| (a) Certification to Securities and Exchange Commission.
Upon request by a holding company which is exempt under §3 of
the Public Utility Holding Company Act of 1935, codified at 15 United
States Code 79, the commission may certify to the Securities and Exchange
Commission (SEC) that the commission has the authority and resources
to protect ratepayers and that it intends to exercise its authority
over holding companies owning both a jurisdictional electric utility
and a foreign utility company (FUCO) under the safe harbor provisions
of subsection (c) of this section or the case-by-case review provisions
of subsection (d) of this section. The commission may also notify
the SEC that a previously-issued certification regarding a requesting
holding company will be ineffective prospectively.
(b) Policy goals. The commission will seek to protect
the public interest in having electricity service available to all
citizens of the state at just, fair, and reasonable rates that are
unaffected by investments by exempt holding companies in foreign utility
companies (FUCOs), while avoiding strictures that would place exempt
holding companies at a competitive disadvantage in international markets.
The commission will consider these policy goals in each decision whether
to issue a certification or to notify the SEC that a previously-issued
certification is prospectively withdrawn.
(c) Safe harbor investments. The following safe harbor
provisions apply to investments in FUCOs by exempt holding companies
that are affiliated with electric utilities subject to the regulatory
jurisdiction of the commission:
(1) The commission must certify to the SEC that the
commission has the authority and resources to protect ratepayers subject
to its jurisdiction and that it intends to exercise its authority,
provided that all holding companies of electric utilities that are
subject to the regulatory jurisdiction of this commission must have
filed with the commission corporate undertakings, signed under oath
by an authorized executive officer of the holding company agreeing
to adhere to the covenants and to make the filings specified in paragraph
(2) of this subsection.
(2) The holding company must adhere to the following
covenants:
(A) That any indebtedness incurred in relation to the
acquisition by the holding company, or by any affiliate of the electric
utility, of an ownership interest in a FUCO will be without recourse
to the electric utility;
(B) That the electric utility, the holding company,
or any affiliate of the electric utility will not enter into any agreements
under the terms of which the electric utility is obligated to commit
funds in order to maintain the financial viability of a FUCO or an
affiliate of the electric utility investing in a FUCO;
(C) That the electric utility will not provide, directly
or indirectly, any guarantees or other forms of credit support for
any funds borrowed by the holding company or an affiliate of the electric
utility in connection with the acquisition of any ownership interest
in a FUCO;
(D) That the electric utility, the holding company,
or any affiliate of the electric utility will not make any investment
in a FUCO under circumstances in which the electric utility would
be liable for the debts and/or liabilities of the FUCO incurred as
a result of acts or omissions of the FUCO;
(E) That the electric utility will maintain and provide
a copy to the commission of its accounting policies and procedures
that assure that the electric utility is adequately and fairly compensated
by the holding company or an affiliate of the electric utility for
any use of the electric utility’s assets or personnel in furtherance
of a FUCO;
(F) That the holding company provides the commission
reasonable access to books and records and financial statements, or
copies thereof, of the FUCO or other affiliate doing business with
the FUCO, in English and stated in United States dollars, as the commission
may request to:
(i) review transactions between the electric utility
and such FUCO or affiliate pursuant to the Public Utility Regulatory
Act §14.154; and
(ii) review transactions between any affiliate and
the FUCO if such affiliate also has transactions directly or indirectly
with the electric utility;
(G) That the holding company will file with the commission
quarterly a report listing the total amount of the aggregate investments
by the holding company and its subsidiaries and the percentage of
the holding company’s consolidated net worth, from the company’s
most recent SEC form 10-Q, represented by such investments;
(i) "Aggregate investment" means all amounts invested,
or committed to be invested, in exempt wholesale generators located
outside the United States (foreign EWGs) and FUCOs, for which there
is recourse, directly or indirectly, to the holding company. Among
other things, the term must include preliminary development expenses
that culminate in the acquisition of a foreign EWG or a FUCO.
(ii) Such report must be filed no later than ten days
following the filing of the 10-Q for the quarter.
(H) That in the event the holding company anticipates
making any investment in a FUCO that would result in the aggregate
investment as defined in subparagraph (G) of this paragraph of such
holding company exceeding 30% of the consolidated net worth of such
holding company, the holding company must so advise the commission
before a final commitment to ownership of such FUCO is made;
(I) That the electric utility will provide, by March
31 of each year, a copy of the electric utility’s three-year
cash flow forecast;
(J) That the holding company will provide to the commission
all SEC forms for reporting information related to foreign EWG and
FUCO investments, no later than ten days after such forms are provided
to the SEC;
(K) That the holding company will promptly notify the
commission whenever any of the following occurs:
(i) It is unable to provide the certifications, undertakings,
or documents provided for in this paragraph;
(ii) The aggregate investment exceeds 30% of consolidated
net worth;
(iii) The holding company’s operating losses
attributable to its direct or indirect investments in foreign EWGs
and FUCOs exceeded 5.0% of consolidated retained earnings during the
previous four quarters; and
(L) That the holding company will comply with the informational
filing requirements of subsection (d) of this section in connection
with a contemplated investment in a FUCO, unless the commission finds
good cause not to require the holding company to provide such additional
information.
(d) Other investments. For any occasion for which a
holding company has undertaken to notify the commission of an event
specified in subsection (c)(2)(H) or (K) of this section, the following
provisions apply:
(1) The holding company must provide the following
information, to the extent such information is reasonably available
at the time of submission of the filing, at least 30 days before the
date when it anticipates making a final commitment to ownership of
a FUCO not already covered by a certification letter:
(A) A description of the proposed investment, including
a description of the FUCO assets being acquired, their geographical
location, the form of the investment (partnership, joint venture,
direct purchase, etc.), the holding company’s percentage share
of the investment, a description of how the investment will fit into
the corporate subsidiary structure, and any other information reasonably
necessary in the opinion of the holding company to provide a complete
overview of the nature of the proposed investment;
(B) Any financial requirements and/or commitments by
the holding company or the electric utility that will be made or assumed
as a result of this investment; this information should include, but
is not limited to, an estimate of the amount of equity capital to
be invested;
(C) Any debt obligations resulting from this investment
which will provide recourse to the holding company or the electric
utility;
(D) The holding company’s general corporate objectives
regarding diversification and foreign utility investments, and the
specific objectives of the proposed FUCO investment;
(E) A statement that the electric utility has effective
written policies and accounting procedures which insure that any use
by the FUCO of assets or personnel of an affiliate of the electric
utility, or other transactions between the FUCO and an affiliate of
the electric utility will not negatively affect Texas ratepayers;
and a statement that the electric utility will demonstrate in each
subsequent rate proceeding before the commission, and each subsequent
audit, that no FUCO investment increased the cost of capital or revenue
requirement of the electric utility;
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