STORM SECURITIZATION/ALT. RATES.

View NCGA Bill Details2019-2020 Session
Senate Bill 559 (Public) Filed Tuesday, April 2, 2019
AN ACT TO PERMIT FINANCING FOR CERTAIN STORM RECOVERY COSTS AND TO REQUIRE THE UTILITIES COMMISSION TO STUDY THE USE OF "MULTIYEAR RATE PLAN" AND "BANDING OF AUTHORIZED RETURN" MECHANISMS FOR RATE SETTING FOR ELECTRIC PUBLIC UTILITIES.
Intro. by Rabon, Hise, Blue.

Status: Special Message Sent To Senate (House action) (Aug 21 2019)

SOG comments (2):

Identical bill

Identical to H 624, filed 4/4/19.

Long title change

House amendment to the 4th edition changed the long title.  Original title was AN ACT TO PERMIT FINANCING FOR CERTAIN STORM RECOVERY COSTS AND TO AUTHORIZE THE UTILITIES COMMISSION TO FIX RATES FOR ELECTRIC PUBLIC UTILITIES USING "MULTIYEAR RATE PLAN" AND "BANDING OF AUTHORIZED RETURN" MECHANISMS.

Bill History:

S 559

Bill Summaries:

  • Summary date: Aug 20 2019 - More information

    House amendment to the 4th edition makes the following changes.

    Part II.

    Eliminates all provisions of Part II, including proposed GS 62-133A, which authorized the Utilities Commission to approve alternate rate methodology.

    Instead, directs the Utilities Commission (Commission) to study the advisability of authorizing specified alternative methods for fixing rates under GS 62-133 for general rate case proceedings for electric public utilities, including studying multiyear rate plans, banding of authorized returns, performance-based ratemaking, revenue decoupling, or any combination of those methods. Requires the Commission to coordinate with Public Staff, and examine other states' experiences allowing alternative rate-setting mechanisms, identify associated advantages and disadvantages, and their impact on consumers, service quality, reliability, resource integration, electric grid modernization, emissions, and any other relevant factors. Directs the Commission to establish a stakeholder process within 60 days of the effective date of the act to support and provide comment on the study. Identifies 12 stakeholders to be included in the process to the extent feasible. Requires the Commission to report to the specified NCGA committee by March 1, 2020.

    Part III.

    Makes conforming changes to the act's effective date provisions. Changes the act's long title.


  • Summary date: Jul 8 2019 - More information

    House committee substitute to the 3rd edition makes the following changes.

    Part II.

    Amends GS 62-133A as adding that if an electric public utility operating under a banding of authorized returns exceeds the midpoint return on equity up to the high-end range of the band approved by the Utilities Commission (Commission) based on its normalized, earned return on equity for the prior 12-month, year-end period as specified in the statute, the utility must determine the after-tax dollar value of the amount of the earnings that exceed the midpoint return on equity up to the high-end range of the band and must, within 60 days of determining that value, submit the value to the Commission for verification along with a petition to the Commission to make investments of an equivalent amount in one or more of: (1) electric infrastructure investments in economically distressed areas or low-income communities that facilitate job creation, (2) electric infrastructure investments that further creation of affordable housing for low-income customers, (3) electric infrastructure investments in communities that will result in quantifiable and measurable benefits for low-income customers in those communities, or (4) energy efficiency and demand-side management programs for low-income customers. Sets out information that must be included in the petition as to the selected investments as well as those that were considered. If approved, requires the Commission to include the costs of the approved investments in the electric public utility's cost of service or rate base, as appropriate. Provides that if a petition is denied, the utility must, within 60 days of the Commission's order, submit a new petition for investments in compliance with the requirements above. Makes organizational and clarifying changes to the statute. 


  • Summary date: Jun 20 2019 - More information

    House committee substitute to the 2nd edition makes the following changes.

    Part I.

    Amends proposed GS 62-172 concerning financing for certain storm recovery costs by public utilities. Amends the definitions set forth as follows. Modifies the term financing costs to include any costs incurred by the Utilities Commission (Commission) or public staff for any outside consultants or counsel retained in connection with the securatization of storm recovery costs (previously, made an internal cross-reference). Modifies storm recovery activity to mean any activity by a public utility, its affiliates, or its contractors, directly and specifically in connection with the restoration of service and infrastructure associated with electric power outages affecting customers of a public utility as the result of (a) storm(s) (previously, an activity by or on behalf of a public utility in connection with the restoration of service and infrastructure as specified). Removes from the term storm recovery activity the explicit inclusion of incremental internal and external labor costs in excess of labor costs that would have been paid even in the absence of the storm, incremental corporate overhead, and incremental costs related to mobilization, staging, and construction, reconstruction, replacement, or repair of electric generation, transmission, distribution, or general plant facilities. Instead, now explicitly includes in the term activities related to mobilization, staging, and construction, reconstruction, replacement, or repair of electric generation, transmission, distribution, or general plant facilities. Modifies storm recovery costs to include (1) all incremental costs, including capital costs, appropriate for recovery from existing and future retail customers receiving transmission or distribution service from the public utility that a public utility has incurred or expects to incur as a result of the storm that are caused by, associated with, or remain as a result of undertaking storm recovery activity (previously, qualified by the utility having obtained an approved petition) and (2) adjustments for capital replacement and operating costs previously considered in determining normal amounts in the public utility's most recent general rate proceeding (previously, adjustments for normal capital replacements and operating costs). Further, requires, with respect to storm recovery costs that the public utility expects to incur, any difference between costs expected to be incurred and actual, reasonable, and prudent costs incurred, or any other rate-making adjustments appropriate to fairly and reasonably assign or allocate storm cost recovery to customers over time to be addressed in future general rate proceedings, provided that the Commission's adoption of a financing order and approval of the issuance of storm recovery bonds cannot be revoked or modified. Makes a clarifying change to the definition of storm recovery property to refer to a financing order rather than an internal cross-reference. 

    Modifies the public utility petition requirements for a financing order to now require the petition to include (1) the storm recovery costs and estimate of any storm recovery activity costs being undertaken but not completed (was, included activities for which the costs are not yet known as identified and requested by the public utility); (2) a comparison between the net present value of the costs to customers estimated to result from the issuance of storm recovery bonds and the costs that would result from traditional financing and recovering recovery costs from customers, specifically demonstrating that the issuance of the storm recovery bonds and the imposition of storm recovery charges are expected to provide quantifiable benefits to customers (was, an estimate of projected cost savings or demonstration of how the bond issuance and recovery charges imposed would reasonably be expected to avoid or mitigate rate impacts to customers as compared with the traditional financing and recovery method); and (3) direct testimony and exhibits supporting the petition (was, only direct testimony). Removes the prohibition against the Commission authorizing the principal costs to be included or excluded as storm recovery costs if precluded by the public utility's settlement agreement. Now requires the Commission to establish a procedural schedule (was, publish a case schedule) within 14 days of a petition being filed that permits a Commission decision no later than 135 days (was, 120 days) after filing. Makes conforming changes. Removes the provisions allowing the Commission to issue a financing order authorizing the financing of reasonable and prudently incurred storm recovery costs and financing costs if it finds that the issuance of the storm recovery bonds and the imposition of storm recovery charges authorized by the financing order is reasonably expected to result in lower overall costs or would avoid or mitigate rate impacts to customers as compared with the traditional method of financing and recovering storm recovery costs. 

    Makes clarifying and organizational changes to, and modifies and adds to, the provisions setting forth the elements required to be included in the Commission's financing order. Requires the financing order to include, in addition to the existing required elements, (1) a finding that the proposed issuance of storm recovery bonds and the imposition and collection of a storm recovery charge are expected to provide quanitifiable benefits to customers compared to the costs incurred absent the bond issuance and (2) a finding that the structuring and pricing of the storm recovery bonds are reasonably expected to result in the lowest storm recovery charges consistent with market conditions at the time the bonds are priced and the terms set forth in the financing order (was, a determination of whether the proposed issuance would reasonably be expected to result in lower overall costs or would avoid or mitigate rate impacts to customers as compared with the traditional method). Makes further technical and clarifying changes. Regarding annual petitions of the public utilities for adjustments, requires the Commission to limit review to mathematical or clerical errors (previously, only mathematical errors). Makes conforming changes. Clarifies that subsequent to the earlier of the transfer of storm recovery property to an assignee or the issuance of storm recovery bonds authorized thereby, a financing order is irrevocable except for changes made pursuant to the formula-based mechanism authorized. Allows for the proceeding and issuance of a subsequent financing order at the request of the public utility if the subsequent order satisfies the financing order criteria specified in the statute (was, criteria specified in a particular subsubdivision requiring the charges be nonbypassable until the financing is paid in full). Extends the period to petition for judicial review by the Supreme Court from within 30 days to within 60 days after the Commission issues a financing order or a decision denying a request for reconsideration. Concerning the duration of a financing order, specifies that the order remains in effect and storm recovery property under the order continues to exist until storm recovery bonds issued pursuant to the order have been paid in full or defeased (previously, did not include defeasance) and the Commission-approved financing costs of the bonds have been recovered in full.

    Concerning the security interest parameters, establishes that no application of the formula-based adjustment mechanism pursuant to the statute affects the validity, perfection, or priority of a security interest in or transfer of storm recovery property (previously, made an internal cross-reference to the provision concerning the adjustment mechanism, and did not specifically provide for the mechanism as formula-based). Makes similar changes concerning the sale, assignment, or transfer of storm recovery property. 

    Establishes that storm recovery bonds are not special obligations or indebtedness of the State or any agency or political subdivision.

    Concerning the obligation of nonimpairment, clarifies that changes made pursuant to the formula-based adjustment mechanism authorized under the statute are excluded from the specified prohibition. 

    Makes further technical and clarifying changes.

    Part II.

    Amends GS 62-133A as follows. Requires an electric public utility to file an application before the Commission may approve multiyear rate plans, banding of authorized returns, or a combination thereof. Requires that the application be filed in and along with a general rate case proceeding initiated under GS 62-133. Amends the definition of multiyear rate plan to require the base rates and revenue requirements for a multiyear plan period be based on a known and measurable set of capital investments. Adds that any banding of authorized returns must not exceed 125 basis points above or 125 basis points below the authorized return on equity set by the Commission. Requires that if the high-end range of the band is exceeded, that the electric public utility refund or credit earnings above that range to customers. Allows the electric public utility to file a general rate case proceeding if the utility falls below the low-end range of the band. Requires the Commission, in setting a midpoint authorized rate of return on equity for banding, to consider any decreased or increased risk to an electric public utility that may result from having an approved multiyear rate plan, banding of authorized returns, or a combination thereof. Requires the Commission’s order denying or approving the proposed rate-making mechanism, plan, or settlement to be in addition to its order ruling on the electric public utility’s request to adjust base rates. Requires that the orders be issued no later than 365 days after the electric public utility files a proposed rate-making mechanism, plan, or settlement that includes multi-year rate plans, banding of authorized returns, or a combination thereof. Adds that if the Commission denies the proposal, then the Commission’s order ruling on the electric public utility’s request to adjust base rates will govern. Allows the Commission to approve rate-making mechanisms, plans, or settlements proposed by an electric public utility only upon a finding by the Commission that such mechanisms, plans, or settlements are just and reasonable (was, will establish rates that are just and reasonable), and which are in the public interest. Adds to the issues that the Commission must consider in reviewing an application to include if the utility’s application will not result in sudden substantial rate increases, or “rate shock” to consumers. Provides that if the Commission approves the multiyear rate plan, banding of authorized returns, or a combination thereof, with modifications, the utility may accept the modifications and implement the multiyear rate plan, banding of authorized returns, or a combination thereof, as modified or may withdraw its application and be governed under the Commission's order ruling on the electric public utility's request to adjust base rates. Adds the requirement that the Commission adopt rules necessary to implement GS 62-133A. Requires that the rules be adopted no later than 120 days after the date the act become law. Makes conforming changes to the act’s effective date provisions. 


  • Summary date: Jun 19 2019 - More information

    House committee substitute to the 2nd edition is to be summarized. 


  • Summary date: Apr 18 2019 - More information

    Senate committee substitute to the 1st edition makes the following changes. 

    Part II

    Amends proposed GS 62-133A to require the Utilities Commission (Commission) to issue an order denying or approving a utility's proposed alternative ratemaking mechanism, plan, or settlement, with or without making modification (previously more generally required the Commissioner to issue an order on its decision). Authorizes the Commission to impose conditions for approval of an application that it deems necessary to ensure the rates are just and reasonable and in the public interest, including periodic reviews with public hearings. Now provides that if the Commission approves the application with modifications, the utility can elect to accept the modifications and implement the proposed plan as modified, or can elect to withdraw its application. In the event of withdrawal, the utility can elect to continue to be regulated under the form of regulation which existed at the time of filing the application or file a revised application under the statute. 


  • Summary date: Apr 4 2019 - More information

    Part I

    Enacts GS 62-172, Financing for certain storm recovery costs. Sets forth 15 defined terms. Authorizes a public utility to petition the Utilities Commission (Commission) for a financing order, defined as an order that authorizes the issuance of storm recovery bonds; the imposition, collection, and periodic adjustments of a storm recovery charge; the creation of storm recovery property; and the sale, assignment, or transfer of storm recovery property to an assignee. Sets forth eight requirements for the petition, including: a description of storm recovery activities taken or proposed, or settlement agreement, if applicable; storm recovery costs and estimates; a proposed reserve level to establish or replenish through storm recovery bonds; and an indication of whether the public utility proposes to finance all or part of the storm recovery costs using storm recovery bonds. Provides further requirements and Commission approval concerning a public utility subject to a settlement agreement that governs the type and amount of principal costs that could be included in storm recovery costs.

    Requires petition proceedings to be disposed of in accordance with the Chapter and rules and regulations of the Commission, except as follows. Requires the Commission to publish a case schedule within 14 days of filing of the petition and requires the Commission place the matter on an agenda that permits a decision no later than 120 days from the date the petition is filed. Requires the Commission to issue a financing order or an order rejecting the petition no later than 120 days after the petition is filed. Provides for a party to petition the Commission for reconsideration of the order within five days of issuance. Allows the Commission to issue a financing order authorizing the financing of reasonable and prudently incurred storm recovery costs and financing costs if it finds that the issuance of the storm recovery bonds and the imposition of storm recovery charges authorized by the financing order is reasonably expected to result in lower overall costs or would avoid or mitigate rate impacts to customers as compared with the traditional method of financing and recovering storm recovery costs. 

    Details 11 required elements of a financing order issued by the Commission to a public utility, including the amount of storm recovery costs to be financed using storm recovery bonds, a mechanism for periodic adjustments in storm recovery charges to customers, and storm recovery charge allocation among customer classes. Allows the financing order to condition the sale or transfer of storm recovery property to an assignee. Requires annual filing of a petition or letter concerning adjustment of storm recovery charges pursuant to the financing order, and requires the Commission to review and either approve the request or inform the public utility of any errors, which the public utility can correct and refile the request. Provides that financing orders are irrevocable after the transfer of storm recovery property to an assignee or the issuance of authorized storm recovery bonds. After issuance, the public utility retains sole discretion regarding whether to assign, sell, or otherwise transfer storm recovery property to cause storm recovery bonds to be issued.

    Provides for instances in which subsequent financing orders may be issued. 

    Allows an adverse party to petition for judicial review by the Supreme Court within 30 days after the Commission issues a financing order or a decision denying a request for reconsideration, or within 30 days after the commission issues its decision on reconsideration. Sets forth parameters for judicial review.

    Establishes that a financing order remains in effect and storm recovery property under the order continues to exist until storm recovery bonds issued pursuant to the order have been paid in full and all Commission-approved financing costs of the bonds have been recovered in full. Further specifies that a financing order issued to a public utility remains in effect and unabated regardless of reorganization, bankruptcy or other insolvency proceedings, merger, or sale of the public utility or its successors or assignees. 

    Details exceptions to the jurisdiction of the Commission. Establishes duties of a public utility that has obtained a financing order and causes storm recovery bonds to be issued concerning customer billing and explanation of charges related to storm recovery costs.

    Sets forth provisions applicable to storm recovery property, including parameters regarding security interests in storm recovery property, and the sale, assignment, or transfer of storm recovery property.

    Requires the description of storm recovery property being transferred to any assignee or pledgee in any transfer agreement or security document, or indication in any financing statement, to refer to the financing order that created the storm recovery property and state that the agreement or financing statement covers all or part of the property described in the financing order. Specifies that the requirement applies to all purported transfers of, purported grants or liens or security interests in, storm recovery property, regardless of whether filed.

    Subjects all financing statements under the statute to Part 5, Filing, Article 9 of the Uniform Commercial Code (UCC), except as to continuation statements.

    Designates NC in the choice of law provision.

    Specifies that storm recovery bonds authorizing in financing orders are not public debt, and requires all storm recovery bonds to contain a statement to that effect, as provided.

    Lists entities which may legally invest any sinking funds, moneys, or other funds in storm recovery bonds, including State and local governments and officers, except for members of the Commission, banking and credit institutions, personal representatives, guardians, trustees, and other fiduciaries, and all other persons authorized to invest in bonds or other obligations of a similar nature. 

    Details actions which the State and its agencies are prohibited from taking which would alter the Article's provisions, impair the value of storm recovery property or the security for the storm recovery bonds or revises storm recovery costs, impair the rights and remedies of bondholders, assignees, and other financing parties; or reduce, alter, or impair storm recovery charges imposed for the benefit of bondholders, assignees, or other financing parties until all principal, interest, premium, costs and fees, expenses, or charges incurred, and any contracts to be performed, have been paid and performed in full. Allows for the provided limitation language to be included in storm recovery bonds issued and related documentation. 

    Clarifies that an assignee or financing party is not a public utility or person providing electric service by virtue of engaging in a transaction under the statute.

    Provides for the statute to govern over any conflicting law. 

    Authorizes the Commission and/or public staff to engage an outside consultant or counsel in making a determination under the section.

    Provides a severability clause. 

    Amends GS 25-9-109 to exempt from the provisions of Article 9 of the Chapter (Security Interests under the UCC) the creation, perfection, priority or enforcement of any sale, assignment of, pledge of, security interest in, or other transfer of, any interest or right or portion of any interest or right in any storm recovery property as defined in new GS 62-172.

    Part II

    Enacts GS 62-133A to authorize the Commission to approve multiyear rate plans, banding of authorized returns, or a combination of both, in a general rate case proceeding initiated pursuant to GS 62-133. Defines banding of authorized returns and multiyear rate plan. Details the process for approval of rate-making mechanisms, plans or settlements proposed by electric public utility, requiring an application, and notice and an opportunity for interested parties to be heard. Allows the Commission to issue an order approve the rate-making mechanism, plans, or settlement upon finding that it will establish rates that are just and reasonable, and which are in the public interest. Details considerations the Commission must address in reviewing an application under the statute. Provides that rate-making mechanisms, plans, or settlements approved under the statute remain in effect for a period of up to five years. Requires electric public utilities to make an annual filing providing for the earned return on equity for the prior 12-month period for purposes of  measuring the utility's earnings under any mechanism, plan, or settlement approved. Provides parameters for the statute's construction. Specifies that all approved mechanisms, plans, or settlements under the statute operate independently and separately from other cost recovery mechanisms allowed by law.


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