(As filed with the Securities and Exchange Commission on October 7, 2005)
File No. 70-10122
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POS AMC
Post-Effective Amendment No. 3
(Amendment No. 5)
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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FIRSTENERGY CORP.
MYR GROUP, INC. AND ITS SUBSIDIARIES
76 South Main Street
Akron, Ohio 44308
(Names of companies filing this statement
and address of principal executive office)
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FIRSTENERGY CORP.
(Name of top registered holding company parent of applicant)
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Leila L. Vespoli, Douglas E. Davidson, Esq.
Senior Vice President and General Counsel Thelen Reid & Priest LLP
FirstEnergy Corp. 875 Third Avenue
76 South Main Street New York, New York 10022
Akron, Ohio 44308
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(Names and addresses of agents for service)
Post-Effective Amendment in this proceeding, filed on August 19, 2004, is
hereby amended and restated in its entirety to read as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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A. Background. By order dated October 29, 2001 in File No. 70-9793
(Holding Co. Act Release No. 27459), as supplemented by supplemental orders
dated November 8, 2001 (Holding Co. Act Release No. 27463) and December 23, 2002
(Holding Co. Act Release No. 27628) (as so supplemented, the "Merger Order"),
the Commission approved the merger between FirstEnergy Corp. ("FirstEnergy"), an
Ohio corporation, and GPU, Inc. ("GPU"), a Pennsylvania corporation. The merger
became effective on November 7, 2001, with FirstEnergy as the surviving entity.
As a result of the merger, FirstEnergy, which is now a registered holding
company, directly or indirectly owns all of the outstanding common stock of ten
electric utility subsidiaries: Ohio Edison Company, The Cleveland Electric
Illuminating Company, The Toledo Edison Company, American Transmission Systems,
Incorporated, Jersey Central Power & Light Company, Pennsylvania Electric
Company, Metropolitan Edison Company, Pennsylvania Power Company, York Haven
Power Company, and The Waverly Electric Power & Light Company, which together
provide service to approximately 4.3 million retail and wholesale electric
customers in a 36,100 square-mile area in Ohio, New Jersey, New York and
Pennsylvania.
MYR Group, Inc. ("MYR"), which was acquired by GPU in 2000,/1/ is now a
direct wholly-owned non-utility subsidiary of FirstEnergy. MYR is a holding
company whose subsidiaries provide utility transmission and distribution,
infrastructure, and related commercial and industrial electrical (and some
mechanical) contracting services to utilities, industrial, mining, institutional
and governmental entities on a nationwide basis. MYR's transmission and
distribution services, which accounted for approximately 61% of MYR's 2004 gross
revenues, include the construction and maintenance of transmission and
distribution power lines, poles, towers and substations for utility, industrial,
institutional and governmental facilities. MYR also performs storm and other
emergency restoration services for utility networks. MYR's infrastructure
services also include installation and servicing of telecommunications and
traffic signalization equipment, which together accounted for about 4% of MYR's
2004 gross revenues. MYR also provides electric construction and maintenance
services to the commercial and industrial marketplace, often referred to as
"inside" electrical construction, which accounted for about 35% of MYR's 2004
gross revenues.
In the Merger Order, the Commission authorized certain non-utility
subsidiaries of FirstEnergy, referred to as "Energy Related Companies," to sell
goods and services to customers not only within the United States as permitted
by Rule 58 but also outside the United States./2/ Specifically, the Commission
authorized Energy Related Companies to sell "Energy Management Services" and
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/1/ The Commission approved GPU's acquisition of MYR by order dated April 14,
2000. See GPU, Inc., et al., Holding Co. Act Release No. 27165.
/2/ Energy Related Companies are defined in the Merger Order as non-utility
subsidiaries which, but for the non-U.S. nature of their business, would fall
within the definition of "energy-related companies" under Rule 58.
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"Consulting Services" anywhere outside the United States,/3/ and to engage in
"Energy Marketing" in Canada and Mexico, subject to a reservation of
jurisdiction with respect to Energy Marketing elsewhere outside the United
States./4/
The Commission also reserved jurisdiction under the Merger Order over
FirstEnergy's request that Energy Related Companies be permitted to engage in
providing "Infrastructure Services" anywhere outside the United States. The term
"Infrastructure Services" is defined to include utility infrastructure services,
including the services provided by MYR and its subsidiaries, such as installing
and maintaining underground communications and energy networks, high voltage
transmission and distribution lines, substations and towers for electric and
telecommunications companies, construction and ongoing maintenance services to
industrial and municipal owners of complex electric and communications
infrastructures on a nationwide basis, management of large volumes of technical
service and repair work for communications and energy utilities and new
residential design and construction services, permitting a single point of
contact for the design and construction of all utility infrastructures
(including electric, gas, water, sewer, cable and telephone) and outdoor
lighting.
The Commission renewed the authorization of FirstEnergy's Energy Related
Companies, subject to the same reservations of jurisdiction, by order dated June
30, 2003 in this proceeding (Holding Co. Act Release No. 27694) (the "2003
Financing Order")./5/
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/3/ "Energy Management Services" are defined as energy management services,
including the marketing, sale, installation, operation and maintenance of
various products and services related to energy management and demand-side
management, including: energy and efficiency audits; meter data management,
facility design and process control and enhancements; construction,
installation, testing, sales and maintenance of (and training client personnel
to operate) energy conservation equipment; design, implementation, monitoring
and evaluation of energy conservation programs; development and review of
architectural, structural and engineering drawings for energy efficiencies,
design and specification of energy consuming equipment; general advice on
programs; the design, construction, installation, testing, sales, operation and
maintenance of new and retrofit heating, ventilating, and air conditioning
("HVAC"), electrical and power systems, fuel cells, uninterruptible power
systems, alarm, security, access control and warning systems, motors, pumps,
lighting, water, water-purification and plumbing systems, building automation
and temperature controls, installation and maintenance of refrigeration systems,
building infrastructure wiring supporting voice, video, data and controls
networks, environmental monitoring and control, ventilation system calibration
and maintenance, piping and fire protection systems, and design, sale,
engineering, installation, operation and maintenance of emergency or distributed
power generation systems, and related structures, in connection with
energy-related needs; and the provision of services and products designed to
prevent, control, or mitigate adverse effects of power disturbances on a
customer's electrical systems.
"Consulting Services" are defined as consulting services with respect to
energy- and gas-related matters for associate and nonassociate companies, as
well as for individuals. Such consulting services would include technical and
consulting services involving technology assessments, power factor correction
and harmonics mitigation analysis, meter reading and repair, rate schedule
design and analysis, environmental services, engineering services, billing
services (including consolidation or centralized billing, bill disaggregation
tools and bill inserts), risk management services, communications systems,
information systems/data processing, system planning, strategic planning,
finance, feasibility studies, and other similar related services.
/4/ "Energy Marketing" is defined as the brokering and marketing of
electricity, natural gas and other energy commodities, as well as providing
incidental related services, such as fuel management, storage and procurement.
/5/ The 2003 Financing Order was supplemented by order dated November 25, 2003
(Holding Co. Act Release No. 27769) to clarify the terms of the Commission's
reservation of jurisdiction over guarantees and other forms of credit support
provided by FirstEnergy.
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B. Action Requested. In this Post-Effective Amendment, FirstEnergy is
requesting that the Commission issue a supplemental order releasing jurisdiction
over the performance of Infrastructure Services in Canada by MYR and other
Energy Related Companies and continue its reservation of jurisdiction over such
activities anywhere else outside the United States. It is expected that the
Infrastructure Services in Canada will consist chiefly of the transmission and
distribution services currently provided by MYR to electric utility network
owners.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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FirstEnergy estimates that the additional fees, commissions and expenses
incurred or to be incurred in connection with the preparation of this
Post-Effective Amendment will not exceed $2,500.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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A. General. Sections 9(a) and 10 of the Act are applicable to the proposed
Infrastructure Services. As indicated in Item 1, all of the services to be
provided by FirstEnergy through MYR or other subsidiaries will come within the
definition of Infrastructure Services under the Merger Order.
The Commission has not previously authorized the sale of infrastructure
services as a discrete non-utility business activity outside the United States,
although it has authorized other types of energy-related non-utility businesses
outside the United States. For example, the Commission has authorized
FirstEnergy (as well as many other registered holding companies) to engage in
the sale of Energy Management Services and Consulting Services (both of which
are specifically covered by Rule 58, if such business activity is conducted in
the United States) anywhere outside the United States. The Commission has also
authorized FirstEnergy (as well as several other registered holding companies)
to engage in energy marketing activities (also explicitly covered by Rule 58, if
such business activities are conducted in the United States) in Canada and
Mexico, and has also authorized at least two registered electric utility holding
companies to acquire or construct various types of non-utility "energy-related
assets" (specifically, natural gas production properties, gas gathering,
processing, transportation and storage facilities, liquid oil reserves and
storage facilities, and associated assets, facilities equipment) in Canada as an
incidental activity to energy marketing./6/
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/6/ See Alliant Energy Corporation, et al., Holding Co. Act Release No. 27448
(Oct. 3, 2001) (authorizing up to $800 million of investments in "energy-related
assets" in the United States and Canada); and Cinergy Corp., et al., Holding Co
Act Release No. 27717 (Aug. 29, 2003) (authorizing up to $1 billion of
investments in "energy-related assets" in the United States, Canada and Mexico).
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The performance of Infrastructure Services by MYR and other Energy Related
Companies in Canada will not expose the FirstEnergy system to business risks
that are materially different from, or greater than, those that FirstEnergy and
other registered holding companies would face in connection with providing
Energy Management Services in Canada. In this regard, there is a significant
degree of overlap in the specific types of services or functions covered by the
definitions of Energy Management Services (see footnote 3 above) and
Infrastructure Services,/7/ the principal distinction being that Energy
Management Services appear to be focused on energy-utilization and other
customer-side-of-the-meter equipment and systems rather than utility
distribution networks. Moreover, the sale of Infrastructure Services outside the
United States would be much less risky than energy marketing (the risks of which
are well documented) or the investment of substantial amounts of capital in
energy-related assets. In this connection, it should be noted that, prior to
being acquired by GPU, MYR (or its predecessor, through various subsidiaries),
has undertaken transmission and distribution system projects from time to time
outside the United States, specifically in Canada and Saudi Arabia.
MYR and other FirstEnergy Energy Related Companies will generally provide
Infrastructure Services in Canada using many of the same resources, i.e.,
personnel, equipment and technology, that are already used in connection with
performing these services in the United States. Where appropriate, MYR or other
Energy Related Companies will subcontract with local vendors, suppliers and
service providers to perform portions of the work. Finally, the extension of
Infrastructure Services into Canada is not expected to involve any significant
new capital investment by Energy Related Companies outside the United States./8/
B. Rule 54 Analysis. Under Rule 53(a), the Commission shall not make
certain specified findings under Sections 7 and 12 in connection with a proposal
by a holding company to issue securities for the purpose of acquiring the
securities of or other interest in an "exempt wholesale generator" ("EWG"), or
to guarantee the securities of an EWG, if each of the conditions in paragraphs
(a)(1) through (a)(4) thereof are met, provided that none of the conditions
specified in paragraphs (b)(1) through (b)(3) of Rule 53 exists. Rule 54
provides that the Commission shall not consider the effect of the capitalization
or earnings of subsidiaries of a registered holding company that are EWGs or
"foreign utility companies" ("FUCOs") in determining whether to approve other
transactions if Rule 53(a), (b) and (c) are satisfied.
FirstEnergy currently meets all of the conditions of Rule 53(a), except for
clause (1). Under the Merger Order and the 2003 Financing Order, the Commission,
among other things, authorized FirstEnergy to invest in EWGs and FUCOs so long
as FirstEnergy's "aggregate investment," as defined in Rule 53(a)(1), in EWGs
and FUCOs does not exceed $5 billion, which $5 billion amount is greater than
the amount which would be permitted by clause (1) of Rule 53(a) which, based on
FirstEnergy's "consolidated retained earnings," also as defined in Rule
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/7/ For example, both Infrastructure Services and Energy Management Services
involve elements of installation, design, construction, management and
maintenance of customer equipment and facilities, as well as wiring and
plumbing.
/8/ Under the terms of the Merger Order and the 2003 Financing Order, any new
investment by FirstEnergy in Energy Related Companies is counted against the
investment limit in Rule 58.
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53(a)(1), of $1.9 billion as of June 30, 2005, would be $950 million. The Merger
Order and the 2003 Financing Order also specify that this $5 billion amount may
include amounts invested in EWGs and FUCOs by FirstEnergy and GPU at the time of
the Merger Order ("Current Investments") and amounts relating to possible
transfers to EWGs of certain generating facilities owned by certain of
FirstEnergy's operating utilities ("GenCo Investments"). FirstEnergy has made
the commitment that through December 31, 2005, its aggregate investment in EWGs
and FUCOs other than the Current Investments and GenCo Investments ("Other
Investments") will not exceed $1.5 billion (the "Modified Rule 53 Test"). Under
the Merger Order and 2003 Financing Order, the Commission reserved jurisdiction
over Other Investments that exceed such $1.5 billion amount.
As of June 30, 2005, FirstEnergy's aggregate investment in EWGs and FUCOs
was approximately $1 billion,/9/ an amount significantly below the $5 billion
amount authorized in the Merger Order. Additionally, as of June 30, 2005,
FirstEnergy's consolidated retained earnings were $1.9 billion. By way of
comparison, FirstEnergy's consolidated retained earnings as of December 31, 2001
were $1.52 billion.
In any event, even taking into account the capitalization of and earnings
from EWGs and FUCOs in which FirstEnergy currently has an interest, there would
be no basis for the Commission to withhold approval of the transactions proposed
herein. With respect to capitalization, since the date of the Merger Order,
there has been no material adverse impact on FirstEnergy's consolidated
capitalization resulting from FirstEnergy's investments in EWGs and FUCOs. As of
June 30, 2005, FirstEnergy's consolidated capitalization consisted of 43.3%
common equity, 1.1% cumulative preferred stock, 52.8% long-term debt and 2.8%
notes payable. As of December 31, 2001, those ratios were as follows: 30.3%
common equity, 3.1% cumulative preferred stock, 2.2% subsidiary-obligated
mandatorily redeemable preferred securities, 60.9% long term debt and 3.5% notes
payable. Additionally, the proposed transactions will not have any impact on
FirstEnergy's consolidated capitalization. Further, since the date of the Merger
Order, FirstEnergy's investments in EWGs and FUCOs have contributed positively
to its level of earnings, other than for the negative impact on earnings due to
FirstEnergy's writedowns of its investments in Avon Energy Partners Holdings
("Avon") and GPU Empresa Distribuidora Electrica Regional S.A. ("Emdersa")./10/
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/9/ This $1 billion amount represents Current Investments only. As of June 30,
2005, FirstEnergy had no GenCo Investments.
/10/ At the time of the Merger Order, FirstEnergy identified certain former GPU
EWG and FUCO investments for divestiture within one year. Among those identified
were Avon, a holding company for Midlands Electricity plc, an electric
distribution business in the United Kingdom and Emdersa and affiliates, an
electric distribution business in Argentina. In May 2002, FirstEnergy sold 79.9%
of its interest in Avon, and in the fourth quarter of 2002, recorded a $50
million charge ($32.5 million net of tax) to reduce the carrying value of its
remaining 20.1% interest. The remaining 20.1% interest in Avon was sold on
January 16, 2004. Through 2002, FirstEnergy was unsuccessful in divesting GPU's
former Argentina operations and made the decision to abandon its interest in
Emdersa in early 2003. On April 18, 2003, FirstEnergy divested its ownership in
Emdersa through the abandonment of its shares in Emdersa's parent company.
FirstEnergy included in discontinued operations Emdersa's net income of $7
million and a $67 million charge for the abandonment in the second quarter of
2003. An after-tax loss of $87 million (including $109 million in currency
transaction losses arising principally from U.S. dollar denominated debt) was
included in discontinued operations in 2002. In December 2003, Emdersa
Guaracachi S. A. ("EGSA"), GPU Power's Bolivia subsidiary, was sold to Bolivia
Integrated Energy Limited. FirstEnergy included in discontinued operations a $33
million loss on the sale of EGSA in the fourth quarter of 2003 and an operating
loss for the year of $2 million. On January 30, 2004, FirstEnergy sold its
28.67% interest in Termobarranquilla S. A., Empresa de Servicios Publicos
("TEBSA") for $12 million. An impairment loss of $26 million related to TEBSA
was recorded in December 2003 in Other Operating Expenses on the consolidated
statement of income and no gain or loss was recognized upon the sale in 2004.
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The domestic public utility subsidiaries of FirstEnergy are financially
sound companies as indicated by their investment grade ratings from the
nationally recognized rating agencies for their senior secured debt. The
following chart includes a breakdown of the senior, secured credit ratings for
those utility subsidiaries that currently have ratings for senior, secured debt:
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Subsidiary Standard & Poors/11/ Moody's/12/ Fitch/13/
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Ohio Edison BBB Baa1 BBB+
Cleveland Electric BBB Baa2 BBB-
Toledo Edison BBB Baa2 BBB-
Penn Power BBB+ Baa1 BBB+
Jersey Central Power BBB+ Baa1 BBB+
Metropolitan Edison Co. BBB+ Baa1 BBB+
Pennsylvania Electric Co. BBB Baa1 BBB+
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FirstEnergy satisfies all of the other conditions of paragraphs (a) and (b)
of Rule 53. With respect to Rule 53(a)(2), FirstEnergy maintains books and
records in conformity with, and otherwise adheres to, the requirements thereof.
With respect to Rule 53(a)(3), no more than 2% of the employees of FirstEnergy's
domestic public utility companies render services, at any one time, directly or
indirectly, to EWGs or FUCOs in which FirstEnergy directly or indirectly holds
an interest. With respect to Rule 53(a)(4), FirstEnergy will continue to provide
a copy of each application and certificate relating to EWGs and FUCOs and
relevant portions of its Form U5S to each regulator referred to therein, and
will otherwise comply with the requirements thereof concerning the furnishing of
information. With respect to Rule 53(b), none of the circumstances enumerated in
subparagraphs (1), (2) and (3) thereunder have occurred.
ITEM 4. REGULATORY APPROVALS.
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No State commission, and no Federal commission, other than this Commission
has jurisdiction over the proposed transaction.
ITEM 5. PROCEDURE.
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FirstEnergy requests that the Commission issue a supplemental order
releasing jurisdiction previously reserved under the 2003 Financing Order over
the performance of Infrastructure Services in Canada and continue to reserve
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/11/ Standard & Poor's Rating Services
/12/ Moody's Investors Service, Inc.
/13/ Fitch, Inc.
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jurisdiction over the performance of Infrastructure Services elsewhere outside
the United States. It is further requested that: (i) there not be a recommended
decision by an Administrative Law Judge or other responsible officer of the
Commission, (ii) the Division of Investment Management be permitted to assist in
the preparation of the Commission's decision and (iii) there be no waiting
period between the issuance of the Commission's order and the date on which it
is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
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(a) Exhibits:
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No additional exhibits filed herewith.
(b) Financial Statements:
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Omitted as not relevant to the proposed transaction.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
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(a) The proposed transaction does not involve a major Federal action
significantly affecting the quality of the human environment.
(b) No federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transaction.
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SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, as amended, the undersigned companies have duly caused this statement to
be signed on their behalves by the undersigned thereunto duly authorized.
FIRSTENERGY CORP.
By: /s/ Harvey L. Wagner
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Harvey L. Wagner
Vice President and Controller
MYR GROUP, INC.
By: /s/ David W. Whitehead
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David W. Whitehead
Assistant Secretary
Date: October 7, 2005
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