WSR 99-03-073

PROPOSED RULES

UTILITIES AND TRANSPORTATION

COMMISSION

[Commission Docket No. A-980085--Filed January 19, 1999, 12:22 p.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 98-14-138.

Title of Rule: Revising rules relating to securities, liens, affiliated interests, refunding of notes, and lease of utility facilities.

Purpose: To implement the requirements of Executive Order 97-02, requiring agencies to review significant rules for need; effectiveness and efficiency; clarity; intent and statutory authority; cost and fairness. The proposal would repeal the existing rules, reorganize and rewrite the substance of the text for compliance with Executive Order 97-02, and promulgate new sections incorporating the redrafted provisions. In addition, the proposal adds provisions to set existing policies in rules, updates definitions, and deletes obsolete provisions.

Statutory Authority for Adoption: RCW 80.01.040 and 80.04.160.

Summary: See Explanation of Rule below.

Name of Agency Personnel Responsible for Drafting: Kathy Folsom, 1300 South Evergreen Park Drive S.W., Olympia, WA 98503, (360) 664-1279; Implementation and Enforcement: Carole J. Washburn, Secretary, 1300 South Evergreen Park Drive S.W., Olympia, WA 98503 [98504], (360) 664-1174.

Name of Proponent: Washington Utilities and Transportation Commission, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: These rules address how the Washington Utilities and Transportation Commission regulates securities, liens, affiliated interests, refunding of notes, and lease of utility facilities transactions of regulated companies. This review is in compliance with Executive Order 97-02 and reviews the chapter for clarity, intent and statutory authority, need, effectiveness and efficiency, coordination, cost and fairness. This proposal would redraft the rules to comply with the executive order, would incorporate and formalize policies, and would eliminate rules that are obsolete.

Proposal Changes the Following Existing Rules: The proposal would repeal existing rules and substitute reorganized and redrafted rules. The proposed substantive changes to rule text include the following: (1) Deleting and adding definitions as needed; (2) clarifying requirements relating to statements and applications; and (3) clarifying reporting requirements for securities and affiliated interest transactions.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposed rules will have minimal fiscal impact on regulated companies or the industry.

RCW 34.05.328 does not apply to this rule adoption. The commission is not an agency to which RCW 34.05.328 applies.

Hearing Location: Commission Hearing Room, Second Floor, Chandler Plaza Building, 1300 South Evergreen Park Drive S.W., Olympia, WA 98504, on February 26, 1999, at 1:30 p.m.

Assistance for Persons with Disabilities: Contact Pat Valentine-Hazzard by February 18, 1999, TDD (360) 586-8203, or (360) 664-1133.

Submit Written Comments to: Carole J. Washburn, Secretary, P.O. Box 47250, Olympia, WA 98504 or e-mail to records@wutc.wa.gov, fax (360) 586-1150, by February 12, 1999. Please include Docket No. A-980085 in your communication.

Date of Intended Adoption: February 26, 1999.

January 13, 1999

Terrence Stapleton

for Carole J. Washburn

Secretary

OTS-2757.1

NEW SECTION

WAC 480-146-240  Application of rules. These rules apply to any public service company which meets the requirements for commission regulation or jurisdiction under RCW 80.04.010. The rules do not apply to a local exchange company that serves less than two percent of the access lines in the state of Washington.

The commission may waive or modify the application of any rule to a public service company upon written request or upon the commission's own motion, except when such provisions are fixed by statute. The waiver or modification must be approved by the commission in writing. Violations of these rules will be subject to the penalty provisions of chapter 80.04 RCW.

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NEW SECTION

WAC 480-146-250  Filing. Any filing under these rules must be made at the commission by mail or in person.

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NEW SECTION

WAC 480-146-260  Statements and applications. Any public service company that issues stocks, stock certificates, other evidence of interest or ownership, bonds, notes, or other evidence of indebtedness must file a statement with the commission. A corporation formed by a merger or consolidation which issues securities must also file a statement with the commission. Statements must include:

(1) A description of the purposes for which the issuance is made, including a certification by an officer authorized to do so that the proceeds from any such financing is for one or more of the purposes allowed by RCW 80.08.030;

(2) A description of the proposed issuance including the terms of the financing; and

(3) A statement as to why the transaction is in the public interest.

Any public service company making such a filing may request from the commission a written order affirming that the public service company has complied with the requirements of RCW 80.08.040. For purposes of this chapter, a request for such an order is termed an application.

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NEW SECTION

WAC 480-146-270  Filing requirements for securities statements and applications. The applicant must submit all information required to comply with the requirements of RCW 80.08.040 and any additional information deemed necessary by the commission. The applicant, authorized representative, or applicant's attorney must sign and date the statement and include a certification that the information is true and correct to the signer's information and belief, under penalties of perjury as set forth in RCW 9A.72.085. When an applicant requests an order affirming compliance with RCW 80.08.040 it must submit a draft order.

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NEW SECTION

WAC 480-146-280  Commission may require additional information. The commission may require the applicant to file or provide pertinent information in addition to that specified by statute or in these rules.

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NEW SECTION

WAC 480-146-290  Applicant may include information by reference. When any information required to support an application is on file with the commission, it is sufficient for the applicant to make specific reference to the information indicating the proceeding, report, or other filing that contains the referenced information.

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NEW SECTION

WAC 480-146-300  Applicant duty when information is unavailable. If any required information is unavailable at the time of the application, the applicant must include with the application the reason why the information is not available and state when it will be available.

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NEW SECTION

WAC 480-146-310  Commission may set application or statement for public hearing. The commission will act upon a complete, filed application or statement as promptly as possible. The commission may consider the application or statement without public hearing or can order a hearing.

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NEW SECTION

WAC 480-146-320  Reporting of affiliated interest transactions. (1) Every public service company, as defined in the application of rules WAC 480-146-240, must file with the commission by June 1 of every year an annual report of all affiliated interest transactions which occurred during the period of January 1 through December 31 of the preceding year.

"Affiliated interest transactions" mean contracts or arrangements between affiliated interests as defined in RCW 80.16.010.

(2) The annual report must contain the following information:

(a) A description of the products or services flowing between the public service company and any affiliated interest;

(b) A description of the pricing basis or costing method and procedures for allocating costs for such products or services rendered, and the amount and accounts charged;

(c) A description of the terms of any loans between the public service company and its affiliate and a listing of the year end loan amounts and maximum loan amounts outstanding during the year;

(d) A description of the terms and maximum amount of any debt guarantees by the public service company for any affiliate and a listing of the year end debt amounts and maximum debt amounts outstanding during the year;

(e) A corporate organization chart of the public service company and its affiliates and a detailed description of the activities of the affiliates with which the public service company has transactions;

(f) A list of all common officers and directors of the affiliated interest company and the public service company along with their titles in each organization, and;

(g) Appropriate financial information for each affiliated interest company including, but not limited to, a balance sheet and income statement.

The commission may request any additional information during its review of the public service company's annual report of affiliated interest transactions.

(3) The annual report required by this section will supersede the reporting requirements contained in previous commission orders authorizing affiliated interest transactions pursuant to chapter 80.16 RCW.

(4) The public service company is obligated to file verified copies of affiliated interest contracts and arrangements as stated in WAC 480-146-XXX.

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NEW SECTION

WAC 480-146-330  Form of lease application. A public service company must file an application containing the terms of a lease of utility facilities, as lessee, in the following form:

before the washington utilities

and transportation commission

Application is hereby made to the Washington Utilities and Transportation Commission for an order authorizing the lease of utility facilities. The following general information and exhibits are furnished in support:

GENERAL INFORMATION

1. Name of applicant.

2. Address of principal office of applicant.

3. Name and address of attorney or agent.

4. State or states under which applicant is organized and form of organization.

5. A general description of the property owned by applicant and the field of its operations.

EXHIBIT "A"

A statement by applicant certifying that the requested approval is necessary or appropriate to exempt any owner of the facilities from being a public utility company under the federal Public Utility Holding Company Act of 1935.

EXHIBIT "B"

Detailed unconsolidated balance sheet as of three months before the date the application is filed, and a pro forma balance sheet as of the same date showing the effect of the proposed lease. Indicate separately the amount of intangibles and the amount reflected in plant acquisition adjustment account if such items are included in the fixed capital or utility plant accounts of the balance sheet.

EXHIBIT "B-1"

(A) Detailed income and profit and loss statement for the twelve months ended as of the date of the balance sheet submitted as Exhibit "B."

(B) Reconcilement of the retained earnings account for the period covered by the income and profit and loss statement. Retained earnings should be segregated from other surplus accounts.

EXHIBIT "C"

1. A description of the property which is to be leased.

2. The historical or original cost of the property to be leased and the related accrued depreciation. (Estimated in both cases if actual amounts are not known.)

3. The amount of contributions in aid of construction.

4. Terms of the lease.

EXHIBIT "D"

Economic and financial justification for entering into the proposed lease including a lease versus purchase analysis.

EXHIBIT "E"

Show such other facts that may be pertinent to the application.

wherefore, the undersigned applicant requests that the Washington Utilities and Transportation Commission make its order granting to such applicant its application.

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NEW SECTION

WAC 480-146-340  Minimum time required for commission order. A public service company must submit an application, except as provided in WAC 480-146-XXX, at least fifteen working days prior to the requested effective date for a commission order. The fifteen day period will start once the applicant has filed with the commission all information and exhibits required by WAC 480-146-XXX.

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NEW SECTION

WAC 480-146-350  Supplemental filings may be exempt from time limitations. Supplemental filings made:

(1) To comply with a previous order;

(2) To change the terms and conditions of a previous order; or

(3) To request that flaws in a previous order must be corrected are exempt from WAC 480-146-XXX.

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NEW SECTION

WAC 480-146-360  Reporting of securities transactions. (1) A public service company must file a letter with the commission outlining the final terms and conditions of the transaction, within thirty days after the issuance of any of the following:

(a) Stock;

(b) Stock certificates;

(c) Other evidence of interest or ownership;

(d) Bonds;

(e) Notes; or

(f) Other evidences of indebtedness.

(2) Every public service company, as defined in the application of rules WAC 480-146-240, that has issued securities during the prior year, must file with the commission by April 1 of each year an annual securities transaction report. At a minimum, the report must contain:

(a) A detail of the final agreements;

(b) A description of the use of proceeds;

(c) The level of expenses for each of the securities transactions for the year ending December 31;

(d) Information to determine the individual and collective impact on capital structure;

(e) The pro forma cost of money for the securities transactions.

(3) Any public service company that is not required to file an annual report must maintain complete records of any securities transactions as outlined in subsection (2) of this section. The commission may request any information as it determines necessary.

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NEW SECTION

WAC 480-146-370  Filing of affiliated interest transactions. Every public service company must file a verified copy, or a verified summary, if unwritten, of contracts or arrangements with affiliated interests before the effective date of the contract or arrangement. Verified copies of modifications or amendments to the contract or arrangements must be filed before the effective date of the modification or amendment. If the contract or arrangement is unwritten, then a public service company must file a verified summary of any amendment or modification.

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NEW SECTION

WAC 480-146-380  Application for approval of lease of utility facilities. The applicant must certify that the requested approval of lease of utility facilities is necessary to exempt any owner of the facilities from being a public utility company under the Public Utility Holding Company Act of 1935. A filing for approval of lease of utility facilities must be submitted in the form of lease application WAC 480-146-330.

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REPEALER

The following sections of the Washington Administrative Code are repealed:

WAC 480-146-010 Filing.

WAC 480-146-020 Requests, applications, and statements.

WAC 480-146-030 General contents.

WAC 480-146-040 Additional information.

WAC 480-146-050 Material incorporated by reference.

WAC 480-146-060 Conditions for public hearing.

WAC 480-146-070 Procedure for merger or consolidation.

WAC 480-146-080 Form of securities application.

WAC 480-146-090 Form of affiliated interest application.

WAC 480-146-091 Reporting of affiliated interest transactions.

WAC 480-146-095 Form of lease application.

WAC 480-146-200 Minimum time required for commission order.

WAC 480-146-210 Supplemental filings exempt from time limitations.

WAC 480-146-220 Waiver of time limitations.

WAC 480-146-230 Reporting of securities transactions.

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