N.J. Admin. Code § 14:4-4.7

Current through Register Vol. 56, No. 19, October 7, 2024

Section 14:4-4.7 - Operational separation

(a) No public utility holding company system shall be operated in any way that materially impairs or could reasonably be expected to materially impair the electric or gas public utility's credit, ability to acquire capital on reasonable terms, or ability to provide safe, adequate and proper utility service at just and reasonable rates.

(b) The Board may adopt an appropriate adjustment to the cost of service of an electric or gas public utility if necessary to offset any material adverse effects from its inclusion within a public utility holding company system, including, but not limited to, any adverse effects on the electric or gas public utility's credit ratings.

(c) If an electric or gas public utility's equity to total capitalization ratio, as determined for ratemaking purposes and excluding securitization debt, falls below 30 percent, the electric or gas public utility shall notify the Office of the Chief Economist and Division of Energy. The notice required in this subsection shall be provided within 10 business days after the end of the calendar quarter in which the ratio fell below the required percentage. The Board may adjust the percentage requirement under this subsection if, after notice and hearing, the Board determines an adjustment is necessary to restore the financial integrity of the electric or gas public utility.

(d) If an electric or gas public utility is required to notify the Board under (c) above, the public utility shall not declare a distribution, whether by dividend or by another method, to the public utility holding company system, without prior Board approval, until the public utility's equity to total capitalization ratio increases sufficiently to exceed the applicable percentage level.

(e) An electric or gas public utility shall notify the Board in writing at least 30 days in advance if it intends to do either of the following:

1. Transfer, other than by way of dividend, more than five percent of the electric or gas public utility's retained earnings to the public utility holding company; or

2. Declare a special cash dividend, the effect of which would be to result in an equity to total capitalization ratio below 30 percent.

(f) On or after April 6, 2009, an electric or gas public utility shall not participate in any money pool unless the Board, prior to April 6, 2009, has approved the money pool participation, or unless all of the following requirements are met:

1. The Board has approved the money pool participation in accordance with 48:3-7.1 and 48:3-7.2;

2. Participation in the money pool is restricted to the public utility holding company, other electric or gas public utilities within the public utility holding company system, subsidiary companies providing electric or gas utility service outside of New Jersey and certified or classified as electric or gas utilities by the public utility commission of the state where service is provided, or any other subsidiary in the public utility holding company system;

3. A subsidiary company in the public utility holding company system that is not a public utility or an out-of-State utility is prohibited from borrowing from the money pool;

4. All borrowers in the money pool have, at a minimum, investment grade credit ratings from all applicable nationally recognized statistical rating organization (NRSROs);

5. Borrowings from the money pool by any participant are restricted to the limitation on unsecured indebtedness contained in its certificate of incorporation, if applicable;

6. The fees for administering the money pool, if any, are cost-based and subject to review by the Board for ratemaking purposes; and

7. Loan terms are 364 days or less.

(g) If an electric or gas public utility is authorized under (f) above to participate in a money pool, the electric or gas public utility shall:

1. Record all money pool transactions in a separate general ledger account within the electric or gas public utility's books of account, on an aggregate monthly basis;

2. Not borrow funds for the specific purpose of lending to the money pool;

3. Not borrow from the money pool if funds are available at lower costs, either through bank borrowings or through issuance of commercial paper;

4. File with the Board and/or Board staff quarterly statements comparing the money pool interest rates with the prevailing market interest rates for similarly situated public utilities;

5. Deposit cash in the money pool only if the cash is otherwise available for investment in short-term money markets or other short-term investments; and

6. Ensure that the participating public utility's chief financial officer or designee render money pool-related decisions based on the best interests of the electric or gas public utility's ratepayers.

(h) If a money pool participant has a senior secured credit rating for its outstanding publicly-held securities, and that rating falls below any applicable NRSROs investment grade (for example, BBB- for Standard & Poor's, or Baa3 for Moody's), an electric or gas public utility shall by no later than the third business day thereafter demand repayment of any outstanding loans made through the money pool to such participant, and make no further loans to such participant through the money pool until further notice by the Board or until such participant's senior secured credit rating for the outstanding publicly-held securities is again investment grade.

N.J. Admin. Code § 14:4-4.7

New Rule, R.2009 d.110, effective 4/6/2009.
See: 40 N.J.R. 1616(a), 41 N.J.R. 1500(a).
Recodified from N.J.A.C. 14:4-4A.7 by R.2012 d.091, effective 5/7/2012.
See: 43 N.J.R. 1150(a), 44 N.J.R. 1534(a).