Current through Register Vol. 48, No. 52, December 27, 2024
a) A utility may
borrow from outside the money pool agreement in order to make loans to an
affiliate that is a public utility under applicable State law. A utility may
not borrow from outside the money pool agreement in order to make loans to
non-utility affiliates, except for loans to service companies and subsidiaries
of the utility.
b) An affiliate
shall be eligible for borrowing from the utility if the affiliate meets one of
the following seven requirements:
1) The
affiliate maintains the following commercial paper ratings from at least two of
the following three major credit rating agencies and a higher, equivalent, or
no credit rating from the third credit rating agency: A-1 or above from
Standard & Poor's or its successor; P-1 or above from Moody's Investors
Service or its successor; and F-1 or above from Fitch Ratings or its
successor;
2) The aggregate amount
of outstanding short-term indebtedness of the affiliate, including amounts to
be borrowed from the utility, excluding amounts drawn on the committed credit
facility, does not exceed the unused balance of funds available to the
affiliate under high-grade committed credit facilities at any time plus the
amount of funds the affiliate invests in the short-term securities described in
Section
340.50(a)(1) and
(2);
3) The affiliate is a high-grade credit
issuer;
4) The aggregate amount of
funds the affiliate borrows is guaranteed by an affiliate of the utility that
meets the requirements set forth in subsection (b)(1);
5) The aggregate amount of funds the
affiliate borrows is guaranteed by an affiliate with a high-grade committed
credit facility that meets the requirements set forth in subsection
(b)(2);
6) The affiliate is a
utility; or
7) The affiliate
provides the utility cash management services through a Commission-approved
agreement and the utility does not issue bonds, notes or other forms of
indebtedness to persons or entities that are not affiliates of the utility; and
A) The utility is a small utility;
or
B) The utility demonstrates that
any benefits from relying on an affiliate to provide all the utility's capital
exceed the risks associated with a decrease in the utility's financial
independence provided that the affiliate is a medium-grade credit
issuer.
c)
The affiliate receiving the loan shall repay the principal amount of the loan,
together with all accrued interest, on demand of the utility.
d) The utility may lend funds to an affiliate
only if the utility cannot earn a higher rate of return on investments of
similar risk in the open market, or the utility will earn no less than the rate
the utility would have earned on investments in existing short-term investment
accounts maintained by the utility during the period in question.
e) Interest. Each affiliate receiving a loan
shall accrue interest monthly on the unpaid principal amount of the loan from
the date of such loan until the principal amount shall be paid in
full.
f) Event of default. If an
affiliate shall generally not pay its debts as the debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against an affiliate seeking to adjudicate it as bankrupt or
insolvent, then the unpaid principal amount of any loans to such affiliate and
all accrued interest shall become immediately due and payable to the
utility.
g) A utility shall neither
lend additional funds nor extend the term of existing loans to any affiliate
that no longer meets any of the eligibility criteria of subsection (b). An
affiliate that exceeds its borrowing limit shall have 90 days to repay
sufficient principal and accrued interest to bring that affiliate back into
compliance with subsection (b) or, alternatively, to repay all outstanding
loans from the utility and accrued interest.
h) When petitioning for approval of an
affiliate to borrow from the utility under one of the eligibility requirements
of subsection (b), a utility shall provide the following as part of its
petition:
1) A utility seeking to meet the
eligibility requirements of subsection (b)(1) shall provide reports from the
two or, if available, three credit rating agencies presenting the commercial
paper ratings for all affiliates that will borrow from the utility;
2) A utility seeking to meet the eligibility
requirements of subsection (b)(2) shall provide:
A) Documentation from the financial
institutions evidencing the line of credit available to the affiliate and the
unused balance of funds available to each affiliate that will borrow from the
utility; and
B) The credit ratings
from the two or, if available, three credit rating agencies for all of the
financial institutions that are extending credit lines to the
affiliates;
3) A utility
seeking to meet the eligibility requirements of subsection (b)(3) shall provide
reports from the two or, if available, three credit rating agencies presenting
the credit ratings for all affiliates that will borrow from the
utility;
4) A utility seeking to
meet the eligibility requirements of subsection (b)(4) shall provide:
A) A copy of the guarantee; and
B) Reports from the two or, if available,
three credit rating agencies presenting commercial paper ratings for the
affiliate of the utility that will guarantee repayment of funds borrowed from
the utility;
5) A
utility seeking to meet the eligibility requirements of subsection (b)(5) shall
provide:
A) A copy of the
guarantee;
B) Documentation from
the financial institutions evidencing the line of credit available to the
affiliate and the unused balance of funds available to the affiliate that will
guarantee repayment of funds borrowed from the utility; and
C) The credit ratings from the two or, if
available, three credit rating agencies for all of the financial institutions
that are extending credit lines to the affiliate;
6) A utility seeking to meet the eligibility
requirements of subsection (b)(6) shall provide certification from the chief
accounting officer of the affiliate utility that the affiliate is authorized to
operate as a utility;
7) A utility
seeking to meet the eligibility requirements of subsection (b)(7) shall
provide:
A) The docket number of the
Commission proceeding in which the cash management agreement was
approved;
B) A copy of the
agreement; and
C) Either:
i) Certification from the chief accounting
officer of the utility that the utility is a small utility, including the total
capitalization of the utility as reported in the last annual report filed with
the Chief Clerk of the Commission; or
ii) Reports from the two or, if available,
three credit rating agencies presenting the credit ratings for all affiliates
that will borrow from the utility.
The information required by this subsection (h) does not bind
the Commission to a decision based solely on the data provided pursuant to this
subsection.
