6. The Existing Unsecured Line of Credit Does Not Require Commission Authorization

CalWater states that it has entered into an unsecured Credit Agreement⁹ having a three-year term and providing a revolving line of credit for short-term financing to meet operational cash requirements and to facilitate issuance of long-term debt and equity at orderly intervals.

The Credit Agreement established through a syndicate of banks is not secured by the plant, property or equipment of CalWater. Furthermore, the Credit Agreement limits borrowings, loans, credit extensions, and letters of credit under the agreement to terms of 12 months or less and contains a provision requiring that the line of credit must be paid off in full for at least 30 consecutive days out of each 12-month period. CalWater contends that under this provision any debt would qualify as a short-term obligation, not subject to Sections 816-830. CalWater seeks confirmation that its unsecured line of credit and the debt issued under its provisions does not require Commission authorization.

Section 823(b) provides that a utility may issue notes, for proper purposes and not in violation of any provision of law, payable at periods of not more than 12 months after the date of issuance of the notes without consent of the Commission. Our review indicates that the Credit Agreement meets the requirements of Section 823(b).

Although the Credit Agreement meets the requirements of Section 823(b), we remind CalWater that Section 823(d) prohibits refunding short term debt through the issuance of stocks or stock certificates, bonds, notes of any term on character without the consent of the Commission. Therefore, although we find that the Credit Agreement is not subject to Sections 816-830 of the Code, that finding is based on our understanding that none of the debt incurred in the Credit Agreement will be refunded through the issuance of equity or debt securities not authorized by the Commission. On that basis we find that the credit agreement is not subject to Sections 816-830, and CalWater may use the Credit Agreement for operational cash requirements.

⁹ The Credit Agreement is 150 pages in length and therefore exceeds the Commission's size limitations for filing and electronic transmission. A paper copy of the Credit Agreement is identified as Exhibit 1 and received into the record.