§ 18-103 — Transitional funding orders

(a) Notwithstanding any other provision of this Act or other law, the Commission is hereby authorized to issue transitional funding orders in accordance with the provisions of this Section, in order to facilitate (i) the issuance of transitional funding instruments by or on behalf of electric utilities or issuers and (ii) the issuance of grantee instruments by or on behalf of grantees. (b) A transitional funding order may be issued by the Commission only upon the application of an electric utility and shall become effective in accordance with its terms only after such electric utility files with the Commission its written consent to all terms and conditions of such order. After the issuance of a transitional funding order, the electric utility or grantee shall retain sole discretion regarding whether to assign, sell, pledge or otherwise transfer intangible transition property and grantee instruments, if any, or to cause transitional funding instruments and grantee instruments, if any, to be issued, including the right to defer or postpone such assignment, sale, transfer, pledge or issuance or to change the terms thereof as allowed by such order. (c) After the effective date of this amendatory Act of 1997, an electric utility may file any number of applications for transitional funding orders. Each application for a transitional funding order shall contain detailed information regarding the electric utility's proposal for (i) the assignment, sale, pledge or other transfer of, or the establishment, creation and granting of rights in and to, intangible transition property and grantee instruments, if any, (ii) the issuance of transitional funding instruments and grantee instruments, if any, (iii) the total dollar amount of intangible transition property to be created and the amount to be sold, pledged, assigned or otherwise transferred or granted hereunder (which amount may be in excess of the principal and interest payable on the transitional funding instruments and grantee instruments, if any, in order to provide for servicing costs and the funding or maintenance of debt service and other reserves, costs and fees as security to the holders of the transitional funding instruments and grantee instruments, if any), (iv) the amount of transitional funding instruments and grantee instruments, if any, to be issued, (v) the amount, expressed in cents per kilowatt-hour, of instrument funding charges to be collected from retail customers or other persons, (vi) the time to maturity for the transitional funding instruments and grantee instruments, if any, and (vii) the electric utility's planned use of the proceeds from the issuance of transitional funding instruments including the amounts allocated for the respective uses specified in subparagraph (1) of subsection (d) of Section 18-103 of this Article. (d) The Commission shall, after proper notice, hold a hearing for the sole purpose of determining whether the application and requested transitional funding order are in compliance with this Article and shall complete its review of the application and issue its final transitional funding order by no later than 90 days after the filing of such application by the electric utility; provided, that, in contested cases where the public interest is in issue pursuant to subparagraph (1)(B) of this subsection (d) or pursuant to subsection (m) of Section 18-104, the Commission may complete its review and issue its final transitional funding order by no later than 120 days after the filing of such application. The order shall create and establish the proposed intangible transition property in the amount requested by the applicant and approve the proposed sale, pledge, assignment or other transfer of, or the establishment, creation and granting of rights in and to, intangible transition property and grantee instruments, if any, the proposed issuance of transitional funding instruments and grantee instruments, if any, and the proposed imposition and collection of the corresponding instrument funding charges, if the Commission finds that each of the following conditions are met: (1) the electric utility will use the proceeds of the sale and issuance of the transitional funding instruments for one or more of the following purposes: (A) to refinance debt or equity, or both, in a manner which the electric utility reasonably demonstrates will result in an overall reduction in its cost of capital, taking into account the costs of financing; provided, however, that any proceeds transferred to a parent company through a common stock repurchase transaction shall be used to retire publicly traded common stock of the parent company or to pay commercially reasonable transaction costs associated with such retirement; (B) if the Commission finds that the sale or issuance of transitional funding instruments for the following purposes is in the public interest, then the following uses of proceeds: (i) to repay or retire fuel contracts or obligations related to nuclear spent fuel previously incurred by the electric utility in providing electric power or energy services prior to the effective date of this amendatory Act of 1997 or (ii) to pay any expenditures required to be undertaken by such electric utility by the provisions of Section 16-128 of this Act including labor severance costs and employee retraining costs; (C) to fund debt service and other reserves, commercially reasonable costs and fees necessary or desirable in connection with the marketing of the transitional funding instruments and grantee instruments, if any; (D) to pay for commercially reasonable costs associated with the issuance and collateralization of transitional funding instruments and grantee instruments, if any; and (E) to pay for the commercially reasonable costs associated with the issuance of such transitional funding instruments, including the costs incurred since the effective date of this amendatory Act of 1997, or to be incurred, in connection with transactions to recapitalize, refinance or retire stock and/or debt, any associated taxes, and the costs incurred or to be incurred to obtain, collateralize, issue, service and administer transitional funding instruments and grantee instruments, including interest and other related fees, costs and charges; provided, (i) that the transitional funding order shall require the electric utility to use (1) at least 80% of such proceeds for the purposes specified in subparagraphs (A) and (B) above and (2) no more than 20% of the maximum amount of such proceeds permitted under subparagraph (6)(B) of this subsection for purposes other than those specified in subparagraph (A) above; (ii) that the electric utility's use of such proceeds for the purposes specified in subparagraph (A) above shall not, as of the date of application of such proceeds, result in the common equity component of its capital structure, exclusive of the portion of its capital structure that consists of obligations representing transitional funding instruments or grantee instruments, being reduced below the lesser of (1) 40% and (2) the common equity percentage as of December 31, 1996 adjusted to reflect any write-off of assets or common equity implemented or required to be implemented as a result of this amendatory Act of 1997; and (iii) in no event shall the electric utility use the proceeds of the sale of grantee instruments or transitional funding instruments to repay or retire obligations incurred by any affiliate of the electric utility (other than in connection with any refinancing of grantee instruments or transitional funding instruments issued by such affiliate), without the consent of the Commission; (2) the expected maturity date for the grantee instruments or the transitional funding instruments, and the final date on which the electric utility, grantee or assignee shall be entitled to charge and collect instrument funding charges, shall each be set to occur no later than December 31, 2008, subject to the provisions of subsections (l) and (m) of Section 18-104; (3) the instrument funding charges authorized in such order will be deducted and stated separately from base rates and transition charges, and, where applicable, other rates for tariffed services, all as provided in subsection (j) of Section 18-104 and in a manner conforming to the allocation of the instrument funding charges implemented pursuant to subparagraph (4) of this subsection; (4) the instrument funding charges authorized in such order shall have been allocated among classes of retail customers in accordance with percentage ratios determined by dividing the base rate revenue from each class by the electric utility's total base rate revenue for the 1996 calendar year; (5) the issuance of the transitional funding instruments will not cause the rates for tariffed services to increase over the rates then in existence as adjusted for the rate decreases provided in subsection (b) of Section 16-111; and (6) the aggregate principal amount of grantee instruments or, if such transitional funding order does not provide for the issuance of grantee instruments, transitional funding instruments, to be issued pursuant to such order, together with the aggregate amount of such instruments issued under any prior orders requested by such electric utility, shall not exceed: (A) during the twelve-month period commencing August 1, 1998, an amount equal to 25% of the applicable electric utility's total capitalization, including both debt and equity, as of December 31, 1996, multiplied by the ratio of the electric utility's revenues from Illinois electric utility retail customers in the 1996 calendar year to its total electric retail revenues for such 1996 year; and (B) thereafter, an amount equal to 50% of the applicable electric utility's total capitalization, including both debt and equity, as of December 31, 1996 multiplied by the ratio of the electric utility's revenues from Illinois electric utility retail customers in the 1996 calendar year to its total electric retail revenues for such 1996 year.

Legislative History

(Source: P.A. 90-561, eff. 12-16-97.)