STATUTORY OR OTHER AUTHORITY: The Washington Utilities and Transportation Commission takes this action under Notice No. WSR 99-03-073, filed with the code reviser on January 19, 1999. The commission brings this proceeding pursuant to RCW 80.01.040 and 80.04.160.

STATEMENT OF COMPLIANCE: This proceeding complies with the Open Public Meetings Act (chapter 42.30 RCW), the Administrative Procedure Act (chapter 34.05 RCW), the State Register Act (chapter 34.08 RCW), the State Environmental Policy Act of 1971 (chapter 34.21C [43.21C] RCW), and the Regulatory Fairness Act (chapter 19.85 RCW).

DATE OF ADOPTION: The commission adopted this rule on

February 26, 1999.

CONCISE STATEMENT OF PURPOSE AND EFFECT OF THE RULE: The proposed rules implement the requirements of Executive Order 97-02, requiring agencies to review rules for clarity, intent and statutory authority, need, effectiveness and efficiency, coordination, cost, and fairness. The new rules incorporate and formalize policies, update definitions, and eliminate rules that are obsolete.

New section WAC 480-146-240 defines the application of the rules and allows for waiver of rules upon a public service company’s written request or upon the commission’s own motion.

New section WAC 480-146-250 defines the method for filing securities statements and applications.

New section WAC 480-146-260 provides the commission may require additional information regarding statements or applications, if necessary.

New section WAC 480-146-270 allows applicants to include by reference information currently on file with the commission.

New section WAC 480-146-280 requires applicants to explain why any omitted information is not available at the time of application.

New section WAC 480-146-290 defines filing requirements for securities statements and requests for a commission written order.

New section WAC 480-146-300 sets forth the filing requirements for securities statements and applications.

New section WAC 480-146-310 provides the commission may determine a securities application or statement will be set for public hearing

New section WAC 480-146-320 sets forth the minimum time required to process requests for a commission securities order.

New section WAC 480-146-330 states conditions under which supplemental securities filings are exempt from time limitations.

New section WAC 480-146-340 requires public service companies to report the final terms and conditions of securities transactions and to report annually details of all securities transactions entered into over the preceding year.

New section WAC 480-146-350 sets forth the filing requirements for affiliated interest transactions.

New section WAC 480-146-360 requires public service companies to file annually a detailed report of all affiliated interest transactions that occurred during the preceding year.

New section WAC 480-146-370 sets forth the conditions necessary for approval of utility facilities leases.

New section WAC 480-146-380 sets forth the filing requirements for utility facilities leases.

REFERENCE TO AFFECTED RULES: This rule repeals the following sections of the Washington Administrative Code:

WAC 480-146-010 Filing, 480-146-020 Requests, applications, and statements, 480-146-030 General contents, 480-146-040Additional information, 480-146-050 Material incorporated by reference, 480-146-060 Conditions for public hearing, 480-146-070 Procedure for merger or consolidation, 480-146-080 Form of securities application, 480-146-090 Form of affiliated interest application, 480-146-091 Reporting of affiliated interest transactions, 480-146-095 Form of lease application, 480-146-200 Minimum time required for commission order, 480-146-210 Supplemental filings exempt from time limitations, 480-146-220 Waiver of time limitations, and 480-146-230 Reporting of securities transactions.

PREPROPOSAL STATEMENT OF INQUIRY AND ACTIONS THEREUNDER: The commission filed a Preproposal Statement of Inquiry (CR-101) on July 1, 1998, at WSR 98-14-138.

ADDITIONAL NOTICE AND ACTIVITY PURSUANT TO PREPROPOSAL STATEMENT: The statement advised interested persons the commission was considering entering a rule making on rules relating to securities, liens, affiliated interests, refunding of notes, and lease of utility facilities. The commission also informed persons of the inquiry into this matter by providing notice of the subject and the CR-101 to all persons on the commission's list of persons requesting such information pursuant to RCW 34.05.320(3) and by sending notice to utility companies. The commission accepted written comments regarding the CR-101 through July 31, 1998.

Pursuant to notice, the commission held one stakeholder meeting on August 31, 1998. The workshop participants included representatives from commission staff, US WEST Communications, Inc. (USWC), GTE Northwest Incorporated (GTE), Sprint Communications Company, Washington Independent Telephone Association (WITA), and Puget Sound Energy Company (Puget). Participants met in a workshop to address the potential rule making and comments that some of the participants had filed. Staff mailed out a letter and a rule discussion draft on November 9, 1998.

NOTICE OF PROPOSED RULE MAKING: The commission filed a notice of Proposed Rule Making (CR-102) on January 19, 1999, at WSR 99-03-073. The commission scheduled this matter for oral comment and adoption under Notice No. WSR 99-03-073 at 9:30 a.m., Wednesday, January 13, 1999, in the Commission's Hearing Room, Second Floor, Chandler Plaza Building, 1300 South Evergreen Park Drive S.W.,

Olympia, WA. The notice provided interested persons the opportunity to submit written comments to the commission.

MEETINGS OR WORKSHOPS; COMMENTS: The commission received oral and written comments from GTE, USWC, WITA, and the Industrial Customers of Northwest Utilities (ICNU). On February 18, 1999, the commission gave supplemental notice of proposed rule adoption hearing. This supplemental notice indicated that in response to comments from interested parties the rules were reordered and language was added to WAC 480-146-350 to conform to RCW 80.16.020.

Based on the comments received, commission staff suggested revised clarifying language that did not change the intent or ultimate effect of the proposed rule.

RULE-MAKING HEARING: The rule proposal was considered for adoption, pursuant to the notice, at the commission's regularly scheduled open public meeting on February 26, 1999, before Chairwoman Marilyn Showalter, Commissioner Richard Hemstad, and Commissioner William R. Gillis. The commission heard oral comments from Kathy Folsom, representing commission staff.

COMMISSION ACTION: After considering all of the information regarding this proposal, the commission adopts the proposed rules, with the changes described below.

CHANGES FROM PROPOSAL: The commission adopts the proposal with the following changes from the text noticed at WSR 99-03-073 (underlined text is added).

Consistent with GTE’s recommendation, the commission reorders the rules to allow all sections dealing with particular issues to be grouped together. This results in a logical sequence within the rules.

Consistent with GTE’s recommendation, the commission adds a provision to WAC 480-146-250 to allow for filing by mail or in person or as the commission may otherwise provide anticipating the future availability of other methods such as electronic filing.

The commission staff adds the following language to WAC 480-146-350 in order to conform the rule to changes in RCW 80.16.020: The commission may institute an investigation and disapprove the contract or arrangement if the commission finds the public service company has failed to prove that it is reasonable and consistent with the public interest. The commission also adopts minor typographical changes.

SUGGESTIONS FOR CHANGE THAT ARE REJECTED: WITA recommended reporting requirements contained in WAC 480-146-340 be reduced. The commission rejects this recommendation because an annual securities transaction report allows the commission to monitor financial transactions to determine the effect on earnings, capital structure and rate of return.

Both GTE and WITA recommended an annual affiliated interest transactions report should not be required in WAC 480-146-360. The commission rejected this recommendation because an annual report is the only means for the commission to monitor ongoing transactions between regulated companies and their affiliates.

STATEMENT OF ACTION; STATEMENT OF EFFECTIVE DATE: In reviewing the entire record, the commission determines that WAC 480-146-010, 480-146-020, 480-146-030, 480-146-040, 480-146-050, 480-146-060, 480-146-070, 480-146-080, 480-146-090, 480-146-091, 480-146-095, 480-146-200, 480-146-210, 480-146-220, and 480-146-230 should be repealed and WAC 480-146-240, 480-146-250, 480-146-260, 480-146-270, 480-146-280, 480-146-290, 480-146-300, 480-146-310, 480-146-320, 480-146-330, 480-146-340, 480-146-350, 480-146-360, 480-146-370 and 480-146-380 should be adopted to read as set forth in Appendix A, as rules of the Washington Utilities and Transportation Commission, to take effect pursuant to RCW 34.05.380(2) on the thirty-first day after filing with the code reviser.

1. WAC 480-146-010, 480-146-020, 480-146-030, 480-146-040, 480-146-050, 480-146-060, 480-146-070, 480-146-080, 480-146-090, 480-146-091, 480-146-095, 480-146-200, 480-146-210, 480-146-220, and 480-146-230 should be repealed and WAC 480-146-240, 480-146-250, 480-146-260, 480-146-270, 480-146-280, 480-146-290, 480-146-300, 480-146-310, 480-146-320, 480-146-330, 480-146-340, 480-146-350, 480-146-360, 480-146-370 and 480-146-380 are adopted to read as set forth in Appendix A, as rules of the Washington Utilities and Transportation Commission, to take effect on the thirty-first day after the date of filing with the code reviser pursuant to RCW 34.05.380(2).

2. This order and the rules set out in Appendix A, after being recorded in the register of the Washington Utilities and Transportation Commission, shall be forwarded to the code reviser for filing pursuant to chapters 80.01 and 34.05 RCW and chapter 1-21 WAC.

3. The commission adopts the commission staff memoranda, presented when the commission considered filing a preproposal statement of inquiry, when it considered filing the formal notice of proposed rule making, and when it considered adoption of this proposal, in conjunction with the text of this order, as its concise explanatory statement of the reasons for adopting and rejecting proposed changes, as required by RCW 34.05.025.

DATED at Olympia, Washington, this 31st day of March 1999.

Washington Utilities and Transportation Commission

Marilyn Showalter, Chairwoman

Richard Hemstad, Commissioner

William R. Gillis, Commissioner

OTS-2757.2

NEW SECTION
WAC 480-146-240
Application of rules.

The rules in this chapter apply to any public service company that 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.

[]

Any filing under this chapter must be made at the commission by mail or in person or as the commission otherwise may provide.

[]

The commission may require the applicant to file or provide pertinent information in addition to that specified by statute or in this chapter.

[]

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.

[]

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.

[]

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 that 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.

[]

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.

[]

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.

[]

A public service company must submit an application, except as provided in WAC 480-146-330, 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 480-146-290.

[]

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 480-146-320.

[]

(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 detailed description 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.

[]

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. The commission may institute an investigation and disapprove the contract or arrangement if the commission finds the public service company has failed to prove that it is reasonable and consistent with the public interest.

[]

(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 that occurred during the period 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 include a corporate organization chart of the public service company and its affiliates.

(3) The annual report must contain the following information for each affiliate that had transactions with the public service company during the preceding year:

(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 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.

(4) 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.

(5) The public service company is obligated to file verified copies of affiliated interest contracts and arrangements as stated in WAC 480-146-350.

[]

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 following form:

(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.

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

[]

     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.

© Washington State Code Reviser's Office