UTILITY STOCK TRANSFER UNDER 66 PA.C.S. § 1102(a)(3)—STATEMENT OF POLICY
§ 69.901. Utility stock transfer under 66 Pa.C.S. § 1102(a)(3).
(a) Background.
(1) Commission jurisdiction over the acquisition or transfer of public utility property is governed by 66 Pa.C.S. § 1102(a)(3) (relating to enumeration of acts requiring certificate). The ambiguous language in 66 Pa.C.S. § 1102(a)(3) has historically caused considerable uncertainty among the Commission, its staff and the industry regarding what type of transaction requires Commission approval. This uncertainty has been particularly apparent regarding stock transfers which may equate to the transfer of utility property.
(2) Recently, the Commission has examined 66 Pa.C.S. § 1102(a)(3) and determined that the transfer of stock or other voting interest of a utility’s parent is jurisdictional regardless of the remoteness of the transaction if the effect of the transaction is to change the control of a utility. Joint Application of Commonwealth Telephone Company, et al., A-310800,F.0006, (October 22, 1993). Furthermore, the Commission has held that a transaction resulting in a change of the de facto controlling interest in a utility or its parent, regardless of the tier in the corporate organization, constitutes a change of control of the utility and is jurisdictional under 66 Pa.C.S. § 1102(a)(3). Joint Application of Paging Network of Pittsburgh, Inc. et al., A-330013,F.0005. In view of these Commission holdings, it is necessary to further define and establish clear standards regarding what transfer of voting interest constitutes a change in de facto control and thereby constitutes the transfer or acquisition of utility property within the intendment of 66 Pa.C.S. § 1102(a)(3).
(b) Policy.
(1) A transaction or series of transactions resulting in a new controlling interest is jurisdictional when the transaction or transactions result in a different entity becoming the beneficial holder of the largest voting interest in the utility or parent, regardless of the tier. A transaction or series of transactions resulting in the elimination of a controlling interest is jurisdictional when the transaction or transactions result in the dissipation of the largest voting interest in the utility or parent, regardless of the tier.
(2) For purposes of this section, a controlling interest is an interest, held by a person or a group acting in concert, which enables the beneficial holders to control at least 20% of the voting interest in the utility or its parent, regardless of the remoteness of the transaction. In determining whether a controlling interest is present, voting power arising from a contingent right shall be disregarded.
(3) Under this section, intrafamily transactions made with only nominal consideration do not constitute a change in de facto control of a utility. For purposes of this section, an intrafamily transaction is a transfer or acquisition of stock to or from a spouse, parent, sibling or direct descendent or to or from a trust which has permissible income or remainder beneficiaries which include the stockholder or the stockholder’s spouse, parent, sibling or direct descendent or to an estate pending distribution or to a guardian or attorney-in-fact acting on behalf of a stockholder.
Source The provisions of this § 69.901 adopted October 21, 1994, effective October 22, 1994, 24 Pa.B. 5328.
Cross References This section cited in 52 Pa. Code § 63.324 (relating to commission approval of a general rule transaction subject to 66 Pa.C.S. § § 1102(a)(3) and 1103); and 52 Pa. Code § 63.325 (relating to commission approval of a pro forma transaction subject to 66 Pa.C.S. § § 1102(a)(3) and 1103).
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