Kevin P. Coughlan is the assigned Examiner in this proceeding.
Findings of Fact
1. Southwest, a California corporation is a public utility subject to the jurisdiction of this Commission.
2. Southwest needs external funds for the purposes set forth in the Application.
3. The authority to issue debt and equity obligations are for proper purposes, not adverse to the public interest.
4. Authorizing Southwest to determine the precise amount and timing of each debt issue, the market in and method by which each debt issue is effected, and the price, interest rate, and other material provisions of each debt issue is not adverse to the public interest.
5. The use of interest rate risk management contracts, interest rate swap agreements, and other rate management agreements in appropriate circumstances is not adverse to the public interest. These features are tools that may improve the terms and conditions of debt issues and may lower overall cost of money for the benefit of ratepayers.
6. Southwest's California operating revenues are 9.96% of its total gas operating revenues.
7. The § 1904(b) fee (in proportion to Southwest's California operating revenues) is $17,753 and not $26,658.
8. Southwest made an overpayment of $8,905 in the fee required by § 1904(b).
9. Guideline (4) of the Evergreening Guidelines states that any evergreen authorization shall have an initial term of no more than five years, unless suspended or extended by the Commission.
10. The Commission reserves the right to make a full assessment and measurement of evergreening at a future date.
11. The reasonableness of any resulting interest rate and cost of money arising from debt capital is normally subject to review in cost of capital or general rate case proceedings.
12. The Commission does not by this decision determine that Southwest's construction budget, cash requirements forecast, and capital ratios presented herein are necessary or reasonable for ratemaking purposes. These issues are normally tested in general rate case or cost of capital proceedings.
Conclusions of Law
1. This is a ratesetting proceeding.
2. A public hearing is not necessary.
3. The authorized financing transactions are for lawful purposes and the money, property, or labor to be obtained is required for these purposes. The proceeds may not be charged to operating expenses or income.
4. Section 817(d) provides that debt issues may be used for the discharge or lawful refunding of obligations.
5. Section 818 requires Commission authorization for the issue of stocks, bonds, notes, or other evidences of indebtedness payable at periods of more than 12 months.
6. Section 823(d) provides that no note payable at a period of not more than 12 months after the date of issuance of such note shall be refunded, in whole or in part, by any issue of stocks or stock certificates or other evidence of interest or ownership, or of bonds, notes of any term or character, or any other evidence of indebtedness, without the consent of the Commission.
7. Southwest should not use the proceeds from the debt and equity securities authorized by this order to fund capital projects until Southwest has obtained any required Commission approvals for the projects, including any required environmental review under CEQA.
8. Southwest's request for "evergreen authority" should be authorized, subject to the Guidelines in D.93-12-022.
9. The Competitive Bidding Rule applies only to utilities with bond ratings of "A" or higher.
10. This authorization is not a finding of the value of Southwest's stock or property, nor does it indicate approval of matters subject to review in ratemaking proceedings.
11. The money, property, and labor to be procured by Southwest with the proceeds of the debt and equity securities authorized by this decision are reasonably required for the purposes specified in this Decision, and such purposes are not reasonably chargeable to operating expenses or income.
12. Southwest should be refunded the amount of $8,905 for the overpayment of the fee required by § 1904(b).
13. Notice of the filing of the Application appeared on the Commission's Daily Calendar of November 23, 2004. There is no known opposition to this Application, and the authority requested should be granted subject to the conditions set forth in this order.
14. The following Order should be effective immediately so that Southwest may issue as soon as possible the debt and equity securities authorized herein.
ORDER
IT IS ORDERED that:
1. The authority requested in Application (A.) 04-11-020 (Application) and described in the following Ordering Paragraphs is granted pursuant to Pub. Util. Code §§ 816 through 830.
2. Southwest Gas Corporation (Southwest) is authorized to obtain debt capital in an aggregate amount not to exceed $415,000,000 through the direct issuance of one or more types of indebtedness, including, without limitation, debentures, bonds, notes, bank loans, capital leases, private placement, commercial paper programs, extendible commercial notes, bankers' acceptances, and other variable-rate instruments which are or may become available in the capital markets or indirectly through one or more governmental agencies, as identified in A.04-11-020.
3. Southwest may determine the precise amount and timing of each debt financing, the market in, and method by which each is issued, the principal amounts and maturities and, if any, the terms of redemption, repurchase security, other security, subordination and conversion provisions, rights, warrants, and the other terms and provisions and the price and interest rate (which may be fixed, adjustable, variable, or set by auction, remarketing, or other rate setting procedures) of the borrowings and of any securities related thereto or issuable in connection therewith in the manner set forth in the Application.
4. Southwest may enter into interest-rate caps, collars, swaps, hedges, and other financial instruments to manage interest rate risks subject to the conditions appearing on pages 15 and 16 of this decision.
5. Southwest may issue and sell up to 4,000,000 shares of its $1 par value common stock, in addition to its existing authority, by public or private offering, or through its Benefit Plans.
6. Southwest may refinance existing long-term debt described in the Application by the issuance and sale of debt or equity securities authorized in this order.
7. Southwest may refinance, refund, or replace short-term debt with the proceeds of the debt or equity securities authorized in this order.
8. Southwest may evergreen long-term debt securities, preferred stock, and common stock subject to The Guidelines for Energy Utilities: Terms and Conditions for Evergreening Authority, authorized by Decision 93-12-022 through December 31, 2009.
9. Southwest shall provide the Energy Division and the Water Division's Audit and Compliance Branch a report providing the following information concerning the amount of interest rate management contracts and other derivative financial instruments: date of execution, date of expiration, amount, counterparty, counterparty rating, nature of transaction, index used, and termination provisions.
10. Pursuant to § 824 and General Order No. Series 24-B (GO 24-B), Southwest shall maintain records that (i) identify the specific short-term debt, long-term debt, and common stock issued pursuant to this decision, and (ii) demonstrate that the proceeds from the debt and equity securities issued pursuant to this decision have been used only for the purposes authorized by this decision.
11. On or before the 25th day of the month following each quarter, Southwest shall file the reports required by GO 24-B, including activities under the evergreen authorization.
12. Southwest shall comply with all applicable environmental laws and regulations when planning and implementing any capital expenditure programs that are financed, in whole or in part, with the proceeds from the debt and equity securities authorized by this decision.
13. The Fiscal Office shall send Southwest a check in the amount of $8,905, representing overpayment of fee required by 1904(b) for
A.04-11-020 (with CSR # 43375 dated November 22, 2004 and the decision number for this proceeding as reference).
14. The authority granted herein shall be effective until the financing authorization is fully utilized.
15. This proceeding is closed.
This order is effective today.
Dated February 24, 2005, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
DIAN M. GRUENEICH
SUSAN P. KENNEDY
Commissioners