COM/TAS/jt2 Date of Issuance 6/12/2012

Decision 12-06-015 June 7, 2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion to Consider Effectiveness and Adequacy of the Competitive Bidding Rule for Issuance of Securities and Associated Impacts of General Order 156, Debt Enhancement Features, and General Order 24-B.

Rulemaking 11-03-007
(Filed March 10, 2011)

DECISION ADOPTING A NEW FINANCING RULE
AND GENERAL ORDER 24-C

Table of Contents

Title Page

DECISION ADOPTING A NEW FINANCING RULE
AND GENERAL ORDER 24-C 1 1

1. Summary 2 2

2. Background 2 2

2.1. History of the Competitive Bidding Rule 2 2

2.2. Procedural Matters 4 4

3. The Current Competitive Bidding Rule and Other Rules and Orders Applicable to Financing Applications 6 6

3.1. The Competitive Bidding Rule and Exemptions 6 6

3.2. Women, Minority, and Disabled Veterans Business Enterprises 8 8

3.3. Debt Enhancement Features Regularly Requested by Applicants 8 8

3.4. General Order 24-B 11 11

4. Competitive Bidding, Negotiated Bid, and Other Manner of Issuing Debt Securities 12 12

5. New Financing Rule 13 13

5.1. Financing Rule 14 14

5.1.1. Parties Positions 14 14

5.1.2. Discussion 18 18

5.2. Exemptions from the Financing Rule 20 20

5.2.1. Parties Positions 20 20

5.2.2. Discussion 21 21

5.3. Women, Minority, and Disabled Veterans Business Enterprises 24 24

5.3.1. Parties Positions 24 24

5.3.2. Discussion 24 24

5.4. Debt Enhancement Features 27 27

5.4.1. Parties Positions 27 27

5.4.2. Discussion 28 28

6. General Order 24-B 30 30

6.1. Parties Positions 30 30

6.2. Discussion 30 30

7. Comments on Proposed Decision 32 32

8. Assignment of Proceeding 32 32

Findings of Fact 32 32

Conclusions of Law 36 36

ORDER 40 40

Attachment A - Utility Long-Term Debt Financing Rule

Attachment B - Final General Order 24-C

Attachment C - Glossary of Selected Financing Terms

DECISION ADOPTING A NEW FINANCING RULE
AND GENERAL ORDER 24-C

1. Summary

By today's decision, we authorize a Financing Rule as ordered herein (see Attachment A), which replaces the current Competitive Bidding Rule (CBR) authorized in Resolution F-616 in 1986. We authorize the new Financing Rule to account for current market conditions and Commission policies enacted since our last review of the CBR in 1986. These revisions include but are not limited to: 1) allowing utilities to choose whether to issue debt via competitive or negotiated bid, as long as the basis for the method is chosen to achieve the lowest cost of capital; 2) requiring utilities with $25 million or more of operating revenues to make every effort to encourage, assist, and recruit Women-, Minority-, Disabled Veteran-Owned Business Enterprises in being appointed as lead underwriter, book runner or co-manager of debt offerings; 3) eliminating the notification and form of communication requirement for the solicitation of bids; 4) requirements for the use of Debt Enhancement Features; and 5) providing additional exemptions applicable to use of the Financing Rule. Revisions to General Order 24-B include: 1) the filing of a General Order 24-C report on a quarterly then semi-annual instead of a monthly basis; 2) revisions to the type of information provided in such reports; and 3) the elimination of the requirement that a utility maintain a separate bank account to record securities proceeds except as required by the Commission as discussed herein.