North Carolina Administrative Code › Title 04 - COMMERCE › Chapter 11 - UTILITIES COMMISSION › Chapter 8 › Article 11 - RESOURCE PLANNING AND CERTIFICATION › Section 11 R08-74 - FINANCING FOR COSTS ASSOCIATED WITH THE EARLY RETIREMENT OF SUBCRITICAL COAL-FIRED

Current through Register Vol. 39, No. 2, July 15, 2024
(a) Purpose. - The
				  purpose of this Rule is to implement and comply with Section 5 of House Bill
				  951, S.L. 2021-165, relating to securitization of costs associated with early
				  retirement of subcritical coal-fired electric generating facilities owned by
				  any electric public utility as defined in N.C. Gen. Stat. §
										62-3(23) serving
				  at least 150,000 North Carolina retail jurisdictional customers as of January
				  1, 2021.
(b) Definitions. - The
				  following definitions apply in this Rule:
(1)
				  Ancillary agreement. - A bond, insurance policy, letter of credit, reserve
				  account, surety bond, interest rate lock or swap arrangement, hedging
				  arrangement, liquidity or credit support arrangement, or other financial
				  arrangement entered into in connection with coal plant retirement
				  bonds.
(2) Assignee. - A legally
				  recognized entity to which a public utility assigns, sells, or transfers, other
				  than as security, all or a portion of its interest in or right to coal plant
				  retirement property. The term includes a corporation, limited liability
				  company, general partnership or limited partnership, public authority, trust,
				  financing entity, or any entity to which an assignee assigns, sells, or
				  transfers, other than as security, its interest in or right to coal plant
				  retirement property.
(3) Bond
				  advisory team. - An advisory body of representatives from the public utility,
				  Commission, and Public Staff established at the Commission's discretion to
				  provide input and advice to the public utility regarding the public utility's
				  decisions on structuring, marketing, and pricing of the coal plant retirement
				  bonds.
(4) Bondholder. - A person
				  who holds a coal plant retirement bond.
(5) Coal plant retirement activity. - An
				  activity or activities by a public utility, its affiliates, or its contractors,
				  directly and specifically in connection with early retirement of subcritical
				  coal-fired electric generating facilities.
(6) Coal plant retirement bonds. - Bonds,
				  debentures, notes, certificates of participation, certificates of beneficial
				  interest, certificates of ownership, or other evidence of indebtedness or
				  ownership that are issued by a public utility or an assignee pursuant to a
				  financing order, the proceeds of which are used directly or indirectly to
				  recover, finance, or refinance Commission-approved coal plant retirement costs
				  and financing costs, and that are secured by or payable from coal plant
				  retirement property. If certificates of participation or ownership are issued,
				  references in this Rule to principal, interest, or premium shall be construed
				  to refer to comparable amounts under those certificates.
(7) Coal plant retirement charge. - The
				  amounts authorized by the Commission to repay, finance, or refinance coal plant
				  retirement costs and financing costs and that are nonbypassable charges (i)
				  imposed on and part of all retail customer bills, (ii) collected by a public
				  utility or its successors or assignees, or a collection agent, in full,
				  separate and apart from the public utility's base rates, and (iii) paid by all
				  existing or future retail customers receiving transmission or distribution
				  service, or both, from the public utility or its successors or assignees under
				  Commission-approved rate schedules or under special contracts, even if a
				  customer elects to purchase electricity from an alternative electricity
				  supplier following a fundamental change in regulation of public utilities in
				  this State.
(8) Coal plant
				  retirement costs. - All of the following, as determined by the Commission in a
				  separate proceeding:
(a) Fifty percent (50%)
				  of the remaining net book value of all of a public utility's subcritical
				  coal-fired electric generating facilities retired early or to be retired early
				  to achieve the authorized carbon reduction goals set forth in Section 1 of
				  House Bill 951 that are appropriate for recovery from existing and future
				  retail customers receiving transmission or distribution service from such
				  public utility.
(b) The public
				  utility's cost of capital from the date of the applicable coal plant retirement
				  to the date the coal plant retirement bonds are issued calculated using the
				  public utility's weighted average cost of capital as defined in its most recent
				  base rate case proceeding before the Commission net of applicable income tax
				  savings related to the interest component; provided, however, if the coal plant
				  is included in base rates in the interval between the public utilities'
				  petition for financing order and the corresponding issuance of coal plant
				  retirement bonds, coal plant retirement costs shall not include the public
				  utility's cost of capital until such time the plant has been removed from the
				  base rate calculation of rates.
(c)
				  Coal plant retirement costs shall be net of applicable insurance proceeds, tax
				  benefits, and any other amounts intended to reimburse the public utility for
				  coal plant retirement activities such as government grants, or aid of any kind
				  and where determined appropriate by the Commission. Coal plant retirement costs
				  include costs of repurchasing equity or retiring any existing indebtedness
				  relating to the early retirement of a subcritical coal-fired electric
				  generating facility.
(d) With
				  respect to coal plant retirement costs that the public utility expects to
				  incur, any difference between costs expected to be incurred and actual,
				  reasonable and prudent costs incurred, or any other ratemaking adjustments
				  appropriate to fairly and reasonably assign or allocate coal plant retirement
				  cost recovery to customers over time, shall be addressed in a future general
				  rate proceeding, as may be facilitated by other orders of the Commission issued
				  at the time or prior to such proceeding; provided, however, that the
				  Commission's adoption of a financing order and approval of the issuance of coal
				  plant retirement bonds may not be revoked or otherwise modified.
(9) Coal plant retirement
				  property. - All of the following:
(a) All
				  rights and interests of a public utility or successor or assignee of the public
				  utility under a financing order, including the right to impose, bill, charge,
				  collect, and receive coal plant retirement charges authorized under the
				  financing order and to obtain periodic adjustments to such charges as provided
				  in the financing order.
(b) All
				  revenues, collections, claims, rights to payments, payments, money, or proceeds
				  arising from the rights and interests specified in the financing order,
				  regardless of whether such revenues, collections, claims, rights to payment,
				  payments, money, or proceeds are imposed, billed, received, collected, or
				  maintained together with or commingled with other revenues, collections, rights
				  to payment, payments, money, or proceeds.
(10) Code. - The Uniform Commercial Code,
				  Chapter 25 of the General Statutes.
(11) Commission. - The North Carolina
				  Utilities Commission.
(12)
				  Financing costs. - The term includes all of the following:
(a) Interest and acquisition, defeasance, or
				  redemption premiums payable on coal plant retirement bonds.
(b) Any payment required under an ancillary
				  agreement and any amount required to fund or replenish a reserve account or
				  other accounts established under the terms of any indenture, ancillary
				  agreement, or other financing documents pertaining to coal plant retirement
				  bonds.
(c) Any other cost related
				  to issuing, supporting, repaying, refunding, and servicing coal plant
				  retirement bonds, including servicing fees, accounting and auditing fees,
				  trustee fees, legal fees, consulting fees, structuring adviser fees,
				  administrative fees, placement and underwriting fees, independent director and
				  manager fees, capitalized interest, rating agency fees, stock exchange listing
				  and compliance fees, security registration fees, filing fees, information
				  technology programming costs, and any other costs necessary to otherwise ensure
				  the timely payment of coal plant retirement bonds or other amounts or charges
				  payable in connection with the bonds, including costs related to obtaining the
				  financing order.
(d) Any taxes and
				  license fees or other fees imposed on the revenues generated from the
				  collection of the coal plant retirement charge or otherwise resulting from the
				  collection of coal plant retirement charges, in any such case whether paid,
				  payable, or accrued.
(e) Any State
				  and local taxes, franchise, gross receipts, and other taxes or similar charges,
				  including regulatory assessment fees, whether paid, payable, or
				  accrued.
(f) Any costs incurred by
				  the Commission or Public Staff for any outside consultants or counsel retained
				  in connection with the securitization of coal plant retirement costs.
(13) Financing order. - An order
				  that authorizes the issuance of coal plant retirement bonds; the imposition,
				  collection, and periodic adjustments of a coal plant retirement charge; the
				  creation of coal plant retirement property; and the sale, assignment, or
				  transfer of coal plant retirement property to an assignee.
(14) Financing party. - Bondholders and
				  trustees, collateral agents, any party under an ancillary agreement, or any
				  other person acting for the benefit of bondholders.
(15) Financing statement. - Defined in
				  Article 9 of the Code.
(16) House
				  Bill 951. - Session Law 2021-165 signed by the State Governor on October 13,
				  2021.
(17) Pledgee. - A financing
				  party to which a public utility or its successors or assignees mortgages,
				  negotiates, pledges, or creates a security interest or lien on all or any
				  portion of its interest in or right to coal plant retirement
				  property.
(18) Public utility. - A
				  public utility, as defined in N.C.G.S. §
											62-3, that sells electric power to
				  retail electric customers in the State.
(19) Subcritical coal-fired generating
				  facility. - A plant that utilizes pulverized coal combustion technology in
				  which the steam pressure within the boiler is below 3200 pounds per square inch
				  and the temperature is below 1025 degrees Fahrenheit (550 degrees Celsius) and
				  has a conversion of the energy in the coal to electricity of no greater than
				  37%.