lated proceeding, the Commission had rejected intervention and a request for reopening the hearing (filed 15 months after its close) by the same two cities. It approved the acquisition by Middle South of the common and preferred stocks of Arkansas-Missouri Power Company, an unaffiliated company. The Commission conditioned its approval upon Middle South's filing a plan under Section 11(e) of the Act to eliminate any resulting minority interest 9 and upon the divestment of the gas utility and ice business of Arkansas-Missouri.10 The cities filed petitions for review of the Commission decision. At the end of the fiscal year the matter was under advisement by the court of appeals.11

Union Electric Company.12 Union, an exempt holding company and an electric and gas utility company, applied to acquire (through an invitation for tenders) the outstanding shares of common stock of Missouri Utilities Company, a nonassociate electric and gas utility company. Hearings were concluded during the fiscal year and briefs were filed with the hearing officer. The Division of Corporate Regulation opposed the application. The Division urged, among other things, that the proposed exchange offer is not reasonable; that the expansion of a combined electric and gas utility system is contrary to the Act; and that Union has failed to make the requisite showing of economies and efficiencies to result from the proposed acquisition. The Division also opposed granting a requested exemption to Union under Section 3(a)(2), except upon the conditions that (1) the gas properties of Union and its subsidiary companies, and (2) the gas and water properties of Missouri Utilities be divested.

Two proceedings pending before the Commission for decision at year-end present the question of whether a holding company, whose utility operations are intrastate but which diversifies into unrelated non-utility activities, is entitled to an intrastate exemption. The Di

vision has taken the position that such activities are detrimental to public, investor and consumer interests, and that therefore their retention precludes the grant or continuation of the exemption. In one of the cases, an application for exemption was filed by National Utilities & Industries Corp., whose utility subsidiary company, Elizabethtown Gas Company, distributes natural gas at retail in New Jersey.13 In Pacific Lighting Corporation, proceedings were instituted by the Commission to determine whether an exemption granted to Pacific in 1936 should be revoked or modified because of Pacific's diversification into non-utility ventures unrelated to the operations of its utility subsidiary company, Southern California Gas Company.14

FINANCING

During fiscal 1972, a total of 16 active registered holding-company systems issued and sold 67 issues of long-term debt and capital stock for cash, aggregating $2.79 billion 15 pursuant to authorizations granted by the Commission under Sections 6 and 7 of the Act. All of these issues were sold at competitive bidding to raise new capital. The public utility financing table in the statistical section presents the amount and types of securities issued and sold by these holding company systems.

The volume of external financing during fiscal 1972 set a new record, representing an increase of 13 percent over fiscal 1971, the previous record year. Preferred stock and common stock issued and sold increased by 101 percent and 24 percent respectively, while the amount of debentures issued and sold in fiscal 1972 decreased by 77 percent from fiscal 1971.

This unprecedented volume of financing was accompanied by further deterioration in the earnings coverages of interest and preferred dividends. For the calendar year 1971, the 17 active registered holding-company systems earned

their interest and preferred dividend requirements an average of 2.04 times (after taxes) as compared to 2.19 times in 1970 and 2.93 times in 1966.

LEGISLATION

During the fiscal year, a bill (S. 1991, 92nd Cong.) which would amend the Act to grant authority to the Commission to permit companies subject to the Act to invest limited amounts in low and moderate cost housing projects under programs subject to certain federal housing statutes was reported favorably by the Senate Committee on Commerce. On July 21, 1972, the Senate passed an amended version of S. 1991. An identical bill was introduced in the House (H.R. 6711), but no committee report has been issued. This legislation was an outgrowth of a Commission decision 16 holding that such investments were not permissible under the Act in its present form.

NOTES FOR PART 6

1 Three of the 20 were subholding utility companies in these systems. They are The Potomac Edison Company and Monongahela Power Company, publicutility subsidiary companies of Allegheny Power System, Inc., and Southwestern Electric Power Company, a public-utility subsidiary company of Central and South West Corporation.

2 These holding companies are British American Utilities Corporation; Kinzua Oil & Gas Corporation and its subsidiary

company, Northwestern Pennsylvania Gas Corporation; and Standard Gas & Electric Company, which has been dissolved and its assets distributed.

3 Holding Company Act Release No. 17530 (April 5, 1972).

4 Previously reported in 37th Annual Report, p. 170; 36th Annual Report, p. 160; 35th Annual Report, p. 149; 34th Annual Report, p. 138.

5 Previously reported in 37th Annual Report, p. 168; 36th Annual Report, p. 160; 35th Annual Report, p. 148; 34th Annual Report, p. 138.

6 Previously reported in 37th Annual Report, p. 170.

7 Cities of Lafayette and Plaquemine, Louisiana V. SEC, 454, F. 2d 941 (C.A.D.C., 1971).

8 Previously reported in 37th Annual Report, p. 171.

9 The plan was approved by the Commission (Holding Company Act Release No. 17446, February 1, 1972) and enforced by the U.S. District Court for the District of Missouri by order dated April 28, 1972 (Civ. Action No. 72C199(2)).

10 The Commission subsequently granted an extension of time within which to complete such divestment (Holding Company Act Release No. 17631, June 27, 1972).

11 Cities of Lafayette and Plaquemine, Louisiana v. SEC, C.A.D.C., No. 71-1337. 12 Previously reported in 37th Annual Report, pp. 172-73.

13 Previously reported in 37th Annual Report, p. 172.

14 Holding Company Act Release No. 17217 (August 3, 1971).

15 Debt securities are computed at their price to company, preferred stock at the offering price, and common stock at the offering or subscription price.

16 Michigan Consolidated Gas Company, Holding Company Act Release No. 16763 (June 22, 1970), aff'd 444 F. 2d 913 (C.A.D.C., 1971).

The Commission's role under Chapter X of the Bankruptcy Act, which provides a procedure for reorganizing corporations in the United States district courts, differs from that under the various other statutes which it administers. The Commission does not initiate Chapter X proceedings or hold its own hearings, and it has no authority to determine any of the issues in such proceedings. The Commission participates in proceedings under Chapter X to provide independent, expert assistance to the courts, participants, and investors in a highly complex area of corporate law and finance. It pays special attention to the interests of public

security holders who may not otherwise be represented effectively.

Where the scheduled indebtedness of a debtor corporation exceeds $3 million, Section 172 of Chapter X requires the judge, before approving any plan of reorganization, to submit it to the Commission for its examination and report. If the indebtedness does not exceed $3 million, the judge may, if he deems it advisable to do so, submit the plan to the Commission before deciding whether to approve it. When the Commission files a report, copies or summaries must be sent to all security holders and creditors when they are asked to vote on the plan. The Commission has