AN ACT TO PERMIT FINANCING FOR CERTAIN STORM RECOVERY COSTS.
House committee substitute to the 2nd edition makes the following changes.
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.
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.