Current through Register Vol. 35, No. 18, September 24, 2024
A. No public
utility may engage in a Class II transaction after November 30, 1982 [the
effective date of former General Order No. 39] without first obtaining written
approval of a general diversification plan from the Commission.
B. The general diversification plan shall
include:
(1) to the extent known the name,
home office address, and chief executive officer of each affiliate, corporate
subsidiary, holding company, or person which is the subject of the Class II
transaction;
(2) a statement of the
goals and effects upon the utility operation of the Class II transaction
including an analysis of the benefits, risks, and any costs to the public
utility which could arise, and including all tax effects on the utility both on
a consolidated entity basis and on a stand-alone basis;
(3) the type of corporate structure to be
used;
(4) the means of implementing
the corporate structure to be used, including, but not limited to, amendments
to corporate articles, any issuances, acquisitions, cancellations, exchanges,
transfers, or conversions of securities, and the impact of such on the rights
of creditors and security holders;
(5) the anticipated capital structure for the
utility, its affiliates, and the consolidated entity (utility plus affiliates)
for the next five (5) years;
(6)
the contemplated annual and cumulative investment in each affiliated interest
for the next five (5) years in dollars and as a percentage of projected net
utility plant and an explanation of why this level of investment is reasonable
and will not increase the risks of investment in the public utility;
(7) an explanation of how the affiliate(s)
will be financed, by whom, and the type and amounts of capital or instruments
of indebtedness;
(8) an explanation
of how the utility's capital structure, cost of capital, and ability to attract
capital at reasonable rates will be impacted;
(9) an explanation of how the utility can
assure that adequate capital will still be available for the construction of
necessary new utility plants and at no greater cost than if the utility did not
engage in this Class II transaction;
(10) to the extent not answered in (9) above,
an explanation of how ratepayers will be protected and insulated from any
risks, costs, or other adverse and material effects attributable to Class II
transactions or their resulting effects;
(11) if the utility intends to divest a
corporate subsidiary, an explanation of the reasons for such divestiture, how
it will be accomplished, how it will affect utility operations, financial
viability, cost of capital, and adequacy of service during the next ten (10)
years following divestiture, the anticipated proceeds to the utility, the
extent, if any, that the utility intends for ratepayers to share in the
proceeds or otherwise benefit from the divestiture, the amount of and reasons
why any ratepayer funds have flowed directly or indirectly to the benefit of
the corporate subsidiary; and
(12)
to the extent not provided above, such information or representations that will
allow the Commission to make the findings contained in NMPSC Rule 450.7(c)
[Subsection C of 17.6.450 10.NMAC].
C. The Commission shall approve the general
diversification plan if it contains the above information in detail acceptable
to the Commission and if the Commission finds that such approval is in the
public interest. Approval is in the public interest if the Commission finds
that the level of investment appears reasonable and that it appears the
utility's ability to provide reasonable and proper utility service at fair,
just, and reasonable rates will not be adversely and materially affected by
Class II transactions and their resulting effect, and if the utility represents
and the Commission, based upon such representations, finds that:
(1) the books and records of the utility will
be kept separate from those of nonregulated business and in accordance with the
Uniform System of Accounts;
(2) the
Commission and its staff will have access to the books, records, accounts, or
documents of the affiliate, corporate subsidiary, or holding company pursuant
to NMSA 1978, Sections
62-6-17
and
62-6-19;
(3) the supervision and regulation of the
public utility pursuant to the Public Utility Act will not be obstructed,
hindered, diminished, impaired, or unduly complicated;
(4) if a holding company is formed the
utility will not pay excessive dividends to such holding company, and the
holding company will not take any action which will have an adverse and
material effect on the utility's ability to provide reasonable and proper
service at fair, just, and reasonable rates;
(5) the public utility will not without prior
approval of the Commission:
(a) loan its
funds or securities or transfer similar assets to any affiliated interest,
or
(b) purchase debt instruments of
any affiliated interests or guarantee or assume liabilities of such affiliated
interests;
(6) all
applicable statutes, rules, or regulations, federal or state, have been or will
be complied with;
(7) when required
by the Commission the utility will have an allocation study (which will not be
charged to ratepayers) performed by a consulting firm chosen by and under the
direction of the Commission; and
(8) when required by the Commission the
utility will have a management audit (which will not be charged to ratepayers)
performed by a consulting firm chosen by and under the direction of the
Commission to determine whether there are any adverse effects of Class II
transactions upon the utility.
D. The Commission's approval of a general
diversification plan and any findings or conclusions made in connection
therewith shall in no way limit or preclude the Commission from subsequently
investigating and reviewing Class I and Class II transactions or from taking
such steps as it deems necessary to protect ratepayers and to assure that the
utility's ability to provide reasonable and proper utility service at fair,
just, and reasonable rates will not be adversely and materially
affected.
E. The Commission may
require the modification of a general diversification plan and may attach
conditions to the approval thereof in order to make such plan consistent with
the public interest or to avoid material and adverse effects on the utility's
ability to provide reasonable and proper service at fair, just, and reasonable
rates.
