SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 18, 2000
Exact name of registrant as specified in its
charter, State or other jurisdiction of incorporation
or organization, Address of principal executive
Commission offices and Registrant's Telephone Number, IRS Employer
File Number including area code Identification No.
- ----------- ------------------------------ ------------------
1-12927 NEW CENTURY ENERGIES, INC. 84-1334327
(a Delaware Corporation)
1225 17th Street
Denver, Colorado 80202
Telephone (303) 571-7511
1-3789 SOUTHWESTERN PUBLIC SERVICE COMPANY 75-0575400
(a New Mexico Corporation)
Tyler at Sixth
Amarillo, Texas 79101
Telephone (303) 571-7511
This combined Form 8-K is separately filed by New Century Energies Inc.
("NCE") and Southwestern Public Service Company ("SPS"). Information contained
herein relating to any individual company is filed by such company on its own
behalf. Each registrant makes representations only as to itself and makes no
other representations whatsoever as to information relating to the other
registrant.
Item 5. OTHER EVENTS
On April 18, 2000, SPS entered into a Stipulation with the staff of the
Public Utility Commission of Texas ("PUCT") and other significant parties, which
was filed with the PUCT, and among other things, specifically addresses SPS's
implementation plans to meet the requirements of the Texas deregulation
legislation enacted in June 1999, Senate Bill 7 ("SB-7"). Such Stipulation, as
summarized in the attached press release (filed as Exhibit 99 in Item 7.
FINANCIAL STATEMENTS AND EXHIBITS), provides for the SPS implementation of full
retail customer choice in its Texas service region and provides for the future
divestiture of certain SPS generation assets. The Stipulation also resolves
certain issues related to the proposed merger between NCE and Northern States
Power Company ("NSP") (the "NCE/NSP Merger") and concludes that such merger is
in the public interest. The NCE/NSP Merger is expected to be complete in
mid-2000. The NCE/NSP Merger is expected to be a tax-free stock-for-stock
exchange for NCE shareholders and to be accounted for as a pooling-of-interests.
Additional information regarding these matters is discussed in the NCE and SPS
1999 Annual Report on Form 10-K. The discussion below addresses important
financial implications and issues related to this Stipulation, pending final
regulatory approval.
SB-7 requires SPS to unbundle its business activities into three separate
legal entities no later than January 1, 2002. The three entities are a power
generation company, a regulated transmission and distribution company and a
retail electric provider. Prior to this legal separation, SPS will be required
to address the provisions limiting or otherwise affecting such activities
contained in its first mortgage bond indenture and in connection therewith, SPS
is planning some or all of the following: open market purchases and/or tender
offer and/or monetary defeasance of all outstanding first mortgage bonds.
Overall, SB-7's objective is to introduce full retail competition into the
Texas electric utility industry. SB-7 limits the market share that a single
generation provider can control to 20% of the generating capacity within a power
region. The establishment of a qualified power region with multiple generation
suppliers is required under SB-7 in order to implement full retail competition.
For SPS to comply with this qualified power region requirement, approximately
2,843 megawatts of existing power generation assets or capacity must be sold to
third party non-affiliates of NCE and NSP by January 1, 2006. Additionally, as
part of the Stipulation, SPS has agreed to divest 1,750 megawatts, at a minimum,
by January 1, 2002. Accordingly, management believes that this divestiture is in
response to the legal requirements of SB-7 and, believes that this divestiture
can occur consistent with the pooling-of-interests accounting requirements. The
Stipulation provides if the Securities and Exchange Commission ("SEC"), through
issuance of a final non-appealable order or other final non-appealable ruling,
determines that the divestiture would be a pooling violation, the divestiture
would be scheduled consistent with meeting the SEC's pooling-of-interests
requirements.
SPS prepares its financial statements in accordance with Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation", ("SFAS 71"), as amended (see the SPS 1999 Annual Report on
Form 10-K). The Emerging Issues Task Force of the Financial Accounting Standards
Board reached a consensus in Issue No. 97-4, "Deregulation of the Pricing of
Electricity" ("EITF 97-4") indicating that when deregulatory legislation is
passed or when a rate order (whichever is necessary to effect change in the
jurisdiction) that contains sufficient detail for an enterprise to reasonably
determine how the transition plan will affect the separable portion of its
business whose pricing is being deregulated is issued, the enterprise should
stop applying SFAS 71 to that separable portion of its business. Deregulation
legislation has been enacted in Texas and New Mexico and now a settlement has
been achieved with all intervenors in Texas. Absent final approvals of the
Stipulation and such transition plans by the PUCT and the New Mexico Public
Regulation Commission, significant uncertainties continue to exist which
preclude a reasonable determination of the impacts of the deregulation of SPS'
generation business and discontinuing the application of SFAS 71 to that
operation. SPS will discontinue the application of SFAS 71 related to the
generation portion of its business when the provisions of EITF 97-4 have been
met, which may be later in 2000. The accounting for the discontinuation of the
application of SFAS 71 could include the write-off of the generation related
regulatory assets and an impairment of other assets resulting from deregulation.
Additionally, there may be other significant financial implications of
implementing SB-7 and electric restructuring in New Mexico. These implications
include, but are not limited to, the refinancing of securities, investments in
information technology, establishing an independent operation of the electric
transmission systems, implementing the procedures to govern affiliate
transactions, the pricing of unbundled energy services and the regulatory
recovery of incurred costs related to these issues. SPS is diligently working to
satisfy the conflicting legislative and regulatory requirements in developing
its transition plans.
The resolution of these matters may have a significant financial impact on
the financial position, results of operations and cash flows of SPS and NCE.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99 Press release dated April 19, 2000
FORWARD LOOKING INFORMATION
The above discussions include "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Investors and prospective investors are cautioned that the
forward-looking statements contained herein with respect to the revenues,
earnings, capital expenditures, resolution and impact of litigation and
regulatory matters, competitive performance, or other prospects for the business
of New Century Energies, Inc., and/or Southwestern Public Service Company or
their affiliated companies, including any and all underlying assumptions and
other statements that are other than statements of historical fact, may be
influenced by factors that could cause actual outcomes and results to be
materially different than projected. Such factors include, but are not limited
to, the effects of weather, future economic conditions, the performance of
generating units, fuel prices and availability, regulatory decisions and the
effects of changes in state and federal laws, the pace of deregulation of
domestic retail natural gas and electricity markets, the timing and extent of
change in commodity prices for all forms of energy, capital spending
requirements, the evolution of competition, earnings retention and dividend
payout policies, changes in accounting standards, the implementation of the
stipulation, the consummation of the proposed merger with Northern States Power
Company and/or other factors. From time to time, New Century Energies, Inc. and
Southwestern Public Service Company may publish or otherwise make available
forward-looking statements. All such subsequent forward-looking statements,
whether written or oral and whether made by or on behalf of each company, are
also expressly qualified by these cautionary statements.
Exhibit 99
JOINT NEWS RELEASE
New Century Energies, Inc. Contact:
Denver, Colorado Media Relations (806) 378-2116
Investor Relations (303) 294-2588
For Release April 19, 2000 Four pages
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Reference: SPS to Lower Electricity Prices,
Agrees To Sell Five Power Plants
`Transition to Competition Plan' Announced
AMARILLO, TEXAS, April 19, 2000 -- Southwestern Public Service Company
today announced it will reduce future electricity prices to most of its
customers in Texas by 7 percent, and, beginning in 2001, will sell to
competitors at least two-thirds of its electric-power generating capacity.
The changes will allow SPS customers to join the majority of the state in
choosing among competing power suppliers as early as Jan. 1, 2002, said SPS
President David Wilks.
Texas law enacted in 1999 requires that for a region to be "qualified" to
be opened to electric competition, no one supplier may own more than 20 percent
of the generation available to serve the region. SPS owns about 70 percent of
the generation in its region. The Public Utility Commission of Texas required
SPS to address its "transition to competition" plan as part of the approval
process for the proposed merger between SPS-parent New Century Energies
(NYSE:NCE) and Northern States Power (NYSE:NSP).
A settlement agreement on the merger and on the transition plan will be
filed with the commission today. The agreement is among SPS, the commission
staff, the Office of
(more)
(SPS to lower prices, sell five power plants; April 19, 2000; page 2 of 4)
Public Utility Counsel, the Texas Industrial Electric Consumers and the Texas
Attorney General's office. SPS also reached related agreements with the Canadian
River Municipal Water Authority and with its rural electric cooperative
wholesale customers in Texas. A PUCT open meeting on the merger application
likely will be scheduled in May.
The price reduction will be in two phases, Wilks said. Upon Texas approval
of the merger, $4.8 million in annual merger-related savings will be passed
through to Texas customers, resulting in an average 1 percent base price
decrease. The bill for a residential customer using 1,000 kilowatt-hours a month
will decline by $0.47, from $64.24 to $63.77.
When full competition begins - likely, Jan. 1, 2002 - there will be an
additional, legislatively mandated $12.4 million, or 6 percent, reduction in
prices for service to residential and small business customers. The additional
monthly savings for the 1,000-kWh residential customer will be $3.83.
Afterward, SPS's rates for residential and small-business customers will
not increase for at least five years, as required by Texas law.
A primary goal of the transition plan is to bring new providers of
electric service into the area, Wilks said. The agreement describes sales of
power plant required before the SPS-served region in Texas would be designated
by the commission as "qualified" to allow customer choice.
The plan anticipates the sale of at least 2,864 megawatts of SPS
generating capacity to meet the customer-choice requirements. The amount is
about 64 percent of the 4,472 megawatts of capacity owned by SPS and its
affiliates at 13 plants in Texas and New Mexico. The agreement also states SPS
may sell 3,191 megawatts, or 71 percent, of its capacity, if the commission
deems the larger amount necessary to "qualify" the SPS-served region for
competition among suppliers. SPS and its affiliates will retain either 1,608 or
1,281 megawatts of capacity in Texas and New Mexico, fueled primarily by natural
gas.
(more)
(SPS to lower prices, sell five power plants; April 19, 2000; page 3 of 4)
The agreement says SPS will sell the following plants to meet customer-choice
requirements:
- Tolk Station, coal-fueled, 1,080 megawatts, Muleshoe, Texas
- Harrington Station, coal-fueled, 1,066 megawatts, Amarillo, Texas
- Jones Station, natural gas-fueled, 486 megawatts, Lubbock, Texas
- Moore County plant, natural gas-fueled, 48 megawatts, Dumas, Texas, and
- one of SPS's two natural gas-fueled power plants near Hobbs, New Mexico:
either 184-megawatt Maddox Station (to meet the 2,864 MW-sold threshold),
or 511-megawatt Cunningham Station (to meet the 3,191 MW-sold threshold).
Wilks said he expects some or all of the plants to be sold before the end
of 2001.
The company has engaged Lehman Brothers as financial adviser on the
divestiture.
No matter who the owners of the sold power plants may be, the plants
involved will continue to operate and to serve customers in the region, Wilks
said.
"The plants aren't going anywhere," he said. "We know these facilities are
important to electric customers in our entire region, and especially to the
communities in which they are located. In fact, SPS will be contracting to
purchase power from the plants from their new owners to meet our continuing
obligation to serve customers and to ensure reliability.
"Agreeing to part with any of our power plants and their crews -
important, valued employees -- is the most difficult decision we have made,
ever," Wilks said. "We designed and engineered most of our plants in-house. They
are among the most efficient in the nation. The plants and their crews have been
a source of great pride at our company for generations. I believe there is not a
finer group of plant employees anywhere."
SPS will work to assure a smooth transition for employees affected by
sales of the plants, Wilks said.
"In October we filed with the Texas commission a proposed plan for a much
smaller sale and a delay in bringing full customer choice to the SPS service
area," he said. "We recognize, however, that retail electric competition is
becoming a reality and is
(more)
(SPS to lower prices, sell five power plants; April 19, 2000; page 4 of 4)
something expected by customers not only in Texas, but in states throughout
America. Utilities nationwide are being required to sell generation. About 17
percent of the fossil-fueled generation capacity in the United States has been
sold or listed for sale in the past four years."
Wilks added, "Despite the required sale of some SPS generation, New
Century Energies will remain a major generator of power and is continuing to
expand its generating capabilities in other regions of the country."
New Century Energies and Northern States Power now have gained approval or
reached settlement agreements in all states requiring merger approval. The
merger also has been approved by the Federal Energy Regulatory Commission.
ABOUT NCE:
New Century Energies was formed by the 1997 merger of Public Service Co.
of Colorado and Southwestern Public Service Company. NCE serves approximately
1.6 million electric customers and more than one million natural gas customers
in Colorado, Texas, New Mexico, Wyoming, Kansas and Oklahoma.
The Denver-based holding company has operating revenues of more than $3.3
billion. Through its subsidiaries, it provides a full range of energy expertise
including the generation, transmission and distribution of electricity, natural
gas distribution, energy trading and marketing, engineering services and
non-utility generation projects. The company also owns a 50 percent interest in
Yorkshire Electricity, which serves more than two million customers in a
northwest portion of the United Kingdom.
NCE plans to merge with Minneapolis-based Northern States Power, to form
Xcel Energy, in the summer of 2000.
###
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEW CENTURY ENERGIES, INC.
/s/Richard C. Kelly
-----------------------------
Richard C. Kelly
Executive Vice President and
Chief Financial Officer
SOUTHWESTERN PUBLIC SERVICE COMPANY
/s/Brian P. Jackson
-----------------------------
Brian P. Jackson
Senior Vice President, Finance and
Administrative Services,
Chief Financial Officer and Treasurer
Dated: April 19, 2000