LRB-2319/1
MDK:kmg:jlb
1997 - 1998 LEGISLATURE
March 4, 1997 - Introduced by Representatives Musser, Gronemus, Harsdorf,
Linton, Robson, Baldwin, R. Young, Black, Bock and La Fave, cosponsored by
Senators Moen, Schultz and Clausing. Referred to Committee on Utilities
Oversight.
AB146,1,6
1An Act to renumber and amend 196.80 (1g) and 196.80 (3);
to amend 196.795
2(2) (a) and 196.80 (title); and
to create 196.80 (1g) (a) to (e), 196.80 (1r) and
3196.80 (4) of the statutes;
relating to: mergers, consolidations and acquisitions
4of electric or gas public utilities, formation of electric or gas public utility
5holding companies, and electric or gas public utility affiliates in a holding
6company system.
Analysis by the Legislative Reference Bureau
Public utility Mergers
Consolidations and acquisitions
Under current law, an electric or gas public utility may not do any of the
following transactions unless the public service commission (PSC) first grants its
approval: 1) merge or consolidate with another public utility; 2) acquire the stock of
another public utility; 3) consolidate or merge with a Wisconsin corporation if
substantially all of the assets of the corporation consist of the public utility's stock;
or 4) sell, acquire, lease or rent any public utility plant or property that is an
operating system or unit. The PSC may determine whether to approve the
transaction with or without a public hearing and must grant its approval if it
determines that the transaction is consistent with the public interest.
This bill creates different approval requirements for transactions involving an
electric or gas public utility and any in-state or out-of-state utility, including the
electric or public gas utility, that has $2,500,000 or more in total annual gross
operating revenues. For these transactions, the bill requires the PSC to hold a
contested case hearing under the state's administrative procedure law. After the
hearing, the PSC may not grant its approval unless it finds that the transaction: 1)
produces demonstrated, direct and substantial short-term and long-term benefits
to ratepayers and ensures that ratepayers will receive the benefits; 2) does not have
an adverse impact on competition in electricity or gas markets; and 3) is in the public
interest.
In making the finding regarding competition, the PSC must request an
advisory opinion from the attorney general. In making the finding regarding the
public interest, the PSC must consider the impact of the proposed transaction on all
of the following: 1) the financial condition, quality of management, employes and
majority security holders of the public utilities involved; 2) the quality of service
provided by the public utilities; 3) the statewide and local economies; 4) the
communities in the service areas of the public utilities; and 5) the environment. In
addition, with respect to the public interest finding, the PSC must consider whether
the proposed transaction preserves the PSC's jurisdiction to effectively regulate the
public utilities involved, and whether it mitigates any significant adverse impacts
on the public interest.
If the PSC grants its approval, it may impose any term, condition or limitation
on the merger, consolidation or acquisition that mitigates any adverse impact to
competition or the public interest that would otherwise result.
public utility holding companies
Under current law, certain requirements apply to the formation of a public
utility holding company. Any company that, in any chain of successive ownership,
directly or indirectly owns, controls or holds 5% or more of the outstanding voting
securities of an electric or gas public utility is a public utility holding company. A
person may not form a public utility holding company unless the PSC grants its
approval after a hearing that is not subject to the procedures of a contested case
hearing. The PSC must grant its approval if it finds that the formation of the public
utility holding company does not materially harm the interests of utility consumers
or investors. In approving the formation of a public utility holding company, the PSC
may only impose terms or limitations that are consistent with specified
requirements regarding the relationship between the members of the holding
company system, which include the public utility holding company itself and any
public utility (other than a telecommunications utility) the voting securities of which
the public utility holding company directly or indirectly owns or holds 5% or more in
any chain of successive ownership.
This bill requires a person to obtain an additional approval from the PSC before
the person may form a public utility holding company in which both of the following
will be members of the proposed holding company system: 1) an electric or gas public
utility; and 2) an in-state or out-of-state utility that provides the same type of
electricity or gas service as the electric or gas public utility provides. The same
additional approval is required for a public utility holding company to take, hold or
acquire, directly or indirectly, 5% or more of the outstanding voting securities of an
out-of-state utility that provides the same type of electricity or gas service as the
electric or gas public utility provides. The method of granting the additional
approval depends on the size of the utilities involved. If no in-state or out-of-state
utility involved in the proposed transaction has total annual gross operating
revenues of $2,500,000 or more, the PSC may grant its approval with or without a
public hearing, if it finds that the formation of the public utility holding company is
consistent with the public interest.
If any of the utilities involved in the proposed transaction has $2,500,000 or
more in total annual gross operating revenues, the PSC must hold a contested case
hearing, make the same 3 findings and consider the same impacts, and the same
factors regarding jurisdiction and mitigation, that are required under the bill for the
PSC's approval of a merger, consolidation or acquisition by an electric or gas public
utility in which any of the public utilities involved in the merger, consolidation or
acquisition has $2,500,000 or more in total annual gross operating revenues. If the
PSC grants its approval, it may impose any term, condition or limitation on the
transaction that mitigates any adverse impact to competition or the public interest
that would otherwise result.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB146, s. 1
1Section
1. 196.795 (2) (a) of the statutes is amended to read:
AB146,3,42
196.795
(2) (a) No person may form a holding company unless the person has
3received a certificate of approval from the commission under this subsection
and, if
4applicable, the consent and approval of the commission under s. 196.80 (1r) (a).
AB146, s. 2
5Section
2. 196.80 (title) of the statutes is amended to read:
AB146,3,7
6196.80 (title)
Consolidation or merger of utilities; holding company
7systems with electric or gas public utilities.
AB146, s. 3
8Section
3. 196.80 (1g) of the statutes is renumbered 196.80 (1g) (intro.) and
9amended to read:
AB146,3,1010
196.80
(1g) (intro.) In this section
, "public:
AB146,3,11
11(f) "Public utility" does not include a telecommunications utility.
AB146, s. 4
12Section
4. 196.80 (1g) (a) to (e) of the statutes are created to read:
AB146,4,2
1196.80
(1g) (a) "Electric or gas public utility" means a public utility that
2provides electricity or gas service.
AB146,4,33
(b) "Holding company" has the meaning given in s. 196.795 (1) (h).
AB146,4,44
(c) "Holding company system" has the meaning given in s. 196.795 (1) (i).
AB146,4,75
(d) "Out-of-state utility" means a utility with a plant or equipment used for
6the production, delivery or furnishing of utility services, other than
7telecommunications services, that is located outside this state.
AB146,4,108
(e) "Provide electricity or gas service" means to generate, produce, transmit,
9deliver, distribute, furnish or provide electricity or gas or both, directly or indirectly,
10to the public in this or any other state.
AB146, s. 5
11Section
5. 196.80 (1r) of the statutes is created to read:
AB146,4,1612
196.80
(1r) (a) A person may not form a holding company under s. 196.795 (2)
13that results in a holding company system that includes both an electric or gas public
14utility and any other public utility, or out-of-state utility, that provides the same
15type of electricity or gas service, unless the person obtains the consent and approval
16of the commission under this section.
AB146,4,2217
(b) A holding company may not take, hold or acquire directly or indirectly 5%
18or more of the outstanding voting securities of an out-of-state utility with the
19unconditional power to vote the securities if there is an electric or gas public utility
20in the holding company system that provides the same type of electricity or gas
21service as the out-of-state utility provides, unless the holding company obtains the
22consent and approval of the commission under this section.
AB146, s. 6
23Section
6. 196.80 (3) of the statutes is renumbered 196.80 (3) (a) and amended
24to read:
AB146,5,6
1196.80
(3) (a)
The interested
A public utility
specified in sub. (1m) (intro.), a
2person specified in sub. (1r) (a) or a holding company specified in sub. (1r) (b) shall
3make an application for the approval and consent of the commission under this
4section. The application shall contain a concise statement of the proposed action, the
5reasons for the action and any other information required by the commission. If an
6application is filed, the commission shall investigate the application.
The
AB146,5,10
7(b) Except as provided in sub. (4), an investigation
under par. (a) may be with
8or without
a public hearing. If the commission conducts a public hearing
under this
9paragraph, the hearing shall be upon such notice as the commission may require.
10If
AB146,5,15
11(c) Except as provided in sub. (4), if the commission finds that the proposed
12action is consistent with the public interest, it shall give its consent and approval in
13writing. In reaching its determination the commission shall take into consideration
14the reasonable value of the property and assets of the corporation to be acquired or
15merged.
AB146, s. 7
16Section
7. 196.80 (4) of the statutes is created to read:
AB146,5,1817
196.80
(4) (a) The commission shall hold a contested case hearing under s.
18227.44 if an application is filed under sub. (3) (a) by any of the following:
AB146,5,2119
1. A public utility specified in sub. (1m) (intro.) that is an electric or gas public
20utility, if the proposed action involves any public utility or out-of-state utility that
21has total annual gross operating revenues of $2,500,000 or more.
AB146,5,2422
2. A person specified in sub. (1r) (a), if any public utility or out-of-state utility
23in the resulting holding company system has total annual gross operating revenues
24of $2,500,000 or more.
AB146,6,4
13. A holding company specified in sub. (1r) (b), if the out-of-state utility whose
2voting securities are taken, held or acquired by the holding company, or any public
3utility, or an out-of-state utility, in the holding company system, has total annual
4gross operating revenues of $2,500,000 or more.
AB146,6,75
(b) After a hearing under par. (a), the commission shall give its consent and
6approval if the commission finds by a preponderance of the evidence that the
7proposed action satisfies all of the following conditions:
AB146,6,118
1. The proposed action produces demonstrated, direct and substantial
9short-term and long-term benefits for ratepayers in this state and ensures, to the
10fullest extent possible, that ratepayers will receive the short-term and long-term
11benefits.
AB146,6,1612
2. The proposed action does not have an adverse impact on competition in a
13market in this state for any electricity or gas service. In making this finding, the
14commission shall request the opinion of the attorney general on the impact of the
15proposed action on such competition and whether any terms, limitations or
16conditions on the proposed action would mitigate any adverse impacts.
AB146,6,1917
3. The proposed action is in the public interest. In making this finding, the
18commission shall consider whether the proposed action satisfies each of the
19following:
AB146,6,2220
a. The proposed action maintains or improves the financial condition and
21quality of management of the public utilities involved in the proposed action and the
22quality of service provided by the public utilities to ratepayers in this state.
AB146,6,2523
b. The proposed action is fair and equitable to union and nonunion employes
24of the public utilities involved in the proposed action and to a majority of the holders
25of securities issued by each public utility.