Fortnightly
TEP's Holding Co. Status on Hold
October 15, 1995By Lori A. Burkhart
The staff of the Arizona Corporation Commission have recommended rejection of a Tucson Electric Power Co. (TEP) proposal to form a holding company, with TEP becoming a wholly-owned subsidiary. The proposal reflects TEP's desire to pursue opportunities in the domestic and international power markets, including development of independent power projects, acquisition of interests in existing power facilities privatized by foreign governments, and construction of cogeneration facilities to serve the energy needs of large industrial customers. But according to commission staffer Gary Harpster, "The business and financial risks created by investing in capital-intensive and highly leveraged independent power projects are unacceptable, given TEP's current financial condition." Should the commission approve formation of the holding company, the staff recommended that it impose 32 conditions on TEP, including:
s Limiting holding company investments in nonutility activities
s Restoring TEP's equity ratio to a reasonable level
s Keeping utility and nonutility businesses separate
s Preventing subsidization of utility and nonutility operations
s Not diverting to the holding company funds that could be invested in TEP
s Not using TEP's service territory to provide competitive advantages to its affiliates.
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