0249-b 0472

AN ACT relative to final authorization of electric rate reduction financing and commission action.

SPONSORS: Sen. Below, Dist 5; Sen. F. King, Dist 1; Sen. D'Allesandro, Dist 20; Sen. Fraser, Dist 4; Sen. Disnard, Dist 8; Sen. Hollingworth, Dist 23; Sen. Johnson, Dist 3; Sen. J. King, Dist 18; Sen. Trombly, Dist 7; Sen. Klemm, Dist 22; Rep. Bradley, Carr 8; Rep. MacGillivray, Hills 21; Rep. Lynde, Hills 24; Rep. Norelli, Rock 31; Rep. Guay, Coos 6

This bill establishes the terms and conditions under which the public utilities commission can issue finance orders authorizing the issuance of rate reduction bonds. The bill also describes how a secured interest in the rate reduction property can be created and perfected.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

AN ACT relative to final authorization of electric rate reduction financing and commission action.

Be it Enacted by the Senate and House of Representatives in General Court convened:

249:1 New Section; Retention of Savings by Electric Utility. Amend RSA 362-A by inserting after section 4-c the following new section:

362-A:4-d Retention of Savings by Electric Utility. An electric utility that is party to an approved renegotiation of a commission order under RSA 362-A:4-c shall be entitled to retain up to 20 percent of the savings resulting from such renegotiation, subject to order of the commission.

249:2 New Chapter; Electric Rate Reduction Financing and Commission Action. Amend RSA by inserting after chapter 369-A the following new chapter:

I. The restructuring of electric utilities to allow retail electric competition and less costly regulation is in the public interest. New Hampshire is implementing such restructuring to create retail customer choice, which will provide retail electric service at lower costs.

II. The divestiture of electric generation by New Hampshire electric utilities will facilitate the competitive market in generation service. Further, the proceeds of generation divestitures may decrease rates for the customers of transmission and distribution utilities.

III. The establishment of structured financing options for electric utilities will facilitate reductions in transmission and distribution rates for all customer classes, thereby advancing the near term rate relief principle of RSA 374-F:3, XI, without creating any debt or financial obligation of the state or other adverse impacts upon the state's finances or credit rating.

IV. The state agrees that its pledge, contract, and agreement and the pledge of the commission not to impair the rights or remedies of holders of rate reduction bonds creates a secure expectation of repayment on the part of such holders.

V. Pursuant to 1999, 289:3, I, the commission has held hearings regarding the original proposed settlement to restructure the Public Service Company of New Hampshire (PSNH) and has issued its April 19 order, accepting the original proposed settlement as being in the public interest and consistent with New Hampshire law, and as a final resolution of the dockets listed therein, subject to the conditions listed in the April 19 order.

VI. Pursuant to 1999, 289:3, I, the commission has held hearings with respect to the securitization proposal contained in the original proposed settlement and has found that implementation of that securitization proposal, subject to the conditions listed in the April 19 order, will result in benefits to customers that are substantially consistent with the principles contained in RSA 374-F:3 and RSA 369-A:1, X and with RSA 369-A:1, XI.

VII. Implementation of that securitization proposal, subject to the conditions listed in the April 19 order, and as further modified in this chapter, will result in benefits to customers that are

substantially consistent with the principles contained in RSA 374-F:3 and RSA 369-A:1, X and with

VIII. Implementation of securitization to achieve the purposes of this chapter requires enactment of further enabling legislation by the general court, and it is in the public interest to pass such further enabling legislation in the form of this chapter.

IX. Approval by the commission of a finance order for PSNH that is consistent with the April 19 order, with subsequent modifications, and subject to the conditions and requirements of this chapter, that is consistent with the conditions of RSA 369-B:3, IV(b), and that is otherwise substantially consistent with RSA 374-F:3, RSA 369-A:1 and RSA 369-B:1 is in the public interest.

X. The differences among rate classes in the amount of the stranded cost recovery charge in the April 19 order are in the public interest. When these differences are combined with the differences in the delivery service charge among rate classes, and with the differences in the likely market price of energy among rate classes, the overall total rate reduction is likely to be very close to an equal percentage for all rate classes, which is consistent with the benefits for all customers principle of RSA 374-F:3, VI. However, it is also in the public interest that any further adjustments to charges between the estimated amounts in the April 19 order and 24 months after competition day be applied equally in cents per kilowatt-hour for all rate classes to which they apply.

XI. The renegotiation of the power purchase obligations requiring PSNH to purchase power from the 6 wood-to-energy facilities and the one trash-to-energy facility is in the public interest in order to reduce the total cost to ratepayers of these obligations, and the sharing of the benefits among ratepayers and all of the parties involved in the renegotiations is in the public interest.

XII. It is in the public interest in the event that the price of transition service during the period that transition service is provided by PSNH exceeds PSNH's actual, prudent and reasonable costs of providing such power so as to create a credit to customers that must be reconciled, that the allocation of this credit between a reduction of the stranded cost recovery charge and a reduction of the duration of stranded cost recovery be made by the commission in a manner that it finds to be in the public interest.

XIII. The commission should design low income programs in a manner that targets assistance and has high operating efficiency, so as to maximize the benefits that go to the intended beneficiaries of the low income program.

XIV. The general court requests that the supreme court and any other courts asked to rule on any matters pertaining to the subject matter of this chapter act as expeditiously as possible. Time is of the essence.

XV. The effect of the stranded cost recovery charge contained in the back-up Delivery Service Rate B tariff as filed by PSNH with its original proposed settlement is just and reasonable, and does not create a charge similar to or have the same effect as an exit fee; provided that not later than 33 months after competition day, the commission shall initiate a rate case on transmission and distribution or delivery services, and this rate case shall establish a back-up charge that is just and reasonable and based on the cost of providing such back-up services, including all applicable stranded cost recovery charges, RRB charges, system benefits charges, and taxes, and retrospectively take effect immediately after 33 months after competition day.

I. "April 19 order" means commission Order No. 23,443 in Docket DE 99-099 as it was issued on April 19, 2000, excluding any subsequent amendments.

II. "Commission" means the public utilities commission established in RSA 363, as it may be constituted from time to time, and any successor agency exercising functions similar in purpose to such commission.

III. "Competition day" means competition day as defined in the original proposed settlement, as adjusted by subsequent modifications.

IV. "Electric utility" means a public utility as defined in RSA 362:2 that provides retail electric service.

V. "Finance order" means an order of the commission adopted prior to or following the effective date of this chapter pursuant to 1999, 289:3, I, pursuant to this chapter, or pursuant to both 1999, 289:3, I and this chapter.

VI. "Financing entity" means any special purpose trust, limited liability company, non-profit corporation, or other entity that is authorized in accordance with the terms of a finance order to issue rate reduction bonds, acquire RRB property, or both on behalf of the electric utility, or any combination of such entities.

VIII. "Original proposed settlement" means the "Public Service Company of New Hampshire Restructuring Settlement Agreement" filed with the commission on August 2, 1999.

X. "Rate reduction bonds" ("RRB") means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, in accordance with this chapter, 1999, 289:3, I and II, and RSA 369-A, the proceeds of which are used, directly or indirectly, to provide, recover, finance, or refinance RRB costs, and which, directly or indirectly, are secured by, evidence ownership interests in, or are payable from, RRB property.

XI. "Retail customer" means any person or entity purchasing directly or otherwise obtaining or being supplied directly with retail electric service for end use consumption, including those served under special contracts.

XII. "Retail electric service" means the delivery of electric power through the provision of transmission and/or distribution service by an electric utility to a retail customer, regardless of such retail customer's source of electric power, and shall include any back-up, maintenance, emergency, and other delivery service provided to a retail customer by an electric utility.

XIII. "RRB charge" means those retail electric service rates that are authorized by the commission in a finance order to recover those RRB costs that are eligible to be funded with the proceeds of rate reduction bonds pursuant to this chapter and the costs of providing, recovering, financing, or refinancing such RRB costs through a plan approved by the commission in the finance order, including the costs of issuing, servicing, and retiring rate reduction bonds. The RRB charge authorized by the commission may vary by cost of service, by customer class, and between special contract customers. All RRB charges shall be assessed on a per kilowatt-hour basis, and shall be non-bypassable as provided in RSA 369-B:4, IV.

XIV. "RRB costs" means expenditures which are incurred by an electric utility or which an electric utility is obligated to incur either prior to or subsequent to the effective date of this chapter, and costs approved by the commission to mitigate such expenditures, as shall be designated in a finance order approved by the commission and which may include but are not limited to:

(a) Expenditures incurred in respect of generation assets, entitlements, and acquisition premiums.

(b) Expenditures incurred in respect to the buyout, buydown, restructuring or renegotiation of power purchase obligations.

(d) Expenditures incurred to refinance or retire existing debt or existing equity capital of the electric utility and any costs related thereto.

(e) Amounts necessary to recover federal or state taxes actually paid by an electric utility, which tax liability recovery is modified by the transactions approved in a finance order issued by the commission pursuant to this chapter.

(f) Reasonable costs, as approved by the commission, relating to the issue, servicing, or refinancing of rate reduction bonds under the provisions of this chapter, including, without limitation, principal and interest payments and accruals, sinking fund payments, debt service and other reserves, costs of credit enhancement, indemnities, if any, owed to the state or the trustee for the rate reduction bonds, issuance costs and redemption premiums, if any, and all other reasonable fees, costs, and charges in respect of rate reduction bonds.

XV. "RRB property" means the irrevocable vested property right created pursuant to this chapter and one or more finance orders, including, without limitation, the right, title, and interest of an electric utility or a financing entity in and to all revenues, collections, claims, payments, money, or proceeds of or arising from the RRB charge authorized to be imposed and collected pursuant to such finance orders to recover RRB costs and the costs of paying, financing, reimbursing, or refinancing the RRB costs, including the reasonable costs of issuing, servicing, and retiring rate reduction bonds, and in and to all rights to obtain adjustments to such RRB charge pursuant to the terms of RSA 369-B:4, III and the finance order, all as determined by the commission in its approval of such finance orders. "RRB property" shall constitute a current and irrevocable vested property right, notwithstanding the fact that the value of such property right may depend upon electricity usage or the performance of certain services.

XVI. "Security interest" means a security interest as defined in RSA 382-A:1-201(37).

XVII. "Service territory" means, with respect to any electric utility, the geographic area established by the commission as the retail electric service territory of such electric utility, as such territory is depicted on the "Electric Utilities Franchise Areas" map issued by the commission, dated July 1, 1993, together with any other geographic area in which such electric utility actually provided retail electric service on such date.

I. The commission is authorized, upon the petition of an electric utility and after a hearing, to issue one or more finance orders pursuant to which rate reduction bonds shall be issued, if the commission finds that the issuance of such finance order or finance orders is in the public interest as set forth in RSA 369-B:1, IX. Any finance order adopted pursuant to 1999, 289:3, I and II prior to the effective date of this chapter shall, following the effective date of this chapter, be deemed to be authorized by this chapter, provided the commission has made the required finding pursuant to RSA 369-B:3, IV(b).

II. Notwithstanding any law, rule, or regulation to the contrary, except as otherwise provided in RSA 369-B:4, III with respect to RRB property, the finance orders and the RRB charge authorized to be imposed and collected pursuant to such finance orders shall be irrevocable, and the commission shall not have authority either by rescinding, altering, or amending the finance order or otherwise, to directly or indirectly, revalue or revise for ratemaking purposes the RRB costs, or the costs of providing, recovering, financing, or refinancing the RRB costs, determine that such RRB charge is unjust or unreasonable, or in any way reduce or impair the value of RRB property either directly or indirectly by taking such RRB charge (other than any portion of such RRB charge constituting a servicing fee payable to the electric utility) into account when setting other rates for the electric utility; nor shall the amount of revenues arising with respect thereto be subject to reduction, impairment, postponement, or termination.

III. Notwithstanding any law, rule, or regulation to the contrary, any requirement under this chapter, under 1999, 289:3, I and II, under RSA 369-A, or under a finance order that the commission take action with respect to the subject matter of a finance order shall be binding upon the commission, and the commission shall have no authority to rescind, alter, or amend that requirement.

(a) Authorize the issuance of an aggregate principal amount of not more than $130,000,000 in rate reduction bonds to finance renegotiated agreements of the existing power purchase obligations requiring PSNH to purchase power from the 6 wood-to-energy facilities and the one trash-to-energy facility; and/or

(b) Authorize the issuance of an aggregate principal amount of not more than $670,000,000, minus $6,000,000 for each month from October 1, 2000 to competition day, in rate reduction bonds. This authorization is in addition to any amount authorized in subparagraph (a). This issuance must be part of a settlement approved by the commission under RSA 374-F to implement electric utility restructuring within the service territory of PSNH. As part of any finance order under this subparagraph (b), the commission must find that the rate reduction bonds authorized by the finance order are consistent with the April 19 order, with any subsequent modifications. Any finance order that is issued under this subparagraph (b) shall also contain a statement of the following conditions, and a finding of the commission that the finance order is consistent with the following conditions:

(1)(A) From competition day until initial transition service end day, PSNH shall supply transition service and default service in its retail electric service territory. After initial transition service end day, any provider or providers of transition service shall have been chosen through a competitive bid process, administered by the commission, to provide such service. The commission may, if it finds it to be in the public interest, divide the competitive bid process into multiple categories or multiple competitive bids;

(B)(i) Transition service for residential customers, street lighting customers, and general delivery service rate G customers shall be available until 24 months after initial transition service end day. From competition day until initial transition service end day, the price of transition service for these customers shall be $0.044 per kilowatt-hour. From initial transition service end day to 12 months after initial transition service end day, the price of transition service for these customers shall be $0.044 per kilowatt-hour, or the competitively bid price for transition service, whichever is less. From 12 months after initial transition service end day to 24 months after initial transition service end day, the price of transition service for these customers shall be $0.046 per kilowatt-hour, or the competitively bid price for transition service for these customers, whichever is less. If the competitively bid price exceeds these fixed prices, the differences shall be reconciled for these customers in the manner prescribed in the original proposed settlement;

(ii) At the end of the transition service period, up to 25 percent of the residential customers, street lighting customers, and general delivery service rate G customers who have not chosen a competitive supplier may be assigned randomly to registered competitive suppliers other than the transition service supplier or suppliers, if the commission finds such random assignment to be in the public interest. The commission shall develop procedures and regulations for this assignment process. Any random assignment must be affirmatively approved by an individual customer;

(C) Transition service for all other customers shall be available until 12 months after initial transition service end day. From competition day to initial transition service end day, the price of transition service for these customers shall be $0.044 per kilowatt-hour. From initial transition service end day to 12 months after initial transition service end day, the price of transition service for these customers shall be the competitively bid price for transition service;

(D) Any difference between the price of transition service from competition day to initial transition service end day and PSNH's actual, prudent and reasonable costs of providing such power shall first be separated between the 2 groups of customers described in subparagraphs (b)(1)(B) and (b)(1)(C), used first to offset any differences described in subparagraph (b)(1)(B), and the net then reconciled for each group of customers either by changing the recovery end date, or by decreasing the stranded cost recovery charge, as the commission finds to be in the public interest;

(E) The commission shall retain the authority to reject any or all bids for transition service at its sole discretion if it finds such action to be in the public interest. Except as specifically provided in this section, the commission shall not accept any bid or implement any pricing strategy for transition service that creates any deferrals;

(F) The selection of a provider or providers of default service prior to 24 months after initial transition service end day may be combined with the selection of a provider or providers of transition service to the extent that the commission finds it to be in the public interest;

(2) No amount shall be securitized which was not listed as part of the $688,000,000 proposed for securitization in the April 19 order, as reduced by any subsequent amortization;

(3) Customer savings shall be not less than the total amount of $450,000,000, excluding savings from rate reduction financing and merger savings, including the $367,000,000 contained in the original proposed settlement, and the $6,200,000 resulting from the settlement of issues pertaining to New Hampshire Electric Cooperative, Inc. A commitment by PSNH to all of the following actions shall be deemed to satisfy this condition:

(A) PSNH shall credit customers with the higher return associated with accumulated deferred income taxes (ADITs) as proposed in PSNH's May 1, 2000 filing;

(B) PSNH shall credit customers with the value derived from using its own assets to provide transition service for a period of 9 months;

(C) PSNH shall extend from 30 months to 33 months the period during which the delivery service charge, exclusive of Hydro Quebec transmission support payments, is fixed at 2.8 cents per kilowatt-hour;

(D) PSNH shall absorb the first $7,000,000 of difference of costs that results in the event that transition service costs during the 12 months following the initial transition service end day exceed the transition service price for that 12 months, as provided in RSA 369-B:3,IV(b)(1)(B)(i);

(E) PSNH shall reduce the maximum amount of necessary and prudent costs associated with the issuance of and closing on the securitization financing and any premiums associated with the retirement of debt and preferred stock from these proceeds that may be recovered from $17,000,000 to $15,000,000. PSNH shall include in its costs the first $700,000 of the costs of the office of the state treasurer related to reviewing and issuing the rate reduction bonds;

(F) PSNH agrees to move the Recovery End Date (RED date) to 1 month earlier than it would otherwise be; and

(G) PSNH agrees that if competition day has not occurred by October 1, 2000, then effective October 1, 2000 PSNH shall temporarily reduce its current effective total rates (base rates plus FPPAC rates) by 5 percent across the board until either competition day or April 1, 2001, whichever occurs earlier.

(4) In the event that PSNH or its parent company is acquired or otherwise sold or merged:

(A) Such merger, acquisition, or sale shall be subject to the jurisdiction of the commission under RSA 369, RSA 374, RSA 378 or other relevant provisions of law, and the merger, acquisition, or sale shall be approved only if it is shown to be in the public interest;

(B) In recognition of the extraordinary benefits provided to PSNH from rate reduction financing, should PSNH or its parent company be acquired or otherwise sold or merged, such merger, acquisition or sale shall be subject to the jurisdiction of the commission under the standard set forth in the original proposed settlement. The commission may approve such a merger if such approval results in the receipt by PSNH customers of a just and reasonable amount of the cost savings that result from such merger, acquisition or sale.

(C) No acquisition premium paid by an acquiring company for the assets or securities of any acquired company, resulting from any such merger, acquisition or sale, may in any way increase rates at any time from what they would have been without the acquisition premium;

(5) The delivery service charge, exclusive of the Hydro Quebec transmission support payments, shall be fixed for a period of 33 months from competition day at $0.028 per kilowatt-hour;

(6) The total system benefits charge shall be fixed at $0.002 per kilowatt-hour for 33 months from competition day divided between low-income assistance and energy efficiency/conservation programs. In the event that the commission finds that a significant amount of unencumbered dollars have accumulated in either program, and are not needed for program purposes, the commission shall refund such unencumbered dollars to ratepayers in a timely manner;

(7) All currently existing opportunities shall be continued for retail customers to generate or acquire electricity for their own use, other than through retail electric service, without an exit fee;

(8) To the maximum extent allowed by federal law, non-discriminatory, open access to PSNH's transmission system shall be available to customers, electricity suppliers, marketers, aggregators, and municipal electric utilities, with charges based only on rates set by federal regulations, plus the actual cost of service for any services not subject to federal price regulation plus, for retail customers, applicable stranded cost recovery charges, RRB charges, systems benefit charges, and taxes;

(9) The stranded cost recovery charge, averaged over all customers, shall not exceed $0.0340 per kilowatt-hour. Any changes in the delivery service charge, stranded cost recovery charge, transition service charge, systems benefit charge, or any other charge between the estimated amounts in the April 19 order and 24 months after competition day shall be applied as an equal change in the cost per kilowatt-hour for all rate classes to which they apply;

(10) The commission shall not order changes in the total rates of customers taking service under special contracts approved pursuant to RSA 378:18 for the duration of those special contracts in effect as of May 1, 2000. Special contract customers selecting option 2 of the original proposed settlement shall have the energy charges under the contract reduced by the initial transition service price;

(11) During any sale of electricity generation assets required by this settlement, neither PSNH, nor any affiliate of PSNH, nor any company that would become an affiliate of PSNH if an announced merger, acquisition or sale were to be consummated, may bid for those assets;

(12) During any competitive bid process to determine a provider or providers of transition service, or of default service to any customer belonging to a rate class that at the time of service is eligible to receive transition service, neither PSNH, nor any affiliate of PSNH, nor any company that would become an affiliate of PSNH if an announced merger, acquisition or sale were to be consummated, may bid to provide such service;

(13) The commission shall administer the liquidation of any electricity generation assets required to be sold by the settlement. Any sale of assets located in the state of New Hampshire that are administered by the commission pursuant to this paragraph shall be conducted in this state. The commission shall select the independent, qualified asset sale specialist who will conduct the asset sale process. PSNH shall be allowed to comment prior to the selection of any such specialist;

(14) The commission shall administer any competitive bid process for transition service or default service required by the settlement;

(15) Subject to the approval of the Federal Energy Regulatory Commission (FERC), in the event that the commission either rejects a proposed sale of Seabrook, or fails to act on such application within 180 days after North Atlantic Energy Corporation's (NAEC's) proposed sale application is filed with the commission, and the failure of the sale is through no fault of Northeast Utilities (NU) or PSNH, NAEC's return on equity shall be increased from 7 percent to 150 basis points more than the average 10-year Treasury bond yield for the preceding 6 months, but not less than 7 percent nor more than 11 percent, and then readjusted accordingly at the end of every 6 month period; and

(16) No finance order shall be final or effective until PSNH and NU have agreed to dismiss with prejudice on competition day PSNH's and NU's claims and causes of action in all pending litigation associated with the implementation of RSA 374-F, including civil action No. 97-97-JD (New Hampshire) / 97-121 L (Rhode Island).

V. Any finance order that expressly states each and every one of the conditions as set forth in RSA 369-B:3, IV, and finds that the finance order is consistent with all of these conditions, shall be deemed to satisfy the conditions and requirements of RSA 369-B:3, IV. If such finance order so satisfies the conditions and requirements of RSA 369-B:3, IV and satisfies the other requirements of this chapter, then such finance order shall be deemed to be authorized by, and issued pursuant to, this chapter.

I. A finance order shall establish and place into effect one or more RRB charges that the commission shall determine to be just and reasonable, including any provisions for subsequent adjustments thereto, that shall provide for the collection of revenues from retail customers of electric utilities sufficient to recover all RRB costs approved by the commission in the finance order, including, without limitation, the payment of principal, premium, if any, interest, credit enhancement, and all other fees, costs, and charges in respect to rate reduction bonds. Such RRB charge or RRB charges shall be set forth in a schedule or schedules filed with the commission in such form as may be determined by the commission, but the filing of such schedule shall not affect or be a condition to the validity of the RRB charge.

II. The commission shall set the RRB charge, per kilowatt-hour of electricity for delivery of retail electric service, in an amount necessary and sufficient to provide for the full recovery of principal, interest, and credit enhancement on the rate reduction bonds, in accordance with the amortization schedule for such bonds determined at the time of offering, as well as all other fees, costs, and charges in respect to the rate reduction bonds, based upon the electric utility's reasonable assumptions, including sales forecasts.

III. Notwithstanding any provision of RSA 369-B:3, the commission shall approve such adjustments to the RRB charge authorized to be imposed and collected pursuant to a finance order as may be necessary to ensure timely recovery of all RRB costs that are the subject of such finance order, including, without limitation, the costs of capital associated with the provision, recovery, financing, or refinancing thereof and the costs of issuing, servicing, and retiring the rate reduction bonds contemplated by such finance order. Such RRB charge shall be adjusted periodically, but not less frequently than annually nor more frequently than monthly, in accordance with the finance order. The commission shall provide in a finance order for a procedure for the timely approval by the commission of periodic adjustments to the RRB charge that is the subject of such finance order. The commission shall approve such adjustments within 60 days of the filing of such adjustment, or within such shorter period as the finance order may designate. These adjustments shall generally serve to reconcile the actual RRB charges collected with the RRB charges expected to have been collected during the relevant prior period in a manner such that the adjusted RRB charge will be sufficient to provide for scheduled principal, interest, credit enhancement, fees and other expenses associated with rate reduction bonds payable in the period during which such adjusted RRB charge will be billed. The electric utility shall include in such filing a report to the commission showing the calculation of each such adjustment.

IV. All charges established in a finance order for an electric utility, including, without limitation, the non-bypassable RRB charge, shall be collected from each retail customer of such electric utility by such electric utility or servicer of the rate reduction bonds or other entity authorized in the finance order or otherwise approved by the commission. If a retail customer purchases or otherwise obtains retail electric service from any person other than the electric utility in whose service territory the retail customer is located, including, without limitation, any successor referred to in RSA 369-B:8, subject to commission approval, the servicer or such new electricity service provider or successor shall collect all such charges, including, without limitation, such RRB charge, from the retail customer by or on behalf of the first electric utility with revenues from such RRB charge remitted solely for the benefit and repayment of rate reduction bonds as a condition to the provision of retail electric service to such retail customer. Each finance order shall impose commercially reasonable terms on such electricity service provider or successor responsible for billing or collecting such charges, including, without limitation, such RRB charge, that are the subject of the finance order. Any retail customer that fails to pay any RRB charge shall be subject to disconnection of service to the same extent that such customer would, under applicable law and regulations, be subject to disconnection of service for failure to pay any other charge payable to an electric utility.

V. The RRB charge shall be charged to and collected from retail customers for such period as prescribed in the finance order. To the extent that the commission, when issuing a finance order, determines that special treatment on retail customers' bills is necessary or desirable to distinguish the RRB charge from other rates and charges in order to facilitate the successful issuance and sale of rate reduction bonds, it may so provide as part of such finance order. A finance order shall specify how amounts collected from a retail customer shall be allocated between the RRB charge and other rates and charges.

VI. The commission shall establish charges for retail customers that purchase or otherwise obtain or are supplied back-up, maintenance, emergency or other delivery service provided to a retail customer by an electric utility. Such charges shall be just and reasonable, and shall not be designed in a manner that creates a charge similar to or has the same effect as an exit fee.

VII. Notwithstanding any statutory or regulatory language to the contrary, the commission shall not authorize or impose, nor shall any electric utility charge or assess, any exit fee, and nothing herein shall affect the rights as set forth in RSA 369-B:3, IV(b)(7). An exit fee is any rate or charge that is based in whole or in part on the amount of electric power and/or retail electric service a customer might have purchased from or through an electric utility but does not purchase due to conservation efforts, use of alternative non-electric energy sources, or the consumption of electricity by such customer from generation connected directly to such customer's electrical load with no intervening facilities of a regulated utility; provided, however, that an exit fee shall not include a just and reasonable capacity or demand charge for backup service as defined in RSA 369-B:4, VI.

VIII. In the event of the municipalization of a portion of an electric utility's service territory, the commission shall, in matters over which the Federal Energy Regulatory Commission does not have jurisdiction, or has jurisdiction but chooses to grant jurisdiction to the state, determine, to a just and reasonable extent, the consequential damages such as stranded investment in generation, storage, or supply arrangements resulting from the purchase of plant and property from the electric utility and RRB costs, and shall establish an appropriate recovery mechanism for such damages. Any such damages shall be established, and shall be allocated between the RRB charge and other rates and charges, in a just and reasonable manner.

IX. Any surplus RRB charge in excess of the amounts necessary to pay principal, premium, if any, interest, credit enhancement and all other fees, costs, and charges in respect to rate reduction bonds shall be remitted to the financing entity and shall be used to benefit retail customers unless this would result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, the following intended characteristics:

(a) Avoiding the recognition of debt on the electric utility's balance sheet for financial accounting and regulatory purposes;

(b) Treating the rate reduction bonds as debt of the electric utility or its affiliates for federal income tax purposes;

(d) Avoiding any adverse impact of the financing on the credit rating of the rate reduction bonds or the electric utility.

I. An electric utility or financing entity may, from time to time, after approval by the commission in a finance order or orders, issue rate reduction bonds. The power and authority of such electric utility or financing entity to issue such bonds shall expire on December 31, 2002.

II. A finance order or finance orders shall direct that the proceeds from the issuance of rate reduction bonds shall be applied only for such purposes approved in such finance order and the financing entity and the electric utility shall apply such proceeds only for such purposes. Rate reduction bonds may qualify for tax-exempt status to the full extent of state and federal law.

III. Notwithstanding any other provision of law, RSA 374:30 and RSA 369 shall not apply to any sale, assignment, or other transfer or grant of a security interest in any RRB property or the issuance of rate reduction bonds under this chapter.

IV. Rate reduction bonds issued pursuant to finance orders adopted by the commission under the provisions of this chapter shall not constitute a debt or liability of the state or of any political subdivision thereof, other than any financing entity established by or on behalf of the state, and shall not constitute a pledge of the full faith and credit of the state or any of its political subdivisions, other than any financing entity established by or on behalf of the state, but shall be payable solely from the funds provided therefor pursuant to the provisions of this chapter and shall not constitute an indebtedness of the state or constitute net tax supported debt of the state within the meaning of any constitutional or statutory debt limitations or restrictions and, accordingly, shall not be subject to any statutory limitations on the indebtedness of the state or the net tax supported debt of the state and shall not be included in computing the aggregate indebtedness of the state or the net tax supported debt of the state in respect to and to the extent of any such limitations. All rate reduction bonds shall contain on the face thereof a statement to the following effect: "Neither the full faith and credit nor the taxing power of the State of New Hampshire or any political subdivision thereof is pledged to the payment of the principal of, or interest on, this bond." This paragraph shall in no way preclude bond guarantees or enhancements pursuant to this chapter nor shall it preclude the payment of compensation for any breach of the state's pledge contained in RSA 369-B:6, II or for any action or failure to act by the commission in contravention of RSA 369-B:3 or RSA 369-B:4.

V. The issuance of rate reduction bonds under this chapter shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.

VI. The exercise of the powers granted by this chapter shall be in all respects for the benefit of the people of this state, for the increase of their commerce, welfare, and prosperity, and as the exercise of such powers shall constitute the performance of an essential public function, neither any electric utility, any affiliate of any electric utility, any financing entity, nor any collection or other agent of any of the foregoing shall be required to pay any taxes or assessments upon or in respect of any revenues or property received, acquired, transferred, or used by any electric utility, any affiliate of any electric utility, any financing entity, or any collection or other agent of any of the foregoing under the provisions of this chapter or upon or in respect of the income therefrom, and any rate reduction bonds shall be treated as notes or bonds of a political subdivision of the state for purposes of RSA 77.

(a) Securities in which all public officers and public bodies of the state and its political subdivisions, all insurance companies, state banks and trust companies, national banking associations, savings banks, savings and loan associations, investment companies, executors, administrators, trustees and other fiduciaries and electric utility consumers may properly and legally invest funds, including capital in their control or belonging to them; and

(b) Securities which may properly and legally be deposited with and received by any state or municipal officer or any agency or political subdivision of the state for any purpose for which the deposit of bonds or obligations of the state is now or may be authorized.

VIII. Rate reduction bonds shall mature at such time or times approved by the commission in the finance order, but not more than 14 years after competition day.

IX. The state treasurer, or other state official designated by the state treasurer, shall have oversight over the terms and conditions of rate reduction bond issuances, to assure that the electric utility exercises fiscal prudence and achieves the lowest overall cost for the rate reduction bonds.

X. Subject to the approval of the commission and the oversight of the state treasurer, or other state official designated by the state treasurer, rate reduction bonds issued and at any time outstanding may, if and to the extent permitted under the indenture or other agreement pursuant to which they are issued, be refunded by other rate reduction bonds.

XI. The state treasurer's oversight under RSA 369-B:5, IX and X shall not be governed by the provisions of RSA 541 or 541-A.

I. The RRB charge shall constitute RRB property when, and to the extent that, a finance order authorizing such RRB charge has become effective in accordance with this chapter, and the RRB property shall thereafter continuously exist as a current and irrevocable vested property right for all purposes with all of the rights and privileges of this chapter for the period and to the extent provided in the finance order, but in any event until the rate reduction bonds, including all principal, interest, premium, costs, and arrearages on such bonds, are paid in full. Prior to its sale or other transfer by the electric utility pursuant to this chapter, RRB property shall be a vested contract right of the electric utility, notwithstanding any contrary treatment thereof for accounting, tax, or other purpose. Upon application by an electric utility or a financing entity, or upon its own motion, the commission shall have authority to initiate such other proceedings, hold such other hearings, and take such other actions as may be necessary to implement, protect, and preserve the value of the finance order, the RRB charge specified therein, and the RRB property.

II. The state does hereby pledge, contract, and agree with the owners of RRB property and holders of and trustees for rate reduction bonds that neither the state, nor any of its agencies, including the commission, shall limit, alter, amend, reduce, or impair the RRB charge, RRB property, finance orders, and all rights thereunder or ownership thereof or security interest therein until the rate reduction bonds, including all principal, interest, premium, costs and arrearages thereon, are fully met and discharged, provided nothing contained in this paragraph shall preclude the limitation, alteration, amendment, reduction, or impairment if and when adequate provision shall be made by law for the protection of such owners, holders and trustees. The state does hereby acknowledge that such owners, holders and trustees may and will rely on this pledge, contract, and agreement and that any such limitation, alteration, amendment, reduction, or impairment without such adequate provision will irreparably harm such owners, holders and trustees. The state treasurer and the financing entity are each authorized to include this pledge, contract, agreement, and acknowledgment of the state in the documentation relating to the rate reduction bonds.

III. An electric utility may sell and assign all or portions of its interest in RRB property to an affiliate to the extent approved in the pertinent finance orders. An electric utility or its affiliate may sell or assign its interests to one or more financing entities that make that property the basis for issuance of rate reduction bonds to the extent approved in the pertinent finance orders. An electric utility, its affiliate, or a financing entity may pledge RRB property as collateral, directly or indirectly, for rate reduction bonds to the extent approved in the pertinent finance orders providing for a security interest in the RRB property, in the manner set forth in RSA 369-B:7. In addition, RRB property may be sold or assigned by:

(a) The financing entity or a trustee for the holders of rate reduction bonds in connection with the exercise of remedies upon a default; or

(b) Any person acquiring the RRB property after a sale or assignment pursuant to this paragraph.

IV. To the extent that any interest in RRB property is so sold or assigned, or is so pledged as collateral, the commission shall require the electric utility to contract with the financing entity that it will continue to operate its system to provide service to its retail customers, will collect amounts in respect of the RRB charge for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or security interest, as applicable, and shall not cause the electric utility to be subject to the provisions of RSA 358-C. Contracts or other arrangements entered into between an electric utility and a financing entity shall not be subject to the provisions of RSA 366. Neither a finance entity nor any other person that is an assignee or pledgee of RRB property shall for any purpose be considered to be an electric utility or a person providing electric service solely by virtue of the transactions described in this chapter.

V. A transfer of RRB property by an electric utility to an affiliate or to a financing entity, or by an affiliate of an electric utility or a financing entity to another financing entity, that the parties have expressly stated in the governing documentation to be a sale or other absolute transfer, in a transaction approved in a finance order and made in connection with the issuance of rate reduction bonds shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the RRB property, in each case notwithstanding any contrary treatment of such transfer for accounting, tax, or other purposes. According the holders of rate reduction bonds a preferred right to revenues of the electric utility or the provision by the electric utility of other credit enhancement with respect to rate reduction bonds shall not impair or negate the characterization of any transfer as a true sale, in each case notwithstanding any contrary treatment of such transfer for accounting, tax, or other purposes. Any finance order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceeding with respect to the debtor, pledgor, or transferor of RRB property.

VI. A transfer of RRB property shall be deemed perfected as against third persons and shall vest title to the RRB property in the transferee when both of the following have taken place:

(a) A finance order authorizing the RRB charge included in the RRB property has become effective in accordance with this chapter.

(b) An assignment of the RRB property in writing has been executed and delivered to the transferee.

VII. As between bona fide assignees of the same right for value without notice, the assignee first filing financing statements in accordance with Article 9 of RSA 382-A naming the assignor of the RRB property as debtor and identifying the RRB property has priority. Any description of the RRB property shall be sufficient if it refers to the finance order creating the RRB property. A copy of the financing statements shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but the filing with the commission and such other filings shall not affect the perfection of the transfer.

VIII. The interest of an assignee or pledgee in RRB property and in the revenues and collections arising from such RRB property are not subject to setoff, counterclaim, surcharge, or defense by the electric utility or any other person or in connection with the bankruptcy of the electric utility or any other person.

I. To the extent the provisions of this section conflict with Article 9 of RSA 382-A, this section shall apply.

II. A security interest in RRB property is valid, is enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the RRB property perfected in the manner described in this section, and attaches when all of the following have taken place:

(a) A finance order authorizing the RRB charge included in the RRB property has become effective in accordance with this chapter.

III. A valid and enforceable security interest in RRB property is perfected when it has attached and when financing statements have been filed in accordance with Article 9 of RSA 382-A naming the pledgor of the RRB property as "debtor" and identifying the RRB property. Any description of the RRB property shall be sufficient if it refers to the finance order creating the RRB property. A copy of the financing statement shall be filed with the commission by the pledgor or transferor of the RRB property, and the commission may require the pledgor or transferor to make other filings with respect to the security interest in accordance with procedures it may establish, but the filing with the commission and such other filings shall not affect the perfection of the security interest. A financing statement filed pursuant to this section is effective until a termination statement is filed.

IV. A perfected security interest in RRB property is a continuously perfected security interest in all revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. RRB property shall constitute property for all purposes, including for contracts securing rate reduction bonds, whether or not the revenues and proceeds arising with respect thereto have accrued.

V. Subject to the terms of the security agreement covering the RRB property and the rights of any third parties holding security interests in the RRB property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section are not defeated or adversely affected by the commingling of revenues and proceeds arising with respect to the RRB property with other funds of the electric utility that is the pledgor or transferor of the RRB property, or by any security interest in a deposit account of that electric utility into which the revenues and proceeds are deposited or in such revenues and proceeds themselves perfected under Article 9 of RSA 382-A or otherwise. Subject to the terms of the security agreement, the pledgees of the RRB property shall have a perfected security interest in all cash and deposit accounts of the electric utility in which revenues and proceeds arising with respect to the RRB property have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the revenues and proceeds with respect to the RRB property received by the electric utility within 12 months before (1) any default under the security agreement or (2) the institution of insolvency proceedings by or against the electric utility, less payments from the revenues and proceeds to the pledgees during that 12-month period. Nothing in this paragraph shall exempt the debtor from the tracing requirements of federal bankruptcy law.

VI. If an event of default occurs under the security agreement covering the RRB property, the pledgees of the RRB property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Article 9 of RSA 382-A, and shall be entitled to conduct a secured party sale of the RRB property or otherwise enforce their security interest in the RRB property, subject to the rights of any third parties holding prior security interests in the RRB property perfected in the manner provided in this section. In addition, the commission may require, in the finance order creating the RRB property, that, in the event of default by the electric utility in payment of revenues and proceeds arising with respect to the RRB property, the commission, upon the application by the pledgees or transferees, including transferees under this section, of the RRB property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of revenues and proceeds arising with respect to the RRB property. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the RRB property. Any surplus in revenues and proceeds in excess of amounts necessary to pay principal, premium, if any, interest, costs, and arrearages on the rate reduction bonds, and other costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.

VII. RSA 382-A:9-204 and RSA 382-A:9-205 shall apply to a pledge of RRB property by an electric utility, an affiliate of an electric utility, or a financing entity.

VIII. This paragraph sets forth the terms by which a consensual security interest can be created and perfected in the RRB property. Unless otherwise ordered by the commission with respect to any series of rate reduction bonds on or prior to the issuance of the series, there shall exist a statutory lien as provided in this paragraph. Upon the effective date of the finance order, there shall exist a first priority lien on all RRB property then existing or thereafter arising pursuant to the terms of the finance order. This lien shall arise by operation of this paragraph automatically without any action on the part of the electric utility, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, under the rate reduction bonds issued pursuant to the finance order to the holders of such rate reduction bonds, the trustee or representative for such holders, and any other entity specified in the finance order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the finance order, have all rights and remedies of a secured party upon default under Article 9 of RSA 382-A, and shall be entitled to conduct a secured party sale of the RRB property or otherwise enforce this statutory lien in the RRB property. This lien shall attach to the RRB property regardless of who shall own, or shall subsequently be determined to own, the RRB property including any electric utility, company, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the RRB property and all third parties upon the effective date of the finance order without any further public notice; provided, however, that any person may, but shall not be required to, file a financing statement in accordance with paragraph III of this section. Financing statements so filed may be "protective filings" and shall not be evidence of the ownership of the RRB property. A perfected statutory lien in RRB property is a continuously perfected lien in all revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. In addition, the commission may require, in the finance order creating the RRB property, that, in the event of default by the electric utility in payment of revenues and proceeds arising with respect to the RRB property, the commission, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of revenues and proceeds arising with respect to the RRB property. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the RRB property. Any surplus in revenues and proceeds in excess of amounts necessary to pay principal, premium, if any, interest, costs, and arrearages on the rate reduction bonds, and other costs arising in connection with the documents governing the rate reduction bonds, shall be remitted to the debtor or to the pledgor or transferor.

369-B:8 Successors to Electric Utilities. Any successor to an electric utility, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electric utility with respect to rate reduction bonds in the same manner and to the same extent as was required of the electric utility before such proceeding or transfer, including, without limitation, billing, collecting, and paying to the holders of the rate reduction bonds or their representatives or the applicable financing entity RRB charges and any other revenues arising with respect to the RRB property and seeking RRB charge adjustments, as necessary and permitted by a finance order, to recover all RRB costs designated in an applicable finance order or finance orders.

369-B:9 Severability. If any provision of this chapter, or the application thereof to any person or circumstance, is held invalid, such invalidity shall not affect other provisions or applications of this chapter, and to that end, the provisions of this chapter are declared to be severable. Each section of this chapter shall be severable from all other sections hereof and the nullification of any section of this chapter shall have no effect on the remaining sections of this chapter.

249:3 Restructuring Policy Principles; Universal Service. Amend RSA 374-F:3, V(b) to read as follows:

(b) As competitive markets emerge, customers should have the option of stable and predictable ceiling electricity prices through a reasonable transition period, consistent with the near term rate relief principle of RSA 374-F:3, XI. Upon the implementation of retail choice, transition service should be available for at least [2] one but not more than 4 years after the start of competition, for customers who have not yet chosen a competitive electricity supplier. Transition service should be procured through competitive means and may be administered by independent third parties. The price of transition service should increase over time to encourage customers to choose a competitive electricity supplier during the transition period. Such transition service should be separate and distinct from default service.

249:4 New Subparagraph; System Benefits Charge; Limitations. Amend RSA 374-F:4, VIII by inserting after subparagraph (f) the following new subparagraph:

(g) The portion of the system benefits charge due to programs for low-income customers per kilowatt-hour in any public utility service territory in the state shall not exceed the amount in PSNH's service territory for a period of 33 months starting on competition day for PSNH as defined in RSA 369-B:2, III.

249:5 Option for Municipalities Purchasing Certain Electric Facilities. Municipalities which seek to purchase PSNH hydro-electric small-scale electric facilities, as defined in RSA 374-D:1, may with the consent of the governing body, prior to October 1, 2000, petition the commission pursuant to RSA 38:9, prior to holding the vote of qualified voters provided for in RSA 38:3, RSA 38:4, or RSA 38:5, for a determination of the fair market value of the facility in the event that the municipality and PSNH are unable to agree to a price to be paid for the facility. The cost of the determination shall be at the expense of the requesting municipality. The commission should select an independent, qualified asset valuation specialist to conduct the asset valuation process. If this option is chosen, all votes required by RSA 38:3, RSA 38:4, or RSA 38:5 must be held prior to the expiration of the time limit required for the ratification vote under RSA 38:13.

249:6 Public Utilities Commission Action. If by June 30, 2000, PSNH has not filed with the commission an acknowledgment of acceptance of the conditions contained in RSA 369-B:3, IV(b), then the commission shall:

I. Suspend the Public Service Company of New Hampshire (PSNH) Restructuring Settlement Docket No. DE 99-099 and resume, as allowed by law, all other dockets stayed by the commission as it addressed Docket No. DE 99-099.

II. Take such action as is in the public interest regarding temporary rates as authorized by RSA 378:27.

III. Pursue appropriate litigation at the New Hampshire supreme court or other appropriate courts on issues such as whether the 1989 Rate Agreement is a contract and whether PSNH and Northeast Utilities may have breached any such contract or, by their actions, allowed any such contract to be voided.

I. Competition day for PSNH as defined in RSA 369-B:2, III shall be not later than October 1, 2000, unless the commission finds due to circumstances beyond its control that further delay is in the public interest.

II. The sale of PSNH fossil generation assets shall take place no later than July 1, 2001, unless the commission finds due to circumstances beyond its control that further delay is in the public interest.

249:8 PSNH Allowed to Pay Dividend. Upon the temporary rate reduction of 5 percent described in RSA 369-B:3, IV(b)(3)(G), PSNH will be allowed to pay a dividend of $50,000,000.