IN THE MATTER OF MIDDLE SOUTH UTILITIES, INC. ARKANSAS POWER & LIGHT COMPANY File Nos. 59-100,54-139. Promulgated March 20, 1953. (Public Utility Holding Company Act of 1935-Section 2 (a) (29) (A)) INTEGRATION OF HOLDING COMPANY SYSTEM Retainability of Integrated Electric System Where electric utility assets controlled by a registered holding company are shown to be interconnected and economically operated, and where in other respects such assets meet the definition of a public utility system contained in Section 2 (a) (29) (A) of the Act, and where Commission has previously made prima facie determination of integration, held that retention of such properties as the principal utility system is appropriate under Section 11 (b) (1). Non-Retainability of Additional System Where subsidiary of registered holding company conducts both electric and gas operations and electric operations are held to be part of integrated electric utility system, held that gas properties are not retainable as additional system, the Commission finding that evidence is not sufficient to justify finding that "loss of substantial economies" would be incurred if retention of gas system were not permitted. Non-Retainability of Other Businesses Minor steam and water operations of subsidiary of registered holding companies held not to be retainable as reasonably incidental or economically necessary or appropriate to operation of principal electric utility system. APPEARANCES: Daniel James and Robert Krones, of Cahill, Gordon, Zachary & Reindel, New York, New York, for Middle South Utilities, Inc. L. J. Darrah, of Jones, Walker & Waechter, New Orleans, Louisiana, for New Orleans Public Service, Inc. J. Raburn Monroe, of Monroe & Lemann, New Orleans, Louisiana, for Louisiana Power & Light Company. Marvin S. Fink, for the Division of Public Utilities of the Securities and Exchange Commission. 35 S. E. C.-85- -11782 1 FINDINGS AND OPINION OF THE COMMISSION These proceedings concern the status of Middle South Utilities, Inc. ("Middle South"), a registered holding company, and its subsidiaries under the provisions of Section 11 (b) (1) of the Public Utility Holding Company Act of 1935 ("Act"). On March 7, 1949, the Commission issued its Order under Section 11 (e) of the Act approving a plan for the dissolution of Electric Power & Light Corporation ("Electric"), a registered holding company,' on the basis of the Commission's Findings and Opinion of March 1, 1949. Subsequent to court approval, the plan was consummated in May and July 1949. That plan, which provided for the dissolution of Electric and the retirement of its outstanding securities through the exchange of portfolio securities, also provided for the creation of a new holding company, Middle South, which acquired from Electric the latter's holdings of the common stocks of Arkansas Power & Light Company ("Arkansas") (100%), Louisiana Power & Light Company ("Louisiana") (100%), Mississippi Power & Light Company ("Mississippi") (100%), and New Orleans Public Service, Inc. ("New Orleans") (95.2%). Each of these companies at that time owned and operated electric utility properties and gas utility properties, and in addition, certain of the companies owned and operated non-utility properties. Middle South also acquired from Electric all of the securities of Gentilly Development Company ("Gentilly"), a non-utility land company. Since Middle South's organization, Arkansas has disposed of its transportation and gas properties, and Mississippi has disposed of its gas properties." At the present time, Arkansas and Mississippi are engaged almost entirely in electric operations. Louisiana conducts electric and gas properties, and New Orleans is engaged in electric, gas and transportation operations. In addition, certain of the subsidiaries have minor steam and water facilities. Gentilly has disposed of its land and now has only cash. In our Findings and Opinion on the Electric plan, we stated that we could approve the creation of Middle South as a holding company although we were not prepared at that time to make the definitive 1 Electric Power & Light Corporation, Holding Company Act Release No. 8906 (March 7, 1949). Electric Power & Light Corporation, 29 S. E. C. 52 (1949). In Re Electric Power & Light Corporation (unreported) Civ. Action No. 49-347 (S. D. N. Y., April 22, 1949), aff'd 176 F. 2d 687 (C. A. 2, 1949) stay denied 337 U. S. 903 (1949). ▲ Arkansas Power & Light Company, 32 S. E. C. 1 (1950) (Gas properties); Arkansas Power & Light Company, Holding Company Act Release No. 10310 (Transportation properties). Mississippi Power & Light Company, 33 S. E. C. 13 (1952). Louisiana disposed of its transportation properties on March 1, 1949. findings required under Section 11 of the Act with respect to the integrated nature of the electric properties or the retainability of the non-electric properties. Accordingly, in our Order of March 7, 1949 approving the Electric plan, we reserved jurisdiction to institute and conduct such further proceedings under Section 11 (b) of the Act with respect to Middle South as may be necessary or appropriate. On January 29, 1953, we issued an Order, convening hearings pursuant to Section 11 (b) (1), directed to Middle South, Arkansas, Louisiana, Mississippi and New Orleans as Respondents, setting forth the following issues: "1. Whether the jurisdiction heretofore reserved in the order of March 7, 1949 with respect to the Middle South holding company system under Section 11 (b) of the Act should be released. 2. Whether the Commission's prima facie determination that the electric utility assets of the Middle South holding company system constitute an integrated electric utility system as defined in Section 2 (a) (29) (A) of the Act and constitute its principal public-utility system as set forth in Section 11 (b) (1) of the Act should be made definitive and final. 3. Whether Middle South and Louisiana should be required to take action to dispose of the gas utility assets and nonutility assets of Louisiana and, if so, what terms and conditions should be imposed in connection therewith. 4. What further action should be required at this time of the respondents under Section 11 (b) (1) of the Act." In their answer filed pursuant to direction of the Commission in the order convening the hearing, Respondents claimed that the electric properties of the four public utility companies constituted an integrated electric utility system and were retainable as Middle South's principal system; Middle South and Louisiana claimed that the gas properties of Louisiana could be retained as an additional system; and Middle South and New Orleans stated that the gas properties and transportation properties of New Orleans together with the electric properties of that Company are operated under a unitary franchise under which the City of New Orleans has the right to require that all three services be rendered by the holder of the franchise. At the public hearing, a representative of the City of New Orleans testified in support of the City's position as set forth in the answer of Middle South and New Orleans, and to the further effect that the City was opposed to segmentation of the gas, electric and transportation properties of New Orleans. No other representatives of public bodies or security holders' interests appeared at the 388606-57-2 |