without any benefit to U.S. consumers.
---------------------------------------------------------------------------

    224. Some commenters suggested that the Commission should adopt a
self-certification process similar process to that used by the SEC. For
example, Scottish Power argues that FUCOs that operate exclusively
outside of the U.S. should not be subject to Commission oversight. The
Commission should continue the SEC's practice of allowing for the
creation of FUCOs by submittal of a notice filing. FUCOs and their
subsidiary operations are generally separate from that of the domestic
utility operations and therefore would not bear in any way on the
jurisdiction rates of such utility company.\225\
---------------------------------------------------------------------------

    \225\ Scottish Power Comments at 14. See also EEI Comments at
34, Public Citizen Comments at 6.
---------------------------------------------------------------------------

Commission Determination
    225. Having again reviewed the ambiguities in statutory
construction, and balancing the facts that Congress repealed section 32
of PUHCA 1935 in its entirety, yet referred to section 32 in the
definitional sections of PUHCA 2005, we conclude that it is reasonable
to interpret PUHCA 2005 to allow entities to obtain EWG status under
PUHCA 2005. However, we will reject the requests from various
commenters that we retain part 365 of our regulations, which permit
only case-by-case applications for EWG status.
    226. Instead, in line with the comments received from Scottish
Power and others, we will establish a self-certification process for
companies that believe they satisfy the criteria for EWG or FUCO
status. This process is similar to that used for self-certifications
for QFs under the Public Utility Regulatory Policies Act of 1978, and
is set forth in section 366.7. Section 366.7(a) provides that the owner
or operator of an EWG or FUCO, or its representative, may file with the
Commission a notice of self-certification demonstrating that it
satisfies the definition of EWG or FUCO. In the case of EWGs, the owner
or operator must also file a copy of the notice with the state
regulatory authority of each state in which the facility is located.
Notices of self-certification or self-recertification will be published
in the Federal Register. An entity filing a good faith notice of self-
certification of EWG or FUCO status will be deemed to have temporary
status upon filing. If no action is taken by the Commission within 60
days after the date of filing of a self-certification notice, the
exempt wholesale generator status or foreign utility company status
shall be deemed to have been granted. The Office of the Secretary will
periodically issue notices listing the entities whose self-
certification of EWG or FUCO status is deemed to have been granted in
the absence of Commission action to the contrary within 60 days after
the date of filing. We believe that such a self-certification of EWG
and FUCO status will be adequate in the vast majority of cases.
    227. For entities that require a higher degree of legal certainty
as to their status, we will permit them to seek a Commission
determination of their EWG and FUCO status as defined under section
366.1 of the Commission's regulations. Specifically, section 366.7(b)
provides that they may seek such a determination by filing a petition
for declaratory order pursuant to Rule 207(a) of the Commission's Rules
of Practice and Procedure justifying the request for EWG or FUCO
status. These petitions will be noticed in the Federal Register. A
person filing a petition for declaratory order in good faith will be
deemed to have temporary EWG or FUCO status until the Commission takes
action to grant or deny the petition.
    228. The self-certification procedure established herein, along
with the continued availability of Commission determinations of EWG and
FUCO status, ensures that the EWG and FUCO exemptions will continue to
be available to any persons who satisfy the statutory criteria.
Moreover, we note that the self-certification procedures established
herein, and advocated by various commenters, are less burdensome than
the procedures established under section 32 of PUHCA 1935.
    229. We disagree with commenters such as Calpine and EEI who argue
that Congress, by incorporating the definition of EWGs and FUCOs into
PUHCA 2005, carried over the requirement from PUHCA 1935 that the
Commission make case-by-case determinations of EWG status. This
argument appears to rest on the erroneous assumption that Congress
effectively reenacted (only) section 32(a) of PUHCA 1935. Had Congress
meant to do so, it could have simply so stated in PUHCA 2005;
alternatively, it could have imported the text from section 32(a) of
PUHCA 1935, with appropriate modifications, into section 1262(6) of
EPAct 2005, as it did for many of the other definitions carried over
from PUHCA 1935. Instead, however, Congress directed that ``[t]he terms
`exempt wholesale generator' and

``foreign utility company'' have the same meanings as in section 32 and
33'' of PUHCA 1935 as they existed on the day prior to the date of
enactment of EPAct 2005. We believe it is a reasonable interpretation
that, even if Congress preserved the option of EWG status
determinations going forward, it did not prescribe the procedural
mechanics requiring a case-specific Commission ruling on what it means
for a person ``to be engaged directly, or indirectly through one more
affiliates * * *, and exclusively in the business of owning or
operating, all or part of one more eligible facilities and selling
electric energy at wholesale.'' Thus, we conclude that, by repealing
section 32 of PUHCA 1935, Congress left to the Commission the
discretion to prescribe the procedures for obtaining EWG status.
    230. As noted earlier, with respect to FUCOs, section 33 of PUHCA
1935, as amended by EPAct 1992 provided that FUCOs would be exempt from
PUHCA 1935 and not deemed an electric utility company, but the
exemption would not apply or be effective unless relevant state
commission(s) certified that they had the authority and resources to
protect ratepayers of public utility companies associated or affiliated
with the FUCO. Given that PUHCA 2005 is largely a books and records
statute, we will waive our accounting and reporting requirements for
FUCOs. However, we will not exempt them from section 366.2 of our
regulations, which allows us to obtain access as necessary with respect
to jurisdictional rates. The case-by-case approach that we adopt here
is consistent with our precedent concerning the treatment of FUCOs
under the FPA and will allow us to ensure adequate protection of
captive customers in the United States.

8. Cross-Subsidization and Encumbrances of Utility Assets

    231. In the NOPR, we noted that PUHCA 2005 is primarily a ``books
and records access'' statute and does not give the Commission any new
substantive authorities, other than the requirement in section 1275 of
EPAct 2005 that the Commission review and authorize certain non-power
goods and services cost allocations among holding company members upon
request. Nor does it give the Commission authority to pre-approve
holding company activities. Accordingly, outside the context of
reviewing a holding company transaction requiring approval under
section 203 of the FPA or a proposed issuance of securities under
section 204 of the FPA, the Commission will continue to rely primarily
on its ratemaking authorities under sections 205 and 206 of the FPA and
sections 4 and 5 of the NGA to protect jurisdictional customers against
inappropriate cross-subsidization or encumbrances of utility assets on
an ongoing basis.
    232. In the NOPR, we also noted that the Commission already has in
place, pursuant to the FPA and NGA, certain reporting requirements
regarding money pools and cash management activities that affect
jurisdictional companies.\226\ Further, in the electric area, we have
policies that protect against cross-subsidization occurring as a result
of wholesale power sales between affiliates in a holding company system
as well as sales of non-power goods and services between such
affiliates.\227\ In the NOPR, we invited comment on whether, in light
of the repeal of PUHCA 1935, the Commission needs to promulgate
additional rules or to adopt additional policies to protect against
inappropriate cross-subsidization or encumbrances of utility assets,
pursuant to our authorities under the FPA and NGA. For example, we
asked whether, if it has the authority to do so, the Commission should
issue rules regarding public utility holding company diversification
into non-utility businesses. Would the Commission have authority to
promulgate such rules under its FPA or NGA ratemaking authority? Should
the Commission modify its existing cash management rules to apply not
only to public utilities, natural gas companies, and oil pipelines, but
also to include public utility holding companies? We sought comment on
these and any other related issues in order to determine whether, in
addition to the regulations being proposed herein under PUHCA 2005, the
Commission may need to consider promulgating separate, additional rules
under the FPA or the NGA.
---------------------------------------------------------------------------

    \226\ Regulation of Cash Management Practices, Order No. 634, 68
FR 40500 (Jul. 8, 2003), III FERC Stats. & Regs. ] 31,145 (June 26,
2003), Order No. 634-A, 68 FR 61993 (Oct. 31, 2003), III FERC Stats.
& Regs. ] 31,152 (2003).
    \227\ See Merger Policy Statement, FERC Stats. & Regs. ] 31,044
at 30,124-25. See also Heartland Energy Services, Inc., 68 FERC ]
61,223 at 62,062-65 (1994); LG&E Power Marketing Inc., 68 FERC ]
61,247 at 62,121-24 (1994).
---------------------------------------------------------------------------

Comments
    233. Commenters were largely opposed to the adoption of any new
rules on cross-subsidization, encumbrances of utility assets,
diversification into non-utility businesses, or the extension of
existing cash management rules.\228\ With respect to rules on cross-
subsidization and encumbrances of utility assets, several commenters
emphasize that additional Commission rules are unnecessary because
existing Commission and state oversight is adequate.\229\ For example,
E.ON and LG&E Energy assert that it is not necessary or appropriate for
the Commission to promulgate additional rules or adopt additional
policies with respect to cross-subsidization or encumbrances of utility
assets because, with the repeal of PUHCA 1935, Congress expressed the
clear intent to eliminate the comprehensive regulation of holding
company systems which had been characterized by PUHCA 1935. In
addition, E.ON and LG&E Energy assert that current Commission and state
regulation of affiliate transactions is sufficient, emphasizing that:
(i) Affiliate transactions also are controlled and/or monitored on an
ongoing basis through codes of conduct in many states; (ii) the
Commission regulates wholesale power sales between affiliates, which is
often the largest portion of affiliate transactions activity; (iii)
under section 1275 of EPAct 2005, the Commission has additional
authority to review the allocation of non-power goods and service
transactions between service companies and public utilities; (iv) the
terms of affiliate financing transactions also are closely monitored by
the Commission and state commissions to make sure that public utility
capital costs are not inflated; (v) where state commissions do not have
jurisdiction over such issuances, Commission authorization would be
required under section 204 of the FPA; and (vi) the Commission has
jurisdiction under section 203 of the FPA over the sale, lease or
disposal of public utility facilities subject to Commission
jurisdiction and under section 204 of the FPA, the Commission must
authorize the assumption of any obligation or liability as guarantor,
indorser, surety, or otherwise in respect of any security of another
person.\230\ FirstEnergy argues that the routine review of each of the
FirstEnergy Operating Companies by independent financial rating
agencies also acts as a deterrent to inappropriate cross-

subsidization or establishment of unreasonable encumbrances on utility
assets.\231\ Finally, Energy East agrees that no new rules are
required, but contends that some benefit could be gained from a single,
uniform set of federal rules on cross-subsidization and affiliate abuse
and federal code of conduct to avoid potentially conflicting state-
imposed standards.\232\
---------------------------------------------------------------------------

    \228\ See, e.g., Alliant Comments at 6, AEP Comments at 9-10,
Ameren Comments at 20, AGL Resources Comments at 8-9, Cinergy
Comments at 30-31, Emera Comments at 12, Entergy Comments at 14-16,
International Transmission Company Comments at 11, KeySpan Comments
at 7-8, MidAmerican Comments at 14, National Grid Comments at 31-32,
PacifiCorp Comments at 7-8, Progress Energy Comments at 8, Questar
Comments at 5-6, Southern Company Services Comments at 8, Washington
Gas & Light Comments at 5, Xcel Comments at 7, Scottish Power
Comments at 14-15.
    \229\ See, e.g., EPSA Comments at 25, FirstEnergy Comments at
17-19.
    \230\ E.ON/LG&E Energy Comments at 21.
    \231\ FirstEnergy Comments at 19.
    \232\ Energy East Comments at 14-15.
---------------------------------------------------------------------------

    234. With respect to rules on diversification, several commenters
argued that the Commission lacks the statutory authority to adopt such
rules.\233\ For example, commenters argue that the SEC had authority
under section 10 and 11 of PUHCA 1935 to regulate such diversification,
but that these sections were repealed and Congress did not provide the
Commission with authority to issue these or similar rules and that the
cross-subsidization language in the PUHCA Repeal Subtitle is only a
reference to the Commission's existing authorities under the FPA, not a
new grant of authority and that the Commission already has ample
authority under sections 203, 205 and 206 of that statue to address
whether inappropriate cross-subsidization or other forms of affiliate
abuse have occurred.
---------------------------------------------------------------------------

    \233\ See, e.g., Chairman Barton Reply Comments at 10-11,
Dominion Comments at 25, EEI Comments at 36, E.ON/LG&E Energy
Comments at 22, EPSA Comments at 25.
---------------------------------------------------------------------------

    235. With respect to the Commission's cash management rules,
Dominion and EEI contend that there is no need to extend the
Commission's current cash management rules to apply to holding
companies. According to Dominion and EEI, the rules already effectively
apply to holding companies because, where a jurisdictional utility is a
participant in a cash management arrangement with a holding company,
that arrangement must comply with Commission cash management rules and
the agreement must be filed. The only ``extension'' of the rules would
be to require a holding company to comply with the rule in a cash
management arrangement that involved only non-utility companies. That
would be an inappropriate expansion of the Commission's authority.\234\
---------------------------------------------------------------------------

    \234\ Dominion Comments at 24, EEI Comments at 35.
---------------------------------------------------------------------------

    236. A number of commenters, however, argued that the Commission
should adopt additional rules to protect against the dangers of cross-
subsidization and diversification into non-utility businesses,\235\ in
particular, structural separation requirements regarding transactions
between utility and non-utility affiliates. APPA/NRECA argue that the
Commission must ensure complete structural protection, so that the
public utility's affiliation with a non-utility business causes no
additional, non-utility risk, including the following requirements: (i)
Public utility business must be conducted through corporations legally
distinct (and financially insulated) from non-utility affiliates; (ii)
public utilities must maintain books and records that are separate from
the books and records of non-utility affiliates, and must prepare
separate financial statements; (iii) public utilities must not
commingle their assets or liabilities with the assets or liabilities of
a non-utility affiliate, or pledge or encumber their assets on behalf
of a non-utility affiliate; and (iv) service or management fees charged
by a public utility's holding company parent or affiliated service
company to the public utility must not include allocations of financing
costs for entities other than the public utility, charges against
equity in other subsidiaries of the parent holding company, or
operating losses of the parent holding company or other affiliated
companies.\236\ MBIA Insurance argues that the Commission should impose
financial and corporate separation requirements regarding transactions
between utility and non-utility affiliates to adequately protect
utilities and their customers: (i) A utility company must not declare
or pay any dividend on any security of the utility if such action would
threaten the financial integrity of the utility; (ii) utilities should
have at least one independent director on their boards of directors;
(iii) non-utility affiliates should not have recourse against the
tangible or intangible assets of utility affiliates; (iv) a utility
must not cross-subsidize or shift costs from a non-utility affiliate of
the utility to the utility, and must fully disclose and fully value any
assets or services by the utility that are provided for the benefit of
a non-utility affiliate; (v) electricity and natural gas customers must
not be subject to the financial risks of non-utility diversification,
and must not be subject to rates or charges that are not reasonably
related to the provision of electricity or natural gas service.\237\
NARUC urges the Commission to prohibit holding companies from
encumbering the assets of its public utility in order to fund a
diversification program and from issuing debt or preferred securities
to pay dividends to a holding company or to making unduly risky loans
to any organization within the holding company system. Specifically,
the Commission should guard against a situation where the relationship
between a financially strong public utility and relatively weaker
affiliates has the effect of increasing the utility's cost of capital
to the detriment of customers. In the event that a public utility
became over-leveraged as a result of subsidization of the holding
company, Commission should consider taking appropriate action,
including limitations of the payment of common stock dividends from the
utility to a parent.\238\
---------------------------------------------------------------------------

    \235\ See, e.g., CEOB Comments at 3, Missouri PSC Comments at
30-32, Santa Clara Comments at 21-22, TANC Comments at 21-22,
Utility Workers Comments at 3.
    \236\ APPA/NRECA Comments at 34-35.
    \237\ MBIA Insurance Comments at 20-24. But see EEI Reply
Comments at 3.
    \238\ NARUC Comments at 13-14. National Grid and NiSource assert
that NARUC has not shown that the existing protections are
ineffective and that NARUC's proposed additional reporting
requirements are unnecessary. National Grid Reply Comments at 7-8,
NiSource Reply Comments at 5.
---------------------------------------------------------------------------

    237. NASUCA argues that, in the case of captive customers, the
proper structural protection would be to prohibit a utility's
affiliation with non-utility businesses, unless there is no risk
involved. If a customer has power supply options, dealings between
utilities and their non-utility affiliates could be approved if: (a)
the information on the risk is fully disclosed; (b) the potential gains
to the customer are commensurate with the risk; and (c) there can be no
possible level of harm so large as to render the utility unable to
comply with its duty to provide service reliably and economically.\239\
Finally, Ohio PUC recommends that the Commission adopt rules similar to
those found in its transition plan administrative rules, which prevent
electric utilities from issuing any security for the acquisition,
ownership, or operation of an affiliate, assuming liabilities with
respect to any security of an affiliate, or pledge, mortgage, or use as
collateral any of its assets for the benefit of an affiliate. In
addition, Ohio PUC recommends the Commission utilize the newly-
established joint federal/state board to develop ``ring-fencing'' rules
to insulate regulated assets from being the subject of cross-
collateralization with unregulated assets.\240\
---------------------------------------------------------------------------

    \239\ NASUCA Comments at 11-12.
    \240\ Ohio PUC Comments at 6-8. AGL Resources argues that Ohio
PUC's ring-fencing proposals are unnecessary, but that if the
Commission decides to impose additional rules, it should do so
through a collaborative process including the Commission, state
commissions, and industry participants. AGL Resources Reply Comments
at 2. See also National Grid Reply Comments at 7-8.

---------------------------------------------------------------------------

    238. With respect to the procedure for implementing these
structural measures to protect customers against the risks of
diversification into non-utility businesses, APPA/NRECA urge the
Commission to create a procedure for evaluating a public utility's
acquisition of, or acquisition by, a non-utility business to ensure:
(a) Compliance with aforementioned limits; (b) non-interference by the
non-utility side in the management of the public utility side; and (c)
that holders of the public utility's debt, and credit rating agencies
which rate that debt, have confirmed that there is no risk of adverse
effect on their position.\241\
---------------------------------------------------------------------------

    \241\ APPA/NRECA Comments at 35-36. See also NASUCA Comments at
12.
---------------------------------------------------------------------------

    239. These commenters argue that the Commission has sufficient
authority to issue additional rules on cross-subsidization and
diversification. For example, Arkansas PSC contends that the Commission
has authority under sections 203, 205, and 206 of the FPA to issue such
rules.\242\ Emera argues that the Commission should use its current
authority under sections 203 and 204 of the FPA to address
international diversification. Emera thus urges the Commission to
explain in its orders authorizing public utility financing under FPA
section 204 that no public utility shall use the proceeds of any such
financing to finance the acquisition or operation of a FUCO, while
pledges of utility assets to support FUCO financings would similarly be
restricted under FPA section 203.\243\
---------------------------------------------------------------------------

    \242\ Arkansas PSC Comments at 24-32.
    \243\ Emera Comments at 7.
---------------------------------------------------------------------------

    240. A number of entities also supported the extension of the
Commission's cash management rules to public utility holding
companies.\244\ According to MBIA Insurance, the Commission's cash
management rules are insufficient to adequately protect regulated
utilities, and it urges the Commission to broaden the application of
the rules beyond utilities and to apply them to holding companies.\245\
---------------------------------------------------------------------------

    \244\ See, e.g., Georgia PSC Comments at 4, Santa Clara Comments
at 22, TANC Comments at 22. AGL Resources opposes comments to expand
cash management rule, noting that some holding companies such as AGL
have two cash management programs to address concerns regarding
cross-subsidization and encumbrances, i.e., separate utility and
non-utility money pools and that the Commission's current rules
allow it to review the utility money pool. AGL Resources Reply
Comments at 4-5.
    \245\ MBIA Insurance Comments at 25.
---------------------------------------------------------------------------

Commission Determination
    241. We interpret section 1275(c) of EPAct 2005 to be a savings
clause, which does not give the Commission the authority to issue
additional Commission rules regarding cross-subsidization, encumbrances
of utility assets, diversification into non-utility businesses, or the
extension of existing cash management rules. Rather, any such authority
resides in the FPA and NGA. In addition, as noted by E.ON and LG&E
Energy, current Commission and state regulations already provide
oversight regarding cross-subsidization and encumbrances of utility
assets. Accordingly, we will monitor industry activities, and we will
adopt new regulations on cross-subsidization or encumbrances of utility
assets, pursuant to our FPA and NGA authorities, only at such time as
our current regulations appear to be insufficient. However, these
matters will be further addressed at the technical conference that we
will be holding within the next year.
    242. The Commission finds persuasive Dominion's argument that
Congress repealed the investment diversification limitations that have
been applicable to registered holding companies, and therefore we will
not propose additional rules regarding diversification into non-utility
businesses at this time. Moreover, we note that, if the Commission were
to propose such rules, we would have to do so under our FPA and NGA
authorities, as we lack the authority to do so under PUHCA 2005.
    243. Finally, we will not propose to extend our cash management
rules to holding companies. As noted by Dominion and EEI, the cash
management rules adopted under the FPA and NGA already effectively
apply to holding companies because, where a jurisdictional utility is a
participant in a cash management arrangement with a holding company,
that arrangement must comply with Commission cash management rules and
the agreement must be filed. Therefore, the Commission will not propose
to extend existing cash management rules.

9. Additional Conforming or Technical Amendments

    244. Section 1272(2) of EPAct 2005 directs the Commission to submit
to Congress detailed recommendations on technical and conforming
amendments to federal law necessary to carry out PUHCA 2005 within four
months after the date of enactment. In the NOPR, the Commission invited
comments as to what technical and conforming amendments the Commission
should include in this submission to Congress.
    245. We received comments on recommendations we should make to
Congress, as well as comments on how we should interpret certain terms
in PUHCA 2005 or modifications we should make to our proposed
regulatory text.
a. Amendments of Definitions
Comments
    246. Oklahoma Corporation Commission requests that the definitions
of ``affiliate'' and ``subsidiary'' in PUHCA 2005 be amended. Oklahoma
Corporation Commission contends that the difference in the two
percentages, i.e., five percent for affiliates and ten percent for
subsidiaries, would cause an affiliate company that is five percent
owned by a holding company to be subject to Commission rules while a
subsidiary that is also owned five percent by a holding company would
avoid the Commission rules. Thus, it urges the Commission to consider
definitions that would cause both the terms ``affiliate'' and
``subsidiary'' to have the same requirements and treatment.\246\
---------------------------------------------------------------------------

    \246\ Oklahoma Corporation Commission Comments at 7.
---------------------------------------------------------------------------

    247. A number of entities requested amendments to the definition of
``electric utility company.'' Morgan Stanley contends that the
definition of ``electric utility company'' is not in accord with other
definitions in PUHCA 2005 and that Congress intended that the two types
of ``public-utility companies,'' i.e. ``electric utility company'' and
``gas utility company'' should relate to retail activities only.
Accordingly, Morgan Stanley recommends that the words ``and not for
resale'' be placed at the end of the PUHCA 2005 definition of
``electric utility company'' to conform this definition with ``public
utility company'' and ``gas utility company.'' \247\
---------------------------------------------------------------------------

    \247\ Morgan Stanley Comments at 10.
---------------------------------------------------------------------------

    248. Morgan Stanley also urges the Commission to recommend to
Congress that at least the entire definition of ``exempt wholesale
generator'' from PUHCA 1935 be incorporated into PUHCA 2005, including
other terms that appear within that defined term, namely, ``eligible
facility'' from 15 U.S.C. 79z-5(a)(2), and ``affiliate'' from 15 U.S.C.
79b(a)(11)(B).\248\
---------------------------------------------------------------------------

    \248\ Id.
---------------------------------------------------------------------------

    249. Emera and National Grid recommend that the Commission adopt a
definition of ``foreign utility company'' clarifying that a FUCO is not
a ``public-utility company'', an ``electric utility company,'' or a
``gas utility company.'' Emera contends that such a definition would be
consistent with section 33 of PUHCA 1935 which

provides that FUCOs are not ``public-utility companies.'' \249\
---------------------------------------------------------------------------

    \249\ Emera Comments 3-4. See also National Grid Comments at 4-
11.
---------------------------------------------------------------------------

    250. Emera and National Grid argue that the Commission should
implement the exemption for passive investors by seeking an amendment
the definition of ``holding company'' to exclude passive investors in a
public-utility company or holding company securities, such as
investment companies.\250\
---------------------------------------------------------------------------

    \250\ Id. at 9.
---------------------------------------------------------------------------

    251. Some commenters have requested that local distribution
companies be exempted from the requirements of PUHCA 2005 and suggest
that the Commission exclude them from the definition of ``natural gas
company.'' For example, American Gas Association requests that the
Commission clarify that local gas distribution companies that are not
regulated by the Commission are not embraced within the phrase
``natural-gas company,'' noting that EPAct 2005 defines the separate
term ``gas utility'' as a local distribution company. AGA asserts that,
while many local distribution companies are technically ``natural-gas
companies'' under the NGA because the natural gas in their systems
flows in interstate commerce, the Commission does not regulate local
distribution companies that are exempted under section 1(b) of the NGA,
Hinshaw pipelines exempted under section 1(c) of the NGA, entities
subject to service-area determinations under section 7(f) of the NGA,
and local distribution companies with blanket certificates.\251\
Dominion requests that the Commission clarify that this same pattern of
exemption from Commission regulation will be carried over with the
respect to the rules that the Commission proposes to issue here.\252\
Finally, Washington Gas & Light urges the Commission to clarify that
the proposed rules do not apply to local distribution companies and
section 7(f) companies that have previously been exempt from regulation
by the Commission. Washington Gas & Light emphasizes that no regulatory
gap would result because these local distribution companies and section
7(f) companies are subject to oversight of their rates and terms and
conditions of service by relevant local regulatory commissions.
Washington Gas & Light further contends that failure to grant this
exemption could cause federal rules, especially for rate setting
purposes, to become inconsistent with the regulations promulgated by
state commissions, creating compliance issues that might have to be
litigated in order to find resolution.\253\
---------------------------------------------------------------------------

    \251\ American Gas Association Comments at 3-4. See also Keyspan
Comments at 6.
    \252\ Dominion Comments at 26-27.
    \253\ Washington Gas & Light Comments at 3-4.
---------------------------------------------------------------------------

Commission Determination
    252. We will reject Oklahoma Corporation Commission's request to
modify the definitions of ``affiliate'' and ``subsidiary.'' Congress
chose to carry over these long-standing definitions from PUHCA 1935 to
PUHCA 2005 and thus clearly expressed its intent to retain these
statutory thresholds. However, we emphasize that section 1262(16)(B)
gives the Commission the authority to deem someone a ``subsidiary'' if
necessary for the rate protection of utility customers, even for
ownership interests of less than ten percent. Further, section 1264
gives the Commission the authority to examine the books and records of
any company in a holding company system, including affiliates and
subsidiaries. Thus, we believe that the Commission has sufficient
authority to protect customers without seeking a modification of these
definitions.
    253. We will reject the requests of Morgan Stanley and others to
amend the definitions of ``electric utility company.'' The definitions
of ``electric utility company'' and ``gas utility company'' in PUHCA
1935 similarly differed in that the definition of ``electric utility
company'' was not limited to retail activities. By carrying over this
distinction into PUHCA 2005, it is clear that Congress did not intend
that these two definitions should be consistent. Moreover, if adopted,
Morgan Stanley's proposal would deprive the Commission of jurisdiction
over holding companies that own public utilities, and Morgan Stanley
has not provided any evidence that Congress meant to do so. With
respect to the definition of ``exempt wholesale generator,'' we will
grant Morgan Stanley's request to carry over the definition of
``eligible facility'' since that term is used within the definition of
EWG. The definition of eligible facility and other relevant provisions
are cross-referenced in the regulatory text of this final rule.
    254. We deny Emera and National Grid's requests that we change the
definition of FUCO to state that a FUCO shall ``not be deemed a public
utility company, electric utility company or gas company under this
part.'' However, we clarify the definition of FUCO to state that these
companies shall not be subject to any of the requirements of this
subchapter other than section 366.2. Therefore, FUCOs are not required
to follow PUHCA 2005 accounting and reporting requirements, but must
continue to grant the Commission access to their accounts, books,
memoranda, and other records.
    255. We will reject Emera's and National Grid's request that we
recommend an amendment to the definition of ``holding company'' to
reflect the exemption for passive investors. We have already adopted
this exemption in our regulations, and thus it is unnecessary to amend
the statutory definition.
    256. With respect to the requests by various commenters on an
amendment concerning local distribution companies that are not
regulated by the Commission as natural gas companies under the NGA, we
find that such a statutory amendment is unnecessary, as we have
exempted local distribution companies from the books and records
requirements of PUHCA 2005 in section 366(c) of our regulations,
pursuant to our exemption authority under section 1266(b).
b. Other Proposed Amendments
Comments
    257. EEI suggests that Commission recommend a technical amendment
to section 3(c)(8) of the Investment Company Act of 1940 (ICA).
According to EEI, section 3(c)(8) currently provides that,
notwithstanding the definition of ``investment company'' found in
section 3(a) of the ICA, a company subject to regulation under PUHCA
1935 shall not be an investment company. By the date repeal of PUHCA
1935 becomes effective, many holding companies will need to assert
their exempt status under section 3(b)(1) of the ICA, or seek an order
of exemption from the SEC under section 3(b)(2) of the ICA; if section
3(c)(8) is not amended, holding companies may be expected to seek the
certainty provided by an SEC order under section 3(b)(2), rather than
to rely on ``self-certification'' under section 3(b)(1). EEI asserts
that an amendment to section 3(c)(8) would, by continuing the exemption
from investment company status that holding companies have enjoyed to
date, make sure that holding company financing may proceed without
disruption after the date repeal of PUHCA 1935 becomes effective.\254\
---------------------------------------------------------------------------

    \254\ EEI Comments at 37. See also Energy East Comments at 18-
19, National Grid Comments at 34-35.
---------------------------------------------------------------------------

    258. NARUC notes that section 1270 of EPAct 2005 indicates that the
Commission has the same powers to enforce the provisions of PUHCA 2005

available under Sections 306 through 317 of the FPA. NARUC recommends
that the Commission request an amendment clarifying that the Commission
is able to enforce the provisions of PUHCA 2005 concerning natural gas
companies using the equivalent powers granted under the NGA.\255\
---------------------------------------------------------------------------

    \255\ NARUC Comments at 14. See also NASUCA Comments at 3.
---------------------------------------------------------------------------

    259. EEI submits that the Commission should recommend that section
1274(a) of EPAct 2005 be amended to specify that the savings provisions
of section 1271 are effective as of the date EPAct 2005 was
enacted.\256\ Similarly, PacifiCorp suggests that, in order to avoid
any gaps, the Commission propose a correction to the savings provision
in section 1271 of EPAct 2005 that allows activities and transactions
authorized under PUHCA 1935 or other law until February 8, 2006, when
PUHCA 2005 takes effect, to continue under the terms of the
authorization notwithstanding any provision of PUHCA 2005 or related
Commission regulations to the contrary.\257\
---------------------------------------------------------------------------

    \256\ EEI Comments at 36. See also Cinergy Comments at 31,
Dominion Comments at 25.
    \257\ PacifiCorp Comments at 6.
---------------------------------------------------------------------------

    260. EEI submits that the Commission should provide a procedure
similar to the SEC's general procedural rules, for submitting
information on a confidential basis.\258\ FirstEnergy states that
certain information is contained in Form U-5S is proprietary
information and that, although the Commission has rejected requests by
regulated public utilities to protect the confidentiality of certain
information contained in their FERC Forms 1, the SEC has permitted
information reported in Form U-5S to be so protected. FirstEnergy
argues that the Commission should therefore make clear that it will
similarly protect the confidentiality of such information.\259\
---------------------------------------------------------------------------

    \258\ EEI Comments at 37-38, FirstEnergy Comments at [259].
    \259\ FirstEnergy Comments at 8.
---------------------------------------------------------------------------

    261. FirstEnergy further contends that, because of the very limited
time available to the Commission to adopt rules needed to implement
PUHCA 2005, the Commission should make clear that any rules that may be
adopted in this proceeding are only interim rules that will be in
effect for no longer than one year. Such a procedure would enable the
Commission to meet its obligation to adopt rules required for
implementation of PUHCA 2005 within four months after its enactment,
but would provide assurance that such hastily-crafted rules would not
be in effect indefinitely. FirstEnergy contends that this approach
would give the Commission and interested parties additional time in
which to learn from their experience under the final rules that are
adopted in this proceeding, to give further consideration to the many
issues that have been raised by the Commission in the NOPR, and to work
toward development of final rules that are properly designed to protect
the public interest.\260\
---------------------------------------------------------------------------

    \260\ Id. at 21-22.
---------------------------------------------------------------------------

Commission Determination
    262. EEI recommends an amendment to section 3(c)(8) of the
Investment Company Act of 1940, which provides that a company subject
to regulation under PUHCA 1935 shall not be an ``investment company''
as defined in and regulated under the Investment Company Act of
1940.\261\ While such companies can file with the SEC and seek
exemption from the Investment Company Act of 1940 by claiming that they
fall within other exemptions, EEI notes that an amendment to section
3(c)(8) would allow such companies to avoid having to make such filings
with the SEC. The Investment Company Act of 1940, however, is not a
statute with which the Commission has experience, and the amendment is
not essential for the Commission to carry out its responsibilities
under PUHCA 2005 or any other statute the Commission administers.
Consequently, the Commission will bring this issue to the attention of
Congress, but will not make any recommendation.
---------------------------------------------------------------------------

    \261\ 15 U.S.C. 80a-3(c)(8) (2000).
---------------------------------------------------------------------------

    263. We agree with the comments of NARUC and will recommend an
amendment to section 1270 clarifying that the Commission is able to
enforce the provisions of PUHCA 2005 concerning natural gas companies
using the equivalent powers granted under the NGA.
    264. We also agree with the suggestions of EEI and others regarding
the effective date of the savings provisions in section 1271, and we
will recommend that section 1274(a) of EPAct 2005 be amended to specify
that the savings provisions of section 1271 are effective as of the
date EPAct 2005 was enacted.
    265. In response to the requests of EEI and others concerning the
protection of confidential information, we note that section 1264(d)
provides that no member, officer, or employee of the Commission shall
divulge any fact or information that may come to his or her knowledge
during the course of examination of books and records as provided in
this section, except as may be directed by the Commission or by a court
of competent jurisdiction. Furthermore, the Commission already has in
place procedures governing the treatment of confidential and other non-
public information in Part 388 of its regulations. Commenters have not
demonstrated that the Commission's current rules are inadequate, and we
conclude that it is unnecessary to adopt further rules at this time.
    266. We will also reject FirstEnergy's request that the Commission
clarify that any rules adopted in this final rule are of an interim
nature. Nevertheless, the Commission will evaluate the rules it adopts
here on an ongoing basis based on its own experience and the
submissions received from parties in individual proceedings and the
technical conference.

Information Collection Statement

    267. Office of Management and Budget (OMB) regulations require OMB
to approve certain information collection requirements imposed by
agency rule.\262\ However, the Commission is carrying out an express
statutory mandate spelled out in EPAct 2005. Moreover, to the extent
that the Commission is carrying over and applying requirements that the
SEC previously has applied, we note that the proposed regulations
assume responsibility for already approved information collections and
reduce their reporting burdens. Indeed, insofar as the regulations
adopted herein eliminate certain SEC regulations concerning accounting,
cost-allocation, recordkeeping, and related rules, they reduce the
information collection burden on regulated entities.
---------------------------------------------------------------------------

    \262\ 5 CFR 1320.11 (2005).
---------------------------------------------------------------------------

    268. In particular, we are adopting a FERC Form No. 60 (annual
reports for service companies), a substantially streamlined version of
what had previously been SEC Form U13-60 implemented by the SEC. In
addition, we will require entities that are or become holding companies
within the meaning of PUHCA 2005 to submit a simple one-time filing,
FERC-65 (Notification of Holding Company Status), as compared to the
more substantial filings and forms previously required by SEC Form U-
5A. We establish a similar, simplified filing, as compared to the SEC's
existing filings and forms, for exemptions and waivers, namely FERC-65A
(Exemption Notification) and FERC-65B (Waiver Notification).
    269. The Commission also eliminates the requirements contained in
its own regulations in 18 CFR part 365; the corresponding information
collection is

FERC-598 ``Determinations for Entities Seeking Wholesale Generator
Status.'' In its place, we are allowing a much simpler self-
certification.
    Public Reporting Burden: (The table below reflects both SEC
reporting burden estimates and the Commission's projections.)

----------------------------------------------------------------------------------------------------------------
                                                    Number of       Number of    Number of hours   Total annual
                Data collection                    respondents      responses      per response        hours
----------------------------------------------------------------------------------------------------------------
SEC U-5A (current).............................               4               1             80               320
SEC U-13-60....................................              65               1             13.5             878
FERC Form 60...................................              65               1              8               520
FERC-65........................................             110               1              3               330
FERC-65A.......................................              35               1              1                35
FERC-65B.......................................              20               1              1                20
FERC-568 (current).............................             112               1              6               672
FERC-598 (proposed)............................              27               1              3                51
----------------------------------------------------------------------------------------------------------------

    Action: Revision and adoption by Commission of currently approved
SEC collections of information.
    OMB Control Nos.: Currently the relevant SEC and Commission
information collections have the following control numbers--SEC: 3235-
0153, 3235-0164, 3235-0182, 3235-0183, 3235-0306 and Commission: 1902-
0166.
    Frequency of Responses: The FERC Form No. 60 information collection
has annual submissions while FERC Form Nos. 65, 65A, and 65B involve
one-time submittals. FERC-598 certifications will be submitted on
occasion.
    Necessity of the Information: The proposed rule implements new
rules under part 366 of the Commission's regulations and deletes
requirements contained in part 365 of its regulations. These revisions
are to implement the repeal of PUHCA 1935 and the implementation of
certain provisions of the EPAct 2005.
    270. For information on the requirements, submitting comments on
these collection of information including ways to reduce the burden
imposed by these requirements, please send your comments to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426 (Attention: Michael Miller, Office of the Executive Director,
(202-502-8415)) or send comments to the Office of Management and Budget
(Attention: Desk Officer for the Federal Energy Regulatory Commission,
fax:<PHONE_NUMBER>, e-mail<EMAIL_ADDRESS>
Environmental Analysis

    271. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\263\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. Included in the exclusion are rules that carry out
legislation, involve information gathering, analyses and dissemination,
and involve accounting.\264\ Thus, we affirm the finding made in the
NOPR that this Final Rule carries out EPAct 2005 and involve
information gathering and analysis and accounting and therefore falls
under this exception; consequently, no environmental consideration is
necessary.
---------------------------------------------------------------------------

    \263\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs.
Preambles 1986-1990 ] 30,783 (1987).
    \264\ 18 CFR 380.4(a)(3), (5), (16) (2005).
---------------------------------------------------------------------------

Regulatory Flexibility Act Certification

    272. The Regulatory Flexibility Act of 1980 (RFA) requires
rulemakings to contain either a description and analysis of the effect
that the rule will have on small entities or to contain a certification
that the rule will not have a significant economic impact on a
substantial number of small entities. \265\ The Commission concludes
that the Final Rule would not have such an impact on small entities.
Most companies to which the Final Rule applies do not fall within the
RFA's definition of small entity.\266\ Therefore, the Commission
certifies that this Final Rule will not have a significant economic
impact on a substantial number of small entities. Moreover, PUHCA 2005
exempts certain persons, and allows the Commission to exempt other
persons and classes of transactions. The various exemptions and waivers
adopted herein further minimize the effect of the Final Rule on small
entities, as many of the entities that should be able to take advantage
of these exemptions and waivers are small entities.
---------------------------------------------------------------------------

    \265\ 5 U.S.C. 603 (2000).
    \266\ 5 U.S.C. 601(3) (2000), citing to section 3 of the Small
Business Act, 15 U.S.C. 632 (2000). Section 3 of the Small Business
Act defines a ``small business concern'' as a business that is
independently owned and operated and that is not dominant in its
field of operation. 15 U.S.C. 632 (2000). The Small Business Size
Standards component of the North American Industry Classification
System, for example, defines a small electric utility as one that,
including its affiliates, is primarily engaged in the generation,
transmission, and/or distribution of electric energy for sale and
whose total electric output for the preceding fiscal year did not
exceed four million MWh. 13 CFR 121.201 (2005).
---------------------------------------------------------------------------

Document Availability

    273. In addition to publishing the full text of this document in
the Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and

in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington, DC 20426.
    274. From the Commission's Home Page on the Internet, this
information is available in the Commission's document management
system, eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
    275. User assistance is available for eLibrary and the Commission's
website during normal business hours. For assistance, please contact
FERC Online Support at 1-866-208-3676 (toll free) or<PHONE_NUMBER> (e-
mail at FERCOnlineSupport@FERC.gov), or the Public Reference Room at
202-502-8371, TTY<PHONE_NUMBER> (e-mail at
public.referenceroom@ferc.gov).

Effective Date and Congressional Notification

    This final rule will take effect February 8, 2006. The Commission
has determined with the concurrence of the Administrator of the Office
of Information and Regulatory Affairs of the Office of Management and
Budget, that this rule is not a major rule within the meaning of
section 251 of the Small Business Regulatory Enforcement Fairness Act
of 1996.\267\ The Commission will submit the Final Rule to both houses
of Congress and the General Accounting Office.\268\
---------------------------------------------------------------------------

    \267\ See 5 U.S.C. 804(2) (2000).
    \268\ See 5 U.S.C. 801(a)(1)(A) (2000).
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List of Subjects in 18 CFR Parts 365 and 366

    Electric power, Natural gas, Public utility holding companies and
service companies, Reporting and recordkeeping requirements, and Cost
allocations.

    By the Commission.
Magalie R. Salas,
Secretary.

0
In consideration of the foregoing, under the authority of EPAct 2005,
the Commission is amending Chapter I of Title 18 of the Code of Federal
Regulations, as set forth below:

SUBCHAPTER T--[REMOVED AND RESERVED]

PART 365--[REMOVED]

0
1. Subchapter T, consisting of part 365, is removed and reserved.

0
2. Subchapter U, consisting of part 366, is added to read as follows:

SUBCHAPTER U--REGULATIONS UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT
OF 2005

PART 366--PUBLIC UTILITY HOLDING COMPANY ACT OF 2005

Subpart A--PUHCA 2005 Definitions and Provisions
Sec.
366.1 Definitions.
366.2 Commission access to books and records.
366.3 Exemption from Commission access to books and records; waivers
of accounting, record-retention, and reporting requirements.
366.4 FERC-65, notification of holding company status, FERC-65A,
exemption notification, and FERC-65B, waiver notification.
366.5 Allocation of costs for non-power goods and services.
366.6 Previously authorized activities.
366.7 Procedures for obtaining exempt wholesale generator and
foreign utility company status.
Subpart B--PUHCA 2005 Accounting and Recordkeeping
366.21 Accounts and records of holding companies.
366.22 Accounts and records of service companies.
366.23 FERC Form No. 60, annual reports by service companies.

    Authority: Sections 1261 et seq. Pub. L. 109-58, 199 Stat. 594.

Subpart A--PUHCA 2005 Definitions and Provisions

Sec.  366.1  Definitions.

    For purposes of this part:
    Affiliate. The term ``affiliate'' of a company means any company, 5
percent or more of the outstanding voting securities of which are
owned, controlled, or held with power to vote, directly or indirectly,
by such company.
    Associate company. The term ``associate company'' of a company
means any company in the same holding company system with such company.
    Commission. The term ``Commission'' means the Federal Energy
Regulatory Commission.
    Company. The term ``company'' means a corporation, partnership,
association, joint stock company, business trust, or any organized
group of persons, whether incorporated or not, or a receiver, trustee,
or other liquidating agent of any of the foregoing.
    Construction. The term ``construction'' means any construction,
extension, improvement, maintenance, or repair of the facilities or any
part thereof of a company, which is performed for a charge.
    Electric utility company. The term ``electric utility company''
means any company that owns or operates facilities used for the
generation, transmission, or distribution of electric energy for sale.
For the purposes of this subchapter, ``electric utility company'' shall
not include entities that engage only in marketing of electric energy
or ``exempt wholesale generators.''
    Exempt wholesale generator. The term ``exempt wholesale generator''
means any person engaged directly, or indirectly through one or more
affiliates as defined in this subchapter, and exclusively in the
business of owning or operating, or both owning and operating, all or
part of one or more eligible facilities and selling electric energy at
wholesale. For purposes of establishing or determining whether an
entity qualifies for exempt wholesale generator status, sections
32(a)(2) through (4), and sections 32(b) through (d) of the Public
Utility Holding Company Act of 1935 (15 U.S.C. 79z-5a(a)(2)-(4), 79z-
5b(b)-(d)) shall apply. An exempt wholesale generator shall not be
considered an electric utility company under this subchapter.
    Foreign utility company. (1) The term ``foreign utility company''
means any company that owns or operates facilities that are not located
in any state and that are used for the generation, transmission, or
distribution of electric energy for sale or the distribution at retail
of natural or manufactured gas for heat, light, or power, if such
company:
    (i) Derives no part of its income, directly or indirectly, from the
generation, transmission, or distribution of electric energy for sale
or the distribution at retail of natural or manufactured gas for heat,
light, or power, within the United States; and
    (ii) Neither the company nor any of its subsidiary companies is a
public utility company operating in the United States.
    (2) A foreign utility company shall not be subject to any
requirements of this subchapter other than Sec.  366.2.
    Gas utility company. The term ``gas utility company'' means any
company that owns or operates facilities used for distribution at
retail (other than the distribution only in enclosed portable
containers or distribution to tenants or employees of the company
operating such facilities for their own use and not for resale) of
natural or manufactured gas for heat, light, or power. For the purposes
of this subchapter, ``gas utility company'' shall not include entities
that engage only in marketing of natural and manufactured gas.
    Goods. The term ``goods'' means any goods, equipment (including
machinery), materials, supplies, appliances, or similar property
(including coal, oil, or steam, but not including electric energy,
natural or manufactured gas, or utility assets) which is sold, leased,
or furnished, for a charge.
    Holding company.
    (1) In general. The term ``holding company'' means--
    (i) Any company that directly or indirectly owns, controls, or
holds, with power to vote, 10 percent or more of the outstanding voting
securities of a public-utility company or of a holding company of any
public-utility company; and
    (ii) Any person, determined by the Commission, after notice and
opportunity for hearing, to exercise directly or indirectly (either
alone or pursuant to an arrangement or understanding with one or more
persons) such a controlling influence over the management or policies
of any public-utility company or holding company as to make it
necessary or

appropriate for the rate protection of utility customers with respect
to rates that such person be subject to the obligations, duties, and
liabilities imposed by this subtitle upon holding companies.
    (2) Exclusions. The term ``holding company'' shall not include--
    (i) A bank, savings association, or trust company, or their
operating subsidiaries that own, control, or hold, with the power to
vote, public utility or public utility holding company securities so
long as the securities are--
    (A) Held as collateral for a loan;
    (B) Held in the ordinary course of business as a fiduciary; or
    (C) Acquired solely for purposes of liquidation and in connection
with a loan previously contracted for and owned beneficially for a
period of not more than two years; or
    (ii) A broker or dealer that owns, controls, or holds with the
power to vote public utility or public utility holding company
securities so long as the securities are--
    (A) Not beneficially owned by the broker or dealer and are subject
to any voting instructions which may be given by customers or their
assigns; or
    (B) Acquired in the ordinary course of business as a broker,
dealer, or underwriter with the bona fide intention of effecting
distribution within 12 months of the specific securities so acquired.
    Holding company system. The term ``holding company system'' means a
holding company, together with its subsidiary companies.
    Jurisdictional rates. The term ``jurisdictional rates'' means rates
accepted, established or permitted by the Commission for the
transmission of electric energy in interstate commerce, the sale of
electric energy at wholesale in interstate commerce, the transportation
of natural gas in interstate commerce, and the sale in interstate
commerce of natural gas for resale for ultimate public consumption for
domestic, commercial, industrial, or any other use.
    Natural gas company. The term ``natural gas company'' means a
person engaged in the transportation of natural gas in interstate
commerce or the sale of such gas in interstate commerce for resale.
    Person. The term ``person'' means an individual or company.
    Public utility. The term ``public utility'' means any person who
owns or operates facilities used for transmission of electric energy in
interstate commerce or sales of electric energy at wholesale in
interstate commerce.
    Public-utility company. The term ``public-utility company'' means
an electric utility company or a gas utility company. For the purposes
of this subchapter, the owner-lessors and owner participants in lease
financing transactions involving utility assets shall not be treated as
``public-utility companies.''
    Service. The term ``service'' means any managerial, financial,
legal, engineering, purchasing, marketing, auditing, statistical,
advertising, publicity, tax, research, or any other service (including
supervision or negotiation of construction or of sales), information or
data, which is sold or furnished for a charge.
    Service company. The term ``service company'' means any associate
company within a holding company system organized specifically for the
purpose of providing non-power goods or services or the sale of goods
or construction work to any public utility in the same holding company
system.
    Single-state holding company system. The term ``single-state
holding company system'' means a holding company system whose public
utility operations are confined substantially to a single state.
    State commission. The term ``state commission'' means any
commission, board, agency, or officer, by whatever name designated, of
a state, municipality, or other political subdivision of a state that,
under the laws of such state, has jurisdiction to regulate public
utility companies.
    Subsidiary company. The term ``subsidiary company'' of a holding
company means--
    (1) Any company, 10 percent or more of the outstanding voting
securities of which are directly or indirectly owned, controlled, or
held with power to vote, by such holding company; and
    (2) Any person, the management or policies of which the Commission,
after notice and opportunity for hearing, determines to be subject to a
controlling influence, directly or indirectly, by such holding company
(either alone or pursuant to an arrangement or understanding with one
or more other persons) so as to make it necessary for the rate
protection of utility customers with respect to rates that such person
be subject to the obligations, duties, and liabilities imposed by this
subtitle upon subsidiary companies of holding companies.
    Voting security. The term ``voting security'' means any security
presently entitling the owner or holder thereof to vote in the
direction or management of the affairs of a company. For the purposes
of this subchapter, the term ``voting security'' shall not include
member interests in electric power cooperatives.

Sec.  366.2  Commission access to books and records.

    (a) In general. Unless otherwise exempted by Commission rule or
order, each holding company and each associate company thereof shall
maintain, and shall make available to the Commission, such books,
accounts, memoranda, and other records as the Commission determines are
relevant to costs incurred by a public utility or natural gas company
that is an associate company of such holding company and necessary or
appropriate for the protection of utility customers with respect to
jurisdictional rates. However, for purposes of this subchapter, no
provision in the subchapter shall apply to or be deemed to include:
    (1) the United States;
    (2) A state or political subdivision of a state;
    (3) Any foreign governmental authority not operating in the United
States;
    (4) Any agency, authority, or instrumentality of any entity
referred to in paragraphs (a)(1), (2), or (3) of this section; or
    (5) Any officer, agent, or employee of any entity referred to in
paragraphs (a)(1), (2), (3), or (4) of this section as such in the
course of his or her official duty.
    (b) Affiliate companies. Unless otherwise exempted by Commission
rule or order, each affiliate of a holding company or of any subsidiary
company of a holding company shall maintain, and shall make available
to the Commission, such books, accounts, memoranda, and other records
with respect to any transaction with another affiliate, as the
Commission determines are relevant to costs incurred by a public
utility or natural gas company that is an associate company of such
holding company and necessary or appropriate for the protection of
utility customers with respect to jurisdictional rates.
    (c) Holding company systems. The Commission may examine the books,
accounts, memoranda, and other records of any company in a holding
company system, or any affiliate thereof, as the Commission determines
are relevant to costs incurred by a public utility or natural gas
company within such holding company system and necessary or appropriate
for the protection of utility customers with respect to jurisdictional
rates.
    (d) Confidentiality. No member, officer, or employee of the
Commission

shall divulge any fact or information that may come to his or her
knowledge during the course of examination of books, accounts,
memoranda, or other records as provided in this section, except as may
be directed by the Commission or by a court of competent jurisdiction.

Sec.  366.3  Exemption from Commission access to books and records;
waivers of accounting, record-retention, and reporting requirements.

    (a) Exempt classes of entities. Any person that is a holding
company, solely with respect to one or more of the following, is exempt
from the requirements of Sec.  366.2 and any accounting, record-
retention, or reporting requirements in this subchapter:
    (1) Qualifying facilities under the Public Utility Regulatory
Policies Act of 1978 (16 U.S.C. 2601 et seq.);
    (2) Exempt wholesale generators; or
    (3) Foreign utility companies.
    (b) Exemptions of additional persons and classes of transactions.
The Commission has determined that the following persons and classes of
transactions satisfy the requirements of paragraph (d) of this section
and may file to obtain an exemption from the requirements this
subchapter pursuant to the notification procedure contained in Sec.
366.4(b)(1):
    (1) Passive investors, so long as the ownership remains passive,
including:
    (i) Mutual funds,
    (ii) Collective investment vehicles whose assets are managed by
banks, savings and loan associations and their operating subsidiaries,
or brokers/dealers; and
    (iii) Persons that directly, or indirectly through their
subsidiaries or affiliates, buy and sell the securities of public
utilities in the ordinary course of business as a broker/dealer,
underwriter or fiduciary, and not exercising operational control over
the utility;
    (2) Commission-jurisdictional utilities that have no captive
customers and that are not affiliated with any jurisdictional utility
that has captive customers, and holding companies that own or control
only such utilities;
    (3) Transactions where the holding company affirmatively certifies
on behalf of itself and its subsidiaries, as applicable, that it will
not charge, bill or allocate to the public utility or natural gas
company in its holding company system any costs or expenses in
connection with goods and services transactions, and will not engage in
financing transactions with any such public utility or natural gas
company, except as authorized by a state commission or the Commission;
    (4) Transactions between or among affiliates that are independent
of and do not include a public utility or natural gas company;
    (5) Electric power cooperatives;
    (6) Local distribution companies that are not regulated as
``natural gas companies'' pursuant to sections 1(b) or 1(c) of the
Natural Gas Act, 15 U.S.C. 717(b), (c)).
    (c) Waivers. The following persons may file to obtain a waiver of
the accounting, record-retention, and filing requirements of Sec.
366.21, 366.22, and 366.23 pursuant to the notification procedures
contained in Sec.  366.4(c)(1):
    (1) Single-state holding company systems as defined in Sec.  366.1;
    (2) Holding companies that own generating facilities that total 100
MW or less in size and are used fundamentally for their own load or for
sales to affiliated end-users; or
    (3) Investors in independent transmission-only companies.
    (d) Commission authority to exempt additional persons and classes
of transactions. The Commission shall exempt a person or classes of
transaction from the requirements of Sec.  366.2 if, upon individual
application as described in paragraph (e) of this section or upon the
motion of the Commission--
    (1) The Commission finds that the books, accounts, memoranda, and
other records of any person are not relevant to the jurisdictional
rates of a public utility or natural gas company; or
    (2) The Commission finds that any class of transactions is not
relevant to the jurisdictional rates of a public utility or natural gas
company.
    (e) Other requests for exemptions and waivers. Any person seeking
an exemption or waiver that is not covered by paragraphs (b) or (c) of
this section, shall file a petition for declaratory order pursuant to
Sec.  385.207(a) of this chapter justifying its request for exemption.
Any person seeking such an exemption or waiver shall bear the burden of
demonstrating that such an exemption is warranted.

Sec.  366.4  FERC-65, notification of holding company status, FERC-65A,
exemption notification, and FERC-65B, waiver notification.

    (a) Notification of holding company status. Companies that meet the
definition of a holding company as provided by Sec.  366.1 as of
February 8, 2006, shall notify the Commission of their status as a
holding company no later than March 10, 2006. Holding companies formed
after February 8, 2006, shall notify the Commission of their status as
a holding company, no later than 30 days after their formation.
Notifications shall be made by submitting FERC-65 (notification of
holding company status), which contains the following: The identity of
the holding company and of the public utilities and natural gas
companies in the holding company system; the identity of service
companies or special-purpose subsidiaries providing non-power goods and
services; the identity of all affiliates and subsidiaries; and their
corporate relationship to each other. This filing will be for
informational purposes and will not be noticed in the Federal Register,
but will be available on the Commission's Web site.
    (b) FERC-65A (exemption notification) and petitions for exemption.
(1) Persons or companies seeking exemption from the requirements of
PUHCA 2005 and the Commission's regulations thereunder under Sec.
366.3(a), or one of the class exemptions adopted under Sec.  366.3(b),
may do so by filing FERC-65A (exemption notification). These filings
will be noticed in the Federal Register; persons or companies that file
FERC-65A must include a form of notice suitable for publication in the
Federal Register in accordance with the specifications in Sec.
385.203(d). Persons or companies that file FERC-65A in good faith shall
be deemed to have a temporary exemption upon filing. If the Commission
has taken no action within 60 days after the date of filing FERC-65A,
the exemption shall be deemed to have been granted. The Commission may
toll the 60-day period to request additional information or for further
consideration of the request; in such case, the claim for exemption
will remain temporary until such time as the Commission has determined
whether to grant or deny the exemption. Authority to toll the 60-day
period is delegated to the Secretary or the Secretary's designee, and
authority to act on uncontested FERC-65A filings is delegated to the
Director of the Office of Markets, Tariffs and Rates or to the Director
of the Office of Markets, Tariffs and Rates' designee.
    (2) Persons or companies that do not qualify for exemption pursuant
to Sec.  366.3(a) or Sec.  366.3(b) may seek an individual exemption
from this subchapter. They may not do so by means of filing FERC-65A
and instead must file a petition for declaratory order as required
under Sec.  366.3(e). Such petitions will be noticed in the Federal
Register; persons or companies that file a petition must include a form
of notice suitable for publication in the Federal Register in
accordance with the

specifications in Sec.  385.203(d). No temporary exemption will attach
upon filing and the requested exemption will be effective only if
approved by the Commission. Persons or companies may also seek
exemptions for classes of transactions by filing a petition for
declaratory order.
    (c) FERC-65B (waiver notification) and petitions for waiver. (1)
Persons or companies seeking a waiver of the Commission's regulations
under PUHCA 2005 pursuant to Sec.  366.3(c) may do so by filing FERC-
65B (waiver notification). FERC-65B will be noticed in the Federal
Register; persons or companies that file FERC-65B must include a form
of notice suitable for publication in the Federal Register in
accordance with the specifications in Sec.  385.203(d). Companies that
file FERC-65B in good faith shall be deemed to have a temporary
exemption upon filing. If the Commission has taken no action within 60
days after the date of filing of FERC-65B, the waiver shall be deemed
to have been granted. The Commission may toll the 60-day period to
request additional information or for further consideration of the
request; in such case, the waiver will remain temporary until such time
as the Commission has determined whether to grant or deny the waiver.
Authority to toll the 60-day period is delegated to the Secretary or
the Secretary's designee, and authority to act on uncontested FERC-65B
filings is delegated to the Director of the Office of Markets, Tariffs
and Rates or the Director of the Office of Markets, Tariffs and Rates'
designee.
    (2) Persons or companies that do not qualify for waiver pursuant to
Sec.  366.3(c) may seek an individual waiver from this subchapter. They
may not do so by means of filing FERC-65B and instead must file a
petition for declaratory order pursuant as required under Sec.
366.3(e). Such petitions will be noticed in the Federal Register;
persons or companies that file a petition must include a form of notice
suitable for publication in the Federal Register in accordance with the
specifications in Sec.  385.203(d) of this chapter. No temporary waiver
will attach upon filing and the requested exemption will be effective
only if approved by the Commission. Persons or companies may also seek
waivers for classes of transactions by filing a petition for
declaratory order.
    (d) Revocation of exemption or waiver. (1) If a person or company
that has been granted an exemption or waiver under paragraphs (b) or
(c) of this section fails to conform with any material facts or
representations presented in its submittals to the Commission, such
company or company may no longer rely upon FERC-65A, FERC-65B, or a
Commission determination granting the exemption or waiver.
    (2) The Commission may, on its own motion or on the motion of any
person, revoke the exemption or waiver granted under paragraphs (b) or
(c) of this section, if the person or company fails to conform to any
of the Commission's criteria under this part for obtaining the
exemption or waiver.

Sec.  366.5  Allocation of costs for non-power goods and services.

    (a) Commission review. In the case of non-power goods or
administrative or management services provided by an associate company
organized specifically for the purpose of providing such goods or
services to any public utility in the same holding company system, at
the election of the system (the public utility holding company,
together with its subsidiary companies) or a state commission having
jurisdiction over the public utility, the Commission shall review and
authorize the allocation of the costs for such goods or services to the
extent relevant to that associate company. Such election to have the
Commission review and authorize cost allocations shall remain in effect
until further Commission order.
    (b) Exemptions. Any holding company system whose public utility
operations are confined substantially to a single state is exempt from
the requirements of paragraph (a) of this section. A holding company
system's public utility operations will be deemed confined
substantially to a single state if the holding company system does not
derive more than 13 percent of its public-utility revenues from outside
a single state. A holding company system or state commission may,
pursuant to this subsection, seek a Commission determination that a
holding company's public utility operations are confined substantially
to a single state by filing a petition for declaratory order pursuant
to Rule 207(a) of the Commission's Rules of Practice and Procedure
(Sec.  385.207(a) of this chapter). Any holding company system or state
commission seeking such a determination shall bear the burden of
demonstrating that such determination is warranted.
    (c) Other classes of transactions. Either upon petition for
declaratory order or upon its own motion, the Commission may exclude
from the scope of Commission review and authorization under paragraph
(a) of this section any class of transactions that the Commission finds
is not relevant to the jurisdictional rates of a public utility. Any
holding company system or state commission seeking to obtain such a
determination under this subsection shall file a petition for
declaratory order pursuant to Rule 207(a) of the Commission's Rules of
Practice and Procedure justifying its request for exemption (Sec.
385.207(a) of this chapter). Any holding company system or state
commission seeking such an exemption shall bear the burden of
demonstrating that such determination is warranted.
    (d) Nothing in paragraphs (a) through (c) of this section shall
affect the authority of the Commission under the Federal Power Act (16
U.S.C. 791 et seq.), the Natural Gas Act (15 U.S.C. 717 et seq.), or
other applicable law, including the authority of the Commission with
respect to rates, charges, classifications, rules, regulations,
practices, contracts, facilities, and services.

Sec.  366.6  Previously authorized activities.

    (a) General. Unless otherwise provided by Commission rule or order,
a person may continue to engage in activities or transactions
authorized under the Public Utility Holding Company Act of 1935 prior
to the effective date of the Public Utility Holding Company Act of
2005, February 8, 2006, until the later of the date such authorization
expires or December 31, 2007, so long as that person continues to
comply with the terms of such authorization. If any such activities or
transactions are challenged in a formal Commission proceeding, the
person claiming prior authorization shall be required to provide at
that time the full text of any such authorization (whether by rule,
order, or letter) and the application(s) or pleading(s) underlying such
authorization (whether by rule, order, or letter).
    (b) Financing authorizations. Holding companies that intend to rely
on financing authorization orders or letters issued by the Securities
and Exchange Commission must file these orders or letters with the
Commission within 30 days after the effective date of the Public
Utility Holding Company Act of 2005, February 8, 2006; any reports or
other submissions that, pursuant to such financing authorizations,
previously were filed with the Securities and Exchange Commission must
instead be filed with the Commission, effective February 8, 2006. For
the purposes of this section, compliance with the terms of such
financing authorizations includes the requirement to notify the
Commission of any financing transactions that a holding company engages
in pursuant to such financing authorization.

Sec.  366.7  Procedures for obtaining exempt wholesale generator and
foreign utility company status.

    (a) Self-certification notice procedure. An exempt wholesale
generator or a foreign utility company, or their representative, may
file with the Commission a notice of self-certification demonstrating
that it satisfies the definition of exempt wholesale generator or
foreign utility company. In the case of exempt wholesale generators,
the person filing a notice of self-certification under this section
must also file a copy of the notice with the state regulatory authority
of the state in which the facility is located. Notices of self-
certification will be published in the Federal Register. Persons that
file such notices must include a form of notice suitable for
publication in the Federal Register in accordance with the
specifications in Sec.  385.203(d) of this chapter. A person filing a
notice of self-certification in good faith will be deemed to have
temporary exempt wholesale generator or foreign utility company status.
If the Commission takes no action within 60 days from the date of
filing of the notice of self-certification, the self-certification
shall be deemed to have been granted. The Commission may toll the 60-
day period to request additional information, or for further
consideration of the request; in such cases, the person's exempt
wholesale generator or foreign utility company status will remain
temporary until such time as the Commission has determined whether to
grant or deny exempt wholesale generator or foreign utility company
status. Authority to toll the 60-day period is delegated to the
Secretary or the Secretary's designee, and authority to act on
uncontested notices of self-certification is delegated to the General
Counsel or the General Counsel's designee.
    (b) Optional procedure for Commission determination of exempt
wholesale generator status or foreign utility company status. A person
may file for a Commission determination of exempt wholesale generator
status or foreign utility company status under Sec.  366.1 by filing a
petition for declaratory order pursuant to Rule 207(a) of the
Commission's Rules of Practice and Procedure (Sec.  385.207(a) of this
chapter), justifying its request for exemption. Persons that file
petitions must include a form of notice suitable for publication in the
Federal Register in accordance with the specifications in Sec.
385.203(d) of this chapter. Authority to act on uncontested notices of
self-certification is delegated to the General Counsel or the General
Counsel's designee.
    (c) Revocation of status. (1) If an exempt wholesale generating
facility or a foreign utility company fails to conform with any
material facts or representations presented by the applicant in its
submittals to the Commission, the notice of self-certification of the
status of the facility or Commission order certifying the status of the
facility may no longer be relied upon.
    (2) The Commission may, on its own motion or on the application of
any person, revoke the status of a facility or company, if the facility
or company fails to conform to any of the Commission's criteria under
this part.

Subpart B--PUHCA 2005 Accounting and Recordkeeping

Sec.  366.21  Accounts and records for holding companies.

    (a) General. Unless otherwise exempted or granted a waiver by
Commission rule or order, every holding company shall maintain and make
available to the Commission books, accounts, memoranda, and other
records of all of its transactions in sufficient detail to permit
examination, audit and verification, as necessary and appropriate for
the protection of utility customers with respect to jurisdictional
rates, of the financial statements, schedules and reports required to
be filed with the Commission or issued to stockholders.
    (b) Unless otherwise exempted or granted a waiver by Commission
rule or order, beginning January 1, 2007, all holding companies must
comply with the Commission's record-retention requirements for public
utilities and licensees or for natural gas companies, as appropriate
(parts 125 and 225 of this chapter). Until December 31, 2006, holding
companies registered under the Public Utility Holding Company Act of
1935 (16 U.S.C. 79a et seq.) may follow either the Commission's record-
retention rules for public utilities and licensees or for natural gas
companies, as appropriate (parts 125 and 225 of this chapter), or the
Security and Exchange Commission's record-retention rules in 17 CFR
part 257.
    (c) Nothing in this section shall relieve any company subject
thereto from compliance with the requirements as to recordkeeping and
record-retention that may be prescribed by any other regulatory agency.

Sec.  366.22  Accounts and records of service companies.

    (a) Record-retention requirements--(1) General. Unless otherwise
exempted or granted a waiver by Commission rule or order, beginning
January 1, 2007, every service company shall maintain and make
available to the Commission such books, accounts, memoranda, and other
records in such manner and preserve them for such periods, as the
Commission prescribes in parts 125 and 225 of this chapter in
sufficient detail to permit examination, audit, and verification, as
necessary and appropriate for the protection of utility customers with
respect to jurisdictional rates.
    (2) Transition period. Until December 31, 2006, service companies
in holding company systems registered under the Public Utility Holding
Company Act of 1935 (16 U.S.C. 79a et seq. (2000)) may follow either
the Commission's record-retention requirements in parts 125 and 225 of
this chapter or the Securities and Exchange Commission's record-
retention rules in 17 CFR part 257.
    (3) Nothing in this section shall relieve any service company
subject thereto from compliance with requirements as to record-
retention that may be prescribed by any other regulatory agency.
    (b) Accounting requirements--(1) General. Unless otherwise exempted
or granted a waiver by Commission rule or order, beginning January 1,
2007, every service company that is not a special-purpose company
(e.g., a fuel supply company or a construction company) shall maintain
and make available to the Commission such books, accounts, memoranda,
and other records as the Commission prescribes in parts 101 and 201 of
this chapter, in sufficient detail to permit examination, audit, and
verification, as necessary and appropriate for the protection of
utility customers with respect to jurisdictional rates. Every such
service company shall maintain and make available such books, accounts,
memoranda, and other records in such manner as are prescribed in parts
101 and 201 of this chapter, and shall keep no other records with
respect to the same subject matter except:
    (i) Records other than accounts;
    (ii) Records required by federal or state law;
    (iii) Subaccounts or supporting accounts which are not inconsistent
with the accounts required either by the Uniform System of Accounts in
parts 101 and 201 of this chapter; and
    (iv) Such other accounts as may be authorized by the Commission.
    (2) Transition period. Until December 31, 2006, service companies
in holding company systems registered under the Public Utility Holding
Company Act of 1935 (16 U.S.C. 79a et seq.), as described in paragraph
(b)(1) of this

section, may follow either the Commission's Uniform System of Accounts
in parts 101 and 201 of this chapter or the Securities and Exchange
Commission's Uniform System of Accounts in 17 CFR part 256.
    (3) Nothing in this section shall relieve any service company
subject thereto from compliance with requirements as to accounting that
may be prescribed by any other regulatory agency.

Sec.  366.23  FERC Form No. 60, annual reports by service companies.

    (a) General. Unless otherwise exempted or granted a waiver by
Commission rule or order, every service company in a holding company
system that is not a special-purpose company (e.g., a fuel supply
company or a construction company) that provides non-power goods or
services to a Commission-jurisdictional public utility or natural gas
company shall file with the Commission by May 1, 2006 and by May 1 each
year thereafter, a report, FERC Form No. 60, for the prior calendar
year. Every such report shall be submitted on the FERC Form No. 60 then
in effect and shall be prepared in accordance with the instructions
incorporated in such form. For good cause shown, the Commission may
extend the time within which any such report is to be filed or waive
the requirements applicable to any such report. The authority to act on
motions for extensions of time to file any such reports or to waive the
requirements applicable to any such reports, including granting or
denying such motions, in whole or in part, is delegated to the Chief
Accountant or the Chief Accountant's designee.
    (b) Transition period. Service companies in holding company systems
exempted from the requirements of the Public Utility Holding Company
Act of 1935 (16 U.S.C. 79a et seq.) need not file an annual report,
FERC Form No. 60, for calendar years 2005 and 2006.

    Note: The following appendixes will not appear in the Code of
Federal Regulations.

Appendix 1 List of Commenters

------------------------------------------------------------------------
                     Acronym                               Name
------------------------------------------------------------------------
AGL Resources...................................  AGL Resources Inc.
Alcoa...........................................  Alcoa Inc.
                                                  Allegheny Energy Inc.
Alliant.........................................  Alliant Energy
                                                   Corporation.
Ameren..........................................  Ameren Services
                                                   Company.
AEP.............................................  American Electric
                                                   Power Service
                                                   Corporation.
AGA.............................................  American Gas
                                                   Association.
American National Power.........................  American National
                                                   Power, Inc.
APGA............................................  American Public Gas
                                                   Association.
APPA/NRECA......................................  American Public Power
                                                   Association/National
                                                   Rural Electric
                                                   Cooperative
                                                   Association.
                                                  American Transmission
                                                   Company LLC.
Cooperatives....................................  Arizona Electric Power
                                                   Cooperative, Inc./
                                                   Southwest
                                                   Transmission
                                                   Cooperative, Inc./
                                                   Sierra Southwest
                                                   Cooperative Services,
                                                   Inc.
Arkansas PSC....................................  Arkansas Public
                                                   Service Commission.
Barclays........................................  Barclays Global
                                                   Investors, N.A.
Barrick.........................................  Barrick Goldstrike
                                                   Mines Inc.
Black Hills.....................................  Black Hills
                                                   Corporation.
CEOB............................................  California Electricity
                                                   Oversight Board.
Calpine.........................................  Calpine Corporation.
                                                  Capital Research and
                                                   Management Company.
Cinergy.........................................  Cinergy Corporation.
                                                  City of Redding,
                                                   California.
Santa Clara.....................................  City Santa Clara,
                                                   California.
Chairman Barton.................................  Congressman Joe
                                                   Barton.
ConEd...........................................  Consolidated Edison
                                                   Company of New York,
                                                   Inc.
Coral Power and Shell WindEnergy................  Coral Power, LLC and
                                                   Shell WindEnergy Inc.
Detroit Edison..................................  Detroit Edison
                                                   Company.
Dominion........................................  Dominion Resources,
                                                   Inc.
Duke Energy.....................................  Duke Energy
                                                   Corporation.
EEI.............................................  Edison Electric
                                                   Institute.
EPSA............................................  Electric Power Supply
                                                   Association.
ELCON...........................................  Electricity Consumers
                                                   Resource Council/
                                                   American Iron and
                                                   Steel Institute/
                                                   American Chemistry
                                                   Council/Portland
                                                   Cement Association.
Emera...........................................  Emera Incorporated.
Energy East.....................................  Energy East
                                                   Corporation.
Entergy.........................................  Entergy Services, Inc.
E.ON/LG&E Energy................................  E.ON AG and LG&E
                                                   Energy LLC.
Exelon..........................................  Exelon Corporation.
FirstEnergy.....................................  FirstEnergy Service
                                                   Company.
FPL Group.......................................  FPL Group, Inc.
Georgia PSC.....................................  Georgia Public Service
                                                   Commission.
Goldman Sachs...................................  The Goldman Sachs
                                                   Group, Inc.
IURC............................................  Indiana Utility
                                                   Regulatory
                                                   Commission.
                                                  International
                                                   Transmission Company.
                                                  Investment Advisor
                                                   Association.
                                                  Investment Company
                                                   Institute.
Kentucky PSC....................................  Kentucky Public
                                                   Service Commission.
Keyspan.........................................  Keyspan Corporation.
MBIA............................................  MBIA Insurance
                                                   Corporation.
MGTC............................................  MGTC Inc.
MidAmerican.....................................  MidAmerican Energy
                                                   Holdings Company.
Missouri PSC....................................  Missouri Public
                                                   Service Commission.

Mittal Steel....................................  Mittal Steel USA ISG,
                                                   Inc.
Morgan Stanley..................................  Morgan Stanley Capital
                                                   Group Inc.
NARUC...........................................  National Association
                                                   of Regulatory Utility
                                                   Commissioners.
NASUCA..........................................  National Association
                                                   of State Utility
                                                   Consumer Advocates.
National Fuel...................................  National Fuel Gas
                                                   Company.
National Grid...................................  National Grid USA.
NiSource........................................  NiSource Inc.
Northeast Utilities.............................  Northeast Utilities
                                                   Service Company.
                                                  PG&E Corporation.
Ohio PUC........................................  Public Utilities
                                                   Commission of Ohio.
Oklahoma Corporation............................  Oklahoma Corporation
                                                   Commission.
                                                  Pacificorp.
                                                  Pepco Holding, Inc./
                                                   Potomac Electric
                                                   Power Company/
                                                   Atlantic City.
                                                  Electric Company/
                                                   Delmarva Power &
                                                   Light Company/
                                                   Conectiv.
                                                  Energy Supply, Inc./
                                                   PEPCO Energy Services
                                                   Inc./PHI Service
                                                   Company and other
                                                   system companies.
                                                  Portland General
                                                   Electric Company.
PPL.............................................  PPL Companies.
                                                  PPM Energy, Inc.
Progress Energy.................................  Progress Energy, Inc.
Public Citizen..................................  Public Citizen Inc.
Wisconsin PSC...................................  Public Service
                                                   Commission of
                                                   Wisconsin.
                                                  Questar Corporation.
                                                  Scottish Power.
                                                  Southern Company
                                                   Services, Inc.
TANC............................................  Transmission Agency of
                                                   Northern California.
                                                  Tri-State Generation/
                                                   Transmission
                                                   Association, Inc.
Utility Workers.................................  Utility Workers Union
                                                   of America.
                                                  WGL Holdings, Inc. and
                                                   Washington Gas &
                                                   Light Company.
Xcel............................................  Xcel Energy Services
                                                   Inc.
------------------------------------------------------------------------

Appendix 2 FERC Form No. 60

United States

Federal Energy Regulatory Commission

Washington, DC 20426

FORM 60

ANNUAL REPORT

FOR THE PERIOD

Beginning -------- and Ending --------

To the

Federal Energy Regulatory Commission of

(Exact Name of Reporting Company)

A -------- Service Company

(''Mutual'' or ``Subsidiary'')

Date of Incorporation -------- If not Incorporated, Date of
Organization --------.
State or Sovereign Power under which Incorporated or Organized ----
----
Location of Principal Executive Offices of Reporting Company ------
--
Name, title, and address of officer to whom correspondence
concerning this report should be addressed:
(Name) (Title) (Address)
Name of Principal Holding Company under which Reporting Company is
organized:

Instructions For Use of Form 60

1. Timing of Filing

    On or before the first day of May in each calendar year, each
mutual service company and each subsidiary service company shall
file with Commission an annual report on Form 60 and in accordance
with the Instructions for that form.

2. Number of Copies

    Each annual report shall be filed in duplicate. The company
should prepare and retain at least one extra copy for itself in case
correspondence with reference to the report becomes necessary.

3. Period Covered by Report

    The first report filed by the company shall cover the period
from the date the Uniform System of Accounts was required to be made
effective as to that company to the end of that calendar year.
Subsequent reports should cover a calendar year.

4. Report Format

    Reports shall be submitted on the forms prepared by the
Commission. If the space provided on any sheet of such form is
inadequate, additional sheets may be inserted of the same size as a
sheet of the form or folded to each size.

5. Money Amounts Displayed

    All money amounts required to be shown in financial statements
may be expressed in whole dollars, in thousands of dollars or in
hundred thousands of dollars, as appropriate and subject to
provisions of Regulation S-X (210.3-01).

6. Deficits Displayed

    Deficits and other like entries shall be indicated by the use of
either brackets or a parenthesis with corresponding reference in
footnotes (Regulation S-X, 210.3-01(c)).

7. Major Amendments or Corrections

    Any company desiring to amend or correct a major omission or
error in a report after it has been filed with the Commission shall
submit an amended report including only those pages, schedules and
entries that are to be amended or corrected. A cover letter shall be
submitted requesting the Commission to incorporate the amended
report changes and shall be signed by a duly authorized officer of
the company.

8. Definitions

    Definitions contained in Instruction 01-8 to the Uniform System
of Accounts for Mutual Service Companies and Subsidiary Service
Companies, Public Utility Holding Act of 2005, shall be applicable
to words or terms used specifically within this Form 60.

9. Organization Chart

    The Service Company shall submit with each annual report a copy
of its current organization chart.

10. Methods of Allocation

    The Service Company shall submit with each annual report a
listing of the currently effective methods of allocation being used
by the service company and on file and approved previously by the
Securities and Exchange Commission pursuant to the Public Utility
Holding Company Act of 19355.

11. Annual Statement of Compensation for Use of Capital Billed

    The service company shall submit with each annual report a copy
of the annual statement supplied to each associate company in
support of the amount of compensation for use of capital billed
during the calendar year.

12. Collection of Information

    The information requested by this form is being collected under
authority of the Public

Utility Holding Act of 2005. The Commission estimates that it will
take each respondent thirteen and one-half (13.5) hours to respond
to this collection of information. A response to this form is
mandatory. The information on this form will not be kept
confidential. An agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless a
currently valid OMB control number is displayed.

13. Where To File

    File Form 60 at the following address:

Federal Energy Regulatory Commission,
888 First Street, NE.,
Washington, DC 20426.

              Listing of Schedules and Analysis of Accounts
------------------------------------------------------------------------
    Description of Schedules and
              Accounts                Schedule or Account No.   Page No.
------------------------------------------------------------------------
Comparative Balance Sheet...........  Schedule I.............          5
Service Company Property............  Schedule II............          7
Accumulated Provision for             Schedule III...........          8
 Depreciation and Amortization of
 Service Company Property.
Investments.........................  Schedule IV............          9
Accounts Receivable from Associate    Schedule V.............          9
 Companies.
Fuel Stock Expenses Undistributed...  Schedule VI............         10
Stores Expense Undistributed........  Schedule VII...........         10
Miscellaneous Current and Accrued     Schedule VIII..........         11
 Assets.
Miscellaneous Deferred Debits.......  Schedule IX............         11
Research, Development, or             Schedule X.............         12
 Demonstration Expenditures.
Proprietary Capital.................  Schedule XI............         12
Long-Term Debt......................  Schedule XII...........         13
Current and Accrued Liabilities.....  Schedule XIII..........         14
Notes to Financial Statements.......  Schedule XIV...........         14
Comparative Income Statement........  Schedule XV............         15
Analysis of Billing--Associate        Account 457............         16
 Companies.
Analysis of Billing--Nonassociate     Account 458............         17
 Companies.
Analysis of Charges for Service--     Schedule XVI...........         18
 Associate and Nonassociate
 Companies.
Schedule of Expense Distribution by   Schedule XVII..........         19
 Department or Service Function.
Departmental Analysis of Salaries...  Account 920............         20
Miscellaneous General Expenses......  Account 930.2..........         20
Notes to Statement of Income........  Schedule XVIII.........         21
Organization Chart..................  .......................         22
Methods of Allocation...............  .......................         22
Annual Statement of Compensation for  .......................         22
 Use of Capital Billed.
------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

                                      Schedule I--Comparative Balance Sheet
                 [Give balance of the Company as of December 31 of the current and prior year.]
----------------------------------------------------------------------------------------------------------------
                                                                                As of December 31,
             Account                          Assets and other debits            -------------------------------
                                                                                Current          Prior
----------------------------------------------------------------------------------------------------------------
                                   Service Company Property

101..............................  Service company property (Schedule II)
107..............................  Construciton work in progress (Schedule II)
                                    Total Property
108..............................  Less: Accumulated provision for depreciation
                                    and amortization of service company property
                                    (Schedule III)
                                    Net Service Company Property

                                   Investments

123..............................  Investments in associate companies (Schedule
                                    IV)
124..............................  Other investments (Schedule IV)
                                    Total Investments

                                   Current and Accrued Assets

131..............................  Cash
134..............................  Special deposits
135..............................  Working funds
136..............................  Temporary cash investments (Schedule IV)
141..............................  Notes receivable
143..............................  Accounts receivable
144..............................  Accumulated provision for uncollectible
                                    accounts
146..............................  Accounts receivable from associate companies
                                    (Schedule V)
152..............................  Fuel stock expenses undistributed (Schedule
                                    VI)
154..............................  Materials and supplies
163..............................  Stores expense undistributed (Schedule VII)
                                   Prepayments
165..............................  Miscellaneous current and accrued assets
                                    (Schedule VIII)
174..............................   Total Current and Accrued Assets

                                   Deferred Debits

                                   Unamortized debt expense
181..............................  Clearing accounts
184..............................  Miscellaneous deferred debits (Schedule IX)
186..............................  Research, development, or demonstration
                                    expenditures (Sch. X)
188..............................  Accumulated deferred income taxes
190..............................   Total Deferred Debits
                                    Total Assets and Other Debits
----------------------------------------------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

                                      Schedule I--Comparative Balance Sheet
----------------------------------------------------------------------------------------------------------------
                                                                                As of December 31,
             Account                    Liabilities and proprietary capital      -------------------------------
                                                                                Current          Prior
----------------------------------------------------------------------------------------------------------------
                                   Proprietary Capital

201..............................  Common stock issued (Schedule XI)
211..............................  Miscellaneous paid-in-capital (Schedule XI)
215..............................  Appropriated retained earnings (Schedule XI)
216..............................  Unappropriated retained earnings (Schedule
                                    XI)
                                    Total Proprietary Capital

                                   Long-Term Debt

223..............................  Advances from associate companies (Schedule
                                    XII)
224..............................  Other long-term debt (Schedule XII)
225..............................  Unamortized premium on long-term debt
226..............................  Unamortized discount on long-term debt-debit
                                    Total Long-Term Debt

                                   Current and Accrued Liabilities

228..............................  Accumulated provision for pensions and
                                    benefits
231..............................  Notes payable
232..............................  Accounts payable
233..............................  Notes payable to associate companies
                                    (Schedule XIII)
234..............................  Accounts payable to associate companies
                                    (Schedule XIII)
236..............................  Taxes accrued
237..............................  Interest accrued
241..............................  Tax collections payable
242..............................  Miscellaneous current and accrued liabilities
                                    (Schedule XIII)
243..............................  Obligations under capital leases--Current
                                    Total Current and Accrued Liabilities

                                   Deferred Credits

253..............................  Other deferred credits
255..............................  Accumulated deferred investment tax credits
                                    Total Deferred Credits
282..............................  Accumulated Deferred Income Taxes
                                    Total Liabilities and Proprietary Capital
----------------------------------------------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

 For the Year Ended----------------------------------------------------

                                                          Schedule II--Service Company Property
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Balance at
               Account                            Description              beginning of      Additions    Retirements or   Other changes    Balance at
                                                                               year                            sales            \1\        close of year
--------------------------------------------------------------------------------------------------------------------------------------------------------
301..................................  Organization
303..................................  Miscellaneous Intangible Plant
304..................................  Land and Land Rights
305..................................  Structures and Improvements
306..................................  Leasehold Improvements
307..................................  Equipment \2\
308..................................  Office Furniture and Equipment

309..................................  Automobiles, Other Vehicles and
                                        Related Garage Equipment
310..................................  Aircraft and Airport Equipment
311..................................  Other Property: \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------

Sub-Totals

107 Construction Work in Progress \4\

Total

    \1\ Provide an explanation of those changes considered material.
    \2\ Subaccounts are required for each class of equipment owned.
The service company shall provide a listing by subaccount of
equipment additions during the year and balance at the close of the
year.
    \3\ Describe other service company property.
    \4\ Describe construction work in progress.

------------------------------------------------------------------------
                                                        Balance at close
      Subaccount description            Additions           of year
------------------------------------------------------------------------

------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

 For the Year Ended----------------------------------------------------

                            Schedule III--Accumulated Provision for Depreciation and Amortization of Service Company Property
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Balance at       Additions                     Other changes
               Account                            Description              beginning of     charged to      Retirements      additions      Balance at
                                                                               year         account 403                   (deductions) *   close of year
--------------------------------------------------------------------------------------------------------------------------------------------------------
301..................................  Organization
303..................................  Miscellaneous Intangible Plant
304..................................  Land and Land Rights
305..................................  Structures and Improvements
306..................................  Leasehold Improvements
307..................................  Equipment
308..................................  Office Furniture and Equipment
309..................................  Automobiles, Other Vehicles and
                                        Related Garage Equipment
310..................................  Aircraft and Airport Equipment
311..................................  Other Service Company Property:
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Provide an explanation of those changes considered material.

 ANNUAL REPORT OF------------------------------------------------------

 For the Year Ended----------------------------------------------------

                        Schedule IV--Investments
 [Instructions: Complete the following schedule concerning investments.
     Under Account 124 ``Other Investments'', state each investment
  separately, with description, including the name of issuing company,
      number of shares or principal amount, etc. Under Account 136,
    ``Temporary Cash Investments'', list each investment separately.]
------------------------------------------------------------------------
                                            Balance at
               Description                 beginning of     Balance at
                                               year        close of year
------------------------------------------------------------------------
Account 123--Investment in Associate
 Companies
Account 124--Other Investments
Account 136--Temporary Cash Investments
    Total
------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

 For the Year Ended

-----------------------------------------------------------------------

        Schedule V--Accounts Receivable From Associate Companies
     [Instructions: Complete the following schedule listing accounts
  receivable from each associate company. Where the service company has
 provided accommodation or convenience payments for associate companies,
   a separate listing of total payments for each associate company by
                     subaccount should be provided.]
------------------------------------------------------------------------
                                            Balance at
               Description                 beginning of     Balance at
                                               year        close of year
------------------------------------------------------------------------
Account 146--Accounts Receivable from
 Associate Companies
    Total
Analysis of Convenience or Accommodation
 Payments: Total Payments for each
 associate
    Total Payments
------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

 For the Year Ended----------------------------------------------------

                                 Schedule VI--Fuel Stock Expenses Undistributed
 [Instructions: Report the amount of labor and expenses incurred with respect to fuel stock expenses during the
  year and indicate amount attributable to each associate company. Under the section headed ``Summary'' listed
             below give and overall report of the fuel functions performed by the service company.]
----------------------------------------------------------------------------------------------------------------
                           Description                                 Labor         Expenses          Total
----------------------------------------------------------------------------------------------------------------
Account 152--Fuel Stock Expenses Undistributed
    Total
Summary:
----------------------------------------------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

 For the Year Ended----------------------------------------------------

                                   Schedule VII--Stores Expense Undistributed
 [Instructions: Report the amount of labor and expenses incurred with respect to stores expense during the year
                          and indicate amount attributable to each associate company.]
----------------------------------------------------------------------------------------------------------------
                           Description                                 Labor         Expenses          Total
----------------------------------------------------------------------------------------------------------------
Account 163--Stores Expense Undistributed
    Total
----------------------------------------------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

 For the Year Ended----------------------------------------------------

         Schedule VIII--Miscellaneour Current and Accrued Assets
 [Instructions: Provide detail of items in this account. Items less than
   $10,000 may be grouped, showing the number of items in each group.]
------------------------------------------------------------------------
                                            Balance at
               Description                 beginning of     Balance at
                                               year        close of year
------------------------------------------------------------------------
Account 174--Miscellaneous Current and
 Accrued Assets
    Total
------------------------------------------------------------------------

 ANNUAL REPORT OF------------------------------------------------------

 For the Year End------------------------------------------------------

               Schedule IX--Miscellaneous Deferred Debits
 [Instructions: Provide detail of items in this account. Items less than
   $10,000 may be grouped, showing the number of items in each group.]
------------------------------------------------------------------------
                                            Balance at
               Description                 beginning of     Balance at
                                               year        close of year
------------------------------------------------------------------------