EARNINGS

The corporate earnings of VEPCO for the twelve months ended December 31, 1946, actual and pro forma, giving effect to the proposed transactions are shown below:

It will be noted from the above table that the balance applicable to common stock of VEPCO will be increased $142,391, as a result of the proposed transactions, without considering the possible future cost of financing the proposed acquisition.

ACCOUNTING TREATMENT

VEPCO has indicated that the accounting entries proposed to be made are subject to the approval of the Federal Power Commission and the State Corporation Commission of Virginia, in addition to our jurisdiction. Since the record is incomplete with respect to the proposed accounting entries we will reserve jurisdiction with respect thereto.

CONCLUSIONS

We have pointed out above that the three divisions of East Coast properties are physically interconnected with the transmission lines and power sources of VEPCO. Accordingly, we find that the proposed acquisition of East Coast securities by VEPCO would tend toward the economical and efficient development of an integrated public utility system as required by Section 10 (c) (2).

As the purchase price for the East Coast securities is still to be determined by competitive bidding, we shall reserve jurisdiction as to

whether, in the event VEPCO is the successful bidder, the consideration is not reasonable or does not bear a fair relation to the sums invested in or the earning capacity of the utility assets underlying the securities to be acquired in accordance with the standards of Section 10 (b) (2). Also, since the record does not contain sufficient data as to the reasonableness of all fees and expenses in connection with this proposal, we shall reserve jurisdiction to consider them under the standards of Section 10 (b) (2).

We observe no basis for making adverse findings under Section 10 (b) (1) and 10 (b) (3) and find that the proposed acquisition satisfies the requirements of Section 10 (c) (1).

VEPCO has submitted an opinion of counsel that the proposed transactions will satisfy the requirements of all applicable State laws. On the basis of such opinion we find that the requirements of Section 10 (f) are satisfied.

The record also indicates that in the event VEPCO is the successful bidder for the East Coast securities, it will subsequently acquire the electric utility assets of East Coast and thereafter dissolve East Coast as a corporate entity. We shall make no findings as to appropriateness of these proposals because the record is not yet complete on this phase of the proposed transactions.

An appropriate order will issue granting the application of VEPCO to submit a bid for the East Coast securities, subject, however, to the terms and conditions prescribed in Rule U-24 and the following additional conditions:

1. That the proposed acquisition of the securities of East Coast shall not be consummated until the proposed purchase prices for such securities shall have been made a matter of record in this proceeding and a further order shall have been entered by the Commission in the light of the record as so completed.

2. That jurisdiction is reserved to approve the reasonableness of all fees and expenses claimed by any persons in connection with these transactions.

3. That in the event the securities of East Coast are acquired by VEPCO, jurisdiction is reserved to consider the acquisition of the electric utility assets of East Coast, cancellation of the East Coast securities and dissolution of East Coast as a corporate entity.

4. Jurisdiction is reserved over all proposed accounting entries to be made in connection with these transactions.

By the Commission (Chairman Caffrey and Commissioners McConnaughey and McEntire), Commissioners Hanrahan and McDonald being absent and not participating.

INDEX DIGEST

The following digest of decisions presents a consolidated summary of the case headnotes arranged alphabetically according to topic headings. The digest is divided into five parts: * Part I, containing decisions under the Securities Act of 1933; Part II, the Securites Exchange Act of 1934; Part III, the Public Utility Holding Company Act of 1935; and Part IV, the Investment Company Act of 1940.

The case headnotes have not been carried over verbatim into this digest. To facilitate the grouping together of decisions standing for a similar proposition under a single digest heading, it has been necessary in some cases to delete from the headnotes all matter not pertinent to the general proposition for which the headnote stood, i. e., the names of companies, the principal amounts of security issues, etc. To the same end, certain case headnotes have been entirely redrafted for the digest so as to conform to a uniform statement of the general proposition. In a few instances, case headnotes, which were not considered important for the purposes of this digest, have been omitted from the digest altogether.

*During the period covered by this volume there were no opinions containing case headnotes under the Trust Indenture Act of 1939, or the Investment Advisers Act of 1940.

25 S. E. C.

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