TRANSACTION DESCRIPTION
The Department of Public Utility Control (the "Department") includes in
the financing order (the "Financing Order") the following detailed
description of the rate reduction bond transaction (the "Transaction
Description").
A. Legislative Overview
Connecticut General Statutes ("Conn. Gen. Stat.") Sections 16-245e to
16-245k (the "Securitization Statute") provide The Connecticut Light and
Power Company ("CL&P"), as well as the other utilities providing electricity
to consumers in Connecticut, with an opportunity to recover certain stranded
costs through the collection of a competitive transition assessment (the
"CTA") and to securitize certain of those costs (the "Eligible Stranded
Costs"). Eligible Stranded Costs include the cost of mitigation efforts,
costs for generation-related regulatory assets and those long-term contract
costs that had been reduced to a fixed-present value through the buy out, buy
down or the renegotiation of such contracts, together with certain specified
related fees, costs and expenses. The Securitization Statute grants the
Department the authority to review a securitization application and issue a
Financing Order for the recovery of such costs. A Financing Order becomes
effective only when the applicant files with the Department its written
consent to all the terms and conditions contained therein.
The Securitization Statute authorizes, among other things, the
Department's creation, through the issuance of a Financing Order, of an
irrevocable property right (referred to in the Securitization Statute and
herein as the "Transition Property") to bill and collect a non-bypassable
charge (the "RRB Charge"), which will be a component of the CTA, in amounts
sufficient to recover the principal, interest, credit enhancement, and fees
and expenses associated with rate reduction bonds (the "RRBs").
Pursuant to Conn. Gen. Stat. Section 16-245j(b), the State of
Connecticut (the "State") pledges and agrees with the owners of the
Transition Property and holders of RRBs that the State shall neither limit
nor alter the RRB Charge, the Transition Property, this Financing Order, and
all rights thereunder until RRBs, together with interest thereon, are fully
met and discharged, unless adequate provision is made for the protection of
the owners or holders. The Securitization Statute also provides that
Transition Property may be sold in a true sale transaction to a special
purpose financing entity (each, an "SPE") in order to facilitate the issuance
of RRBs.
As discussed in more detail below, Conn. Gen. Stat. Section 16-245i(c)
directs the Department to adjust the RRB Charge periodically at the request
of CL&P in order to ensure the timely recovery of Periodic RRB Payment
Requirements (defined below).
Pursuant to Conn. Gen. Stat. Sections 16-245e(a)(2) and 16-245g(c), the
RRB Charge will be a non-bypassable charge assessed against each customer (as
such term is defined in Conn. Gen. Stat. Section 16-245e(a)(3)) of CL&P
(each, a "Retail Customer"). Pursuant to Conn. Gen. Stat. Section 16-
245g(c), the RRB Charges will be applied equally to all Retail Customers of
the same class in accordance with methods of allocation in effect on July 1,
1998. Subject to Department approval, the RRB Charge may in the future
include a pro rata component of any "exit fee" collected from any Retail
Customer pursuant to Conn. Gen. Stat. Section 16-245w.
The Securitization Statute requires that the State, acting through the
office of the State Treasurer (referred to herein and in the Securitization
Statute as the "Finance Authority"), or another "financing entity" approved
by the Finance Authority, issue the RRBs. The Finance Authority has worked
closely with CL&P to ensure that CL&P exercises fiscal prudence in the
structuring and execution of its RRB transaction (the "RRB Transaction") and
achieves the lowest overall cost to Connecticut ratepayers for the RRBs and
related notes issued by the SPE (the "SPE Debt Securities"). The Finance
Authority has reviewed and commented on CL&P's application (the
"Application") and the testimony and supporting materials filed with the
Application and has indicated that it believes that the RRB Transaction is
consistent with achieving the highest possible credit rating on the RRBs and
that CL&P's estimated transaction costs that the Finance Authority has
purview to review, as discussed below, are reasonable. The Finance Authority
will review and approve the final terms and conditions of the RRB Transaction
as described herein and in this Financing Order.
At the time of the filing of the Application, the Finance Authority
requested that CL&P note that certain matters discussed in the Application,
such as the use of RRB proceeds, the calculation of savings derived from the
RRB Transaction, ratemaking issues that extend beyond the RRB Charge itself,
the actual cost to CL&P of servicing the RRB Transaction, and the
reasonableness of certain cost not approved by the Finance Authority (such as
fees of CL&P's counsel and mitigation expenses), are beyond the Finance
Authority's purview. Accordingly, the Finance Authority expressed no opinion
as to these matters. During the proceeding, the Finance Authority expressed
concern whether the estimated servicing start-up fee of $450,000 represents
an actual incremental cost to CL&P, but will be reviewing the reasonableness
of this expense in the coming months. The Department would deny recovery, to
the extent that CL&P is training existing employees and using internal
sources. The Department encourages CL&P to keep actual costs to a minimum
and to continue to work closely with the Finance Authority in their review of
the reasonableness of these transaction cost estimates.
A. Regulatory Overview
In its order dated July 7, 1999 in Docket No. 99-02-05 (the "Stranded
Cost Decision"), the Department approved approximately $3.6 billion as the
total amount of CL&P's stranded costs. At the time of the Stranded Cost
Decision, the costs of certain mitigation efforts, such as the buyout/buydown
of independent power producer ("IPP") contracts, as well as the cost of
retiring capital, were not yet quantifiable and, therefore, were not
considered. In its subsequent order dated October 1, 1999 in Docket No. 99-
03-36 (the "Standard Offer Decision"), the Department determined that certain
Eligible Stranded Costs of CL&P qualify for recovery through the issuance of
RRBs.
CL&P has applied to the Department for a Financing Order approving the
issuance of RRBs in the aggregate principal amount of approximately $1.55
billion and related transactions pursuant to the terms of the Securitization
Statute. The issuance of SPE Debt Securities and RRBs will reduce the
carrying charge associated with the recovery of such Eligible Stranded Costs,
which will result in a net savings to CL&P customers reflected in a lower CTA
than would be required to recover such Eligible Stranded Costs if this
Financing Order were not adopted. Securitization is expected to account for
a portion of the ten percent rate reduction achieved pursuant to the Standard
Offer Decision.
The Eligible Stranded Costs to be securitized by the issuance of the SPE
Debt Securities and RRBs and their amounts (including the securitization fee)
are as follows:
Eligible Stranded Costs Balance to be Securitized (000)(FN 1)
FAS 109 Regulatory Asset $ 211,076
Unamortized Loss on Reacquired Debt $ 15,253
Connecticut Yankee Regulatory Asset $ 103,495
Maine Yankee Regulatory Asset $ 71,277
Cost of Retiring Debt and Preferred Stock $ 10,396
PPA Buyout/Buydown Payments $ 1,036,469
PPA Entitlement Auction $ 102,276
Total $ 1,550,242
B. The RRB Transaction
This Financing Order approves, among other things, the following aspects
of the RRB Transaction, which are more fully described in the testimony of
Richard A. Soderman attached as Exhibit 1 to the Application (the "Soderman
Testimony"), the testimony of Randy A. Shoop attached as Exhibit 2 to the
Application (the "Shoop Testimony"), and the testimony of Mark A. Englander
attached as Exhibit 3 to the Application (the "Englander Testimony" and
together with the Soderman Testimony and the Shoop Testimony, the "CL&P
Testimony"), and finds that the components of the RRB Transaction are
consistent with achieving the highest credit ratings and therefore the lowest
costs on the SPE Debt Securities and the RRBs. This structure is subject to
modification, depending on (i) negotiations with the rating agencies selected
by CL&P, subject to the approval of the Finance Authority, to assign credit
ratings to the SPE Debt Securities and the RRBs and (ii) market conditions at
the time the SPE Debt Securities and the RRBs are issued. The final
structure will be determined by CL&P at the time the RRBs are priced, subject
to the approval of the Finance Authority as provided herein, and after input
from the rating agencies, tax authorities, and the underwriters.
(FN 1) The Standard Offer Decision did not approve the securitization of the
IPP contract buyouts/buydowns or associated financing costs. However, as
explained in the testimony of Richard A. Soderman, CL&P has included these
amounts in its securitization application to avoid duplicate proceedings.
Securitization of these amounts, however, will not occur without Department
approval of the individual IPP contract renegotiations.
CL&P will securitize approved Eligible Stranded Costs and will recover
such amount, together with the transaction costs of issuing the SPE Debt
Securities and the RRBs, from its Retail Customers through the RRB Charge.
CL&P's right to collect the RRB Charge is irrevocable pursuant to Conn. Gen.
Stat. Section 16-245i(b)(1), and the charge itself is non-bypassable to
CL&P's customers pursuant to Conn. Gen. Stat. Section 16-245e(a)(2). The
Transition Property is the principal asset underlying the RRBs and represents
a continuously existing property right created pursuant to Conn. Gen. Stat.
Section 16-245h(a).
1. Formation/Capitalization of SPE and Sale of Transition Property
CL&P will form one or more bankruptcy-remote SPEs, each of which is
expected to be a Delaware limited liability company wholly-owned by CL&P and
authorized to acquire Transition Property and to issue SPE Debt Securities.
Each such SPE will constitute a "financing entity" for purposes of the
Securitization Statute. For each SPE to remain "bankruptcy-remote" from
CL&P, the fundamental organizational documents of each SPE will impose
significant limitations on its activities and the ability of CL&P to take
actions as the holder of the equity interest therein. For example, each SPE
will be formed for the limited purpose of acquiring the Transition Property
and Other SPE Collateral (defined below) and issuing and selling the SPE Debt
Securities. It will not be permitted to engage in any other activities, and
will have no assets other than the Transition Property and Other SPE
Collateral.
Each SPE will be managed by a management committee, which will have
rights and authority similar to that of a board of directors for a
corporation. As long as the SPE Debt Securities and the RRBs remain
outstanding, CL&P shall be required to cause each SPE to have at least two
independent directors or managers (i.e., directors or managers not affiliated
with CL&P). Without the consent of these independent directors or managers,
each SPE will be unable (a) to amend provisions of fundamental organizational
documents which ensure the bankruptcy-remoteness of such SPE, (b) to
institute bankruptcy or insolvency proceedings or to consent to the
institution of bankruptcy or insolvency proceedings against it, or (c) to
dissolve, liquidate or wind up the SPE. Other provisions may also be
included to support the bankruptcy-remote character of each SPE as required
by the rating agencies.
CL&P will capitalize each SPE in an amount anticipated to be at least
0.50% of the initial principal balance of RRBs issued with respect to that
SPE, which capitalization amount will be deposited into the Capital
Subaccount (defined below). This capitalization is required so that CL&P may
treat the SPE Debt Securities issuance by the SPE as debt for tax purposes.
To the extent that the Capital Subaccount is depleted, the capitalization
amount will be replenished through the RRB Charge, as adjusted periodically.
Because each SPE will be a special-purpose entity with limited business
activities and no staffing, it is anticipated that each SPE will enter into
an administration agreement (the "Administration Agreement") with CL&P
pursuant to which CL&P shall perform administrative services and provide
facilities for each SPE to ensure that it is able to perform such day-to-day
operations as are necessary to maintain its existence and perform its
obligations under the RRB Transaction documents. The Administration
Agreement incorporates provisions to ensure that CL&P will be paid a market-
based fee (the "Administration Fee") in an amount commensurate with its costs
of performing such services and providing such facilities.
CL&P will sell all of its rights in the Transition Property to one or
more SPEs in transactions each of which under Conn. Gen. Stat. Section 16-
245k(h) will be intended to be and will be treated as a legal true sale and
absolute transfer to such SPE. Because of such true sale treatment, the
Transition Property owned by an SPE would not, should there arise a CL&P
bankruptcy, become part of the CL&P bankruptcy estate and CL&P creditors
would have no recourse to the Transition Property or the RRB Charge.
2. Issuance of SPE Debt Securities and RRBs
To raise the funds to pay the purchase price of the Transition Property
to CL&P, an SPE will issue and sell SPE Debt Securities to a special purpose
trust established by the Finance Authority. The special purpose trust,
which, like the SPE, will constitute a "financing entity" under the
Securitization Statute, will sell interests in the SPE Debt Securities by
issuing and selling RRBs, the proceeds of which, net of transaction expenses,
will be remitted to such SPE and ultimately to CL&P. The terms of the RRBs
will mirror substantially the terms of the SPE Debt Securities unless an
interest rate exchange agreement or other hedging arrangement is implemented
(collectively, a "hedging agreement," as further described below).
All of the assets of such SPE, specifically the Transition Property and
the other collateral of the SPE ("Other SPE Collateral"), will be pledged as
collateral to secure the SPE Debt Securities. The Other SPE Collateral will
include without limitation, (a) the rights of each SPE under all RRB
Transaction documents including (i) the sale agreement (the "Sale Agreement")
by which each SPE acquires all rights in the Transition Property (and
including any hedging agreement in place with respect to variable rate RRBs),
(ii) the servicing agreement (the "Servicing Agreement") pursuant to which
CL&P, or any successor servicer (the "Servicer"), acts as servicer for the
Transition Property, and (iii) the Administration Agreement, and (b) the
rights of each SPE in and to the collection account (the "Collection
Account") and any subaccounts established therein including the general
subaccount (the "General Subaccount"), the overcollateralization subaccount
(the "Overcollateralization Subaccount"), the capital subaccount (the
"Capital Subaccount"), and the reserve subaccount (the "Reserve Subaccount"),
and any investment earnings on amounts held by such SPE. An amount equal to
investment earnings earned on the initial capital contributed by CL&P will be
returned to CL&P semiannually or more frequently as a distribution of capital
by the SPE so long as there are sufficient moneys to make scheduled
distributions of interest and principal on the RRBs, fund any credit
enhancement, and pay required financing expenses.
RRBs sold to investors will take the form of pass-through certificates
representing undivided beneficial interests in the SPE Debt Securities and
any hedging agreement entered into in connection with the transaction. SPE
Debt Securities will take the form of notes secured by a first priority
statutory lien on all Transition Property as provided in Conn. Gen. Stat.
Section 16-245k(g), together with a pledge of the Other SPE Collateral.
It is anticipated that the RRBs will be issued and sold to capital
market investors in one or more series, each of which may be offered in one
or more classes each having a distinct principal amount, term, interest rate
and amortization schedule. The form, interest rate (whether fixed or
variable), repayment schedule, classes, number and determination of credit
ratings, and other characteristics of the SPE Debt Securities and the RRBs
will be determined at the time of pricing based on then-current market
conditions, with the objective to achieve the lowest "all-in" financing cost
possible. Under certain circumstances (subject to the approval of the
Finance Authority), the SPE Debt Securities and the RRBs may be subject to
call provisions and may be refinanced through a subsequent issuance of SPE
Debt Securities and RRBs to the extent such refinancing would result in a
lower interest cost associated with the SPE Debt Securities and the RRBs
refinanced.
The SPE Debt Securities and RRBs (being undivided beneficial interests
in the SPE Debt Securities and any hedging agreement entered into in
connection with the transaction) will, by their terms, be nonrecourse to CL&P
and its assets, and, in accordance with Conn. Gen. Stat. Section 16-
245j(c)(1), will not be secured by a pledge of the general credit, full faith
or taxing power of the State or any agency or subdivision of the State (other
than the special purpose trust). Instead, the SPE Debt Securities and RRBs
will be secured by a pledge of all of the right, title, and interest of each
SPE in the Transition Property and the Other SPE Collateral. The final terms
and conditions of the SPE Debt Securities and the RRBs shall be subject to
the approval of the Finance Authority.
The targeted ratings on the RRBs will be triple-A. Because principal
payments will likely be made at different times on each class of SPE Debt
Securities and RRBs, each class will have separate expected and legal final
maturity dates. The SPE Debt Securities and the RRBs will have final
maturities not later than December 31, 2011, in accordance with Conn. Gen.
Stat. Section 16-245j(c)(6).
The SPE Debt Securities and the RRBs are expected to be sold at or near
par value and will not in any event be sold for more than par value. All
accrued interest on the SPE Debt Securities and the RRBs will be paid not
less frequently than semiannually, depending on market conditions at the time
of pricing. The SPE Debt Securities and the RRBs will not be subordinated to
the claims of any creditors or the equity owner of the SPE, other than for
payments of trustee, servicing fees, and other specified transaction-related
fees.
The SPE Debt Securities and the RRBs will be repaid from charges to all
Retail Customers through the collection of the RRB Charge by CL&P or any
successor to the CL&P distribution system, any other successor Servicer or
any third party supplier (each a "TPS") from which the customer has chosen to
receive electric service.
If variable rate RRBs are issued, the special purpose trust will enter
into a hedging agreement whereby the special purpose trust would make fixed
payments to a counterparty, and the counterparty would make variable rate
payments to RRB holders. These fixed rate payments would be taken into
account in calculating the RRB Charge. This protects the special purpose
trust and ratepayers against the risk that interest rate fluctuations would
cause variable rates to exceed the fixed rates that were used to calculate
the RRB Charge.
3. The RRB Charge
RRB Charges will be periodically calculated and set at a level intended
to recover (a) the principal balance of (in accordance with the expected
amortization schedule), and interest on, the SPE Debt Securities authorized
under this Financing Order, (b) the costs of servicing the SPE Debt
Securities and the RRBs, including the Servicing Fee, the Administration Fee,
fees for the trustees, rating agency fees, legal and accounting fees,
managers'/directors' fees, contingent indemnity obligations in the RRB
Transaction documents (including indemnities for losses resulting from a
default by the servicer or any third party supplier), and other related fees
and expenses (collectively, "servicing and administrative expenses"), and (c)
the cost of creating and maintaining any credit enhancement (other than
credit enhancement obtained because CL&P is making RRB Charge remittances
less frequently than daily) required for the SPE Debt Securities and the RRBs
(the required periodic payment of such, including deficiencies on past due
principal and interest for any reason, the "Periodic RRB Payment Requirement"
and, collectively, the "Total RRB Payment Requirements"). The periodic
calculation of the RRB Charge will be based on assumptions and the
methodology set forth in the CL&P Testimony, including sales forecasts,
charge-off patterns, and lags between RRB Charge billing and collection.
Upon final determination of all terms of the SPE Debt Securities and the RRBs
and at least two business days in advance of the RRB issuance, CL&P will file
an issuance advice letter substantially in the form of Attachment MAE-1 to
the Englander Testimony (the "Issuance Advice Letter"). The Issuance Advice
Letter will confirm the final structure and repayment terms of the RRB
Transaction, the total principal amount and pricing of the RRBs, the initial
RRB Charge, the overcollateralization amount (described below) and targeted
transaction subaccount balances (described below), the capital contribution
amount, the frequency of the true-ups and dates of true-up filings and, to
the extent known at the time the Issuance Advice Letter is filed, the actual
up-front transaction costs and ongoing servicing and administrative expenses.
To confirm that the actual terms of the RRB Transaction will result in
savings for ratepayers (and therefore lower rates), the Department will
require CL&P to provide in the Issuance Advice Letter a calculation of
projected savings to ratepayers, using the methodology contained in the CL&P
Testimony, applied to the actual structure and terms of the RRBs. So long as
the terms and structure result in net savings to CL&P's customers in
accordance with this approved methodology, CL&P is authorized to undertake
the RRB Transaction. See Conn. Gen. Stat. Section 16-245f. The Finance
Authority may rely upon the savings calculations set forth in the Issuance
Advice Letter conclusively and without independent investigation or
verification in approving the issuance of the SPE Debt Securities and the
RRBs.
The up-front transaction costs arising from the issuance of the RRBs
will include, among other items, the underwriting spread, original issue
discount, rating agency fees, accounting fees, Securities and Exchange
Commission registration fees, printing and marketing expenses, legal fees,
the Finance Authority's financial advisor fees, the servicing set-up fee,
trustee set-up fees, and the administrative cost to set up each SPE and
special purpose trust. With the exception of CL&P counsel fees, many of
these costs will be subject to the approval of the Finance Authority. In
addition to the recovery of these up-front transaction costs, the Company's
Eligible Stranded Costs to be recovered from RRB bond proceeds will also
include redemption costs, including call premiums and related expenses,
required to reduce existing capitalization of CL&P.
So that the RRB Charge may recover interest payments on and fees
associated with the RRBs, it will be calculated to reflect the all-in
financing cost of the RRBs as determined by market conditions at the time of
issuance. The initial RRB Charge for Retail Customers, established by this
Financing Order and calculated using the methodology contained in the
Soderman Testimony, will become effective automatically on the date of the
RRB issuance.
The RRB Charge is expected to be imposed, adjusted and collected so that
the principal of and costs associated with the RRBs are fully paid by the
final maturity date of the RRBs (which may be no later than December 31,
2011). However, pursuant to Conn. Gen. Stat. Section 16-245g(e), in the
event that the RRBs have not been fully repaid prior to their final maturity,
the RRB Charge shall continue to be billed and collected until the principal
and interest and all costs associated with the RRBs have been fully repaid.
The RRB Charge will be included as a component of the unbundled CTA line
item on a customers' bill and will be footnoted as such.
4. Servicing of RRBs
CL&P will enter into a Servicing Agreement with one or more SPEs to
perform servicing functions on behalf of each SPE, including billing and
collecting the RRB Charge from CL&P's Retail Customers. Pursuant to the
Servicing Agreement with each SPE, CL&P will act as Servicer of the
Transition Property. CL&P will be responsible for calculating, billing,
collecting, and remitting the RRB Charges as described earlier and in the
Englander Testimony. The Servicing Agreement will provide that CL&P, as
initial Servicer, may not voluntarily resign its duties as Servicer without
obtaining the prior approval of the Department. As Servicer, CL&P will also
be obligated to retain all books and records regarding the RRB Charge,
subject to the right of each SPE to inspect those records.
As consideration for its servicing responsibilities, CL&P or any
successor Servicer will receive a periodic servicing fee (the "Servicing
Fee"), as described in the Englander Testimony, which will be recovered
through the RRB Charge. In order to support each SPE's legal status separate
and apart from CL&P, the Servicing Fee paid to CL&P must be market-based.
The annual Servicing Fee, payable semiannually or more frequently, will be a
part of the Servicing Agreement and will be based on a percentage of the
initial principal balance of RRBs. The Servicing Fee represents a reasonable
good faith estimate of an arm's-length, market-based fee for servicing RRBs.
Such servicing responsibilities include without limitation, billing,
monitoring, collecting, and remitting RRB Charges, systems modifications to
bill, monitor, collect, and remit RRB Charges, reporting requirements imposed
by the Servicing Agreement, procedures required to coordinate with each TPS,
required audits related to CL&P's role as Servicer, and legal and accounting
functions related to the servicing obligation. The Servicing Fee paid to
CL&P will be lower than the Servicing Fee paid to a successor Servicer that
does not concurrently bill the RRB Charge with charges for other services.
In the event of a failure by any Retail Customer to pay the RRB Charge,
CL&P, as initial Servicer, or any successor Servicer, will be authorized to
terminate electric service to such customer in accordance with and to the
extent permitted by Conn. Gen. Stat. Sections 16-262c through 16-262i, and
any applicable regulations, notwithstanding any objection or direction to the
contrary by CL&P.
CL&P or any successor Servicer will periodically remit (as frequently as
required by the rating agencies and in all events within one calendar month
of collection) collections of RRB Charges to the SPE. To the extent
estimation of such collections is required, CL&P will design a methodology
that will be satisfactory to the rating agencies and that will approximate
most closely actual collections. On each payment date for the RRBs, the
trustee for the SPE Debt Securities will release money from the Collection
Account to the trustee for the RRBs, which in turn will pay (or cause to be
paid) interest and principal on the RRBs to RRB holders. The SPE will also
use the RRB Charge remittances to pay fees and expenses on the RRBs and to
fund certain credit enhancement reserves.
In the event of default by CL&P or any successor Servicer in payment of
the RRB Charges to an SPE, the Department will, upon application by (1) the
trustee or holders of the RRBs, (2) the trustee for the special purpose
trust, (3) such SPE or its assignees, or (4) pledgees or transferees of the
Transition Property and Other SPE Collateral, order the sequestration and
payment to or for the benefit of such SPE or such other party of revenues
arising with respect to the Transition Property and Other SPE Collateral.
This will provide additional certainty that the RRB Charges will benefit the
owner of the Transition Property and should serve to enhance the credit
quality of the RRBs.
In accordance with Conn. Gen. Stat. Section 16-245g(e), amounts
collected from a Retail Customer shall be allocated on a pro rata basis among
(i) the RRB Charge, (ii) any remaining portion of the CTA not the subject of
this Financing Order, and (iii) CL&P's other charges.
5. Third Party Suppliers
A TPS is an entity-other than CL&P-that will provide electric generation
service to a customer and that could bill and collect from that customer (1)
all transmission, distribution, and transition charges, including the CTA and
RRB charge, (2) transmission and distribution charges, but not the CTA or
RRB Charge, or (3) no charges, as CL&P would continue to bill and collect all
charges directly from the customer even though the customer has chosen a TPS
as its electric supplier.
Billing, collection, and remittance by a TPS may increase the rise of
shortfalls in RRB Charge collection by exposing the cashflow to potential
interruption due to the default, bankruptcy, or insolvency of that TPS. This
risk of interruption will increase risks to investors, potentially reducing
the credit rating and increasing the rate of interest on RRBs that would be
required by investors. Rating agencies have been particularly concerned
because many TPSs will likely be unrated start-up companies.
The Department will not authorize a TPS to bill and collect the RRB
Charge for remittance to CL&P as Servicer (or any successor Servicer) unless
such TPS meets specified creditworthiness criteria and complies with
specified billing, collection, and remittance procedures and information
access requirements. The Department will require creditworthiness standards
and other procedures and requirements that are consistent with maintaining
the triple-A ratings on the RRBs. Such authorization must be consistent with
the following minimum criteria, procedures, and requirements:
The TPS must agree to remit the full amount of RRB Charges it bills to
Retail Customers, regardless of whether payments are received from such
customers, within 15 days after CL&P's (or any successor Servicer's) bill for
such charges.
The TPS must provide CL&P (or any successor Servicer) with total monthly
kWh usage information in a timely manner for the Servicer to fulfill its
obligations, as such information is the basis of such remittance.
CL&P (or any successor Servicer) will be entitled, within seven days
after a default by the TPS in remitting any RRB Charges billed, to assume
responsibility for billing all charges for services provided by CL&P (or any
successor Servicer), including the RRB Charges, or to switch responsibility
to a third party.
If and so long as a TPS does not maintain at least a triple-B long-term
unsecured credit rating from Moody's Investors Service or Standard & Poor's
Rating Services, such TPS shall maintain, with the Servicer or as directed by
the Servicer, a cash deposit or comparable security equal to one month's
maximum estimated collections of RRB Charges, as agreed upon by CL&P (or any
successor Servicer) and the TPS.
In the event of a default in the remittance of RRB Charges by the TPS,
such amount will be included in the periodic adjustment of the RRB Charge as
described in the CL&P Testimony.
6. Credit Enhancement
In order for the RRBs to receive triple-A ratings, the exposure to
losses due to, among other things, shortfalls in projected sales of energy,
longer-than-expected delays in bill collections, and higher-than-estimated
uncollectible accounts must be minimized. This will be accomplished with
various forms of credit enhancement, including the various components of the
Collection Account and the True-Up Mechanism summarized below.
The RRB Charge collections will be deposited into the Collection
Account, which will be comprised of at least four subaccounts - the General
Subaccount (which will hold the RRB Charge collections before each payment
date), the Overcollateralization Subaccount (which will hold the
overcollateralization amount described below), the Capital Subaccount (which
will hold the initial capital contribution to the SPE), and the Reserve
Subaccount (which will hold any excess collections of RRB Charges as
described below). RRB Charge collections in excess of debt service on the
SPE Debt Securities and the RRBs and servicing and administrative expenses
will be allocated (a) to the Capital Subaccount to the extent the amount
therein has been reduced to below the initial capital contribution, (b) to
the Overcollateralization Subaccount up to the required level set forth for
such date at issuance by the rating agencies and (c) to the Reserve
Subaccount any remaining amounts. To the extent that RRB Charges are
insufficient to pay scheduled debt service on the SPE Debt Securities and the
RRBs and servicing and administrative expenses during any period, the
accounts will be drawn upon in the following order (a) the Reserve
Subaccount, (b) the Overcollateralization Subaccount and (c) the Capital
Subaccount. A more detailed description and an illustration of the
Collection Account allocation procedure is set forth in the Englander
Testimony.
The RRB Charge will be calculated (both initially and subsequently as a
result of the True-Up Mechanism described below) to collect, as a component
of the Periodic RRB Payment Requirement, an overcollateralization amount
which constitutes an amount in excess of debt service on the SPE Debt
Securities and the RRBs and servicing and administrative expenses and any
amount necessary to restore the capital contribution to the Capital
Subaccount minimum balance. The overcollateralization amount required to
achieve the highest credit rating will be finalized prior to the issuance of
the SPE Debt Securities and the RRBs and will depend primarily on rating
agency requirements and tax considerations, subject to the approval of the
Finance Authority, but is currently expected to be at least 0.50% of the
initial principal amount of the SPE Debt Securities and the RRBs. The
overcollateralization will be collected pro rata over time and deposited to
the Overcollateralization Subaccount such that the amount therein will
accumulate over time in accordance with a schedule set forth at issuance.
CL&P will adjust the RRB Charge, up or down, pursuant to a true-up
mechanism established in accordance with Conn. Gen. Stat. Section 16-245i(c)
and as described in the CL&P Testimony (the "True-Up Mechanism"). The True-
Up Mechanism is a periodic adjustment to the RRB Charge which accounts for
any previous or projected over- or under-collections of the RRB Charge. At
least annually and as frequently as quarterly, CL&P will request a RRB Charge
adjustment such that, during the period for which that RRB Charge will be
billed, RRB Charge collections will be sufficient to (a) pay principal and
interest with respect to the SPE Debt Securities and the RRBs in accordance
with the expected amortization schedule, (b) pay servicing and administrative
expenses, (c) maintain the Overcollateralization Subaccount balance at the
required levels, and (d) restore the Capital Subaccount to the balance
originally required upon the inception of the transaction. Any amounts
accounted for in the Reserve Subaccount, which represent collections in
excess of the fully funded credit enhancement reserves, at the time that CL&P
calculates a periodic RRB Charge adjustment will be incorporated in such
adjustment.
CL&P, as initial Servicer (or any successor Servicer), will account for,
and ultimately credit to ratepayers, any amounts remaining in the Collection
Account (other than the Capital Subaccount and an amount equal to interest
earnings thereon) after the RRBs are paid in full. Such amounts include any
overcollateralization amounts, including interest earnings thereon, or RRB
Charge collections that remain after the Total RRB Payment Requirements have
been discharged. Such amounts will be released to the SPE, in accordance
with 245h(b), upon retirement of the RRBs and discharge of the Total RRB
Payment Requirements. These benefits will inure to ratepayers through a
credit to their CTA or, if there is no CTA, through a credit to other rates.
If CL&P, as initial Servicer (or any successor Servicer), is making RRB
Charge remittances less frequently than daily, CL&P (or such successor
Servicer) will account for and remit to the trustee for the SPE Debt
Securities any interest on RRB Charge collections.
At least fifteen days prior to January 1 each year, CL&P as Servicer (or
any successor Servicer) will file with the Department a periodic RRB Charge
true-up advice letter, a form of which is included as Attachment MAE-2 to the
Englander Testimony (a "Routine True-Up Letter"). The resulting upward or
downward adjustments to the RRB Charge, calculated in accordance with the
methodology set forth in the Soderman Testimony, will be effective
automatically on January 1 each year or on such other date as specified in
the Routine True-Up Letter, notwithstanding the fact that such adjustment
will occur simultaneously with the adjustment to other components of the CTA,
which other adjustments may not become effective immediately. Further, to
the extent required by the rating agencies, CL&P may also file quarterly or
monthly Routine True-Up Letters in addition to the Routine True-Up Letter
filed at least fifteen days prior to January 1 each year. Any such
adjustments will be effective fifteen days after the filing of the applicable
Routine True-Up Letter.
Whenever CL&P, as servicer, determines that the methodology used to
calculate RRB Charge adjustments requires modification to more accurately
project and generate adequate RRB Charge collections, a non-routine true-up
letter (a "Non-Routine True-Up Letter") may be filed, with the resulting RRB
Charge adjustment (reflecting such modification to the methodology or model)
to be effective upon review and approval by the Department within 60 days of
such filing.
Both Routine True-Up Letters and Non-Routine True-Up Letters may be
filed periodically through the legal final maturity date. Beginning in the
last year that the SPE Debt Securities and the RRBs are scheduled to be
outstanding, quarterly or monthly Routine True-Up Letters will be filed.
All true-ups will be performed on a system-wide basis (i.e., across
customer classes rather than on a class-by-class basis) in accordance with
Conn. Gen. Stat. Section 16-245g(c).
If, as a result of a true-up calculation, the RRB Charge would be
increased above the CTA then in effect, the CTA will, on the effective date
of the RRB Charge adjustment, be increased to the amount of the RRB Charge,
as so adjusted. If adjustments to the CTA necessary to meet the required
ten percent rate reduction in effect, pursuant to Conn. Gen. Stat. 16-244c,
would cause the CTA to fall below the required RRB Charge, the Department
must instead, effective as of the time of the RRB Charge adjustment, adjust
components of CL&P's rates and charges, other than the RRB Charge, as
necessary to satisfy such rate reduction requirement.
CL&P may be required to obtain a letter of credit or other credit
enhancement to protect against any cash collection losses resulting from the
temporary commingling of funds. If such credit enhancement is required, the
RRB Charge will be adjusted accordingly to cover the cost of such enhancement
(other than credit enhancement obtained because CL&P is making RRB Charge
remittances less frequently than daily).
7. Tax Considerations
The possibility that the Internal Revenue Service (the "IRS") would
assess income taxes when this Financing Order is issued or when CL&P receives
the initial proceeds from the SPE Debt Securities, rather than when the RRB
Charge revenues are collected, is a risk to CL&P associated with the RRB
Transaction. In addition to having tax consequences, this would also affect
the economics of issuing the SPE Debt Securities and the RRBs, as the
benefits of the RRB Transaction depend largely upon recognizing taxable
income in respect of the recovery of Eligible Stranded Costs as RRB Charges
are paid by Retail Customers, rather than being accelerated into current
income upon the issuance of the SPE Debt Securities and the RRBs.
As a result, CL&P has submitted a private letter ruling request to the
IRS seeking confirmation that (a) the issuance of this Financing Order by the
Department authorizing the collection of RRB Charges will not result in gross
income to CL&P; (b) the issuance of the SPE Debt Securities to the special
purpose trust and the issuance of RRBs by the special purpose trust will not
result in gross income to CL&P; and (c) SPE Debt Securities will be treated
as obligations of CL&P for tax purposes. If the RRB Transaction results in
current income taxation of the proceeds of such transaction, the benefits of
the RRB Transaction would be substantially reduced. Should the IRS choose
not to provide a ruling, or rule adversely, CL&P would have to reassess the
RRB Transaction and, if possible, modify it to eliminate the risk of current
taxation. Based upon favorable IRS rulings previously issued in respect of
RRB Transactions in California, Illinois, Pennsylvania, New Jersey, and
Massachusetts, CL&P anticipates a favorable ruling.
The interest paid to holders of RRBs will be exempt from income taxes
imposed in the State under Conn. Gen. Stat. Section 16-245j(c)(3), but will
not be exempt from federal income taxes or taxes imposed by other states.
8. Accounting and Financial Reporting
The amount financed through the RRB Transaction is expected to be
recorded in accordance with generally accepted accounting principles ("GAAP")
as long-term debt on the balance sheet of the SPE for financial reporting
purposes. CL&P, each SPE, each special purpose trust, and the holders of
RRBs will expressly agree pursuant to the terms of the applicable documents
to treat the SPE Debt Securities as debt of such SPE secured by, among other
things, the Transition Property and the Other SPE Collateral for this
purpose. Because each SPE will be wholly-owned by CL&P, it is required that
such SPE be consolidated with CL&P for financial reporting purposes under
GAAP. Therefore, the SPE's debt will appear on the consolidated balance
sheet of CL&P in its annual and quarterly financial filings to the Securities
and Exchange Commission. For purposes of financial reporting to the
Department, CL&P will exclude the SPE's debt from its capital structure. The
RRB Transaction is not expected to impact CL&P's credit ratings, as it is
expected that the rating agencies will determine that the RRBs, which are not
supported by CL&P's general revenue stream, and not collateralized by the
assets of CL&P, do not affect CL&P's creditworthiness. Therefore, it is
anticipated that the rating agencies will exclude the RRBs as debt for
purposes of calculating financial ratios.
9. True-Sale Opinion and Collection Shortfalls
Rating agencies will require acceptable opinions of bankruptcy counsel,
at the time the SPE Debt Securities and the RRBs are issued, to the effect
that the transfer of the Transition Property from CL&P to an SPE constitutes
a legal true sale such that if CL&P were to become the subject of a
bankruptcy or insolvency case, the Transition Property would not be part of
CL&P's bankruptcy estate and therefore would not be subject to the claims of
CL&P's creditors.
Conn. Gen. Stat. Section 245k(h) expressly provides that transfers of
Transition Property, as described in that section and as approved in a
financing order, shall be so treated for all purposes as an absolute transfer
and true sale. In addition, the SPE Debt Securities and the RRBs will be
nonrecourse to CL&P and its assets, other than the Transition Property sold
to an SPE and the Other SPE Collateral.
Another element of the bankruptcy analysis focuses on the separate legal
status of CL&P and each SPE. Although each SPE will be wholly-owned by CL&P,
the RRB Transaction will be structured so that, in the event of a bankruptcy
of CL&P, each SPE's separate legal existence would be respected and the
assets and liabilities of each SPE would remain separate from the estate of
CL&P. The structural elements supporting such separate existence include,
without limitation, requirements that each SPE be adequately capitalized,
that CL&P be adequately compensated on an arm's-length basis for the
servicing functions it performs in billing, collecting, and remitting the RRB
Charges, that each SPE has at least two independent directors or managers,
and that CL&P and each SPE take certain steps to ensure that creditors are
not mislead as to their separate existence. These structural protections are
very important because, without such protections, a bankruptcy court might
invoke the doctrine of substantive consolidation and disregard each SPE's
separate existence. Substantive consolidation is an equitable doctrine in
bankruptcy cases that allows courts to disregard the separate existence of
two or more affiliated entities to ensure the equitable treatment of all
creditors and to maximize creditor recoveries. When entities are
substantively consolidated in a bankruptcy proceeding, their assets and
liabilities are pooled, thereby eliminating intercompany claims, and claims
of third-party creditors against any of those entities are generally treated
as claims against the common pool of assets created by consolidation.
In order to preserve the bankruptcy-remote status of each SPE and the
true-sale nature of the Transition Property and Other SPE Collateral once it
is transferred to each SPE, CL&P cannot have any claim on the RRB Charges.
In its capacity as Servicer, CL&P will bill RRB Charges along with other
charges for services rendered to Retail Customers obligated to pay such
charges. If CL&P collects less than the full amount that is billed to such
customers, it is not permitted to favor itself over each SPE, as owner of the
Transition Property. In accordance with Conn. Gen. Stat. Section 16-245g(e),
amounts collected from a Retail Customer obligated to pay the RRB Charge
shall be allocated on a pro rata basis among (i) the RRB Charge, (ii) any
remaining portion of the CTA not the subject of this Financing Order, and
(iii) CL&P's other charges.
10. Use of Proceeds
As set forth in the CL&P Testimony, CL&P will use RRB proceeds to pay
for transaction costs, reduce capitalization, pay call and tender premiums
and refinancing costs associated with such capital reduction, and pay IPP
buyout/buyout payments approved by the Department.
CL&P will seek to deploy the total proceeds received related to
restructuring, including those arising from asset sales, in a manner that
maximize the net economic benefit to ratepayers. In carrying out any
strategy relating to the use of proceeds, CL&P shall remain in compliance
with its charter, loan agreement(s), bond indenture(s), this Financing Order
and the Securitization Statute.
FINDINGS
The Department makes in the Financing Order the following findings (the
"Findings"). Capitalized terms used in this Exhibit B and not otherwise
defined are used as defined in the Transaction Description.
1. The issuance of this Financing Order is in the public interest and
the financing of each component of Eligible Stranded Costs will result in net
savings for CL&P customers reflected in lower Eligible Stranded Costs than
CL&P's customers would have paid if this Financing Order were not adopted.
Such net savings will be passed on directly to customers through lower rates.
2. CL&P or any of its generation entities or affiliates will not have
an unfair competitive advantage as a result of the issuance of this Financing
Order and the implementation of the RRB Transaction.
3. This Financing Order is irrevocable pursuant to Conn. Gen. Stat.
Section 16-245i(b)(1).
4. The execution of the RRB Transaction as set forth in the
Transaction Description will result in a net economic benefit to customers
consistent with the requirements in the Standard Offer Decision.
5. The RRB Charge is just and reasonable.
6. The components of the RRB Transaction are consistent with achieving
the highest credit ratings and therefore the lowest cost on the RRBs.
1. The cost of CL&P's mitigation efforts are reasonable relative
to the amount of the reduction in stranded costs resulting from the
mitigation.
7. In order to implement the Standard Offer Decision and to achieve
the required rate reduction of ten percent, the Department finds that CL&P's
Eligible Stranded Costs, in an amount equal to approximately $1.55 billion,
as detailed in the CL&P Testimony and the Transaction Description above, are
eligible to be funded with the proceeds of RRBs, in accordance with this
Financing Order and subject to the Securitization Statute.
8. The estimated up-front transaction costs, the ongoing servicing and
administrative expenses, the cost of any credit enhancement (other than
credit enhancement obtained because CL&P is making RRB Charge remittances
less frequently than daily) associated with the RRB Transaction, costs to
mitigate expenditures and any other fee, cost or expense in respect of the
RRBs as described in the Transaction Description and in the CL&P Testimony,
are reasonable and are eligible for recovery through the RRB Transaction in
accordance with Conn. Gen. Stat. Section 16-245e(a)(2) (subject, in the case
of certain expenses, to review by the Department and the Finance Authority,
as described herein).
9. All Eligible Stranded Costs hereunder may be recovered through the
RRB Charge, to be assessed against and collected from all of CL&P's Retail
Customers.
10. Pursuant to Conn. Gen. Stat. Section 16-245g(c), the RRB Charge
shall be applied equally to all Retail Customers of the same class in
accordance with methods of allocation in effect on July 1, 1998, and as
further described in the Transaction Description.
11. As described in the Transaction Description and in the Englander
Testimony, the RRB Charge shall be set at a level to fully recover the
Periodic RRB Payment Requirement in accordance with the amortization schedule
that will be filed as Exhibit 1 to the Issuance Advice Letter.
12. In accordance with Conn. Gen. Stat. Section 16-245e(a)(13), the
Department finds that the RRB Charge (including, without limitation, the RRB
Charge included in special contract customer rates as described in the CL&P
Testimony) constitutes Transition Property, which is a current irrevocable
vested property right including, without limitation, the right, title, and
interest of a public utility or a financing entity (i) in and to the RRB
Charge established pursuant to this Financing Order, as adjusted periodically
pursuant to Conn. Gen. Stat. Section 16-245i(b)(2) and this Financing Order,
in an amount sufficient to pay the Total RRB Payment Requirements, (ii) in
and to all revenues, collections, claims, payments, money or proceeds of or
arising from the RRB Charge authorized pursuant to this Financing Order, and
(iii) in and to all rights to obtain adjustments to the RRB Charge pursuant
to the terms of Conn. Gen. Stat. Section 16-245i(b)(2) and this Financing
Order.
13. The amount of the SPE Debt Securities and the RRBs to be issued,
as described in the CL&P Testimony and the Transaction Description, is just
and reasonable.
14. The amount of necessary credit enhancement, as described in the
Englander Testimony or required by the rating agencies or tax authorities is
just and reasonable, subject to the approval of the Finance Authority.
15. Based upon CL&P's accounting and billing information systems
capabilities, the proposed billing, collection and remittance of actual RRB
Charges is just and reasonable. To the extent estimation of RRB Charge
collections is required for remittance to the trustee for the SPE Debt
Securities, such estimation procedure will be consistent with achieving the
highest credit ratings on the RRBs.
16. The RRB Charge billing, collection, and remittance procedures
imposed upon any successor Servicer or TPS are reasonable, subject to the
approval of the Finance Authority.
17. The owner of the Transition Property will have the right to
recover an aggregate amount equal to the Total RRB Payment Requirements until
such amounts have been discharged in full through continued assessment,
collection, and remittance of RRB Charges from all of CL&P's Retail
Customers.
18. The RRB Charge will be a monthly usage-based charge and may in the
future, subject to Department approval, include a pro rata component of any
"exit fee" collected from any Retail Customer pursuant to Conn. Gen. Stat.
Section 16-245w.
19. The methodology used to calculate the RRB Charge associated with
the RRB Transaction (including, without limitation, the RRB Charge included
in special contract customer rates as described in the CL&P Testimony)and the
periodic adjustments thereto as described in the CL&P Testimony are
reasonable and comply with Conn. Gen. Stat. Section 16-245i(b)(2) and (c).
20. CL&P's plan to account and ultimately credit ratepayers for
amounts remaining in the Collection Account after the RRBs are paid in full
(other than amounts in the Capital Subaccount, including earnings on the
initial capital contributed by CL&P, which are to be returned as a
distribution of capital to CL&P) is just and reasonable and is in accordance
with Conn. Gen. Stat. Section 16-245h(b).
21. In accordance with Conn. Gen. Stat. Section 245k(h), the sale of
the Transition Property by CL&P to an SPE shall be treated as an absolute
transfer of all of CL&P's right, title, and interest, as in a legal true
sale, and not as a pledge or other financing, of the Transition Property, in
each case notwithstanding the following, which are hereby determined not to
affect such absolute transfer and legal true sale: (i) any contrary treatment
of such transfer for accounting, tax or other purposes, (ii) certain
indemnities (including mandatory redemption or repurchase obligations related
thereto) provided for in the SPE Debt Securities or in the transaction
documents, (iii) CL&P's continued collection of RRB Charges pursuant to the
Servicing Agreement authorized by this Financing Order, or (iv) CL&P's
providing any credit enhancement to the SPE as described in the Englander
Testimony.
22. The SPE Debt Securities and the RRBs will be nonrecourse to CL&P
and its assets, but will be secured by a pledge of all right, title, and
interest of each SPE in its Transition Property and Other SPE Collateral.
23. Each SPE and each special purpose trust is found to be a
"financing entity," as that term is defined in Conn. Gen. Stat. Section 16-
245e(a)(11).
24. The formation of one or more SPEs by CL&P, the capitalization of
each SPE by CL&P with an amount currently expected to equal approximately
0.50% of the initial principal balance of the RRBs, and entering into the
Sale Agreement, the Servicing Agreement, the Administration Agreement, and
other agreements and transactions by CL&P and each SPE are necessary for the
consummation of the RRB Transaction.
25. Pursuant to Conn. Gen. Stat. Section 16-245j(b), the State pledges
and agrees with the owners of the Transition Property and holders of RRBs
that the State shall neither limit nor alter the RRB Charge, the Transition
Property, this Financing Order, and all rights thereunder until RRBs,
together with interest thereon, are fully met and discharged, unless adequate
provision is made for the protection of the owners or holders.
26. Pursuant to Conn. Gen. Stat. Section 16-245i(b)(1), this Financing
Order and the RRB Charge authorized hereunder shall be irrevocable and the
Department shall not have authority either by rescinding, altering, or
amending this Financing Order or otherwise, to (i) revalue or revise for
ratemaking purposes the Eligible Stranded Costs to be securitized hereunder,
(ii) determine that the RRB Charge is unjust or unreasonable, or (iii) in any
way reduce or impair the value of the Transition Property either directly or
indirectly by taking the RRB Charge into account when setting other rates for
CL&P, nor shall the amount of revenues arising with respect thereto be
subject to reduction, impairment, postponement, or termination.
27. The annual Servicing Fee, payable semiannually or more frequently,
is a reasonable good faith estimate of an arm's-length, market-based fee for
servicing RRBs pursuant to the Servicing Agreement, as described in the
Englander Testimony.
28. The final terms and conditions of the SPE Debt Securities and the
RRBs, including, without limitation, the schedule of principal amortization,
credit enhancement, the frequency of principal or interest payments, the
interest rates on the SPE Debt Securities and the RRBs and manner of setting
such interest rates (fixed or variable), the manner of sale of the RRBs, the
number and determination of credit ratings, and the approval of final
transaction documents, will, to the extent consistent with the provisions of
this Financing Order, be determined by CL&P, subject to the approval of the
Finance Authority at the time RRBs are priced and after input from legal
counsel, the rating agencies, tax authorities, and the underwriters.
29. In accordance with Conn. Gen. Stat. Section 16-245j(c)(1) and (2),
SPE Debt Securities and the RRBs issued pursuant to this Financing Order
shall not constitute a debt or liability of the State or of any political
subdivision thereof, and shall not constitute a pledge of the full faith and
credit of the State or any of its political subdivisions, and the issuance of
SPE Debt Securities and the RRBs will not in any way obligate the State or
any political subdivision thereof to make appropriations for their payment.
ORDERS AND APPROVALS
The Department includes in the Financing Order the following orders and
approvals (the "Orders and Approvals"). Capitalized terms used in this
Exhibit C and not otherwise defined are used as defined in the Transaction
Description.
General
1. CL&P's Application for the issuance of the SPE Debt Securities and
the RRBs and the consummation of the RRB Transaction as set forth in the
Transition Description are approved subject to the terms and conditions
stated in this Financing Order.
2. The Transaction Description and Findings are hereby adopted by the
Department.
3. The cost of all mitigation efforts are approved.
Creation of Transition Property
1. CL&P is authorized to recover through the issuance of SPE Debt
Securities and RRBs its Eligible Stranded Costs, including up-front
transaction costs associated with such issuance, in an amount equal to
approximately $1.55 billion.
2. The Eligible Stranded Costs approved hereunder shall be recovered
through the RRB Charge, to be assessed against and collected from all Retail
Customers in CL&P's service territory, as further described in Order and
Approval No. 0 in this Financing Order.
3. As of the effective date of this Financing Order and in accordance
with Conn. Gen. Stat. Section 16-245e(a)(13), there is created and
established for the benefit of CL&P (or any assignee in accordance with the
terms hereof) Transition Property, which is a current irrevocable vested
property right including, without limitation, the right, title, and interest
(i) in and to the RRB Charge established pursuant to this Financing Order
(including, without limitation, the RRB Charge included in special contract
customer rates as described in the CL&P Testimony), as adjusted periodically
pursuant to Conn. Gen. Stat. Section 16-245i(b)(2) and this Financing Order,
in an amount sufficient to pay the Total RRB Payment Requirements, (ii) in
and to all revenues, collections, claims, payments, money or proceeds of or
arising from the RRB Charge authorized pursuant to this Financing Order, and
(iii) in and to all rights to obtain adjustments to the RRB Charge pursuant
to the terms of Conn. Gen. Stat. Section 16-245i(b)(2) and this Financing
Order.
4. The RRB Transaction will result in net savings for CL&P customers
as reflected in the CL&P Testimony and all such savings will inure to the
benefit of ratepayers, directly or indirectly as described in such testimony.
Establishment of SPE
1. The formation by CL&P of one or more wholly owned, bankruptcy-
remote SPEs to which the Transition Property subject to this Financing Order
is to be sold, is approved.
2. The initial capitalization by CL&P of the SPE, which is currently
expected to be approximately 0.50% of the initial principal balance of RRBs,
subject to prevailing market conditions at the time of RRB pricing and rating
agency and tax authority input, is in accordance with all applicable
Connecticut law, rules and regulations and is hereby approved. Any other
credit enhancement (other than credit enhancement obtained because CL&P is
making RRB Charge remittances less frequently than daily) will be collected
as part of the periodic adjustment to the RRB Charge.
Sale of Transition Property
1. In accordance with Conn. Gen. Stat. Section 16-245h(c), CL&P is
hereby authorized to sell or assign, without recourse, all of its interest in
the Transition Property that arises from this Financing Order to one or more
SPEs. Each SPE is authorized to acquire the Transition Property and to
pledge the Transition Property (and the Other SPE Collateral) as collateral,
directly or indirectly, for the SPE Debt Securities and the RRBs.
2. Upon the sale by CL&P of the Transition Property to each SPE, (i)
such SPE shall have all of the rights originally held by CL&P with respect to
such Transition Property, including, without limitation, the right to
exercise any and all rights and remedies, including the right to authorize
the Servicer to disconnect service (including backup service) to the extent
permitted by Conn. Gen. Stat. Sections 16-262c through 16-262i, and
applicable regulations, to assess and collect any amounts payable by any
customer in respect of such Transition Property, notwithstanding any
objection or direction to the contrary by CL&P, as initial Servicer, or any
successor Servicer, and (ii) any payment by any customer to such SPE shall
discharge such customer's obligations in respect of such Transition Property
to the extent of such payment, notwithstanding any objection or direction to
the contrary by the Servicer.
3. Upon the sale by CL&P of the Transition Property to an SPE, CL&P or
any successor Servicer shall not be entitled to recover RRB Charges other
than for the benefit of the holders of the SPE Debt Securities and the
related RRBs in accordance with CL&P's duties as Servicer of such Transition
Property as authorized by this Financing Order.
4. The sale by CL&P of the Transition Property to an SPE in accordance
with Conn. Gen. Stat. Sections 16-245h(c) and 16-245k(h), and in a manner
described in such sections, shall be treated as an absolute transfer of all
of CL&P's rights, title and interest, as a legal true sale, and not as a
pledge or other financing, of the Transition Property, in each case
notwithstanding the following, which are hereby determined not to effect such
absolute transfer and legal true sale: (i) any contrary treatment of such
transfer for accounting, tax or other purposes, (ii) certain indemnities
(including mandatory redemption or repurchase obligations related thereto)
provided for in SPE Debt Securities or in the RRB Transaction documents,
(iii) CL&P's continued collection of the RRB Charge pursuant to the Servicing
Agreement authorized by this Financing Order, or (iv) CL&P's providing any
credit enhancement to such SPE as described in the Englander Testimony.
5. Each SPE, as owner of the Transition Property, and the holders of
the SPE Debt Securities and the RRBs, or any trustee acting therefor, shall
rely on and be entitled to the benefit of the pledge and agreement of the
State contained in Conn. Gen. Stat. Section 16-245j(b), and the Finance
Authority is authorized to include this pledge and undertaking in any
contracts or marketing materials with current or prospective holders of the
SPE Debt Securities and the RRBs, or any trustees acting therefor.
6. In accordance with Conn. Gen. Stat. Section 16-245h(a) and the
Findings, the Transition Property created and established by this Financing
Order shall constitute property from the effective date of this Financing
Order for all purposes, including for the purpose of contracts relating to or
securing the SPE Debt Securities and the RRBs, whether or not the revenues
and proceeds arising with respect to RRB Charges have accrued at the time of
this Financing Order.
7. In accordance with Conn. Gen. Stat. Sections 16-245e(a)(13) and 16-
245h(a), the Transition Property created and established by this Financing
Order shall constitute a current property right of the owner thereof or its
assignee or transferee, which continuously exists for all purposes with all
of the rights and privileges as provided in the Securitization Statute, from
the effective date of this Financing Order until the owner or its assignee or
transferee has received RRB Charges sufficient to discharge the Total RRB
Payment Requirements in full. In accordance with Conn. Gen. Stat. Section
16-245j(b), such property right may not be limited or altered in
contravention of such provision.
8. Pursuant to Conn. Gen. Stat. Section 16-245k(g), upon the effective
date of this Financing Order there shall exist a statutory first priority
lien on all Transition Property then existing or thereafter arising pursuant
to the terms of this Financing Order. Such lien shall secure all
obligations, then existing or subsequently arising, to the holders of RRBs,
the trustee or representative for such holders, each SPE and special purpose
trust and shall arise by operation of law automatically without any action on
the part of CL&P or any other person. Such lien shall be valid, perfected,
and enforceable upon the effectiveness of this Financing Order without any
further public notice. CL&P expects to file a financing statement with
respect to the Transition Property which will constitute a "protective
filing" pursuant to Conn. Gen. Stat. Section 16-245k(g). If the Transition
Property subject to this Financing Order is transferred and sold to more than
one SPE, any collections in respect of the undivided beneficial interests in
RRB Charges related to such Transition Property will be allocated pro rata
among such undivided beneficial interests to give effect to the pari passu
first priority statutory liens on each SPE's portion of the Transition
Property subject to this Financing Order.
SPE Debt Securities and RRBs
1. Each SPE is authorized to issue SPE Debt Securities and to pledge
(i) all of its interest in Transition Property and (ii) the Other SPE
Collateral, which shall include without limitation, the rights of the SPE
under the RRB Transaction documents including the Sale Agreement, the
Servicing Agreement, and the Administration Agreement, the Collection Account
and any subaccount therein, including the General Subaccount, the
Overcollateralization Subaccount, the Capital Subaccount, and the Reserve
Subaccount, any investment earnings on amounts contained therein (but
excluding an amount equal to investment earnings earned on the initial
capital contributed by CL&P which will be returned to CL&P semiannually or
more frequently as a distribution of capital by the SPE so long as there are
sufficient moneys to make scheduled distributions of interest and principal
on the RRBs, fund any credit enhancement, and pay required financing
expenses), to secure payment of the SPE Debt Securities.
2. Each SPE is authorized to sell the SPE Debt Securities to the
special purpose trust in consideration of the payment of the net proceeds of
the RRBs (which RRBs will substantially mirror the financial terms and
conditions of the SPE Debt Securities), together with any hedge agreement
entered into in connection with the RRB Transaction, in accordance with Order
and Approval No. 0 in this Financing Order.
3. Each SPE formed by CL&P and each special purpose trust authorized
and created by the Finance Authority is determined to be a "financing entity"
under Conn. Gen. Stat. Section 16-245e(a)(11), and each special purpose trust
is authorized to issue RRBs evidencing undivided beneficial interests in SPE
Debt Securities.
4. The final maturity of any RRBs (or SPE Debt Securities) maturing
not later than December 31, 2011, in accordance with Conn. Gen. Stat. Section
16-245j(c)(6), is hereby approved.
5. The special purpose trust may issue variable rate RRBs if CL&P
determines at the time of issuance that such issuance, together with any
interest rate exchange agreement or other hedging arrangement, will result in
a lower all-in financing cost on the RRBs, subject to the approval of the
Finance Authority.
6. The final terms and conditions of the SPE Debt Securities and the
RRBs authorized by this Financing Order, including, without limiting the
foregoing, the schedule of principal amortization, credit enhancement,
frequency of principal or interest payments, the interest rates on the SPE
Debt Securities and the RRBs and manner of setting such interest rates (fixed
or variable), the manner of sale of the RRBs, the number and determination of
credit ratings, the approval of final transaction documents, and certain
transaction costs as set forth in the CL&P Testimony, shall, to the extent
consistent with the provisions of this Financing Order, be determined by
CL&P, subject to the approval of the Finance Authority at the time RRBs are
priced and after input from the rating agencies, tax authorities, and the
underwriters.
7. The amount of SPE Debt Securities and RRBs to be issued shall be
determined as described in the CL&P Testimony, and the net proceeds of the
SPE Debt Securities and the RRBs shall be used as described in the CL&P
Testimony and in accordance with Conn. Gen. Stat. Section 16-245j(c)(4) and
this Financing Order.
8. The special purpose trust shall remit the proceeds from the
issuance of the RRBs authorized by this Financing Order, less underwriters'
discount and original issue discount, to an SPE, which shall, in turn, remit
such net proceeds, less certain transaction costs of issuing the SPE Debt
Securities and the RRBs, to CL&P.
9. The amounts necessary for credit enhancement for the SPE Debt
Securities and the RRBs and any subsequent adjustments thereto shall be
determined as described in the CL&P Testimony, subject to the requirements of
the rating agencies to achieve triple-A ratings, the requirements of tax
authorities, and the approval of the Finance Authority.
10. In accordance with Conn. Gen. Stat. Section 16-245j(a), the RRBs
and the SPE Debt Securities shall be nonrecourse to CL&P and its assets,
other than the Transition Property sold to the SPE and Other SPE Collateral
subject to this Financing Order, provided nothing herein shall prevent CL&P
or its successors or assigns from (a) entering into the Servicing Agreement
authorized pursuant to Conn. Gen. Stat. Section 16-245h(d) and this Financing
Order, which arrangements may include the making of representations,
warranties, and agreements and the providing of covenants and indemnities,
not amounting to recourse, for the benefit of the holders of the RRBs and the
SPE Debt Securities, and the making of remittances of amounts representing
actual collections of RRB Charges, (b) entering into agreements in connection
with the sale and transfer of the Transition Property to an SPE and sale of
the SPE Debt Securities, which agreements may include representations and
warranties with respect to, among other things, the validity of the
Transition Property and the title thereto, and providing specific covenants,
indemnities, and repurchase obligations, not amounting to recourse, in
connection with such transfer for the benefit of the holders of the RRBs and
the SPE Debt Securities, (c) entering into an Administration Agreement with
each SPE as further described in the CL&P Testimony and authorized herein,
and (d) capitalizing each SPE as described provided herein.
Reports
1. At least two business days in advance of the RRB issuance, CL&P
shall file with the Department, for informational purposes, an Issuance
Advice Letter, subject to the approval of the Finance Authority, setting
forth the final structural details of the SPE Debt Securities and the RRBs,
including the repayment terms (in accordance with the expected amortization
schedule), the initial RRB Charge, the amount necessary for credit
enhancement, the identification of each SPE and special purpose trust, and
the transaction costs of issuance, ongoing transaction expenses and a
calculation confirming net savings to ratepayers as a result of the RRB
Transaction. Such filing shall not be a condition to the effectiveness of
this Financing Order or the issuance of the SPE Debt Securities and the RRBs
and shall be automatically effective upon filing.
2. Within 90 days following the closing of the RRB Transaction, and
within 60 days of the end of each fiscal quarter thereafter until the
proceeds have been applied in full, CL&P shall file with the Department a
report showing the use of RRB proceeds in compliance with this Financing
Order. Such filing shall not be a condition to the effectiveness of this
Financing Order or the issuance of SPE Debt Securities and the RRBs.
Servicing of SPE Debt Securities and RRBs
1. CL&P, as Servicer, or any successor Servicer, is required, in
accordance with Conn. Gen. Stat. Section 16-245h(d), to enter into a
Servicing Agreement with an SPE pursuant to which it agrees to continue to
operate its distribution system to provide service to its customers, to bill
and collect RRB Charges for the benefit and account of such SPE or its
assigns, and to account for and remit these amounts to or for the account of
such SPE or its assigns.
2. CL&P's proposed billing, collection, and remittance procedure is
approved, subject to rating agency approval to the extent estimation of RRB
Charge collections is required.
3. In the event of a default by a Servicer in remittance of RRB
Charges, the Department will, in accordance with Conn. Gen. Stat. Section 16-
245k(e) and (g), upon application by (i) the trustee or holders of the SPE
Debt Securities, (ii) the trustee or holders of the RRBs, (iii) the trustee
for the special purpose trust, (iv) such SPE or its assignees, or (v) pledges
or transferees of the Transition Property and Other SPE Collateral, order the
sequestration and payment to or for the benefit of such SPE or such other
party of revenues arising with respect to the Transition Property and Other
SPE Collateral.
4. In the event of a default by a Servicer under any Servicing
Agreement with respect to RRBs, each special purpose trust or the trustees or
representatives of the holders of the SPE Debt Securities or the RRBs may
immediately appoint a successor Servicer for the Transition Property, subject
to the approval of the Department, who shall promptly assume billing
responsibilities for RRB Charges. The Department shall act on an expedited
basis within 30 days to approve such successor Servicer. Such successor
Servicer shall assume all rights and obligations under Conn. Gen. Stat.
Section 16-245k(k) and this Financing Order as though it were the Servicer at
the time such SPE Debt Securities and RRBs were issued.
5. To the extent that a successor Servicer replaces CL&P as Servicer
in any of its servicing functions with respect to the RRB Charges and the
Transition Property authorized by this Financing Order, such replacement will
be approved only if it will not cause the then current credit ratings on RRBs
to be withdrawn or downgraded. In any event, CL&P shall remain as Servicer
if a resignation will result in the reduction or withdrawal of the credit
rating of the RRBs.
6. Regardless of who is responsible for billing of the RRB Charge,
such RRB Charge will be assessed against and collected from all of CL&P's
Retail Customers. Each Retail Customer will continue to be responsible to
the Servicer for payment of the RRB Charge billed, but not yet remitted, to
the extent such Retail Customer has not paid RRB Charges billed to it.
7. In the event of a failure of any Retail Customer to pay the RRB
Charge, the Servicer is authorized to disconnect electric service to such
customer in accordance with Conn. Gen. Stat. Sections 16-262c through 16-
262i, and applicable regulations.
8. CL&P, as initial Servicer, or any successor Servicer, shall be
entitled to an annual Servicing Fee, payable semiannually or more frequently.
The Department approves the Servicing Fee as follows: As initial Servicer,
CL&P will be paid a market-based Servicing Fee equal to 0.05% per annum of
the initial principal balance of the RRBs, which fee will be included in the
calculation of the RRB Charge. A successor Servicer will be paid a market-
based Servicing Fee, as approved by the Department, not exceeding 1.25% per
annum of the initial principal balance of the RRBs.
Third Party Suppliers
1. Any TPS that proposes to collect RRB Charges shall (i) meet the
creditworthiness criteria to be established by the Department and, at a
minimum, the criteria set forth and approved in this Financing Order; and
(ii) comply with the billing, collection and remittance procedures and
information access requirements set forth herein and in the Englander
Testimony.
2. The Department will not authorize a TPS to bill and collect the RRB
Charge for remittance to CL&P as Servicer (or any successor Servicer) unless
such TPS meets specified creditworthiness criteria and complies with
specified billing, collection, and remittance procedures and information
access requirements. The Department will require creditworthiness standards
and other procedures and requirements that are consistent with maintaining
the triple-A ratings on the RRBs. Such authorization must be consistent with
the following minimum criteria, procedures, and requirements: (i) such TPS
agrees to remit the full amount of RRB Charges it bills to Retail Customers,
regardless of whether payments are received from such Retail Customers,
within 15 days after CL&P's (or any successor Servicer's) billing date for
such charges, (ii) such TPS shall provide CL&P (or any successor Servicer)
with total monthly kWh usage information in a timely manner for the Servicer
to fulfill its obligations, as such information is the basis of such
remittance, and (iii) CL&P (or any successor Servicer) will be entitled,
within seven days after a default by the TPS in remitting any RRB Charges
billed, to assume responsibility for billing all charges for services
provided by CL&P (or any successor Servicer), including the RRB Charges, or
to switch responsibility to a third party. In addition, if and so long as
such TPS does not maintain at least a triple-B long-term unsecured credit
rating from Moody's Investors Service or Standard & Poor's Rating Services,
such TPS shall maintain, with the Servicer or as directed by the Servicer, a
cash deposit or comparable security equal to one month's maximum estimated
collections of RRB Charges, as agreed upon by CL&P (or any successor
Servicer) and the TPS. In the event of a default in the remittance of RRB
Charges by a TPS, such amount will be included in the periodic adjustment of
the RRB Charge as described in the CL&P Testimony.
RRB Charge: Establishment and Adjustment
1. In accordance with Conn. Gen. Stat. Section 16-245i(b)(1), this
Financing Order and the RRB Charge authorized hereunder shall be irrevocable
and the Department shall not have authority either by rescinding, altering,
or amending the Financing Order or otherwise, to (i) revalue or revise for
ratemaking purposes the Eligible Stranded Costs to be securitized hereunder,
(ii) determine that the RRB Charge is unjust or unreasonable, or (iii) in any
way reduce or impair the value of the Transition Property either directly or
indirectly by taking the RRB Charge into account when setting other rates for
CL&P, nor shall the amount of revenues arising with respect thereto be
subject to reduction, impairment, postponement, or termination.
2. In accordance with Conn. Gen. Stat. Section 16-245g(c), the RRB
Charge (including, without limitation, the RRB Charge included in special
contract customer rates as described in the CL&P Testimony) and its
imposition, collection and payment are approved by this Financing Order. The
RRB Charge shall be assessed against and collected from all of CL&P's Retail
Customers. The RRB Charge shall be a monthly usage-based component of the
CTA on each Retail Customer's monthly bill and may in the future, subject to
Department approval, include a pro rata component of any "exit fee" collected
from any Retail Customer pursuant to Conn. Gen. Stat. Section 16-245w until
the Total RRB Payment Requirements are discharged in full. The RRB Charges
will be applied equally to all Retail Customers of the same class in
accordance with methods of allocation in effect on July 1, 1998, and as
further described in the CL&P Testimony. The RRB Charge will be sufficient
in the aggregate to pay the Total RRB Payment Requirements, i.e., the
principal balance of (in accordance with the expected amortization schedule),
and interest on, the RRBs authorized for issuance pursuant to this Financing
Order, together with servicing and administrative expenses for SPE Debt
Securities and RRBs and the cost to CL&P of creating and maintaining any
credit enhancement (other than credit enhancement obtained because CL&P is
making RRB Charge remittances less frequently than daily) required for the
SPE Debt Securities and the RRBs.
3. The methodology used to calculate the RRB Charge (including,
without limitation, the RRB Charge included in special contract customer
rates as described in the CL&P Testimony) and to periodically adjust such RRB
Charge, as set forth in the Issuance Advice Letter and as described in the
CL&P Testimony, is approved. The RRB Charge (including, without limitation,
the RRB Charge included in special contract customer rates as described in
the CL&P Testimony), which will constitute Transition Property, will be filed
initially with the Department in the Issuance Advice Letter and adjusted up
or down, as necessary, in Routine True-Up Letters or Non-Routine True-Up
Letters. The RRB Charge will be included as a component of the unbundled CTA
line item on a Retail Customer's bill and is expected to be footnoted as
such.
4. The initial RRB Charge, as filed in the Issuance Advice Letter,
will be effective automatically on the date of the RRB issuance.
5. In accordance with Conn. Gen. Stat. Section 16-245i(b)(2) and (c),
CL&P, or a successor Servicer, on behalf of the pledgees or transferees of
the Transition Property, is authorized to file periodic RRB Charge
adjustments to the extent necessary to ensure the timely recovery of revenues
sufficient to provide for the payment of an amount equal to the sum of the
Periodic RRB Payment Requirements for the upcoming year or other applicable
period. The Transition Property includes the right to obtain such
adjustments.
6. At least fifteen days prior to January 1 each year, CL&P as
Servicer (or any successor Servicer) will file with the Department a Routine
True-Up Letter. The resulting adjustments to the RRB Charge, up or down,
shall be effective automatically on January 1 each year or on such other date
as specified in the Routine True-Up Letter, notwithstanding the fact that the
adjustment to the other components of the CTA occur simultaneously and may
not become effective immediately. CL&P may also file quarterly or, in the
last year the RRBs are outstanding, monthly Routine True-Up Letters in
addition to the Routine True-Up Letter filed at least fifteen days prior to
January 1 each year. Any such adjustments will be effective 15 days after
the filing of the applicable Routine True-Up Letter. Beginning in the year
prior to the expected final maturity date, quarterly or monthly adjustments
may be performed.
7. So long as Routine True-Up Letters are filed in accordance with
the adjustment calculation methodology approved in this Financing Order, no
hearing or other action by the Department regarding such Routine True-Up
Letter filings shall be required and the resulting RRB Charge adjustments
will be effective as provided herein and in such filings.
8. In the event that CL&P, as Servicer, determines that the
methodology used to calculate the RRB Charge requires adjustment to more
accurately project and generate adequate RRB Charge collections, a Non-
Routine True-Up Letter may be filed, with the resulting RRB Charge adjustment
(reflecting such modification to the methodology or model) to be effective
upon review and approval by the Department within 60 days after such filing.
Use of RRB Proceeds
9. CL&P's use of proceeds, as described in the Shoop Testimony and in
this Financing Order, is approved.
Approval of Sale Agreement, Servicing Agreement,
Administration Agreement, and Other RRB Transaction Documents
1. CL&P's entering into the Sale Agreement, the Servicing Agreement,
the Administration Agreement, and other RRB Transaction documents with one or
more SPEs and with other parties to the RRB Transaction as described herein
and other dealings between CL&P and each SPE contemplated by the RRB
Transaction are hereby authorized and approved in accordance with all
applicable Connecticut law, rules, and regulations.
Accounting for Certain Benefits
1. Any amounts accounted for in the Reserve Subaccount, which
represent collections in excess of the fully funded credit enhancement
reserves, at the time that CL&P calculates a periodic RRB Charge adjustment,
will be incorporated in such adjustment in accordance with Conn. Gen. Stat.
Section 16-245i(b)(2) and (c). CL&P, as initial Servicer (or any successor
Servicer), shall account for and ultimately credit to ratepayers any amounts
remaining in the Collection Account (other than the Capital Subaccount and an
amount equal to interest earnings thereon) after the RRBs are paid in full.
Such amounts include any overcollateralization amounts, including interest
earnings thereon, or RRB Charge collections that remain after the Total RRB
Payment Requirements have been discharged. Such amounts will be released to
the SPE upon retirement of the RRBs and discharge of the Total RRB Payment
Requirements. These benefits will inure to the benefit of ratepayers through
a credit to their CTA or, if there is no CTA, through a credit to other
rates.
2. If CL&P, as initial Servicer (or any successor Servicer), is making
RRB Charge remittances less frequently than daily, CL&P (or such successor
Servicer) will account for and remit to the trustee for the SPE Debt
Securities any interest on RRB Charge collections.
3. An amount equal to investment earnings earned on the initial
capital contributed by CL&P will be returned to CL&P semiannually or more
frequently as a distribution of capital by the SPE so long as there are
sufficient moneys to make scheduled distributions of interest and principal
on the RRBs, fund any credit enhancement, and pay required financing
expenses.
November 15, 2000
Ms. Louise E. Rickard
Acting Executive Secretary
Department of Public Utility Control
10 Franklin Square
New Britain, CT 06051
RE: Docket No. 00-05-01 - Application of The Connecticut Light and
Power Company for Approval of the Issuance of Rate Reduction Bonds
and Related Transactions
Dear Ms. Rickard:
In accordance with Order No. 9 of the decision dated November 8, 2000
(the "Decision") of the Department of Public Utility Control (the
"Department") in Docket No. 00-05-01, The Connecticut Light and Power Company
("CL&P") submits the accompanying conforming financing order reflecting
modifications to the proposed financing order (Exhibit 4) submitted by CL&P
with its application. Clean and blacklined versions are enclosed for the
convenience of the Department.
CL&P respectfully requests that the Department confirm in writing that
this submittal conforms to the Decision and is adopted by reference as part
of the Decision.
Very truly yours,
Daniel P. Venora
December 12, 2000
In reply, please refer to:
Docket No. 00-05-01:EL:MLH
Daniel P. Venora, Esq.
Kenneth H. Eagle, Esq.
Duncan D. McCory, Sr. Regulatory Planning Analyst
Randy A. Shoop
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
Richard J. Wasserman, Esq.
Day, Berry & Howard LLP
City Place I
Hartford, CT 06103-3499
Re: Docket No. 00-05-01, Application of The Connecticut Light and Power
Company for Approval of the Issuance of Rate Reduction Bonds and Related
Transactions - Compliance Filing, Order No. 9
Dear Messrs. Venora, Eagle, McCory, Shoop and Wasserman:
The Department of Public Utility Control (Department) acknowledges
receipt of The Connecticut Light and Power Company's (Company) November 15,
2000, submittal, pursuant to Order No. 9 in the Decision dated November 8,
2000, in the above-captioned docket.
Department review of the information submitted finds it to be in
compliance with the directives contained in Order No. 9. Therefore, the
conforming financing order reflecting modifications is approved and adopted
by reference as part of the Decision.
Sincerely,
DEPARTMENT OF PUBLIC UTILITY CONTROL
Louise E. Rickard
Acting Executive Secretary
cc: Service List
