposal for physical separation of the new
businesses, for sharing of information and technology systems, and for
maintenance of separate books and records for the new businesses. It also
provides details regarding the separation of functions and operations among the
new businesses, financial and legal aspects of the proposed business separation,
asset and liability transfers to the new businesses, and the provision of
corporate support services through a separate organization. It also contains a
proposed plan for interim separation of certain services designated by the
Commission as "competitive energy services" on or before September 1, 2000, as
required by Section 39.051 (a) of PURA and Section 25.343 of the Commission's
substantive rules.
EXHIBIT 1
Page 2 of 2
The plan does not propose any change in the existing rates of the
Companies. On April 1, 2000, the Companies will file an application with the
Commission requesting that rates be set for the new transmission and
distribution utility business which begins operation on January 1, 2002.
This filing has been assigned Docket No. ____. Persons who wish to
intervene or comment upon these proceedings should notify the Commission. A
request to intervene or for further information should be mailed directly to the
Public Utility Commission of Texas, P. O. Box 13326, Austin, Texas 78711-3326.
Further information may also be obtained by calling the Commission's Office of
Consumer Affairs at (512) 396-7120. Hearing and speech impaired individuals with
text telephones may contact the Commission at (512) 936-7136.
Central and South West
BUSINESS SEPARATION PLAN FILING PACKAGE
January 10, 2000
1. Application. The filing requirements in this filing package shall apply to
the electric utilities that file with the Commission their plan to implement
business separation as required under Section ss.39.051 of Public Utility
Regulatory Act (PURA) relating to Unbundling.
2. Electronic Files. To the maximum extent possible, the BSP-FP, including
testimonies, schedules, and workpapers, shall be provided to all
participants on diskette or CD-ROM format on date of filing in an
electronic format (e.g., diskette, CD-ROM, or via electronic mail) on the
date of filing. Any numerical data provided electronically shall be in
Microsoft Excel (preferred), Lotus Symphony, Lotus 1-2-3, or ASC II format
for a MS-DOS formatted computer.
3. Workpapers. Concurrently with the filing of 11 copies of the BSP-FP, the
utility must also separately file with the Commission 11 complete sets of
workpapers used in the preparation of certain schedules, subject to the
provisions of General Instruction No. 34 dealing with voluminous
workpapers. In addition one (1) complete set of the same workpapers shall
be delivered to the Office of Public Utility Counsel on the date of
filing. Upon request by any person moving to intervene (which request may
be made prior to any anticipated rate filing), the utility will furnish
to such person a set of the workpapers filed with the Commission
a. Workpaper referencing format: The workpaper reference shall
always begin with the characters "WP/" followed by the schedule to
which the workpaper refers. Specific workpapers shall then be
referenced by ascending numbers. The resulting series of workpapers
shall have a pyramid structure, with the top workpaper (the
workpaper with the least complicated reference, for example WP/A-1)
being the workpaper which directly reflects the amounts shown on a
particular schedule (in this case, Schedule A-1). The next level
down the pyramid (using the A-1 series, this would be WP/A-1/1)
would contain information which explains a portion of the top
workpaper (in this case, WP/A-1). Each successive level down the
pyramid would explain something from the next higher level.
b. Workpaper content: All assumptions, calculations, sources, and data
supporting allocation or functionalization of the reporting period
expenses and/or balances shall be included in the workpaper
supporting each schedule. In addition, specific numbers which "tie"
between the schedule and the workpaper must be referenced on both
the workpaper and the schedule.
c. Workpaper location: All workpapers not considered voluminous (See
General Instruction No. 4, below) shall be organized and appear in
the same order as the schedules they support.
4. Voluminous Material. For any individual schedule or supporting
workpaper that consists of 100 or more pages and is not available
electronically, the company may designate such information as voluminous.
All voluminous material shall be made available in a designated location
in Austin on the date of filing. If the volume of the data meet the
threshold for the "freight car doctrine" [eight linear feet of document],
the requested material shall be made available at its normal repository on
the date of filing. The utility shall provide a schedule detailing all
normal repositories and cross-reference all BSP-FP schedules to the
information contained in those repositories. The utility shall deliver a
copy of all voluminous materials not subject to the "freight car doctrine"
to both the Office of Regulatory Affairs (ORA) and the Office of Public
Utility Counsel on the day of filing the BSP-FP application.
5. Numbering of Schedules. Schedules shall be referenced by schedule number
and name as indicated in each instruction and shall identify the witness
sponsoring the schedule. Schedules, which are not applicable, shall be so
designated.
6. Confidentiality. If the utility claims that requested information is
confidential, a statement to that effect shall be included in the BSP-FP
in the schedule where the information is requested. All information
requested in the schedule for which the utility does not claim
confidentiality shall be included in the appropriate BSP-FP schedule. The
utility shall include as part of Section M a signed statement by its
attorney that presents, for each schedule or section for which the utility
claims that the requested information is confidential, the claimed reasons
that the information should be treated as confidential and that states
that the attorney has reviewed the information sufficiently to state in
good faith that the information is confidential.
Until a protective order is issued, the utility shall provide ORA or a
party granted intervenor status the information claimed to be confidential
if the party agrees to be bound by the draft protective order contained in
Section M as if it had been issued. Use of the draft protective order
contained in Section M as a confidentiality agreement pending issuance of
a protective order does not preclude issuance of a protective order that
differs from the draft protective order contained in Section M.
FILING REQUIREMENTS FOR BUSINESS SEPARATION PLAN AND
COMPLIANCE WITH CODE OF CONDUCT
This Business Separation Plan Filing Package (BSP-FP) shall be used by utilities
in preparing their plans for business separation or unbundling required by the
Public Utility Regulatory Act ss.39.051 (PURA), and P.U.C. SUBST. R. 25.342,
relating to Electric Business Separation. The requested information shall be
provided to the extent known at the time of filing, except for Section L which
requires complete information by January 10, 2000. If information is not known,
the utility shall state so, and provide an estimated date when such information
will be known and a supplemental report submitted to the commission for
approval. Utilities shall have their completed plan filed no later than May 1,
2001. The requested disclosures apply only to the activities, which the company
provides as an integrated utility prior to separation, and to services between
the transmission and distribution utility and its affiliates. The utility shall
maintain consistency among the BSP-FP and P.U.C. SUBST. R. 25.341 relating to
Definitions, P.U.C. SUBST. R. 25.343 relating to Competitive Energy Services,
P.U.C. SUBST. R. 25.344 relating to Cost Separation Proceedings, and P.U.C.
SUBST. R. 25.346 relating to Separation of Electric Utility Metering and Billing
Service Costs and Activities. In addition to the specifically requested
information, the utility may provide any information or documentation it
believes could be helpful to the commission when evaluating the plan.
LIST OF REQUIRED TESTIMONY:
The company shall provide testimonies to address the issues under each section.
Section A) Table of Contents. This section shall provide a list of testimonies,
schedules, supporting witnesses, and issues addressed in each section.
Section # Supporting Witness Issues Addressed
- --------- ------------------ ----------------
ss.B Mark D. Roberson Mr. Roberson summarizes the requests for relief
contained within the separation plan of the
Companies, introduces the various witnesses, and
discusses issues surrounding consistency between
the proposed separation plan and SB7. Mr.
Roberson also generally describes CSW's proposed
two-stage structural separation proposal and how
it complies with SB7 and PUCT requirements.
Finally, Mr. Roberson summarizes CSW's position
on the various other sections of the Business
Separation Plan Filing Package (BSP-FP).
ss.C Wendy G. Hargus Ms. Hargus describes the financial and legal
aspects of CSW's proposed business separation
plan, specifically CSW's two-stage structural
separation and how it will minimize refinancing
cost. Ms. Hargus also discusses the proposed
capital structures of the new companies that
will be created, the effect of the business
separation plan on the CSW money pool, and the
status of CPL's securitization filing made
pursuant to SB7.
ss.D Preston Kissman Mr. Kissman discusses CSW's new regulated
Transmission and Distribution Utility - Energy
Delivery Company (EDC). Mr. Kissman describes
EDC's structure, services offered by EDC,
personnel requirements, separation from CSW's
power generation company and retail electric
provider, necessary facilities, and the
information technology and equipment necessary
to continue providing reliable service. He also
addresses a certain competitive energy service,
pulse metering, that the companies seek to offer
after September 1, 2000.
ss.D Michael S. Mr. Isenberg discusses CSW's new power
Isenberg generation company which will be separated from
the current integrated utilities. Mr. Isenberg
describes the functions that the power
generation company will perform, and the
staffing and personnel requirements for the new
organization.
Section # Supporting Witness Issues Addressed
- --------- ------------------ ----------------
ss.D Robert G. Goumaz Mr. Goumaz describes the development of CSW's
new retail electric provider (REP) which is
being created as a result of SB7. He discusses
the organizational structure and the functions
the REP will perform, the assets and information
technology systems required to perform those
functions, and the steps that will be taken to
ensure that the transfer of retail customers
from CSW's integrated utilities to its REP will
not adversely affect the reliability and quality
of customer service provided to those customers.
ss.E Stacy Noel Ms. Noel describes the methodology that will be
used by the CSW Texas companies to complete
physical separation of facilities, equipment,
and employees needed to accomplish the business
separation required by SB7.
ss.F Debbie L. Potter Ms. Potter describes the access controls and
firewalls that will be in place to prevent
employees of a competitive affiliate from
gaining access to confidential information about
EDC system operations. Ms. Potter demonstrates
that CSW currently has structural, transactional
and behavioral safeguards in place that will be
expanded to meet the requirements of the Code of
Conduct.
ss.G R. Russell Davis Mr. Davis describes the accounting for the
separation of business organizations, the
accounting for the transfers of assets and
liabilities, the allocation methods and
accounting for assets and equipment that is
shared, and the allocation methods to be
utilized and the accounting for shared services.
ss.H R. Russell Davis Mr. Davis describes the Corporate Support
Services Organization that will exist within the
CSW System, lists the corporate support services
to be provided by the organization, and
discusses the allocation methods to be utilized
and the accounting for corporate support
services.
ss.I R. Russell Davis Mr. Davis describes the keeping of separate
books and records.
ss.J David P. Sartin Mr. Sartin discusses CSW's internal codes of
conduct and demonstrates their consistency and
compliance with applicable PURA and PUCT
requirements and how CSW's business separation
plan (during both the period January 10, 2000 to
December 31, 2001 and from January 1, 2002
forward) complies with internal and PUCT codes
of conduct.
ss.K None None
Section # Supporting Witness Issues Addressed
- --------- ------------------ ----------------
ss.L Billy G. Berny Mr. Berny describes in detail CSW's plans for
separating competitive energy services and shows
that CSW's plan to separate its competitive
energy services meets the requirements of
applicable PURA and PUCT requirements. Mr.
Berny also presents CSW's plans concerning
certain services that are currently offered
under PUCT-approved tariffs.
ss.M None None
Section B) Executive Summary of the Business Separation Plan. This section shall
address the issues listed below:
1. Overview of the present structure of the integrated utility;
CSW is a legal entity incorporated in the State of Delaware. It is a
registered holding company under the Public Utility Holding Company
Act of 1935. CSW's corporate office is located in Dallas, Texas. CSW
owns and operates four fully integrated electric utility companies
(CPL, WTU, PSO, and SWEPCO), one service company (CSWS) and several
unregulated companies. Each of the four electric utilities, with
support from CSWS, currently constructs, operates, and maintains
generation and T&D facilities and provides energy services to
end-use and wholesale customers.
Management of generation, transmission planning and design, project
management, and many other functions which can be performed most
cost-effectively on a shared basis (such as accounting, information
technology, purchasing, and cash management) is centralized within
the CSWS organization. The Energy Delivery organization within CSWS
manages all T&D functions within the electric utility companies,
with asset ownership maintained in the electric utility companies.
CSWS Power Generation centrally manages all CSW generation, although
asset ownership remains within the individual electric utility
companies. Also, centralized within the CSWS Customer Relations
organization are the customer service functions of the electric
utility companies.
An organization chart showing CSW's current structure is included in
the attachments at the end of this section.
The testimony of Wendy Hargus provides additional detail regarding
CSW's current structure.
2. Overview of the separation plan, including but not limited to,
the following issues:
The plan proposes that full legal entity or structural separation
of the Companies occur in two stages in order to minimize
refinancing costs that must be incurred and to comply with existing
contractual requirements relate to existing securities issued by
the existing utility companies. The first stage would begin on
January 1, 2002, and would last up to six years. By January 1, 2002,
separate legal entities with separate managements would be
established to conduct energy delivery, power generation,
and retail electric provider businesses. During the first-stage
period, the electric delivery and generation assets, as well as
certain operating employees, will remain with the existing utility
companies, although those assets and employees will be managed and
controlled by the EDC and PGC companies. The primary purpose of the
existing utility companies after January 1, 2002, will be to hold
legal ownership of the electric delivery and generation assets. All
employees and assets needed by the retail electric provider will be
transferred to it by January 1, 2002. No later than January 1, 2008,
all assets and employees of the existing utility companies will have
been transferred to the EDC and PGC when the existing contractual
requirements of the Companies' debt instruments that restrict the
transfer of legal ownership of assets are eliminated through
refinancing in a cost-efficient manner. Further details of the
Companies' plan are contained in the testimony of Mark D. Roberson
and Wendy G. Hargus.
The proposed organization charts for each stage of the plan are
included in the attachments to this section.
The proposed business separation plan is formulated on a stand-alone
CSW basis, reflecting the current status of the CSW system. The
pending merger between CSW and American Electric Power Company, Inc.
(AEP) will result in a change of ownership and executive management
of CSW, but should not substantially affect the components of the
proposed restructuring plan. Any changes to the proposal that would
result due to changes in management and ownership resulting from the
merger are expected to be minor in nature. To the extent that this
business separation plan changes as a result of the merger, timely
amendments will be filed with the Commission.
(a) Specific type of separation chosen (affiliated,
non-affiliated, divestiture) and how such method will comply
with PURA ss.39.051 and ss.39.157;
CSW proposes a two-stage structural separation plan,
continuing to utilize a holding company structure. This
structure will result in each of the three separated
businesses being affiliated first-tier subsidiaries of CSW.
The two-stage plan is permissible under PURA ss.ss.39.051 and
39.157 because essentially all aspects of structural
separation would be present, including the creation of
separate legal entities for the EDC, the PGC, and the REP;
full operational separation; separate accounting systems;
legal separation of management and control of operations and
assets; and full effectiveness of the Code of Conduct. Only
the transfer of legal ownership of the assets and transfer of
certain operating personnel would be deferred during Stage 1
to minimize refinancing costs that will be incurred to
eliminate existing contractual impediments on asset ownership
transfers, thereby producing an estimated savings of at least
$35 million NPV based upon the current base case estimate. The
proposal meets both the literal requirements and the spirit of
PURA ss.39.051. The literal requirements are met by having
separate generating, T&D and retail companies with real
separate identities, including separate books and records, and
separate management. Stage 1 permits the existing utility
companies to honor the contractual commitments of their
existing debt instruments without increasing the significant
costs of refinancing the outstanding debt by January 1, 2002.
It also meets the spirit of PURA ss.39.051, which is to create
a competitive environment and to prevent the regulated T&D
utility from providing preferential treatment to, or somehow
subsidizing, its competitive affiliates.
The plan fully complies with the provisions of PURA
ss.39.051 and ss.39.157.
The testimony of Ms. Hargus provides a detailed explanation of
the basis for CSW's plan.
(b) Timeline to implement the major milestones in the business
separation plan;
Two major milestones exist for CSW's restructuring plan.
The first is January 1, 2002, at which time Stage 1 will
commence with all aspects of full structural separation
present except the transfer of the legal ownership of the T&D
and generation assets. The second is Stage 2 commencing
by January 1, 2008, by which time full transfer of
legal ownership of assets and all employees will have occurred
after existing contractual restrictions have been eliminated
in a cost-efficient manner.
(c) Measures taken to ensure that reorganization will not affect
safe and reliable operations of the generation, transmission,
and distribution systems;
The ongoing responsibility for the safe and reliable operation
of generation facilities will continue to reside with
generation management and power plant employees, as it does
today. No significant changes in the responsibilities,
management oversight, or number of employees needed for
operations and maintenance of generation units are
contemplated as a result of restructuring. While it is likely
that increased competition in the Texas generation market
could change the role of certain units in the future, it is
anticipated that rules imposed by an independent system
operator and contractual commitments to generation customers
will be sufficient to ensure the units' safe and reliable
operation. Michael S. Isenberg addresses the safe and reliable
operation of the generation system in his testimony.
Safe and reliable operation of the T&D systems will likewise
be unaffected by the reorganization. There will not be
significant changes in the job descriptions of employees
performing T&D operations, except that jobs relating to
competitive energy services are being redefined or eliminated
and new jobs will be added to provide services to REPs. EDC
central operations will have its headquarters in Tulsa,
Oklahoma, where the majority of management personnel are
currently located. Most of the nonmanagement personnel will be
located where they are today. Very little relocation is
anticipated at this time. Facilities, including service
centers, warehouses, and offices will continue to be located
in close proximity to T&D facilities and end-use customers,
ensuring timely response to outages and new service
installations, as well as cost-effective and efficient
construction, maintenance, and repair of T&D facilities. IT
systems required to efficiently and effectively run the T&D
business will be used by the T&D business, with support from
the centralized IT group. In addition, T&D central operations
will have its own separate information services group to
support those systems used exclusively in providing T&D
services. The testimony of Preston Kissman describes the T&D
systems in detail. Safe and reliable operation of the T&D
systems will not be affected by the restructuring.
Finally, CSW has taken numerous steps to ensure that the
transfer of retail customers from CSW's integrated utilities
to its REP will not adversely affect the reliability and
quality of service provided to those customers. First, CSW has
begun the process of allocating to the REP sufficient physical
assets and IT and systems to ensure that the REP will be as
responsive to customers' needs as the integrated utility
companies currently are. Second, training programs will be
initiated so that each REP employee thoroughly understands the
nature of the business separation plan and will be able to
fully communicate with customers about the changing nature of
relations with them. Third, the REP plans to test its systems
in the pilot program with respect to the transfer of CSW's
customers to nonaffiliated REPs. Similarly, the CSW REP's
likely participation in pilot programs outside the CSW service
area will allow the REP to test its systems to ensure a smooth
transition to competition beginning January 1, 2002. The
testimony of Robert G. Goumaz addresses the REP's commitment
to continued reliable and high-quality service.
(d) Total estimated amount of assets and liabilities transferred
to each company;
The total estimated amount of assets to be transferred to each
entity is not known at this time. However, Exhibit RRD-2 to
the testimony of Mr. Davis shows the general categories
of plant assets to be transferred. The transfer of assets
will be valued at net book value, in accordance with the rules
of the SEC pertaining to registered holding companies and
PUC Subst. R. 25.34. Information regarding the amount of
assets to be transferred to each company will be provided in
a timely manner when those decisions are made, which is
estimated to be by April 1, 2000.
The total amount of liabilities to be transferred to each
entity, which relate primarily to debt, is also not known at
this time, but again the transfer will occur at net book value
if there is any transfer of debt. Information regarding the
amount of liabilities to be assigned to each company will be
provided in a timely manner when those decisions are made. As
Ms. Hargus discusses in her testimony, most of the outstanding
debt of the existing utilities will have to be eliminated in
order to transfer ownership of the T&D and generation assets
because of existing contractual restrictions.
(e) Total number of employees in each company/function before and
after the separation; and
The estimated total number of employees in each function
before and after the separation is as follows:
Before After
Separation Separation
Power Generation 1,638 1,700
Transmission & Distribution 4,120 3,700 - 4,200
Retail Electric 0 220 - 270
Mr. Isenberg describes the staffing of the PGC operation, Mr.
Kissman describes the staffing of the EDC operation, and Mr.
Goumaz addresses the staffing of the REP.
(f) Estimated one-time cost of reorganization; under the company's
proposed separation; and
CSW has not developed a detailed estimate of the restructuring
costs at this time due to the uncertainty of the refinancing
costs, the systems that will be required to restructure, and
information about how the market structure will develop.
However, based on experience in the other states which have
restructured, CSW believes that its cost of restructuring
will be in the range of $100 to $200 million. The cost
of restructuring will include the cost of refinancing,
regulatory filings at various state and federal regulatory
agencies, physical separation, and the development of IT and
accounting systems required to meet the new market structures
in both ERCOT and the Southwest Power Pool (SPP). Since the
design of competitive systems in the SPP is not yet complete,
restructuring costs may increase further. Mr. Roberson
addresses estimated restructuring costs in his testimony.
CSW will include its estimate of the restructuring costs in
its April 1, 2000 Unbundled Cost of Service filing.
(g) If the company's proposal is not to create separate
corporations, the costs necessary to reorganize into separate
corporations.
CSW proposes to create separate corporations, utilizing the
two-stage process described in the plan. The costs necessary
to reorganize into separate corporations are provided in
Section B. 2.(f) of the BSP-FP and the testimony of Mr.
Roberson. A greater cost would be incurred if the utilities
were required to transfer legal ownership of the T&D and
generation assets as of January 1, 2002, as opposed to the
cost that will be incurred to implement CSW's proposed
two-stage plan.
3. Waivers that the company is requesting to any of the requirements of
PURA, commission rules, or guidelines regarding the BSP-FP, because
of company specific situations (justification for each waiver shall
be addressed in detail in related sections);
CSW requests waivers of the following requirements:
- CSW seeks a waiver of PUC Subst. R. 25.341(6)(G) to permit the
continued provision of information related to customer usage
other than as required for the rendering of a monthly electric
bill, including pulse service, for customers taking this
tariffed services as of September 1, 2000 through January 1,
2002, as explained in Section L of the BSP-FP and the
testimony of Billy Berny.
- If the Commission determines that tariffed transformer lease
and maintenance services are competitive energy services, CSW
seeks a waiver of PUC Subst. R. 25.341(6)(F) to continue
offering these services to existing customers as of September
1, 2000 for the period September 1, 2000 to January 1, 2002,
as explained in Mr. Berny's testimony.
- If the Commission determines that engineering services,
machine shop services, and railcar maintenance services
currently provided by CSW, Power Generation to non-affiliates
are competitive energy services, CSW requests a good cause
exception to PUC Subst. R. 25.341(6) to continue providing
these services until January 1, 2002, as explained in the
testimony of Mr. Isenberg.
- CSW may request waivers of provisions of the Code of Conduct
to the extent necessary to resolve conflicts which could arise
with code of conduct rules ultimately adopted by the Arkansas,
Oklahoma, or Louisiana regulatory authorities.
4. The company's planned internal code of conduct consistent with
PURA ss.39.157(d) and P.U.C. SUBST. R. 25.272, relating to Code of
Conduct for Electric Utilities and Their Affiliates (code of
conduct). The company shall include sworn affidavits showing
commitment to implement the internal code of conduct; and
Section J of the BSP-FP and the testimony of David Sartin provide
and discuss the interim and final internal Codes of Conduct
proposed by CSW. The affidavit of Mr. Roberson showing CSW's
commitment to implement the Codes of Conduct is included in the
attachments to this section.
5. A summary of any other information the company believes will be
valuable for the commission to approve the plan.
All information CSW believes will be valuable for the Commission to
review in order to approve the plan is contained in the BSP-FP
and supporting testimony. CSW will provide any additional
information on a timely basis as that information becomes available.
ATTACHMENT
SECTION
B
AFFIDAVIT OF MARK D. ROBERSON
1. My name is Mark D. Roberson. I am over 18 years of age and competent to make
this affidavit. I am employed by Central and South West Services, Inc. as Vice
President Regulatory Affairs. I am an officer of the Company. In that capacity,
I am responsible for ensuring company compliance with all rules and regulations
of the Public Utility Commission of Texas (Commission). The CSW Code of Conduct
which is being filed in this case was developed under my supervision and control
as Vice President Regulatory Affairs. I will be a member of the CSW Code of
Conduct Management Oversight Team. This affidavit is filed pursuant to Section
B-4 of the Business Separation Plan Filing Package.
2. I have carefully reviewed the requirements of the Public Utility Regulatory
Act and the Commission's rules regarding codes of conduct for incumbent
utilities. I have also carefully reviewed and am familiar with the CSW Code
of Conduct.
3. The following demonstrates CSW's commitment to implement and comply with
the Code of Conduct:
a. the company is developing an extensive training and educational
program for all employees regarding the Code of Conduct;
b. the company has created a Code of Conduct Management Oversight Team
comprised of three officers to ensure compliance with the Code of
Conduct and to take all necessary measures to remedy any violations
of the Code of Conduct;
c. internal audits for Code of Conduct compliance issues will be
conducted annually for at least the first three years with extended
audits conducted at a minimum of every three years;
d. an informal complaint procedure has been established so that any
allegation of a violation of the Code of Conduct will be fully
investigated by an officer of the company;
e. all employees of CSW companies will be notified of the Code of
Conduct and of the importance of compliance with it by each
employee. Violations of the Code of Conduct by a CSW employee will
result in disciplinary measures, including possible termination of
employment; and
f. numerous structural safeguards to ensure compliance have been
established. These are detailed in CSW's Code of Conduct as
described in the testimony of Mr. David P. Sartin and include, among
other safeguards, physical separation of employees and the office
space of the various affiliates, certain restrictions on the
transfer of employees among affiliates, maintenance of separate
books and records by any regulated affiliate of CSW, and
instructions to officers and directors who are shared by affiliates
regarding the unauthorized transfer of information among certain
affiliates.
/S/ MARK D. ROBERSON
MARK D. ROBERSON
SUBSCRIBED AND SWORN TO BEFORE ME this 7th day of January, 2000, to which
witness my hand and official seal.
/s/ Steven Beaty
NOTARY PUBLIC, STATE OF TEXAS
MY COMMISSION EXPIRES:
Steven Beaty
July 18, 1000 Print Name of Notary
CURRENT LEGAL ENTITY STRUCTURE
(JANUARY 1, 2000)
| Other
|--------|Unregulated
| |Subsidiaries
|
| |Service
|----------|Company
| |(CSWS)
|
|--------|CSW Leasing
|
|---------|EnerShop
CSW----------|
|-----------| C3
| |Comm
|
|-----------| CSW
| |Credit
|
|--------| CSW---------|SEEBOARD
| |International
|
|----------| CSW
| |Energy
|
| CPL-------|SPE PSO SWEPCO WTU
| | | | |
-------------------------------------------------------------
Stage I Legal Entity Structure
(2002 - 2008 Period)
|Other Existing
|--------| Unregulated
| |Subsidiaries
|
| |Service
|----------|Company
| |(CSWS)
|
|--------| Power }
| | Generation }
| |Company (PGC) }
| }
|---------| Energy } newly
| | Delivery } created
| |Company (EDC) } entities
CSW----------| }
|-----------| Retail }
| | Electric }
| |Provider (REP) }
|
|
| CPL-------|SPE PSO SWEPCO WTU
| | | | |
-------------------------------------------------------------
STAGE II - FINAL LEGAL ENTITY STRUCTURE
(by January 1, 2008)
|Other Existing
|--------| Unregulated
| |Subsidiaries
|
| |Service
|----------|Company
| |(CSWS)
|
|--------| Power |CPL |PSO |SWEPCO |WTU
| | Generation-----|Genco----|Genco----|Genco ----|Genco
| |Company (PGC)
|
|--------| Retail
| | Electric PSO
| |Provider (REP) Distco
CSW-------| |
|-----| Energy ERCOT SPP CPL | SWEPCO WTU
| Delivery Transco Transco Distco---|SPE | Distco Ditsco
|Company (EDC) | | | | | |
------------ | | | | | |
| | | | | | |
------------------------------------------------
Section C) Financial and Legal Aspects of Business Separation. This section
shall address the financial and legal aspects of the business separation
including, but not limited to, the following issues:
1. The impact of the reorganization on the capital structure of the
newly created companies:
(a) If common ownership is planned, what will be the capital
structures of the new affiliated unbundled companies?
Under the proposed plan, during Stage 1, it is anticipated
that the capital structures of the existing utility companies
will remain largely unchanged. Those capital structures as of
September 30, 1999, are as follows:
Capital CPL SWEPCO WTU
Common Equity 48.5% 52.6% 49.7%
Preferred Stock 0.1% 0.4% 0.5%
Trust Preferred 5.3% 8.5% 0.0%
Long-Term Debt 46.1% 38.5% 49.8%
Total 100.0% 100.0% 100.0%
Note: CPL amounts include pro-forma adjustments for the
reacquisition of $160 million of auction rate preferred stock
in November and December 1999 and the issuance of $200 million
of floating rate notes.
It is anticipated that the capital structures of the EDC, PGC
and the REP will be initially financed primarily with
short-term debt. During the Stage 1 period, as securities are
retired or refinanced at the existing utility companies, new
securities may be issued by the EDC or PGC. The capital
structures of the EDC, PGC and the REP at the end of the Stage
1 period are not known at this time. As conditions and the
financial markets' assessment of the risk profile of
disaggregated utilities change, the capital structure
requirements of the separate entities may change in order to
maintain targeted bond ratings. The capital structure of the
EDC will be provided in the April 1, 2000 Unbundled Cost of
Service filing. Ms. Hargus addresses this issue in her
testimony.
(b) How will violations of existing debt indentures be avoided?
Substantially all long-term debt of the existing utility
companies has been issued under first mortgage indentures and
unsecured debt indentures which contain covenants and other
contractual provisions which prohibit or provide significant
restrictions on the transfer of assets from the corporate
entities (the operating utility companies) which issued the
debt. Transfer of legal title to the T&D and generation assets
of the existing companies by January 1, 2002 would require
retirement and refinancing of at least a major portion of this
debt prior to January 1, 2002. This refinancing would cost an
estimated additional amount of $35 million based on current
interest rates. In the plan, CSW effects legal entity
separation by January 1, 2002 of the separate businesses to
the greatest extent consistent with compliance with the
contractual requirements of the security instruments of the
existing utility companies and the cost-effective retirement
of the debt. From and after January 1, 2002, the T&D and
generation operations and assets will be solely directed and
managed by the new EDC and PGC as first-tier subsidiaries of
CSW; the assets and liabilities of the existing utility
companies and some portion of their operating personnel will
remain at the existing utility companies during the Stage 1
transitional period under the plan, but will be totally
separated, subject to all code of conduct requirements, and
under the sole direction of the EDC or PGC, as applicable. The
REP business and assets will be legally separated and operated
from and after January 1, 2002. The Stage 1 transitional
period in the CSW plan will permit CSW to retire securities at
the lowest cost in accordance with their contract terms and
provides CSW with a greater opportunity to refinance when
market conditions are believed to be most advantageous. The
Stage 1 transitional period provides CSW an opportunity to
save at least $26 to 45 million net present value in
refinancing costs by completing the refinancing no later than
January 1, 2008 rather than by January 1, 2002. The testimony
of Ms. Hargus provides detail regarding the present debt
structures; the contractual restrictions on asset transfers;
CSW's plan to refinance debt during the Stage 1 transitional
period and the cost savings the Stage 1 transitional period
will allow.
(c) What restrictions will be imposed on common stock dividends
from the subsidiary to the parent company? None. It is
expected that the new subsidiary legal entities created by the
separation plan will pay dividends and continue to use
dividend policy to meet credit criteria and to balance their
capital structures. The testimony of Ms. Hargus addresses this
issue.
(d) What will be the allocation of financial liabilities, equity,
retained earnings, and any other stockholder accounts? The
capital requirements of the EDC, PGC, and the REP are expected
to be small during the Stage 1 transitional period and to be
financed primarily with short-term debt. The ultimate capital
structures of those companies and any other new legal entities
to be formed by 2008 are not known at this time.
(e) Will any new or existing credit support arrangements violate
P.U.C. SUBST. R. 25.272(d)(7) or PURA ss.39.157(d)(17)?
No. Refinancing of existing securities during the Stage 1
period will not involve any pledges of utility assets or cash
in violation of PURA or the rules of the PUCT. After Stage
2 begins in 2008, each of the separate EDC and PGC entities
will finance its own requirements. The testimony of Ms. Hargus
addresses this issue. Also, Mr. Roberson explains why the
plan does not violate PURA or the Commission's rules.
(f) Any other financial issues specific to the company which are
relevant to the separation; and
CPL is seeking a financing order from the Commission
permitting it to securitize approximately $1.3 billion of
regulatory assets and other qualified costs. The proceeds
from securitization will be used to retire CPL debt and
equity, including a significant portion of CPL's FMBs. That
request is pending before the Commission at this time. The
level of CPL debt retired through securitization will also
affect the cost of refinancing the remaining debt.
All of these issues are discussed in the testimony of Ms.
Hargus.
2. The legal structure of the newly created affiliated companies:
retail electric provider (REP) and power generation companies (PGC),
including:
(a) Structure (Corporation, Partnership, etc.);
The new entities may be organized as corporations, limited
liability companies, limited partnerships, or other entities
authorized by applicable state laws. No decision has yet been
made regarding the legal structures, although when a decision
is made it will be communicated to the Commission in a timely
manner.
(b) List of officers and directors, and to the extent that there
are shared officers and directors, certification by affidavit
describing the procedures and mechanisms in place to ensure
that such sharing does not circumvent P.U.C. SUBST. R.
25.272(d)(3) or PURAss.39.157(d)(9); and
The officers and directors of the newly-created affiliate
companies have not yet been named. It is likely that there
will be shared officers or directors during Stages 1 and 2
of the plan. A listing of those officers and directors will
be provided as soon as those decisions are made.
The affidavit of Mr. Roberson included as an attachment to
this section explains how the sharing of officers and
directors does not circumvent PUC Subst. R. 25.272 or PURA
ss.39.157(d)(9), (g), or (i).
(c) Location and legal mailing address of headquarters of each
company. The location and legal mailing address of the
newly-created REP and PGC have not yet been determined. That
information will be provided by the fourth quarter of 2000.
The location and mailing address of the new EDC, as explained
by Mr. Kissman, will be:
2 West 2nd Street
Tulsa, OK 74103
ATTACHMENT
SECTION
C
AFFIDAVIT OF MARK D. ROBERSON
1. My name is Mark D. Roberson. I am over 18 years of age and competent to make
this affidavit. I am employed by Central and South West Services, Inc. as Vice
President Regulatory Affairs. I am an officer of the Company. This affidavit is
filed pursuant to Section C-2 (b) of the Business Separation Plan Filing
Package.
2. In addition to my duties as Vice President, Regulatory Affairs, I will be a
member of the CSW Code of Conduct Management over sight team which will have
responsibility to ensure that the Code of Conduct is complied with in all
respects.
3. It is likely that after CSW's business separation plan is implemented the
newly created utility will share officers and directors with its competitive
affiliates. At this time CSW has not named any officers or directors of those
entities.
4. I have carefully reviewed the CSW Code of Conduct and I am familiar with its
provisions. In my opinion the following procedures and mechanisms contained
in ss.4.4 and 4.5 of the Code of Conduct ensure that the sharing of such
officers and directors will not circumvent PURA ss.39.157 (d)(9) or PUC SUBST.
R. 25.272(d)(3).
ss.4.4 Employee transfers and temporary assignments.
CSW will not assign, for less than one year, regulated company
employees engaged in transmission or distribution system operations
to a competitive affiliate unless the employee does not have
knowledge of confidential information.
Regulated company employees engaged in transmission or distribution
system operations, including persons employed by the EDC, who are
engaged in transmission system operations on a day-to-day basis
or have knowledge of transmission or distribution system
operations and are transferred to a competitive affiliate,
will not remove or otherwise provide or use confidential property
or information gained from the regulated company
or EDC in a discriminatory or exclusive fashion, to the
benefit of the competitive affiliate or to the detriment of
non-affiliated electric suppliers.
Movement of an employee engaged in transmission or distribution
system operations, including a person employed by the EDC, who
is engaged in transmission or distribution system operations
on a day-to-day basis or has knowledge of transmission or
distribution system operations from a utility to a competitive
affiliate or vice versa, may be accomplished through either
the employee's termination of employment with one company and
acceptance of employment with the other, or a transfer to another
company, as long as the transfer of an employee from the regulated
company to an affiliate results in the utility
bearing no ongoing costs associated with that employee. Transferring
employees will sign a statement indicating that they are aware of
and understand the restrictions and penalties set forth in this
code. The regulated company will also post a conspicuous notice of
such transfer on its Internet site or other public electronic
bulletin board within 24 hours and for at least 30 days. The
exception to this provision is that employees may be temporarily
assigned to an affiliate or non-affiliated utility to assist in
restoring power in the event of a major service interruption or
assist in resolving emergency situations affecting system
reliability. Consistent with the reporting requirements in part 5.
of Attachment A, within 30 days of such a deviation from the code of
conduct, the regulated company will report this information to the
appropriate regulatory commission and will conspicuously post the
information on its Internet site or other public electronic bulletin
board for 30 days.
ss.4.5 Sharing of office space.
The regulated companies' office space will be physically separate
from that of its competitive affiliates. The physical separation
will be accomplished first by having office space in separate
buildings. If separate buildings are not possible or practical, the
separation will be accomplished by having offices on different
floors with separate access, or the same floor with separate access.
Physical separations with electronic or other secured access will be
used to keep the regulated company's office space physically
separate from its competitive affiliates.
5. In addition to the above provisions in the CSW Code of Conduct, all
employees, officers and directors that serve in shared positions will
receive specific training regarding their responsibility to avoid the
sharing of any confidential information. Common officers and directors
between regulated and non-regulated businesses will be required to sign
statements annually indicating they understand the provisions of the Code
of Conduct and identifying any areas of concern for consideration by the
Code of Conduct Management Oversight Team.
6. A Code of Conduct Management Oversight Team will be established to ensure
compliance with the Code of Conduct in all respects. This team will meet
as required to resolve Code of Conduct issues and to monitor compliance
meetings will occur no less frequently than annually, as long as CSW is
subject to the provisions of the Code of Conduct.
/S/ MARK D. ROBERSON
MARK D. ROBERSON
SUBSCRIBED AND SWORN TO BEFORE ME this 7th day of January, 2000, to which
witness my hand and official seal.
/S/ STEVEN BEATY
NOTARY PUBLIC, STATE OF TEXAS
MY COMMISSION EXPIRES:
STEVEN BEATY
July 18, 1000 Print Name of Notary
Section D) Separation of Functions and Operations. This section shall provide
detailed information regarding the services provided by each company. The
description of activities shall be organized according to the following order.
1. Holding company:
(a) PGC;
The primary services of the power generation company (PGC)
will be the generation, purchase, and sale of energy and
capacity in the wholesale energy market and the delivery and
sale of generation-related ancillary services. These energy
services are being performed by the existing utility companies
at this time.
With the exception of the purchased power agreement for wind
power from the SW Mesa Renewable Energy Project and purchased
power agreements from qualifying facilities, all existing
purchased power agreements and market-based wholesale
contracts involving the CSW electric utilities will be
assigned to PGC. The cost-based wholesale contracts will
transfer to the PGC when legal ownership of the assets is
transferred. The purchased power agreement for wind power from
the SW Mesa Renewable Energy Project will be assigned to the
CSW REP. The treatment of purchased power agreements with
qualifying facilities under PURPA has not yet been determined,
pending formulation of ERCOT and PUCT rules.
In addition, PGC will perform operations or services that are
similar to services performed by CSWS Power Generation or
other affiliates today. These functions and services include
energy and gas trading, origination, scheduling and
settlements, and the development of renewable projects. These
functions and services are described in detail in the
testimony of Mr. Isenberg.
Further, there are three areas in which services have been or
could be performed for external customers of CSW by the power
generation company. Those services are Engineering Services,
Machine Shop Services, and Rail Car Maintenance Services.
These services are described in detail in the testimony of Mr.
Isenberg. The amount of work done to date in these areas has
been relatively small. No waiver of the Competitive Energy
Services rule is necessary for the provision of these services
by the power generation company for the following reasons.
Engineering Services were provided by CSWS under an
authorization by the SEC pursuant to an application on Form
U-1 and not on behalf of the regulated electric companies, and
the Competitive Energy Services rule allows competitive energy
services to be provided by a company separate and apart from
the regulated utility. The SWEPCO Machine Shop Services and
Railcar Maintenance Services are not the types of services
that are specifically listed in the rule as competitive energy
services. None of these services provides any of CSW's
electric operating companies a competitive advantage in the
developing retail market. Finally, all of these services will
be offered by the unregulated power generation company after
business separation. In the event the PUCT does determine that
any or all of these services are consistent with the
description of competitive energy services contained in the
rule, the power generation company seeks a good cause
exception to the rule to continue these services until January
1, 2002, for the reasons enumerated above.
Other competitive opportunities will be considered but have
not been identified at this time.
(b) Energy services previously performed by the regulated utility;
and
Generally, all of the operations, and services currently
performed and provided by CSWS, Power Generation will be
performed by the new power generation company. Exceptions
include transmission dispatch and certain environmental
services (environmental lab and waste management activities)
which will not be performed by the new power generation
company. Energy services previously performed by the
regulated utilities that will be performed by the power
generation company include the sale of energy and capacity
in the wholesale energy market and the provision of
generation-related ancillary services.
(c) Other internal supplementary functions and services
transferred from the regulated utility;
Internal supplemental functions and services transferred from
the existing utility companies or CSWS to the power generation
company will include:
- fossil generation plant management and oversight
- business planning including budgeting and forecasting
- fossil plant operations and maintenance
- technical support including engineering services to
plants
- asset utilization and optimization
- administrative support to plants
- technical training development and implementation
- production procurement (purchasing and contracting)
- machinery, welding and equipment repair
- STP management and oversight
- oil, gas, coal, and lignite supply and procurement
- fuel transportation arrangements
- fuel contract management
- generation dispatch
- energy and fuel accounting
- production-related regulatory reporting
- environmental services (air, water)
- environmental permitting
The organization chart of the proposed power generation company is
included in the attachments to this section. The testimony of Mr. Isenberg
provides detail regarding the operation of, and services to be provided
by, the power generation company.
2. Transmission and distribution utility (T&D Utility):
(a) System services;
System services are those services essential to the
transmission and distribution of electricity from the point of
interconnection of a generation source or third-party electric
grid facility to the point of interconnection with a retail
customer or other third-party facility. The main system
services to be offered by the new electric distribution
company (EDC) include transmission use of system, distribution
use of system, standard metering and billing services, street
lighting services, and the associated customer services. The
activities that must be performed to provide system services,
described in detail in the testimony of Mr. Kissman, include
the following:
Transmission System Services:
- The planning, design, construction, operation,
maintenance, repair, retirement, and replacement of
transmission facilities, equipment, and protective
devices
- The regulation and control of electricity in the
transmission system
- Transmission system voltage and power continuity
- Response to electric delivery problems, including
outages, interruptions, and voltage variations, and
restoration of service in a timely manner
- Commission-approved public education and safety
communication programs specific to transmission systems
- Transmission utility billing system services including,
but not limited to:
- generation of billing charges by application of rates
to customers' meter readings, as applicable;
- contract negotiation and administration with REPs,
end-use customers, and wholesale transmission
customers for services rendered;
- presentation of charges to REPs and wholesale
customers for the actual services provided and the
rendering of bills;
- extension of credit to and collection of payments
from REPs and wholesale customers;
- disbursement of funds collected ;
- customer account data management;
- customer information and call center activities
related to billing inquiries by REPs and wholesale
customers;
- administrative activities necessary to maintain
billing accounts for REPs and wholesale customers;
- an operating billing system;
- error investigation and resolution;
- electronic messaging and message handling; and
- certain environmental services.
- Transmission utility end-use customer service related to
system and discretionary services associated with energy
efficiency programs, demand-side management
administration, public safety advertising, tariff
administration, and other Commission-approved end-use
customer services.
Distribution System Services:
- The planning, design, construction, operation,
maintenance, repair, retirement, and replacement of
distribution facilities, equipment, and protective
devices
- The regulation and control of electricity in the
distribution system
- Distribution system voltage and power continuity
- Response to electric delivery problems, including
outages, interruptions, voltage variations, and
restoration of service in a timely manner
- Commission-approved public education and safety
communication programs specific to distribution systems
- Transmission and distribution utility metering system
services including, but not limited to:
- ownership of standard meter equipment and meter
parts;
- storage of standard meters and meter parts not in
service;
- measurement or estimation of the electricity
consumed or demanded by an end-use consumer
during a specified period limited to the customer
load usage necessary for the rendering of electric
bills;
- meter calibration and testing;
- non-interval, interval, and remote meter reading;
- individual customer outage detection and usage
monitoring;
- theft detection and prevention;
- customer account maintenance;
- installation or removal of metering equipment;
- operating metering system; and
- error investigation and re-reads.
- Distribution utility billing system services including
but not limited to:
- generation of billing charges by application of
rates to end-use customers' meter readings, as
applicable;
- contract negotiation and administration with REPs
for services rendered;
- presentation of charges to REPs for the actual
services provided and the rendering of bills;
- extension of credit to and collection of payments
from REPs;
- disbursement of funds collected;
- customer account data management;
- activities related to handling billing inquiries
from REPs on behalf of end-use customers;
- administrative activities necessary to maintain a
REP billing account;
- an operating billing system and support;
- error investigation and resolution; and
- electronic messaging and message handling.
- Distribution utility end-use customer services relating
to system and discretionary services associated with
energy efficiency programs, demand-side management
programs, public safety advertising, tariff
administration, and other Commission-approved end-use
services
- Street lighting service
(b) Discretionary services;
Discretionary services are services that are related to, but
not essential to, the transmission and distribution of
electricity from the point of interconnection of a generation
source or third-party electric grid facilities to the point of
interconnection with a retail customer or other third-party
facilities. At this time, it is anticipated that the EDC will
offer non-standard system connections or expansions as
discretionary services. These services include all
non-standard T&D facilities requested by the end-use customer,
such as the provision of redundant service or special filter
or voltage control devices, standard facilities in excess of
the standard line extension policy, and non-standard or
special metering required by wholesale and large end-use
customers.
(c) Non-energy services; and
The EDC will offer other services which maximize the value of
existing T&D system service facilities and are provided using
existing personnel and facilities that are essential to the
provision of T&D system services. These services will be
provided on a nondiscriminatory basis to third parties,
including cooperatives, municipals, wholesale customers, cable
companies and telecommunications companies. Provision of these
services allows the EDC to leverage existing facilities,
equipment, contracts, and personnel, thereby reducing the
overall cost of service. These services include the following:
- Telephone and cable pole attachments
- Contract tree management and forestry services
- Dispatching operation services for transmission
facilities of other T&D utilities interconnected with
the T&D facilities of CSW
- Right-of-way leasing
- Provisions of emergency assistance to restore electric
service
- Transmission line and substation maintenance and
operation services
- Leasing of FCC-approved frequencies
(d) Competitive energy services continued to be provided by the
utility pursuant to commission waiver;
Competitive energy services are defined as "business
activities which are capable of being provided on a
competitive basis in the retail market." The EDC has no plans
to offer competitive energy services after December 31,
2001. CSW does, however propose to continue the provision
of information relating to customer usage other than as
required to render electric bills, including pulse metering,
for the period September 1, 2000 through December 31, 2001,
to allow time for end-use customers taking this service to
transition to new providers of this service. CSW plans to
discontinue offering this service to new end-use customers
after September 1, 2000 and will cease to offer it as
of January 1, 2002. CSW may consider filing a petition to
continue offering the service with the Commission at a later
date if customers are unable to obtain similar services from
alternative providers and continue to want the service. Since
these are tariffed services, CSW proposes to continue these
services in accordance with the treatment of outdoor security
lighting by the Commission and a waiver is sought only if one
is necessary. The testimony of Mr. Kissman and Mr. Berny
address this request.
CSW also intends to continue providing tariff-related
transformation services currently offered by SWEPCO. CSW does
not believe that these services fall within the definition of
competitive energy services and accordingly no waiver is
sought for the continued provision of the services. If the
Commission disagrees, CSW proposes to resolve this issue as
set forth in the testimony of Messrs. Berny and Roberson.
The organization charts for the proposed T&D utility are included in
the attachments to this section.
3. REP;
The primary purpose of CSW's REP will be to provide retail electric
service to end-use customers. To accomplish this, the REP will
acquire wholesale energy supply and necessary transmission services
to meet its customers' needs. The REP will also provide other
support services necessary to meet customers needs, including
end-use customer billing services, end-use customer credit services,
and end-use customer inquiry services. The testimony of Robert G.
Goumaz addresses the functions of the REP.
4. Competitive energy services previously performed by the regulated
utility;
CSW does not intend to transfer any of the competitive energy
services currently offered by its existing utility companies to its
REP. However, to the extent the dissolution of the WTU merchandising
business is not complete by September 1, 2000, any remaining assets
and related liabilities would be transferred from WTU, but no
decision has been made as to whether the assets and liabilities will
be transferred to the REP. It is likely that CSW's REP may provide
competitive energy services as the market evolves and customers'
requirements become better understood. Some of the services may
be similar to those provided by the existing integrated utilities.
However, any such services will be developed separate and apart
from the competitive energy services currently offered by the
existing integrated utility companies.
5. Other internal supplementary functions and services transferred from
the regulated utility;
The internal supplementary functions and services to be transferred
from the existing utility companies to the REP include the
following:
- Customer Accounting: the routine maintenance of customer
accounts.
- Customer Inquiries: primary communication with REP customers
regarding service issues.
- Technology Support: the required support for maintaining
the REP' automated systems, computer hardware, and user
support.
- Supply Acquisition: the acquisition of energy supply from
a variety of sources. While similar functions are performed
by the integrated utility companies today, these functions
are not expected to be transferred to the REP.
- Business Operations: the back office requirements of the REP.
- T&D Utility Coordination: the ongoing coordination with
multiple T&D utilities. While resources in the existing
integrated utility companies may have the skills required, the
function itself does not exist and therefore cannot be
transferred.
- Sales and Account Management: sales and account management
activities. While resources in the existing integrated utility
companies may have the skills required, the operation itself
does not exist and therefore cannot be transferred.
The organization chart for the proposed REP is included in the
attachments to this section.
6. Corporate support services (CSS)(addressed separately in Section H);
and
Corporate support services are addressed separately in Section H.
7. Other affiliates (newly created and existing).
The company shall also provide supporting organization charts
including the numbers of employees. The charts should have a pyramid
structure with the top chart showing the organization of the holding
company and all affiliated companies. For the PGC, T&D utility, REP,
and CSS, charts shall show activities at the manager level.
The following is a listing of other currently existing affiliates.
No new affiliates, other than those addressed elsewhere in this
BSP-FP, are contemplated at this time.
CSW Energy - Develops, acquires, constructs, and owns and operates
independent power projects in the United States. CSW Energy
currently has 214 employees. An organization chart is included in
the attachments to this section.
CSW International - Engages in international activities including
developing, acquiring, financing and owning the securities of exempt
wholesale generators and foreign utility companies. CSWI currently
has no employees. Therefore, no organization chart exists.
C3 Communications - Provides automated metering, interval meter data
and related products and services, and high-capacity city to city
fiber networks for telecommunications carriers and other wholesale
customers. Currently, C3 Communications employs approximately 100
people. An organization chart is included in the attachments to this
section.
Enershop - Provides energy services and energy service engineering
and currently has 10 employees. An organization chart is included in
attachments to this section.
CSW Corporation - The parent company provides short-term financing
through the CSW Money Pool. There are no employees of CSW
Corporation. Therefore, no organization chart exists.
CSW Credit - Purchases (factors) the accounts receivable from
the U.S. electric subsidiaries and other utilities. There are no
employees at CSW Credit. Therefore, no organization chart exists.
CSW Leasing -Leases long-term transportation equipment. There are no
employees in CSW Leasing. Therefore, no organization chart exists.
CSW Energy Services - Seeks to secure electricity supply business in
states which will permit retail competition. There are no CSW Energy
Services employees. Therefore, no organization chart exists.
SEEBOARD - One of the 12 regional electric companies formed as a
result of the restructuring and subsequent privatization of the
United Kingdom electric industry in 1990. CSW acquired indirect
control of SEEBOARD in 1996. SEEBOARD's principal business is the
distribution and supply of electricity. In addition, SEEBOARD is
engaged in gas supply, electric generation, and electrical
contracting.
SEEBOARD employs approximately 3,900 people. An organization chart
is included in the attachments to this section.