cities. Under all the circumstances of this case, we shall grant the request of Electric and our order to issue herein will so provide.

FEES AND EXPENSES

Pursuant to an agreement entered into between Southwestern and Electric, Southwestern is to pay all expenses incident to the organization of Electric, the conveyance and transfer to Electric of the properties proposed to be sold, and the issuance and sale by Electric of its securities, except that Southwestern is not to pay underwriting commissions and fees with respect to the sale of the cumulative preferred stock and common stock.

Carrington, Gowan, Habberton, Johnson & Walker of Dallas, Tex. have been designated as counsel for the prospective bidders for the bonds and preferred stock.

The record does not contain an estimate of fees and expenses to be paid or incurred by Southwestern and Electric in the consummation of the proposed transactions. We shall therefore reserve jurisdiction over all such fees and expenses to determine their reasonableness.

CONCLUSIONS

On the basis of the record, we find that the proposed sale and transactions incident thereto are necessary to effectuate the provisions of Section 11 (b) and fair and equitable to the persons affected thereby. Without deciding whether Sections 7, 10 and 12 apply directly to the transactions herein proposed, neither Southwestern nor Electric being presently a registered holding company or a subsidiary of a registered holding company, we have weighed the proposed transactions against the standards of Sections 7, 10 and 12.

As previously stated, pro forma earnings available for the common stock for the 12 months ended February 28, 1945, are approximately $1.09 per share, and after adjustment for depreciation equivalent to the maintenance fund requirement of the indenture are approximately 96 cents per share. Since the stock is being offered pro rata to Southwestern common stockholders through rights which may be exercised or sold, we are not required to consider the price in the same manner as if the sale were to outside interests. Under these circumstances we do not find that the price is outside the range of reasonableness or requires any adverse findings under the standards of the Act. With respect to the other aspects of the proposed transactions we have also con

9

It should be emphasized, however, that nothing herein is to be construed as an indication of the Commission's opinion as to what action Southwestern's common stockholders should take with respect to the rights.

cluded that, subject to the conditions imposed and reservations of jurisdiction made herein, the statutory standards are satisfied.10

Southwestern and Electric have requested that our order in these proceedings conform to the requirements of Sections 371 and 1808 of the Internal Revenue Code, as amended. Since Southwestern has been ordered, pursuant to Section 11 (b), to dispose of its east-central Texas properties, we conclude that the proposed transactions are necessary and appropriate to effectuate the provisions of Section 11 (b) of the Act. If bids for the securities of Electric are accepted by the company and approved by us, our subsequent order or orders will contain the requested recitals.

Our order will contain a condition that Electric report the results of competitive bidding, pursuant to Rule U-50, and the proposed underwriting agreement with respect to the common stock, and that the proposed issue and sale of bonds and preferred stock and of common stock pursuant to such underwriting agreement shall not be consummated until a further order of this Commission shall have been entered in the light of the results of the competitive bidding and the terms of such proposed underwriting agreement. That order may contain such further terms and conditions as may be deemed appropriate, and jurisdiction will be reserved for this purpose. As noted above, jurisdiction will be reserved over the fees and expenses to be paid or incurred by both Southwestern and Electric and over fees and expenses to counsel for prospective bidders. As noted above, our order will also be conditioned upon appropriate amendments to the charter of Electric within 6 months.

An appropriate order will issue in accordance with this opinion.

By the Commission: (Commissioners Pike, McConnaughey and Caffrey) Chairman Purcell and Commissioner Healy being absent and not participating.

10 As noted above, the New Mexico Public Service Commission has approved the proposed sale by Southwestern and the record indicates that no other State commission has jurisdiction over the proposed transactions.

Reserve for possible losses on sales of property and other contingencies.

607,348

Reserve for expenses of proposed transactions (other than underwrittng commissions and "standby" fee, if any)..

@60,000

Accounting entry to be recorded on books of Southwestern Public Service Company to reflect the sale of the Jacksonville Marlin Mexia properties and other assets and liabilities (as of February 28, 1945) for approximately $4,036,210: to reserve $60,000 thereof for expenses to be incurred due to the proposed sale of properties and to charge off the excess of net property and plant, over the cash received from the sale of properties and other assets and liabilities, to the "Reserve for loss on sale of properties" and the balance not provided for to earned surplus.

APPENDIX B

SOUTHWESTERN ELECTRIC SERVICE COMPANY

Pro forma balance sheet as at February 28, 1945. (Giving effect to the sale of 3.15 percent bonds and 42 percent preferred stock at its par value or principal amount and the common stock ($1 par value) at $9.50 per share; and the excess cost of properties to be charged off against a sufficient capital surplus to be taken from premium on capital stock.)