SB 196 -FN-LOCAL - AS AMENDED BY THE SENATE
5/20/99 1324s
1999 SESSION
SENATE BILL 196-FN-LOCAL
AN ACT relative to electric rate reduction financing.
SPONSORS: Sen. Johnson, Dist 3; Sen. Gordon, Dist 2; Sen. Hollingworth, Dist 23; Sen. Below, Dist 5; Rep. Gilmore, Straf 11; Rep. Chandler, Carr 1; Rep. Scanlan, Graf 11; Rep. Howard, Carr 10; Rep. Torressen, Carr 10
COMMITTEE: Energy and Economic Development
This bill expresses certain legislative purposes and findings relative to electric rate reduction financing.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
5/20/99 1324s
99-0978
03/09
STATE OF NEW HAMPSHIRE
In the Year of Our Lord One Thousand Nine Hundred and Ninety-Nine
AN ACT relative to electric rate reduction financing.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Statement of Purpose.
I. The state of New Hampshire and Public Service Company of New Hampshire (PSNH) are in the process of negotiating a settlement to resolve the outstanding issues concerning the implementation within PSNH's service territory of electric utility restructuring pursuant to RSA 374-F. Any settlement proposal that results from these negotiations will in all likelihood include a component for securitizing a portion of PSNH's stranded costs.
II. It is important that the general court, through the declaration of purpose and findings of RSA 369-A:1, express its understanding of securitization and the criteria that are essential to meet prior to authorizing the use of securitization.
2 New Chapter; Electric Rate Reduction Financing. Amend RSA by inserting after chapter 369 the following new chapter:
CHAPTER 369-A
ELECTRIC RATE REDUCTION FINANCING
369-A:1 Declaration of Purpose and Findings. The general court finds that:
I. Restructuring of electric utilities to provide greater competition and more efficient regulation has been found by the general court to be in the public good and New Hampshire is now aggressively pursuing restructuring and increased customer choice in order to provide electric service at lower and more competitive rates.
II. The transition to competitive markets for electricity is a complex endeavor and requires the development of creative and flexible mechanisms to facilitate the movement from monopoly to competition.
III. The establishment of structured financing options for public utilities will enhance and facilitate the expeditious transition to competition, choice for retail electric customers, and reductions in electric rates for all customer classes consistent with the near term rate relief principle of RSA 374-F:3, XI, without creating any debt or obligation of the state or other adverse impacts upon the state's finances or credit rating. Structured financing options may facilitate and help mitigate stranded cost recovery that the commission determines is appropriate, equitable, and balanced pursuant to authority granted in RSA 374-F:3, XII and 374-F:4.
IV. Structured finance options are best pursued in the context of settlement agreements between a utility and the commission concerning the implementation of competition.
V. Rate reduction bonds are instruments underwritten for recovery by a guaranteed promise of customer repayment as part of the stranded cost recovery charge on a customer's bill. These bonds' irrevocable guarantee of repayment creates a secure expectation of performance and thus allows for an attractive rate of refinancing of a utility's stranded costs.
VI. Stranded costs are at significant risk of not being recovered under traditional rate regulation and market pressures. Electricity prices in New Hampshire are so high as to cause customers to aggressively consider fuel switching, conservation, or self generation. Technological innovation may soon allow small scale self generation units to be viable in the near future. Over time, technological innovation will increasingly threaten the recovery of stranded costs.
VII. Once stranded costs are securitized through rate reduction bonds, a utility immediately recovers through a lump sum payment that portion of its stranded costs underwritten by the bond. As such, the risk of not recovering that portion of a utility's stranded costs is completely removed. The utility may then favorably recapitalize its debt structure taking advantage of its improved risk profile.
VIII. A lump sum payment derived from a rate reduction bond provides a large infusion of cash with which a utility may repay its debt. This infusion of cash also gives a utility a tremendous opportunity to become a major participant in deregulated electric generation markets or deregulated telecommunication markets.
IX. The financial and security advantages that accrue to a utility in the form of improved debt structure, risk reduction, and new cash resources could make such a utility an attractive investment opportunity. It is likely that any such utility's publicly traded stock value would rise considerably, especially for a utility that had faced significant investor uncertainty.
X. The extraordinary benefits that utilities and their investors will receive through issuance of rate reduction bonds are appropriate and fair, but only to the extent that customers also receive equitable and extraordinary benefits. Unless these customer benefits can be achieved at the same time that utilities receive the extraordinary benefits of securitization, the use of revenue reduction bonds and the irrevocable obligation they create for customers is not in the public interest. The benefits to customers should be substantially consistent with the following principles:
(a) The opportunity to choose among a range of competitive suppliers in a manner that promotes public trust in the benefits of competitive options. Public trust is not achieved if a utility uses rate reduction bonds to maintain a commanding presence in all of the traditional utility functions of transmitting, distributing, and generating electricity.
(b) Electricity prices consistent with RSA 374-F:3, XI, the near term rate relief principles for all customer classes.
(c) Electricity prices that approach the regional average within 4 years.
(d) Electricity prices that do not create another rate gap for New Hampshire customers.
(e) Risk sharing by the utility of the non securitized portion of the utility's stranded cost should regional average prices not be approached in 4 years.
(f) The continued opportunity for end users to generate electricity for their own use without an exit fee.
(g) Further renegotiations between representatives of the 6 wood-to-energy facilities, Public Service Company of New Hampshire, the public utilities commission, and other interested parties in order to reduce customer cost of this source of electricity.
(h) The cessation of any dispute, litigation, or regulatory proceedings concerning any electric restructuring issue, in any forum where the utility's position is adverse to the state of New Hampshire, the commission, or the New Hampshire Electric Cooperative prior to use of structured financing options.
(i) Retention of commission jurisdiction over any proposed settlement.
(j) Filing of any proposed settlement at the public utilities commission prior to further legislative consideration of authorization to use structured financing options.
3 Effective Date. This act shall take effect upon its passage.
LBAO
99-0978
2/12/99
SB 196 -FN-LOCAL - FISCAL NOTE
AN ACT relative to electric rate reduction financing.
FISCAL IMPACT:
The Public Utilities Commission stated this bill will decrease state revenue and state, county and local expenditures in FY 2000 and each year thereafter. There will be no fiscal impact on county and local revenue.
METHODOLOGY:
The Commission assumed this bill will take effect in FY 2000. To the extent rate reduction bonds lower rates and in turn lower utility receipts, then there would be a related decrease in franchise tax revenues but there is insufficient information to calculate the magnitude of the impact. To the extent rate reduction bonds lower rates, then governmental entities as utility customers will see lower expenditures. The Commission may incur significant increased resource requirements to implement and regulate rate reduction bonds but the impact would be a function of the popularity and complexity of the bonds and cannot be estimated.