11. Assignment of Proceeding
Timothy Alan Simon is the assigned Commissioner and Seaneen M. Wilson is the assigned Administrative Law Judge in this proceeding.
1. Based on SDG&E's forecast of uses, the forecast of funds needed by SDG&E over the period 2010-2012 is $4.9 billion. Of this need:
a. $1,310.61 million will be provided from current financing authority;
b. $2,387 million will be provided from cash from internal sources;
c. $103 million will be provided from short-term debt;
d. $800 million will be provided from new Debt Securities; and
e. $150 million will be provided from new Preferred or Preference Stock.
2. The proper term for securities issued pursuant to Pub. Util. Code §817 is greater than 12 months.
3. The requested financing authority of $800 million of new Debt Securities and $150 million of new Preferred or Preference Stock appears necessary to provide the external funding required to meet SDG&E's projected cash requirements through 2012.
4. The proposed new financing requested by SDG&E and the associated money, property, or labor to be procured or paid for with the proceeds of this proposed new financing, are, pursuant to Pub. Util. Code §§ 817 and 818, reasonably required for proper purposes, which purposes are not, in whole or in part, reasonably chargeable to operating expenses or to income.
5. Resolution F-616 requires utilities to issue debt using competitive bids.
6. Resolution F-616 also provides for exemptions from the CBR for debt issues in excess of $200 million and debt that must be obtained on a negotiated basis.
7. SDG&E and its affiliate Southern California Gas Company have employed ten DBE firms in their First Mortgage Bond offerings since 2004, whose offerings totaled $3 billion.
8. The necessity or reasonableness for ratemaking purposes of SDG&E's construction budget, cash requirements forecast, and capital structure, are normally reviewed and authorized in general rate cases or cost of capital proceedings.
9. GO 24-B requires utilities to submit a monthly report to the Commission that contains, among other things: (a) the amount of debt issued by the utility during the previous month; (b) the total amount of debt outstanding at the end of the prior month; (c) the purposes for which the utility expended the proceeds realized from the issuance of debt during the prior month; and (d) a monthly statement of the separate bank account that the utility is required to maintain for all receipts and disbursements of money obtained from the issuance of debt.
10. The Commission has frequently authorized utilities to report on a quarterly basis the information required by GO 24-B in order to reduce the utilities' administrative and compliance costs.
11. Notice of A.10-05-016 appeared in the Commission's Daily Calendar on May 19, 2010 and no protests were filed.
12. Resolution ALJ 176-3254 preliminarily categorized A.10-05-016 as ratesetting and determined that a hearing would not be necessary.
1. SDG&E should be authorized to issue new Debt Securities of up to $800 million and new par or stated-value Preferred or Preference Stock of up to $150 million, all of which are for proper purposes and consistent with the requirement of Pub. Util. Code §§ 817 and 818.
2. SDG&E should be authorized to issue new Debt Securities including: First Mortgage Bonds; debentures; medium-term notes, direct long-term notes pursuant to a line of credit with banks, insurance companies or other financial institutes; accounts receivable financing; tax-exempt debt issued through one or more political subdivisions; variable rate debt; subordinated debt; "Fall-Away" mortgage bonds; overseas indebtedness; hybrid capital; and foreign securities; issuing such indebtedness as secured or unsecured; in domestic or foreign markets.
3. Pursuant to Pub. Util. Code §851, SDG&E should be authorized to encumber its utility property, including but not limited to accounts receivable and utility property, to secure Debt Securities, authorized herein.
4. SDG&E should be authorized to guarantee the securities of a SPE that is a regulated subsidiary or regulated affiliate of SDG&E, pursuant to § 701.5. The SPE may be created solely for the purpose of issuing securities to the public or privately to support SDG&E's operations or service in which case, SDG&E should have 100% ownership and control of the SPE.
5. SDG&E should be authorized to issue Debt Securities through one or more political subdivisions (also identified as "Authority") to obtain tax-exempt status for the securities, authorized herein, whenever SDG&E's facilities qualify for tax-exempt financing under federal or state law. In this structured financing, SDG&E may be authorized to unconditionally guarantee or otherwise secure the obligations of an Authority. As a means of securing the Authority's obligations, SDG&E should be authorized to issue and pledge or deliver bonds in an equal principal amount to the Authority or a trustee.
6. SDG&E should be authorized to use the following kinds of debt enhancements to manage interest rate risks of its Debt Securities authorized herein: put options; call options; sinking funds; interest rate swaps; swaptions; caps and collars; currency swaps; credit enhancements; capital replacements; interest deferral; special-purpose entity transactions; delayed drawdown; and issuance hedging strategies (including treasury locks, treasury options, forward starting interest rate swaps, and long hedges.
7. SDG&E should be authorized to utilize preference provisions, dividends, redemption provisions, capital replacement, and special-purpose entity transactions in issuances of Preferred or Preference Stock authorized herein.
8. SDG&E should be authorized to utilize electronic means other than telephone, such as e-mail: 1) for the invitation of bids; 2) for the receipt of bids from two or more underwriters or underwriting syndicates; 3) to accelerate, postpone or cancel the scheduled date and time for the receipt of bids and/or vary the terms and provisions of the Debt Securities submitted for bid; and 4) to reject all bids and request resubmission of bids.
9. Consistent with the CBR, SDG&E must use the CBR for all issuances of fixed rate Debt Securities in the form of public offerings of fixed-rate debentures and First Mortgage Bonds of $200 million or less in principal amount (other than tax-exempt securities) that are sold publicly in the domestic market, through competitive bidding.
10. SDG&E should be granted an exemption from the CBR for all issuances of medium-term notes, foreign debt, long-term loans, Debt Securities issued in conjunction with tax-exempt financings, subordinated debt, special-purpose entity transactions, and for all issuances in excess of $200 million.
11. SDG&E should continue to be exempt from the CBR for financings involving Preferred Stock, Preference Stock, and hybrid capital. SDG&E should be exempted from the CBR's one-day notice requirement.
12. SDG&E should file with the Commission, on or before the 25th day of the month following each quarter, a report under GO Series 24-B.
13. The order herein is not a finding of the reasonableness of SDG&E's proposed construction plan or expenditures, the resulting plant balances in rate base, the capital structure, or the cost of money, nor does it indicate approval of matters subject to review in a general rate case or other proceedings.
14. SDG&E should remit a check for $487,000, as required by §§ 1904(b) and 1904.1 of the Pub. Util. Code.
15. The authority granted by this Decision should not become effective until SDG&E has paid the fees prescribed by §§ 1904(b) and 1904.1.
16. SDG&E should not use the proceeds from the debt authorized by this decision to fund its capital projects until SDG&E has obtained all required Commission approvals for the projects, including any required environmental review under CEQA.
17. The order herein does not involve any commitment to any specific project which may result in a potentially significant impact on the environment; thus it is not a project subject to CEQA.
18. The authority granted SDG&E herein is in compliance with Pub. Util. Code §§ 701.5, 816, 817, 818, 824, and 851.
IT IS ORDERED that:
1. San Diego Gas & Electric Company is authorized to issue new Debt Securities up to $800 million for terms of greater than 12 months.
2. San Diego Gas & Electric Company is authorized to issue new par or stated-value Preferred or Preference Stock up to $150 million.
3. San Diego Gas & Electric Company is authorized to issue new Debt Securities and par or stated-value Preferred or Preference Stock in compliance with Public Utilities Code §§ 701.5, 816, 817, 818, 824, and 851.
4. San Diego Gas & Electric Company is authorized to issue new Debt Securities in the form of: First Mortgage Bonds; debentures; medium-term notes; direct long-term notes pursuant to a line of credit with banks, insurance companies or other financial institutes; accounts receivable financing; tax-exempt debt issued through one or more political subdivisions; variable rate debt; subordinated debt; "Fall-Away" mortgage bonds; overseas indebtedness; hybrid capital; and foreign securities; and issuing such indebtedness as secured or unsecured, in domestic or foreign markets.
5. Pursuant to Public Utilities Code §851, San Diego Gas & Electric Company is authorized to encumber its utility property including but not limited to accounts receivable and utility property to secure the Debt Securities authorized herein.
6. San Diego Gas & Electric Company is authorized to guarantee the securities of a Special Purpose Entity that is a regulated subsidiary or regulated affiliate of San Diego Gas & Electric Company, pursuant to Public Utilities Code §701.5. The Special Purpose Entity may be created solely for the purpose of issuing securities to the public or privately to support San Diego Gas & Electric Company's operations or service in which case, San Diego Gas & Electric Company should have 100% ownership and control of the Special Purpose Entity.
7. San Diego Gas & Electric Company is authorized to issue Debt Securities through one or more political subdivisions (also identified as "Authority") to obtain tax-exempt status for the securities authorized herein, whenever San Diego Gas & Electric Company's facilities qualify for tax-exempt financing under federal or state law. In this structured financing, San Diego Gas & Electric Company may unconditionally guarantee or otherwise secure the Authority's obligations to its debt holders. As a means of securing the Authority's obligations, San Diego Gas & Electric Company may issue and pledge or deliver bonds in an equal principal amount to the Authority or a trustee.
8. San Diego Gas & Electric Company is authorized to utilize the following kinds of debt enhancements to manage interest rate risks of its Debt Securities authorized herein: put options; call options; sinking funds; interest rate swaps; swaptions; caps and collars; currency swaps; credit enhancements; capital replacements; interest deferral; special-purpose entity transactions; delayed drawdown; and issuance hedging strategies (including treasury locks, treasury options, forward starting interest rate swaps, and long hedges).
9. San Diego Gas & Electric Company is authorized to utilize preference provisions, dividends, redemption provisions, capital replacement, and special-purpose entity transactions in issuances of Preferred or Preference Stock authorized herein.
10. San Diego Gas & Electric Company is authorized to utilize electronic means other than telephone, such as e-mail: 1) for the invitation of bids; 2) for the receipt of bids from two or more underwriters or underwriting syndicates; 3) to accelerate, postpone or cancel the scheduled date and time for the receipt of bids and/or vary the terms and provisions of the Debt Securities submitted for bid; and 4) to reject all bids and request resubmission of bids.
11. Consistent with the Competitive Bidding Rule, San Diego Gas & Electric Company must use the Competitive Bidding Rule for all issuances of: fixed rate Debt Securities in the form of public offerings of fixed-rate debentures; and First Mortgage Bonds of $200 million or less in principal amount (other than tax-exempt securities) that are sold publicly in the domestic market through competitive bidding.
12. San Diego Gas & Electric Company is granted an exemption from the Competitive Bidding Rule for all issuances of medium-term notes, foreign debt, long-term loans, Debt Securities issued in conjunction with tax-exempt financings, subordinated debt, and special-purpose entity transactions; financings involving Preferred Stock, Preference Stock, and hybrid capital; and for all issuances in excess of $200 million.
13. San Diego Gas & Electric Company is not required to comply with the Competitive Bidding Rule's one-day notice requirement.
14. San Diego Gas & Electric Company must report on a quarterly basis all the information required by General Order 24-B with respect to securities issued pursuant to this Order. However, San Diego Gas & Electric Company must report this information on a monthly basis if directed to do so by the Commission staff.
15. San Diego Gas & Electric Company may not use the proceeds from the debt authorized by this decision to fund its capital projects until it has obtained all required Commission approvals for the projects, and has complied with all environmental laws and regulations applicable to the projects.
16. San Diego Gas & Electric Company must remit a check for $487,000, as required by §§ 1904(b) and 1904.1 of the Public Utilities Code, to the Commission's Fiscal Office at 505 Van Ness Avenue, Room 3000, San Francisco, CA 94102. The number of this Decision must appear on the face of the check. The authority granted by this Decision is effective once San Diego Gas & Electric Company has paid the fees prescribed by § 1904(b).
17. Application 10-05-016 is closed.
This order is effective today.
Dated October 28, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
Commissioner Dian M. Grueneich, being necessarily absent, did not participate.
