§ 48:3-62 — Authorization for issuance of transition bonds.

14. a. For purposes of recovering a portion of the stranded costs of an electric public utility that are deemed eligible for rate recovery in a stranded cost recovery order consistent with the provisions of section 13 of this act, and for compliance by the electric public utility with the rate reduction requirements determined by the board to be necessary and appropriate consistent with the provisions of sections 4 and 13 of this act, or for the purposes of recovering basic generation service transition costs of an electric public utility, the board may authorize the issuance of transition bonds by the electric public utility or other financing entity approved by the board. Such bonds shall be secured through an irrevocable bondable stranded cost rate order imposing a non-bypassable transition bond charge as provided in section 18 of this act and shall provide for collection of the transition bond charge by the electric public utility or another entity approved by the board. This transition bond charge shall be assessed in connection with the recovery of stranded costs pursuant to section 13 of this act or basic generation service transition costs pursuant to this section, but each electric public utility shall maintain separate accounting for transition bond charges so that the board can determine, at any time, the amount of each type of charge that has been assessed and collected by the electric public utility. The net proceeds of the transition bonds shall be used by or on behalf of the electric public utility solely for the purposes of reducing the amount of its otherwise recovery-eligible stranded costs, as determined by the board in accordance with the provisions of section 13 of this act, or reducing the amount of basic generation service transition costs through the refinancing or retirement of electric public utility debt or equity, or both, or the buyout, buydown or other restructuring of a power purchase agreement if such buyout, buydown or restructuring leads directly to substantial customer benefits over the term of the power purchase agreement. The entire amount of cost savings achieved as a result of the issuance of such transition bonds, whether as a result of a reduction in capital costs or a lengthened recovery period associated with otherwise recovery-eligible stranded costs or basic generation service transition costs or as a source of cash for the buyout, buydown or other restructuring of a power purchase agreement, shall be passed on to the customers of the electric public utility in the form of reduced rates or mitigated rate increases for electricity. Anything in this act or any other law to the contrary notwithstanding, except for adjustments authorized under paragraph (2) of subsection a. and subsection b. of section 15 of this act, transition bond charges approved by the board in a bondable stranded costs rate order shall not be offset, reduced, adjusted or otherwise diminished either directly or indirectly. b. For the purposes of recovering stranded costs of an electric public utility, the issuance of transition bonds for an electric public utility may be authorized by the board if all the following findings are made by the board in connection with its review of a stranded cost filing made by an electric public utility pursuant to section 13 of this act: (1) The electric public utility has taken reasonable measures to date, and has the appropriate incentives or plans in place to take reasonable measures, to mitigate the total amount of its stranded costs; (2) The electric public utility will not be able to achieve the level of rate reduction deemed by the board to be necessary and appropriate pursuant to the provisions of sections 4 and 13 of this act absent the issuance of transition bonds; (3) The issuance of such bonds will provide tangible and quantifiable benefits to ratepayers, including greater rate reductions than would have been achieved absent the issuance of such bonds and net present value savings over the term of the bonds; and (4) The structuring and pricing of the transition bonds assure that the electric public utility's customers pay the lowest transition bond charges consistent with market conditions and the terms of the bondable stranded costs rate order. If so authorized in the financing order by the board, the structure and pricing of the transition bonds shall be conclusively deemed to satisfy this requirement if so certified by a designee of the board upon the pricing of the transition bonds, which certification will be final and uncontestable as of its date. c. Subject to the other requirements of this section: (1) The board may authorize the issuance of transition bonds for utility generation plant stranded costs determined by the board to be recoverable pursuant to paragraph (1) of subsection a. of section 13 of this act in a principal amount of up to 75 percent of the total amount of the electric public utility's recovery-eligible utility generation plant stranded costs, as determined by the board in accordance with the provisions of section 13 of this act, or, in the event that an electric public utility divests itself of a majority of its generating assets, which divestiture will result in a lower market transition charge than that which would have been collected from customers had the electric public utility not divested such assets, and the utility has established, as determined by the board, the stranded cost amount with certainty attributable to its remaining generating asset or assets, the board may authorize the issuance of transition bonds in a principal amount up to the full stranded cost value of such remaining generating asset or assets based on the following criteria: (a) The greater the level of aggregate rate reduction provided pursuant to subsections d. and e. of section 4 of this act, the higher the percentage of stranded costs for which transition bonds may be issued; (b) The higher the degree of certainty, such as might be obtained by auction or sale of the assets, as to the magnitude of the electric public utility's actual stranded costs, the larger the magnitude of transition bonds which may be permitted; and (c) Based on evidence on the record, such amount will produce substantial and quantifiable savings for the customers of that utility; (2) The board may authorize the issuance of transition bonds for the buyout or buydown of long-term power purchase contracts with non-utility generators determined by the board to be recoverable pursuant to paragraph (3) of subsection a. of section 13 of this act in a principal amount to be determined by the board in accordance with the provisions of section 13 of this act, based on the following criteria: (a) The greater the level of aggregate rate reduction provided pursuant to subsections d. and e. of section 4 of this act, the higher the percentage of stranded costs that may be securitized; (b) The higher the degree of certainty as to the magnitude of the electric public utility's actual stranded costs, the larger the magnitude of transition bonds which may be permitted; and (c) Based on evidence on the record, such amount will produce substantial and quantifiable savings for the customers of that electric public utility because the amount of the buyout or buydown payment is substantially less than the total projected stranded costs associated with the contract; and (3) The board may authorize the issuance of transition bonds for the recovery of up to the full amount of an electric public utility's reasonably and prudently incurred basic generation service transition costs based on the criteria that such amount will produce benefits for customers of the electric public utility which include the lowest transition bond charges consistent with market conditions and the terms of the bondable stranded costs rate order. d. The board may approve transition bonds with scheduled amortization upon issuance of up to: (1) Fifteen years if the electric public utility intends to utilize the proceeds from such transition bonds to reduce the stranded costs related to utility-owned generation; (2) The remaining term of a power purchase agreement if the electric public utility intends to utilize the proceeds from such transition bonds solely for the purposes and requirements of paragraph (2) of subsection c. of this section; or (3) Fifteen years if the electric public utility intends to utilize the proceeds from such transition bonds for the purpose of the recovery of basic generation service transition costs. e. Transition bonds for the purpose and requirements of paragraph (1), (2) or (3) of subsection c. of this section may be issued in one or more series, in one or more offerings, and each such series may consist of one or more classes of transition bonds. f. The board shall issue orders with respect to each electric public utility's amortization of stranded costs or basic generation service transition costs through the transition bond charges pursuant to this section. g. For the purpose of recovering basic generation service transition costs, an electric public utility may make a filing in a form to be adopted by the board to request the board to authorize the issuance of transition bonds and to issue a bondable stranded cost rate order. The board shall review such filing, and after providing appropriate notice and an opportunity for hearing, may render a determination authorizing the issuance of transition bonds. If so authorized in the financing order by the board, the structure and pricing of the transition bonds shall be conclusively deemed to assure the lowest transition bond charges consistent with market conditions and the terms of the bondable stranded costs rate order when so certified by a designee of the board upon the pricing of the transition bonds, which certification will be final and uncontestable as of its date. L.1999,c.23,s.14; amended 2002, c.84, s.2.