HOUSE BILL REPORT

SB 5668

BYSenators Moore, Benitz, Newhouse, Stratton, Smitherman and Williams

Revising provisions on the issuance of securities by public service companies.

House Committe on Energy & Utilities

Majority Report:  Do pass.  (13)

      Signed by Representatives Nelson, Chair; Todd, Vice Chair; Armstrong, Barnes, Brooks, Gallagher, Hankins, Jesernig, Madsen, May, Miller, Sutherland and S. Wilson.

Minority Report:  Do not pass.  (2)

      Signed by Representatives Unsoeld and Jacobsen.

House Staff:Deborah Senn (786-7198), Fred Adair (786-7113) and Ted Hunter (786-7114)

AS PASSED HOUSE APRIL 8, 1987

BACKGROUND:

Presently, the Washington Utilities and Transportation Commission does not grant permission to a public service company to issue securities unless the commission has approved the final terms of the issuance.  Interest rates can change rapidly, yet the commission needs the planned issuing interest rate and the broker needs the commission approval--a "Catch-22" situation.  Commission approval of a range in the terms of the issuance can alleviate the problem.

SUMMARY:

Any order issued by the Utilities and Transportation Commission that grants a public service company permission to issue securities may be based on reasonable estimates of the final terms of the issuance.  The order may allow the public service company to complete the transaction if the final terms are within a range of conditions established by the commission.  The range of conditions may include a range of time in which the securities may be issued, a range in the maximum amount of the issuance, a range in the cost of the issuance, and a range in the interest rate to be paid.

An existing provision is repealed that requires a public service company issuing new securities to pay to the Utilities and Transportation Commission a fee based on the principal amount or stated value of securities authorized for issuance.

Fiscal Note:      None Requested.

House Committee ‑ Testified For:    Dennis Okomoto, Treasurer, Pacific Northwest Bell.

House Committee - Testified Against:      Sharon Nelson, Chair; Bob Bratton, Commissioner; and Tony Cook, Utilities and Transportation Commission.

House Committee - Testimony For:    Interest rates move rapidly.  Pacific Northwest Bell almost lost a favorable interest rate while securing UTC approval.  Each basis point (percentage point) change in interest rate means thousands of dollars to ratepayers.  An authorized range should suffice as the UTC's protection of ratepayer interest.  The company has an incentive to get the most favorable terms.

House Committee - Testimony Against:      The UTC is readily available at any time to give approval without delay to a financing deal.  Knowing and approving the final terms is the best protection of ratepayer interests.