ished as a result of the issuance of the new securities since the resulting reduction in fixed charges will, if it has any effect on consumers, make it less difficult to bring about a further reduction in rates.

On the other hand, it would be conceivable that our permission to issue the new securities, or their issuance, could be cited as creating some obstacle to rate reduction or as affecting the price on condemnation or sale, to the possible detriment of consumers or the public interest. Declarant has stipulated, however, that no such position will be taken in any proceedings or negotiations with respect to rates or in connection with any condemnation or sale. Accordingly, our order permitting the declaration to become effective will not help to raise or sustain the existing rates; if the constitutional and statutory power now exists in the local regulatory authorities to modify the rates, nothing in our order will have the effect of diminishing that power. In view of this stipulation and the conditions attached to our order, the public interest and that of investors and consumers appear adequately protected.

It also appears that the requirements of Section 12 (c) and Rule U-12C-1 and Section 12 (f) and Rule U-12F-1 are satisfied with relation to the transaction by which declarant is to acquire from Cities Service Power & Light Company various securities being called for redemption in connection with the proposed financing.

Although we conclude that the declaration should be permitted to become effective for purposes of Section 7 and should be approved as an application under Rules U-12C-1 and U-12F-1, nothing in this opinion is intended to voice approval of the write-ups in the asset accounts or of the existing distribution of voting power, or otherwise to limit the jurisdiction of the Commission to consider and deal with these matters in appropriate proceedings in the future.

Our order in this case will include the following conditions:

(1) That the issuance and sale of the aforesaid bonds, debentures, and common stock shall be effected in substantial compliance with the terms and conditions set forth in, and for the purposes represented by, said declaration as amended;

(2) That except as this Commission may by order or orders from time to time permit, so long as any of the declarant's first mortgage bonds, 32% series, due 1964, are outstanding under the indenture between declarant and Guaranty Trust Company of New York, as trustee, the declarant shall not declare or pay any dividends (other than dividends payable in shares of its common stock), or make any other distribution on any of its common stock, or purchase any shares of its common stock (other than with the proceeds of additional

common stock financing) unless the amount expended by the declarant for maintenance and repairs, plus provision for reserves for renewals and replacements or depreciation, during the period from the date of the indenture to the date of the proposed payment of such dividend or making of such distribution or purchase, plus the earned surplus of the declarant accumulated since the date of the indenture, and not restricted by the terms of condition number (3), remaining after payment of such dividend or the making of such distribution or purchase, shall equal the sum of 15 percent of the gross electric operating revenues and 10 percent of the gross gas and steam operating revenues (as said terms are defined in Section 8 of Article IV of the indenture) during such period. The foregoing shall also apply to any successor of the declarant, except that any earned surplus of declarant at the date of such succession which may become frozen as capital surplus as a result of such succession shall be considered as earned surplus in determining whether the requirements of this condition have been satisfied.

The provisions contained in the foregoing paragraph shall be subject to revocation or modification by this Commission at any time upon its own motion or upon application of the declarant;

(3) That no charges shall be made against earned surplus accumulated under the restrictive provisions of subdivision (c) of Section 9 of Article IV of the debenture indenture, even after the retirement of the debentures and the discharge of said indenture, except for adjustments inherent in declarant's fixed assets and investments in subsidiaries consolidated at February 28, 1939, unless (a) such charge has been previously authorized by appropriate resolution by declarant's board of directors and (b) 30 days' prior notice of the making of such charge be given to this Commission. The Commission reserves jurisdiction on the receipt of such notice, in and as part of the proceedings herein, after notice given within 30 days and opportunity for hearing, to disapprove any such charge on the basis of the record herein and any additional evidence that may be adduced by any interested party. And in the event the Commission has notified declarant to show cause why such charge shall not be disapproved, the charge in question shall not be made until expressly authorized by order of this Commission;

(4) That the balance of declarant's earned surplus to be restricted under Section 9 of Article IV of the proposed indentures, on the effective date of such indentures, shall not be less than $644,133.32, after making the proposed credit to declarant's property account of $467,748.45, as stipulated by declarant;

(5) That until further order by this Commission, all corporate and consolidated balance sheets hereafter made public by declarant shall contain appropriate reference to intercompany appreciation charged to declarant's net assets;

(6) That the Commission's findings and opinion on this declaration shall not in any manner diminish the Commission's power under Section 11 (b) of the Public Utility Holding Company Act of 1935. Jurisdiction is hereby reserved to consider, in appropriate proceedings under that section or otherwise, whether voting power is fairly or equitably distributed among declarant's security holders and to confer voting power upon the outstanding preferred stock and the bonds and debentures issued under this declaration to the extent that it may appear appropriate to do so;

(7) Jurisdiction is hereby reserved with respect to underwriting contracts, price and spread, and fees and expenses.

An appropriate order will issue.

By the Commission: Chairman Frank not participating (see statement on p. 833), Commissioner Eicher concurring (see concurring opinion on p. 833), and Commissioner Healy dissenting (see dissenting opinion on p. 837).

5 S. E. C.

APPENDIX 2

INTERCOMPANY APPRECIATION CHARTED TO NET PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT ACCOUNTS OF DECLARANT

The following table shows the method of calculating the figure of $23,424,418.59 for total intercompany appreciation, the transactions being listed in the order in which described in the body of the opinion:

It should be noted that the above figure of $23,424,418.59 is the total figure for intercompany appreciation, i. e., the amount by which the

5 S. E. C.