changed circumstances indicated that the plan was no longer fair and equitable. No challenge has been taken either to this finding or to that portion of the order vacating prior approval of the plan. The status of the old plan is, therefore, exactly the same as though it had been originally disapproved. Thus the basis for the entry of the 11 (b) (2) order in the instant case is even stronger than in the American Power & Light case since the order here was issued only after full hearing and disapproval of the earlier 11 (e) plan. In so far as this argument is advanced to indicate Delaware's good faith in filing its plans, we have already discussed above and in our previous opinion the reasons why the company's good faith is not in issue. Finally, Delaware urged that the new plan had not yet been the subject of a hearing under Section 11 (e). As we have indicated, this plan is now the subject of a pending hearing and will be given proper consideration at the conclusion of such hearing. However, it is clear that the filing of this new plan cannot operate as a stay to prevent otherwise appropriate action under Section 11 (b) (2). As the Court stated in the American Power & Light case, such a filing does not "oust the Commission of jurisdiction to enter its orders under § 11 (b) (2). That jurisdiction grows out of the statutory command that the Commission declare by order, as soon as practicable, what each holding company system requires by way of integration and simplification." (91 L. ed. at p. 106). The ultimate objective specified in our 11 (b) (2) order is identical with the ultimate objective of each of the company's plans. The company has never disputed the validity of that objective. Accordingly, its challenge here in substance and effect is that it should not be placed under any compulsion to comply with Section 11 (b). This challenge takes no account of the possibility of a good-faith difference of opinion which might make for inordinate delay in the submission and consideration of a series of 11 (e) plans which the Commission is unable to approve and of the fact that, absent an 11 (b) (2) order, neither the Commission nor any other interested party can ensure that a plan which does meet the statutory standards for compliance with Section 11 (b) will be approved and submitted to the courts. As we see it, the compulsion of an 11 (b) (2) order, which brings into play the provisions of Sections 11 (c) and 11 (d), is not only appropriate but obligatory when it is considered necessary to ensure expeditious compliance with the Act. For the reasons stated, we must deny the motion to modify our order of November 8, 1946. An appropriate order will issue. By the Commission (Chairman Caffrey and Commissioners McConnaughey, McEntire and Hanrahan). IN THE MATTER OF NATIONAL POWER & LIGHT COMPANY LEHIGH VALLEY TRANSIT COMPANY File No. 54-51. Promulgated January 30, 1947. (Public Utility Holding Company Act of 1935) SIMPLIFICATION OF HOLDING COMPANY SYSTEM Where a registered holding company, its subsidiary, and an associate electric utility company filed an application and declaration respecting transfer of electric utility assets owned by subsidiary but integrated with electric system of associate electric utility company, and respecting use of proceeds for retirement of vendor subsidiary's debt, held, proposed transactions constitute steps in compliance with order of Commission directing dissolution of registered holding company. SALE AND ACQUISITION OF UTILITY ASSETS BY SUBSIDIARIES OF A REGISTERED HOLDING COMPANY Where a registered holding company, its subsidiary, and an associate electric utility company filed an application and declaration with respect to the sale of utility assets by subsidiary and the acquisition thereof by associate electric utility company, held, application-declaration granted and permitted to become effective pursuant to Sections 12 (d) and 12 (f) of the Act. APPEARANCES: Ralph M. McDermid of Reid & Priest for Lehigh Valley Transit Company. Thomas J. Perkins and Edmund G. Hauff for Pennsylvania Power & Light Company. Ira A. Hawkins of Simpson, Thacher & Bartlett for National Power & Light Company. Melvin G. Dakin, Jerome M. Alper and Marvin S. Fink for the Public Utilities Division of the Commission. FINDINGS AND OPINION OF THE COMMISSION National Power & Light Company ("National"), a registered bolding company subsidiary of Electric Bond and Share Company ("Bond and Share"), also a registered holding company, Lehigh Valley Tran 25 S. E. C.-35-7169 sit Company ("Lehigh"), a subsidiary of National, and Pennsylvania Power & Light Company ("Penn"), a subsidiary of Bond and Share, have filed a joint application-declaration, and amendments thereto, pursuant to the applicable provisions of the Public Utility Holding Company Act of 1935, and the rules thereunder, requesting approval of the sale by Lehigh and an acquisition by Penn of certain electric facilities and related properties for a cash consideration of $1,500,000. The joint application-declaration states that this is a step in the overall plan for compliance with the order of this Commission dated August 23, 1941, directing the dissolution of National.1 The application states that the proceeds from the proposed sale will be deposited with the Trustee under the mortgage securing Lehigh's outstanding bonds, and will be used to retire such bonds in accordance with a plan for the rearrangement of the capital structure of Lehigh which will be filed with the Commission upon the approval of the transaction herein proposed.❜ The proposed sale and acquisition have been expressly authorized by the Public Utility Commission of the State of Pennsylvania. After appropriate notice public hearings on said joint applicationdeclaration were duly held. Having considered the record we make the following findings: DESCRIPTION OF PARTIES Lehigh, a Pennsylvania corporation, operates an electric railway and motor coach transportation system in Lehigh, Northampton, Bucks and Montgomery Counties, Pennsylvania. Lehigh is subject to the jurisdiction of the Pennsylvania Public Utility Commission and the Interstate Commerce Commission. Penn, also a Pennsylvania corporation, is engaged in the generation, transmission, distribution and sale of electric energy in various urban and rural communities in Eastern Pennsylvania, including much of the territory served by Lehigh's transportation system. Penn is subject to the jurisdiction of the Pennsylvania Public Utility Commission and the Federal Power Commission. 1 Electric Bond and Share Company, et al., 9 S. E. C. 978 (1941). The Commission on November 9, 1942, ordered National, among other things, to amend its plan of May 7, 1942, to set forth the extent and manner in which it proposed that Lehigh (a) restate its plant, surplus, capital and other accounts so as to eliminate writeups; (b) set up adequate reserves for depreciation of plant and property; (c) make such other accounting adjustments as may be deemed necessary to meet the requirements of the Act, and (d) revise and simplify its capital structure and take such other steps as may be deemed necessary to effectuate a fair and equitable redistribution of voting power. Electric Bond and Share Company, et al., 12 S. E. C. 392 (1942). 'Lehigh conducts its motor coach operations through two subsidiaries, Lehigh Valley Transportation Company and Easton and South Bethlehem Transportation Company. DESCRIPTION OF PROPERTY TO BE TRANSFERRED Lehigh proposes to convey to Penn the steam electric generating station and sub-station at Allentown, Pennsylvania, certain properties related thereto, and the sub-stations located at Catasauqua, Sellersville and Bethlehem, Pennsylvania. The generating station has constituted an integral part of the Penn power system since 1913. Penn states that it has a present investment of approximately $700,000 in sub-station facilities at the Allentown site and about $156,000 in the three sub-stations which it proposes to acquire. Much of this property is interwoven physically and functionally with the property Penn proposes to purchase. Under an agreement entered into as of April 1, 1937, and approved by the Pennsylvania Public Utility Commission," the generating station, sub-stations, a transmission line and certain communication equipment are leased by Lehigh to Penn at an annual rental of $250,000. Of this rental $230,000 is deemed applicable by the companies to the generating station and sub-station equipment now proposed to be sold. FAIRNESS OF PRICE The value to Lehigh of the properties proposed to be sold depends upon its ability to lease or sell them to Penn which is the only electric utility company able to utilize them. On the other hand, the value to Penn of the properties proposed to be acquired depends upon the prospective utilization thereof as part of the Penn power system. It should be noted that Lehigh presently purchases from Penn the power From 1913 to 1928 it was regularly operated; from 1928 to 1938, the plant was on a cold reserve basis; operations were thereafter resumed as shown in the following table: Application of Lehigh Valley Transit Company and Pennsylvania Power & Light Company, 19 Pa. P. U. C. 10, 457 (1938). The lease is terminable by either party by 24 months written notice. The record indicates that the property in question was developed in large measure to meet the needs of Penn, and in part financed by Penn; that it is an integral part of the Penn electric system, and that Lehigh's revenues from this property have, for more than thirty years, been derived principally from Penn or its predecessors. needed for its electric railway operation and will continue to do so after the consummation of the sale here proposed." Penn states that the Allentown generating station is necessary to meet its system requirements through the year 1954. It is further stated that when the Allentown plant is no longer needed as reserve capacity, some of the generation facilities would be converted to substation use, and that the greater portion of the buildings would be used for essential shop, storage and other purposes. The record indicates that continuation of the lease would result in the expenditure of $1,955,000 in rentals for the property proposed to be acquired for the period June 30, 1946, to December 31, 1954, the time during which Penn contemplates it will need the reserve capacity of the Allentown station. The sub-station facilities at Allentown are stated to be the focal point of Penn's distribution system in the Allentown area. Upon termination of the lease Penn would be faced with the necessity of moving the facilities installed at the sub-station sites and of acquiring other property to meet its needs, or of purchasing the sub-station properties at that time. Penn has submitted estimates of the cost of obtaining energy and capacity from sources other than the Allentown station. Analysis of such estimates indicates that it is more economical for Penn to purchase the properties proposed to be sold at the price stated than it would be to acquire its energy from these other sources. In reaching this determination we have considered not only the relative costs of acquiring energy elsewhere and producing it at Allentown, but also the residual uses accruing to Penn by reason of ownership of these properties." Lehigh has made no determination of the original cost of the properties proposed to be sold, and has no segregated book cost thereof. An estimate of depreciated original cost submitted by Penn does not differ materially from the price proposed to be paid. The sale and acquisition have been approved by the Pennsylvania Public Utility Commission. Having carefully scrutinized the proposed transactions in the light of the close association between Penn and Lehigh, and having further 'Lehigh contemplates conversion to motor coaches by the year 1949 after which time it will no longer need electric energy for its transportation operations. The record indicates that without the Allentown plant Penn would be deficient 158,000 kilowatt years of required capacity through the year 1954. Of this estimated deficiency, Penn estimates that 146,000 kilowatt years could be supplied by the Allentown plant. ⚫ These residual uses include: the value of the land which Penn will acquire, and the value of buildings and facilities presently used and to continue in use for sub-station purposes; the value of the generating facilities to be converted to sub-station and other purposes when generation is discontinued: and the savings resulting to Penn by reason of the transmission and distribution facilities remaining at their present leased locations thus obviating the necessity and cost of moving them at a later date. |