DR 97-251
                         NEW ENGLAND POWER COMPANY
          Order Approving Transfer and Granting Related Requests 
                          O R D E R   N O. 22,982
                               July 20, 1998
         APPEARANCES:  Thomas Robinson, Esq., for New
     England Power Company; Carlos A. Gavilondo, Esq., for
     Granite State Electric Company; Donna C. Sharkey, Esq., for
     Enron Capital & Trade Resources, Inc.; Ann Ross, Esq.,for
     the Retail Merchants Association of New Hampshire (RMA);
     Stephen J. Judge, Associate Attorney General, for the
     Governor's Office of Energy and Community Services; Michael
     Holmes, Esq., for the Office of Consumer Advocate; and
     Robert J. Frank, Esq., for the Staff of the New Hampshire
     Public Utilities Commission.
               This order approves a request by New England Power
     Company (NEP) for authority to transfer its New Hampshire
     hydro electric facilities in a proposed transaction with
     USGen New England, Inc. (USGenNE) pursuant to which NEP has
     agreed to sell substantially all of its non-nuclear
     generating assets.  As explained below, the Commission finds
     that NEP's proposal meets the public good standard of RSA
     374:30 and generally comports with the State's electric
     utility restructuring policies in RSA 374-F.  The Commission
     does not address in this order whether NEP, or its
     affiliated New Hampshire utility, Granite State Electric
     Company (GSEC), have adequately mitigated any stranded costs
     which might be borne by GSEC's ratepayers; however, the
     Commission finds that NEP utilized a reasonable market
     procedure to quantify any such costs.  In addition to the
     proposed transfer of generation assets, this order approves
     several incidental requests by NEP.  Specifically, the
     Commission grants NEP's request for authority to issue up to
     $100 million in long-term securities through December 31,
     2000 for the purpose of funding potential payment
     obligations to USGenNE which are part of the divestiture
     transaction.  The Commission also makes findings which will
     enable USGenNE to acquire NEP's generating assets without
     becoming subject to the Public Utility Holding Company Act
     of 1935 (PUHCA), 15 U.S.C.  79 et seq.
               On December 8, 1997, NEP filed a petition
     requesting, inter alia, permission under RSA 374:30 to
     transfer its New Hampshire hydroelectric facilities to
     USGenNE in conjunction with a proposed sale of most of NEP's
     other non-nuclear generating assets and unit entitlements. 
     In the same filing, NEP has also requested authority under
     RSA 369:1 to issue long-term debt to fund certain contingent
     obligations as part of the aforementioned transaction.  NEP
     also seeks certain "eligible facilities" findings pursuant
     to PUHCA, 15 U.S.C.  79 et seq.   
               The Commission initiated this proceeding by an
     order of notice issued on January 6, 1998.  A prehearing
     conference was held on January 22, 1998.
               In Order No. 22,849 (February 17, 1998), the
     Commission granted timely requests for intervention by the
     following entities: the Town of Littleton, New Hampshire
     (Littleton); the Conservation Law Foundation (CLF); the
     Governor's Office of Energy and Community Services (ECS);
     USGenNE; the Business and Industry Association of New
     Hampshire (BIA); Enron Energy Services Company (Enron); and
     the Retail Merchants Association of New Hampshire (RMA).  In
     the same order, the Commission directed Granite State
     Electric Company (GSEC) to enter an appearance in this
               In Order No. 22,885 (March 30, 1998), the
     Commission granted requests for confidential treatment filed
     by NEP on February 13, 1998, March 4, 1998 and March 24,
               In Order No. 22,886 (March 31, 1998), the
     Commission approved a stipulation filed by NEP and GSEC, and
     supported by several other parties, concerning the scope of
     this docket in relation to DR 98-012.        
               Evidentiary hearings were held on March 24-26 and
     April 1-2, 1998. The following parties appeared and
     presented testimony during the hearings: NEP, Enron, ECS,
     and OCA.  Post-hearing briefs were filed by NEP, Enron,
     USGenNE, ECS, and OCA on April 17, 1998.  Each of the
     foregoing parties except USGenNE also filed reply briefs on
     April 24, 1998.  
               The Commission deliberated this matter at its June
     15, 1998 public meeting.
          A.   NEP
               1.   Background
               NEP is a Massachusetts corporation and a
     wholly-owned subsidiary of the New England Electric System
     (NEES); it owns and operates generation and transmission
     facilities throughout Northern New England, including New
     Hampshire.  NEP provides wholesale requirements service to
     four affiliated retail electric utilities, including GSEC.  
               NEP and USGenNE have entered into a series of
     interrelated agreements pursuant to which NEP has agreed to
     sell, and USGenNE has agreed to purchase, substantially all
     of NEP's non-nuclear generation assets and approximately
     1,100 MW of power procured by NEP under long-term contracts
     with independent power producers and non-utility generators. 
     These agreements followed a competitive bidding process
     which NEP initiated during March, 1997 to comply with the
     terms of a retail electric restructuring settlement reached
     in Massachusetts with various state officials, consumer
     groups and environmental organizations.  Exhibit 3, p. 6. 
     NEP states that the instant transaction with USGenNE is a
     fundamental element in the corporate restructuring of NEES
     in response to state and regional policies to implement
     retail choice for electric customers.        
               NEP requests approvals and findings in three
     areas.  First, NEP seeks authority pursuant to RSA 374:30 to
     transfer ownership of its hydro electric facilities which
     are located, in whole or in part, within the State of New
     Hampshire.  Second, NEP seeks authority pursuant to RSA
     369:1 to issue up to $100 million in long-term debt to
     finance possible payment obligations to USGenNE in the event
     that NEP is able to obtain a release from its obligations
     under the power contracts as part of the proposed
     transaction with USGenNE.  Finally, NEP requests certain
     "eligible facilities" findings pursuant to Section 32 of
     PUHCA, 15 U.S.C.  79z-5a,  and the implementing regulations
     of the Federal Energy Regulatory Commission (FERC), 18
     C.F.R.  365.3.  Below, we briefly summarize NEP's position
     with respect to the foregoing requests.
               2.   Asset Transfer
               NEP contends that the proposed asset transfer to
     USGenNE exceeds the public good standard of RSA 374:30
     because it will result in substantial benefits for the State
     and its electric customers.  According to NEP, the
     transaction will disaggregate NEP's generation and
     transmission facilities, thereby reducing or eliminating
     NEP's vertical market power.  NEP further argues that the
     transfer will mitigate horizontal market power by reducing
     the concentration of generation in the New England market. 
     NEP states that the proposed transaction will relieve it of
     long-term obligations under its above-market power contracts
     and fuel transportation contracts, which will: 
          ...reduce NEP's share of stranded costs
               attributable to [GSEC] by more than half (from
               $130 million to $57 million, for a first year
               reduction in stranded cost charges from 2.8
               cents/kWh to 1.4 cents/kWh under the schedule
               proposed in Docket No. DR 98-012).  Regardless of
               whether the Commission finds the mitigation from
               the sale insufficient or rejects recovery of some
               stranded costs in Docket No. DR 98-012, such
               mitigation nevertheless reduces [GSEC's] overall
               stranded cost obligation, and therefore is in the
               public good. 
     Initial Brief at 7-8 (citations omitted).  NEP points out
     that it has agreed to pass through, on a wholesale basis,
     GSEC's share of the savings associated with the proposed
     divestiture even if retail choice is delayed for GSEC's
     customers.  Id. at 8.   
               In addition to cost savings, NEP asserts that the
     transfer will also produce environmental and conservation
     benefits because USGenNE has agreed to honor certain
     commitments related to the relicensing of the Fifteen Mile
     Falls Project located in the Upper Connecticut River area of
     New Hampshire and Vermont.  NEP alleges other miscellaneous
     benefits from the proposed transaction, including (a) a
     commitment by USGenNE to honor several tax stabilization
     agreements negotiated with three New Hampshire communities,
     (b) an $85 million payment by USGenNE above the $1.59
     billion purchase price to fund agreements with labor unions
     representing NEP employees affected by industry
     restructuring, and (c) possible tax revenues to the State in
     excess of $4 million as a result of the transaction.
               3.   Request for Eligible Facilities Findings
               NEP requests that the Commission make certain
     "eligible facilities" findings under Section 32 of PUHCA and
     the pertinent regulations of the Federal Energy Regulatory
     Commission (FERC), 18 C.F.R.  365.3.  NEP states that such
     findings are necessary to enable USGenNE to acquire NEP's
     generating assets without becoming subject to PUHCA, which
     is a condition of the proposed transaction.  NEP states that
     the Commission must make eligible facilities findings with
     respect to all of the generating facilities which are being
     sold to USGenNE, even those located outside of New
     Hampshire.  In addition, NEP seeks the same findings
     relative to its generating assets which are not part of the
     USGenNE transaction.  A list of all of the facilities and
     entitlements for which eligible facilities findings are
     sought is located in Exhibit NEP-3 at MEJ-3.   
               4.   Request for Financing Authority                   
               NEP seeks authority to issue up to $100 million in
     long-term securities through December 31, 2000 to fund
     contingent liabilities, referred to as "Trigger Payments,"
     detailed in the Amended IPP Contracts Transfer Agreement
     (IPP Agreement).  See, Exhibit NEP-4 (Book 6, pp.6-14). 
     According to NEP, the IPP Agreement requires NEP and USGenNE
     to work cooperatively to transfer or assign (to USGenNE)
     each of NEP's existing power contracts, or to otherwise
     reduce or terminate these obligations.  NEP asserts that the
     Trigger Payments "would be used to achieve economic savings
     for customers."  Initial Brief at 13-14.  NEP has also
     agreed to cap the financing rate at 250 basis points above
     the rate for 30-year Treasury Bills.  According to NEP, that
     cap would currently yield a rate below nine percent.
          B.   USGenNE
               USGenNE is an indirect wholly-owned subsidiary of
     PG&E Corporation, an exempt public utility holding company
     under section 3(a)(1) of PUHCA.  It presented no testimony
     but submitted a post-hearing brief which addressed the
     testimony by the OCA regarding horizontal market power
     issues.  Specifically, USGenNE alleges that the OCA's
     recommendations would require the Commission to regulate the
     interstate wholesale electricity market which is within the
     FERC's exclusive jurisdiction.  Also, USGenNE contends that
     the OCA's recommendations are inconsistent with state law
     because it would require the Commission to regulate an
     industry (the wholesale generation market) which is not a
     natural monopoly.
          C.   Enron     
               Enron argues that NEP's petition should be
     rejected or, alternatively, that NEP and USGenNE should be
     required to "restructure" the proposed transaction in a
     manner that maximizes ratepayer benefits.  Enron claims that
     the NEP-USGenNE proposal is the product of a flawed auction
     which produced unsatisfactory results compared to other
     recent asset sales. According to Enron, the proposed
     transaction "is a far better deal for NEES shareholders than
     for ratepayers."  Initial Brief at 4. 
               During the hearing, Enron presented the expert
     testimony of Richard Levitan who opined that the auction was
     flawed in two respects, causing NEP's assets to be
     significantly undervalued: first, NEP should not have
     combined the sale of its generating assets with the
     assumption of its above-market purchase power agreements;
     and second, the wholesale "backstop obligation" requires
     USGenNE to sell wholesale power to NEP's retail affiliates
     at below-market rates.  According to Mr. Levitan, the
     inclusion of a backstop as a bidding requirement
     significantly depressed the asset value produced by the
     auction.  Mr. Levitan testified that, overall, the results
     of the proposed divestiture are unsatisfactory when compared
     to those achieved in other recent transactions in New
     England and elsewhere.  See Exhibit 11, p. 7 ("By any
     reasonable standard other than appreciation of stockholder
     equity, NEES' divestiture produces by far the worst
     results...The injury to NEES' ratepayers is heightened by
     the harm which befalls the competitive market under the
     structure of the [t]ransaction.").     
               Enron notes that NEP characterizes the transaction
     as a $1.59 billion asset sale despite the fact that NEP will
     become obligated to "repay" USGenNE $1.2 billion over a
     ten-year period.  This obligation is embodied in the PPA
     Transfer Agreement and it requires NEP to make annual
     contributions of between $150 million and $170 million to
     fulfill its wholesale power contracts.  According to Enron,
     after this obligation is recognized, the net proceeds to NEP
     resulting from the asset sale amount to only $400 million. 
     This adjustment yields a market-to-book ratio of between
     0.62 to 0.95 which is far below the results obtained in
     other recent assets sales.  
          D.   OCA
               The OCA argues that the Commission's decision in
     this case should be decided simultaneously with the GSEC
     settlement in DR 98-012.  According to the OCA, the record
     in this proceeding is inadequate to approve NEP's petition. 
     Alternatively, the OCA recommends that the Commission
     condition any approval of the transfer by prohibiting
     USGenNE from owning any additional capacity in New England
     after the transaction with NEP unless it shows that New
     Hampshire ratepayers will not be harmed.   
               The OCA asserts that several aspects of the
     proposed transfer are potentially anti-competitive; namely,
     the "backstop" provision in the Asset Purchase Agreement
     which could enable USGenNE to gain a market advantage and
     cause competitors to abandon the market and the potential
     for cross-subsidization between USGenNE's wholesale
     operations and retail sales.  The OCA also presented expert
     testimony concerning the potential for horizontal market
     power after the proposed transfer.  According to the OCA,
     the Commission has the duty and obligation to ensure that
     USGenNE will not possess horizontal market power as a result
     of the transaction.   
          E.   ECS
               ECS articulates three reasons for supporting the
     proposed transfer.  First, ECS states that the transfer will
     promote the Legislature's objective to introduce competition
     in the electric industry.  Second, ECS opines that the
     proposed transaction "provides GSEC with an exceptional
     opportunity to mitigate its stranded costs."  Finally,
     according to ECS, the transfer "guarantees that the citizens
     of New Hampshire will enjoy significant environmental
     benefits."  Exhibit ECS-1, p. 2.  
               ECS claims further that the proposed transaction
     will achieve "the actual separation of substantially all of
     [NEP's] non-nuclear generation from its transmission and
     distribution...while NEP attempts to divest its remaining
     generating facilities, these assets will remain functionally
     separated from GSE[C]."  Id. at 3.  In addition, ECS argues
     that the proposed transaction will promote competition by
     expanding the number of participants in the New England
     power market.  ECS also rejects Enron's arguments regarding
     the alleged diminution in asset value due to the inclusion
     of the backstop obligation in the auction.  
               ECS takes no position on NEP's request for
     financing authority and notes that Commission approval of
     that aspect of NEP's filing is not essential for NEP and
     USGenNE to complete the proposed transaction.     
               Finally, ECS urges prompt approval of the proposed
     transaction because, according to ECS, every month of delay
     costs GSEC's ratepayers $600,000 in potential savings that
     would otherwise be realized.  According to ECS, regardless
     of the outcome of the GSEC settlement proceeding, the
     transfer will ensure approximately 17 percent lower
     electricity prices for GSEC's customers.  
               We find that NEP's proposed transaction with
     USGenNE meets the public good standard in RSA 374:30 and is
     generally consistent with the restructuring policies in RSA
     374-F.  As set forth below, we also grant NEP's related
     requests for financing authority and "eligible facilities"
     findings.  The foregoing approvals are premised upon one
     condition: namely that USGenNE agrees to offer transition
     service to GSEC under terms and conditions which are
     consistent with our decision in DR 98-012.  
          A.   Preliminary Observations    
               NEP and several other parties urge the Commission
     to expeditiously approve the divestiture transaction,
     irrespective of the outcome of GSEC's settlement proposal in
     docket DR 98-012, because such approval will purportedly
     lead to lower rates for GSEC's retail customers.  We point
     out, however, that NEP agreed in the instant proceeding to
     "pass through" the divestiture savings to GSEC's ratepayers
     only if GSEC (and GSEC's retail customers) agreed to pay
     NEP's claimed stranded costs before any review of those
     costs was undertaken by this Commission.  In fact, NEP's
     original filing in this case was premised upon an assumption
     that we would approve GSEC's retail restructuring proposal. 
      During the hearing, NEP agreed to flow through the savings
     resulting from the transaction even if the retail settlement
     was not approved prior to the divestiture transaction. Under
     both possible scenarios (retail access versus no retail
     access), however, NEP committed to allow GSEC's retail
     ratepayers to benefit from the transaction only if GSEC paid
     its fully allocated share of NEP's stranded costs via a
     "Contract Termination Charge" (CTC).  We make this
     observation because NEP and several other parties have
     alleged that any delay in approving the proposed divestiture
     "costs" GSEC's customers $600,000 per month in rate
     savings.  It is primarily our concern in this area that led
     us to delay issuing this order until such time as we
     addressed GSEC's retail restructuring settlement in DR
          B.   Scope of Proceeding
               The scoping stipulation which we approved in Order
     No. 22,886 purported to uncouple the issues to be considered
     in this proceeding from those which needed to be addressed
     in the retail settlement docket.  As noted above, however,
     it is clear that we cannot simply disregard those aspects of
     the proposed transaction which bear directly on issues
     relating to retail competition, including NEP's claimed
     entitlement to stranded cost recovery.  It would be
     inconsistent with our statutory responsibilities to evaluate
     NEP's petition in this case without regard for the extent to
     which an unconditional approval might impair our ability to
     implement retail competition for GSEC's customers consistent
     with RSA 374-F.  This comports with the scoping stipulation
     which provides that an issue appropriately addressed within
     this docket is "the consistency of the transfer...with RSA
     374-F and the Commission's policy on restructuring." 
     Scoping Stipulation, p. 2.  
          C.   Authority to Transfer Facilities Pursuant to RSA
               1.   Standard of Review   
               Pursuant to RSA 374:30, the Commission may
     authorize NEP to sell its New Hampshire-based hydro
     facilities to USGenNE if we find that the proposed transfer
     is in the public good.   The Commission has historically
     applied a "no harm" standard when evaluating requests to
     transfer utility assets.  See Grafton County Electric Light
     & Power Co. v. State, 77 N.H. 539 (1915); see also, Re
     Hampton Water Works Company, Inc., 80 N.H.P.U.C. 468, 473
     (1995) ("[O]ur obligation is to ensure that the interests of
     ratepayers are balanced against the right of shareholders to
     be free of regulation which unreasonably restrains
     legitimate corporate activities.").  Under the no harm test,
     the NEP-USGenNE transaction should be approved unless we
     find that it will have an adverse impact on the public. 
     Id.; Eastern Utilities Associates, 76 N.H.P.U.C. 236, (252)
     (1991).             This case involves somewhat different
     considerations than past utility asset sales because it must
     be assessed in the context of RSA 374-F.  Accordingly, we
     conclude that the appropriate standard for evaluating NEP's
     petition is twofold.  First, NEP must meet the traditional
     "no harm" test by showing that the proposed transaction does
     not adversely affect the public interest.  Re Eastern
     Utilities Associates, 76 NH PUC 236, 252 (1991).  Assuming
     that NEP meets the "no harm" standard, it must also show
     that the transaction is generally consistent with RSA 374-F
     and, in particular, with GSEC's obligation to mitigate
     stranded costs.  See, RSA 374-F:3, XII(b); see also,
     Restructuring New Hampshire's Electric Utility Industry:
     Final Plan, pp. 54-57 (February 28, 1997).     
               2.   Discussion
               We find that the divestiture meets the no harm
     standard in that it will not lead to any adverse
     consequences for GSEC's ratepayers or other third parties. 
     This is primarily because NEP agreed to freeze its wholesale
     rates for customers who do not take service under
     alternative rate schedules.  Under those circumstances, NEP
     assumed the risk that it would be forced to procure
     replacement power at costs which are higher than its current
     generation portfolio.  See New England Power Company, et
     al., 82 FERC  61,179 (1998).      
               We also agree that the transaction promotes the
     policy objectives of RSA 374-F, although several aspects of
     NEP's filing warrant discussion.
               First, NEP and others have mistakenly asserted
     that the proposed transaction will eliminate or reduce
     vertical market power in a retail access environment.  The
     transaction involves wholesale, not retail, unbundling.  NEP
     is already required by FERC to functionally unbundle its
     wholesale generation and transmission services.  The
     proposed transaction with USGenNE takes that policy one step
     further by divesting generation assets which are allocated
     under various wholesale arrangements.  The vertical
     disaggregation required by RSA 374-F relates to retail
     services, i.e., those provided by GSEC.  The instant
     proposal does not require GSEC to unbundle its retail
     services; on the contrary, it contemplates that GSEC will
     continue to provide bundled  service by purchasing wholesale
     "backstop" service from USGenNE.  Nonetheless, we find that
     NEP's proposed divestiture is consistent with RSA 374-F to
     the extent that New Hampshire law supports  FERC's
     unbundling policies and the evolution of a competitive
     wholesale market.  See RSA 374-F:1 ("[T]he development of
     competitive market for wholesale and retail electricity are
     key elements in a restructured industry...").               NEP also asserts that the proposed divestiture will
     reduce the stranded costs which are "attributable" to GSEC
     by more than half, from $130 million to $57 million.  This
     proposition assumes that GSEC is legally obligated to pay
     its allocated share of NEP's stranded costs which result
     from the introduction of retail access in GSEC's service
     territory.  Although we have serious questions about whether
     GSEC has any such obligation in light of the FERC's decision
     on the contract between PSNH and the New Hampshire Electric
     Cooperative, Inc., we believe that NEP implemented a
     reasonable market process to quantify and mitigate stranded
     costs consistent with RSA 374-F.        We find
     particularly compelling the fact that not one party has
     challenged the bidding procedures employed by NEP.  We agree
     with NEP's statement that the "best evidence of value is the
     price actually paid by a willing buyer to a willing seller
     after a full, fair and open sales process."  NEP Initial
     Brief, p. 11.  No evidence was presented which suggests that
     the bidding process was inequitable or that bidders were
     denied an opportunity to access all relevant data.  In fact,
     Enron acknowledged that it did not contest the fairness or
     equity of the process from the bidders' standpoint.  
               According to several parties, NEP's decision to
     include a "backstop" requirement in the bidding rules
     depressed the actual purchase price which it could have
     otherwise obtained from prospective bidders.  We agree that
     the inclusion of the backstop obligation had the effect of
     reducing the actual purchase price that USGenNE proposes to
     pay (or that another bidder would have paid) for NEP's
     assets.  But it does not necessarily follow that the
     backstop bidding requirement actually reduced the overall
     value which NEP received for its generation assets.  
               One of the issues we considered in DR 98-012 was
     how best to ensure that GSEC's ratepayers receive the full
     value of the backstop commitment by USGenNE.  Our only
     concern is that USGenNE may insist on providing transition
     service on terms or conditions which deviate from our
     decision in DR 98-012.   Although we seriously question
     whether the inclusion of a such a commitment would be
     appropriate in the case of other utilities, we note that NEP
     committed to the instant transaction as a result of a
     settlement reached in Massachusetts.  By approving the
     instant transaction we do not imply that a similar approach
     should be adopted in the case of any other utility.  On the
     contrary, we think the better approach is to separately bid
     transition service to ensure that it is procured at the
     lowest possible price.  Nonetheless, in this case we are
     unable to conclude that the inclusion of this obligation
     unreasonably depressed the resulting purchase price for
     NEP's assets.       
               We also disagree with Enron's assertion that NEP
     should have excluded from the auction its above-market
     purchase power contracts.  According to Enron, the proposed
     sale to USGenNE yields an unacceptably low market-to-book
     ratio.  As NEP points out, Enron's analysis did not
     incorporate various components of the transaction which
     increased the value of the consideration provided by
     USGenNE.  Moreover, as noted above, our inquiry is more
     appropriately focused on ensuring that the bidding process
     was open and fair--a matter which no party has contested.
               In sum, we find that NEP's divestiture proposal is
     consistent with RSA 374-F and meets the public good standard
     in RSA 374:30.  Our conclusion is based upon three primary
     considerations.  First, the sale will cause no demonstrable
     adverse impact on the public.  Second, the underlying
     transaction between NEP and USGenNE is consistent with state
     and federal policies concerning retail and wholesale
     competition.  And, finally, NEP has committed to allocate
     fully the proceeds from the sale to GSEC irrespective of
     whether we approve the settlement in DR 98-012.     
          D.   Financing Authorit  
               NEP seeks authority to issue up to $100 million in
     long-term debt through the year 2000 to fund "trigger
     payments" to USGenNE under the Purchase Agreement. 
     According to NEP, these payment obligations will arise upon
     the occurrence of certain events such as the assignment or
     modification of NEP's purchase power contracts.  During the
     hearing, NEP committed to cap the financing rate at 250
     basis points above the rate for 30-year Treasury Bills. 
     No party objected to NEP's request for financing authority.  
               We find that NEP's proposed issuance of up to
     $100,000,000 in long-term debt, under the modified terms and
     conditions described in NEP's post-hearing Brief, is
     reasonable and meets the public good standard of RSA 369:1. 
     The proposed borrowing facilitates the proposed divestiture
     transaction with USGenNE which we found in the previous
     section to be in the public good. 
          E.   Eligible Facilities Findings
               In addition to seeking approval of the asset
     transfer and proposed financing, NEP asks for certain
     "eligible facilities" findings under Section 32 of PUHCA and
     the implementing regulations of FERC, 18 C.F.R.  365.3. 
     NEP states that USGenNE has made the receipt of EWG status a
     condition to the closing of the divestiture transaction. 
     NEP nonetheless requests that we make such findings relative
     to all of their generating facilities, not just those which
     are being sold to USGenNE. 
               Pursuant to PUHCA and FERC's regulations, the
     facilities which are being transferred to USGenNE may be
     considered eligible facilities under PUHCA only if we make
     the following determinations:
          (a) the designation will benefit consumers; 
          (b) the designation does not violate State law; and 
          (c) the designation is in the public interest.
     18 C.F.R.  365.3(b).
               We herein grant NEP's request for the foregoing
     findings relative to those facilities which NEP is
     transferring to USGenNE pursuant to the proposed divestiture
     transaction.  The bases for these findings are the same as
     those stated above in approving the proposed transfer. 
     Again, we premise our findings in this area on the sole
     condition that USGenNE agrees to provide GSEC transition
     service consistent with the outcome of DR 98-012.  We
     decline at this time to make the same findings relative to
     facilities which are not part of the proposed USGenNE sale. 
     Without knowing how or under what terms and conditions that
     NEP will sell its remaining generation facilities, including
     its nuclear entitlements, we are unable to assess whether
     similar findings are warranted relative to those facilities. 
               Based upon the foregoing, it is hereby 
               ORDERED, that NEP's request for approval of its
     New Hampshire-based hydro generation facilities is approved
     pursuant to RSA 374:30 subject to the sole condition that
     USGenNE and NEP accept the outcome of DR 98-012 relative to
     the provision of transition service; and it is
               FURTHER ORDERED, that NEP's request for financing
     authority is approved pursuant to RSA 369:1 as set forth in
     this order; and it is
               FURTHER ORDERED, that NEP's request for eligible
     facilities findings is granted relative to the generation
     facilities which are the subject of the NEP-USGenNE
     transaction, but NEP's request for the same findings
     relative to facilities which are not being sold to USGenNE
     is denied.  
               By order of the Public Utilities Commission of New
     Hampshire this twentieth day of July, 1998.
       Douglas L. Patch    Bruce B. Ellsworth   Susan S. Geiger
           Chairman           Commissioner       Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary