§ 209a. Qualified cost mitigation charge orders

(a) Definitions. As used in this section:

(1) "Electric utility" means any entity engaged in the distribution of electricity directly to the consumers within the State of Vermont.

(2) "Issuer" means any entity approved in a qualified cost mitigation charge order to issue mitigation bonds; "issuer" may include the Vermont qualifying facility contract mitigation authority or the Vermont Public Power Supply Authority.

(3) "Mitigation bond" means a note, bond, debenture, or any other evidence of indebtedness or certificate evidencing an interest in any evidence of indebtedness authorized by a qualified cost mitigation charge order.

(4) "Mitigation charge" means any volumetric charge imposed by the Commission pursuant to a qualified cost mitigation charge order.

(5) "Participating qualifying facility" means any facility described in subdivision 209(a)(8) of this title.

(6) "Power purchase arrangement" means a contract for sale of electricity between a participating qualifying facility with a capacity of 900 kilowatts or greater and a Rule 4.100 purchasing agent, approved by the Public Service Board on or before January 1, 1995.

(7) "Qualified cost mitigation charge order" means an order of the Commission that complies with the requirements of this section.

(8) "Rule 4.100" means Public Utility Commission Rule 4.100 or any amended or successor rule regarding small power production or cogeneration.

(9) "Rule 4.100 purchasing agent" means an entity designated by the Commission to perform the power and financial accounting requirements of Rule 4.100.

(10) "Savings" means the total benefit to electric ratepayers resulting from a qualified cost mitigation charge order, including specifically those benefits resulting from modifications of purchase power arrangements and benefits attributable to the availability of a qualified cost mitigation charge order to pay for those modifications, offset by the costs incurred to obtain the qualified cost mitigation charge order and purchase power arrangement modifications.

(b) General. Upon an application submitted by the Rule 4.100 purchasing agent or other person or entity, and subject to the terms and conditions of this section, the Commission may issue within five years following the effective date of this section one or more qualified cost mitigation charge orders. A qualified cost mitigation charge order shall impose mitigation charges payable to the issuer of mitigation bonds in order to finance the costs associated with mitigating one or more power purchase arrangements.

(c) Qualified cost mitigation charge order provisions. A qualified cost mitigation order shall contain, at a minimum, all of the following:

(1) a finding that a qualified cost mitigation charge order will promote the general good within the State of Vermont;

(2) a uniform mitigation charge imposed for the benefit of the issuer on the consumption of all electricity within the State of Vermont to the extent such electricity is conveyed to consumers by electric utilities, and a requirement that such charge be reflected on ratepayer bills in a manner which clearly reflects both the amount of the charge and the reduction in power costs resulting from the charge;

(3) a specific mechanism for automatic adjustment of the mitigation charge, at least annually, in accordance with electricity consumption forecasts prepared by the Rule 4.100 purchasing agent or other entity approved by the Commission, so that the mitigation charge is imposed at all levels designed to provide revenues sufficient to make timely payments of accrued interest and scheduled principal on all mitigation bonds, as well as ongoing administrative expenses, credit enhancement fees, and scheduled overcollateralization amounts with respect to such mitigation bonds. This automatic adjustment may implement a system in which the mitigation charge is initially paid in full by the electric utilities, and uncollectable amounts plus reasonable carrying costs are reimbursed to the utilities as part of the adjustment;

(4) the covenant and pledge of the State of Vermont set forth in subsection (h) of this section.

(d) Approval by the Commission. The Commission may approve within five years following the effective date of this section a qualified cost mitigation charge order for buydowns or other appropriate modifications, except buyouts, of power purchase arrangements upon finding that such an order will promote the general good within the State of Vermont. To determine that such an order will promote the general good, the Commission shall find that:

(1) significant, quantifiable savings are substantially likely to result from the buydowns and other appropriate modification of purchase power arrangements and the amount of such savings;

(2) such savings will be passed on to electric ratepayers pursuant to subsection (m) of this section;

(3) facilities whose power purchase arrangements are the subject of the buydowns or other appropriate modifications will be reasonably assured to continue to operate for the life of their power purchase arrangements.

(e) Additional factors. The Commission shall also give consideration to the following factors:

(1) the feasibility of any prospective alternative methods of achieving ratepayer savings;

(2) any impact of the transaction on existing or prospective opportunities for electric consumers to exercise retail choice;

(3) the impact of the transaction on renewable energy resources;

(4) the specific regulatory and accounting treatment that will be required of the purchasing agent, the issuer, the participating qualifying facilities, and the participating electric utilities; and

(5) such other related factors as the Commission deems appropriate.

(f) Collections and remittances. Mitigation charges and the right to receive mitigation charges shall be property of the issuer. The right to receive mitigation charges shall constitute a present interest in property. If requested by the issuer or any successor that is entitled to receive mitigation charges, mitigation charges shall be collected by each participating electric utility for the benefit of the issuer or the issuer's transferee. Mitigation charges collected by an electric utility shall be remitted by such electric utility to the issuer or its designee within one month after receipt thereof by such electric utility, or such shorter period as shall be designated by the Commission. Upon 30 days' written notice to an electric utility, the issuer or any successor entitled to receive mitigation charges at any time and for any reason may direct that the electric utility shall cease to collect mitigation charges. Any electric utility in possession of mitigation charges shall have no right, title, or interest in such collections, but rather shall hold such collections in trust for the benefit of the issuer.

(g) Nonbypassable. Mitigation charges shall be separately stated on consumers' retail electric bills, and shall be payable regardless of any change in structure or identity of the electric utility, and regardless of any change in ownership or operation of any electric generation, transmission, or distribution facilities. If a consumer pays only part of its electric bill for any period, a pro rata portion of the payment may be applied to payment of the mitigation charge for the period.

(h) State pledge. The State of Vermont covenants and pledges for the benefit of the issuer, any assignee of the issuer, and the owners of mitigation bonds that neither the mitigation charge nor the automatic adjustment mechanism set forth in subsection (e) of this section shall be altered, revoked, amended, postponed, impaired, limited, or terminated by the State of Vermont, by the Commission, or by any other agency or instrumentality of the State, absent adequate provision for the protection of the issuer, any designee of the issuer, and the owners of the mitigation bonds. The Commission, as agent of the State of Vermont, is authorized and directed to deliver written confirmation of this covenant and pledge in connection with the issuance of all mitigation bonds.

(i) Bankruptcy. A qualified cost mitigation charge order shall remain in full force and effect, notwithstanding any bankruptcy, reorganization, or other insolvency proceeding with respect to:

(1) any electric utility or successor or assign of any electric utility; or

(2) the Rule 4.100 purchasing agent or any successor or assign of the Rule 4.100 purchasing agent.

(j) Assignment of mitigation charge revenues. The issuer may grant a security interest in, or otherwise assign mitigation charges and the right to receive mitigation charges in connection with, the issuance of mitigation bonds. Such grant or assignment shall be valid and enforceable without delivery or filing.

(k) Hearing procedure. A qualified cost mitigation charge order shall be issued only upon hearing, following due notice to all electric utilities, the owners of all participating qualifying facilities, the Department, and the Rule 4.100 purchasing agent. A qualified cost mitigation charge order issued under this section shall involve all of the State's electric utilities, absent a showing of good cause by any such utility as to why the requirements and customer benefits resulting from a qualified cost mitigation charge order should not be applicable to it.

(l) Pass-through of savings. A qualified cost mitigation charge order shall contain measures to ensure that savings resulting from that order are passed through to the benefit of electric ratepayers. Such measures may include reduction in utility regulatory assets or creation of regulatory liabilities, adjustments to depreciation or amortization schedules, or the filing of revised tariffs reflecting such savings, which tariffs may be ordered by the Commission without regard to the remaining provisions of this title.

(m) In establishing the appraisal value for the assessment of property taxes on the facilities whose power purchase arrangements are the subject of the buydowns or other appropriate modifications, the municipality may include the amount of any cost mitigation payments made under the authority of this section. For municipalities using an income-based valuation method, the value of any lump sum mitigation payment shall be amortized or prorated over the period of the cost mitigation contract.

(n) Report to Legislature. Upon approval of a cost mitigation order, the Commission shall submit a report to the Legislature containing the order and detailed information on the findings of the Commission, including the risks, savings, and costs likely to result from the buydowns and other appropriate modifications of purchase power arrangements contained in the order. (Added 2001, No. 145 (Adj. Sess.), § 3.)