| (vi) Investment limits in equity securities. The following investment limits shall apply to the percentage of the aggregate market value of all non-fixed income investments relative to the total portfolio market value. (I) Except as noted in subclause (II) of this clause, when the weighted average remaining life of the liability exceeds five years, the equity cap is 60%. (II) When the weighted average remaining life of the liability ranges between five years and two and a half years, the equity cap shall be 30%. Additionally, during all years in which expenditures for decommissioning the nuclear units occur, the equity cap shall also be 30%. (III) When the weighted average remaining life of the liability is less than two and a half years, the equity cap shall be 0%. (IV) For purposes of this subparagraph, the weighted average remaining life in any given year is defined as the weighted average of years between the given year and the years of each decommissioning outlay, where the weights are based on each year's expected decommissioning expenditures divided by the amount of the remaining liability in that year. (V) Should the market value of non-fixed income investments, measured monthly, exceed the appropriate cap due to market fluctuations, the fund administrator shall, as soon as practicable, reduce the market value of the non-fixed income investments below the cap. Such reductions may be accomplished by investing all future contributions to the fund in debt securities as is necessary to reduce the market value of the non-fixed income investments below the cap, or if prudent, by the sale of equity securities. (vii) A decommissioning trust shall not invest in securities issued by the Transferee Company or the Collecting Utility collecting the funds or any of their respective affiliates; however, investments of a decommissioning trust may include commingled funds that contain securities issued by the Transferee Company or Collecting Utility if the securities of such company or utility constitute no more than 5.0% of the fair market value of the assets of such commingled funds at the time of the investment. (C) Specific investment restrictions. The following restrictions shall apply to all decommissioning trusts. Where a Transferee Company has multiple Nuclear Decommissioning Trust Funds for a single generating unit, the restrictions contained in this subsection apply to all such trusts in the aggregate for that generating unit. (i) Fixed-income investments. A decommissioning trust shall not invest trust funds in corporate or municipal debt securities that have a bond rating below investment grade (below "BBB-" by Standard and Poor's Corporation or "Baa3" by Moody's Investor's Service) at the time that the securities are purchased and shall reexamine the appropriateness of continuing to hold a particular debt security if the debt rating of the company in question falls below investment grade at some time after the debt security has been purchased. Commingled funds may contain some below-investment-grade bonds; however, the overall portfolio of debt instruments shall have a quality level, measured quarterly, not below an "AA" grade by Standard and Poor's Corporation or "Aa2" by Moody's Investor's Service. In calculating the quality of the overall portfolio, debt securities issued by the federal government shall be considered as having an "AAA" rating. (ii) Equity investments. (I) At least 70% of the aggregate market value of the equity portfolio, including the individual securities in commingled funds, shall have a quality ranking from a major rating service, such as the earnings and dividend ranking for common stock by Standard and Poor's or the quality rating of Ford Investor Services. Further, the overall portfolio of ranked equities shall have a weighted average quality rating equivalent to the composite rating of the Standard and Poor's 500 index assuming equal weighting of each ranked security in the index. If the quality rating, measured quarterly, falls below the minimum quality standard, the fund administrator shall as soon as practicable and prudent to do so, increase the quality level of the equity portfolio to the required level. (II) A decommissioning trust shall not invest in equity securities where the issuer has a capitalization of less than $100 million. (iii) Commingled funds. The following guidelines shall apply to the investments made through commingled funds. Examples of commingled funds appropriate for investment by nuclear decommissioning trust funds include United States equity-indexed funds, actively managed United States equity funds, balanced funds, bond funds, real estate investment trusts, and international funds. (I) The commingled funds should be selected consistent with the goals specified in paragraph (1) and the requirements in paragraph (2) of this subsection. (II) In evaluating the appropriateness of a particular commingled fund, the fund administrator has the following duties, which shall be of a continuing nature: (-a-) A duty to determine whether the fund manager's fee schedule for managing the fund is reasonable, when compared to fee schedules of other such managers; (-b-) A duty to investigate and determine whether the past performance of the investment manager in managing the commingled fund has been reasonable relative to prudent investment and utility decommissioning trust practices and standards; and (-c-) A duty to investigate the reasonableness of the net after-tax return and risk of the fund relative to similar funds, and the appropriateness of the fund within the entire decommissioning trust investment portfolio. (III) The payment of load fees shall be avoided. (IV) Commingled funds focused on specific market sectors or concentrated in a few holdings shall be used only as necessary to balance the trust's overall investment portfolio mix. (f) Periodic Reviews of Decommissioning Costs and Nuclear Decommissioning Trust Funds. (1) Following a transfer of Texas jurisdictional nuclear generating plant assets, including the associated Nuclear Decommissioning Trust Funds, any remaining costs associated with nuclear decommissioning obligations shall remain subject to cost-of-service regulation based on a periodic review of such costs pursuant to subsections (f)(3) or (g)(4) of this section. The reasonable and necessary nuclear decommissioning costs as periodically approved by the commission shall continue to be included as a nonbypassable charge of the Collecting Utility associated with the Texas jurisdictional nuclear plant asset. Subsection (g) of this section shall apply to such charges by a Collecting Utility. (2) The Transferee Company shall periodically perform, or cause to be performed, a study of the decommissioning costs of each Texas jurisdictional nuclear generating unit it owns or in which it leases an interest. A study or re-determination of the previous study shall be performed at least every five years, starting from the date of the most recent decommissioning cost study for the plant on file with the commission. The study or re-determination shall consider the most current and reasonably available information on the cost of decommissioning. A copy of the study or re-determination along with an updated funding analysis shall be filed with the commission and copies provided to the commission's Financial Review Division and the Office of Public Utility Counsel. The funding analysis shall be based on the most current information reasonably available for the cost of decommissioning, an allowance for contingencies of 10% of the cost of decommissioning, the balance of funds in the decommissioning trusts, anticipated escalation rates, the anticipated after-tax return on the funds in the trust, and other relevant factors. The funding analysis shall be accompanied by a description of the assumptions used in the analysis and shall calculate the required annual funding amount necessary to ensure sufficient funds to decommission the nuclear generating plant at the end of its useful life. (3) The commission, on its own motion or on the motion of the Legal and Enforcement Division, the Office of Public Utility Counsel, or any affected person, may initiate a proceeding to review the Transferee Company's trust balances, compliance with this section, or the annual funding amount. The Transferee Company shall provide any information required to conduct the review upon request in accordance with the commission's procedural rules. (4) During each periodic review of decommissioning costs, the following evidence shall be provided: (A) The Transferee Company shall file the periodic cost study described in paragraph (2) of this subsection, along with an updated decommissioning funding analysis described in paragraph (2) of this subsection, within 90 days of completion of the periodic cost study. The cost study and funding analysis shall be accompanied by a report or testimony supporting the analyses and the requested annual funding amount. (B) The Nuclear Decommissioning Trust Funds administrator shall demonstrate that the decommissioning funds are being invested prudently and in compliance with the investment guidelines in subsection (e) of this section. Cont'd... |
