-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FxkuMdzMBhtsgDqEH8BLBYpdg9SueOAUNcCqck7kHne5P02OH1n0t6V38pPdxwQL SkyTgPVNznuVIHOe2AFFrg== /in/edgar/work/0000072741-00-000216/0000072741-00-000216.txt : 20001023 0000072741-00-000216.hdr.sgml : 20001023 ACCESSION NUMBER: 0000072741-00-000216 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20001020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST UTILITIES SYSTEM CENTRAL INDEX KEY: 0000072741 STANDARD INDUSTRIAL CLASSIFICATION: [4911 ] IRS NUMBER: 042147929 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: SEC FILE NUMBER: 070-09697 FILM NUMBER: 743504 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 U-1/A 1 0001.txt AMENDMENT NO. 3 TO FORM U-1 FILE NO. 70-9697 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 3 TO FORM U-1 APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 WITH RESPECT TO THE ISSUANCE OF RATE REDUCTION BONDS AND RELATED TRANSACTIONS The Connecticut Light and Power Western Massachusetts Electric Company Company 174 Brush Hill Avenue 107 Selden Street West Springfield, MA 01090 Berlin, CT 06037 Public Service Company of New Hampshire 1000 Elm Street Manchester, NH 03101 (Names of companies filing this statement and addresses of principal executive offices) NORTHEAST UTILITIES (Name of top registered holding company) Cheryl W. Grise, Senior Vice President, Secretary and General Counsel Northeast Utilities Service Company 107 Selden Street Berlin, CT 06037 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to: Jeffrey C. Miller, Esq. Assistant General Counsel Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 Randy A. Shoop Assistant Treasurer - Finance Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 Richard J. Wasserman, Esq. Day, Berry & Howard LLP CityPlace I Hartford, CT 06103-3499 I. The application/declaration in this file, as amended (the "Application") is amended as follows: A. By replacing paragraph 42 with the following: 42. CL&P and WMECO are seeking approval for their proposed transactions from the Connecticut and Massachusetts public utilities commissions, respectively, and PSNH has obtained approval from the New Hampshire public utilities commission for its proposed transaction. PSNH has also obtained approval from the Maine public utilities commission for its proposed transaction. ____________________ [FN] 20 See supra note 6. B. By replecing paragraph 44 with the following: 44. Exhibits. Each Utility undertakes to file all material financing documents relating to its RRB transaction with the certificate filed pursuant to Rule 24 under the Act after the consummation of such transaction. The following exhibits are filed with this Application (asterisked (*) items were filed with the original Application; double asterisked (**) items were filed with Amendment No. 1 to this Application; triple asterisked (***) items were filed with Amendment No. 2 to this Application; quadruple asterisked items (****) are filed with this Amendment No. 3). C 1 Registration Statement on Form S-3 for the CL&P RRBs (to be filed by further amendment) C 2 Registration Statement on Form S-3 for the WMECO RRBs (to be filed by further amendment) C 3 Registration Statement on Form S-3 for the PSNH RRBs (to be filed by further amendment) *D 1.1 Application of CL&P to the Connecticut Department of Public Utility Control for Approval of the Issuance of Rate Reduction Bonds and Related Transactions D 1.2 Financing Order of the Connecticut Department of Public Utility Control (to be filed by further amendment) *D 2.1 Petition of WMECO to the Massachusetts Department of Telecommunications and Energy for Approval of the Issuance of Electric Rate Reduction Bonds D 2.2 Financing Order of the Massachusetts Department of Telecommunications and Energy (to be filed by further amendment) *D 3.1 PSNH's Settlement Agreement (Exhibit 10.2, NU Form 10-Q for the Quarter ended June 30, 1999, File No. 1-5324) ***D 3.1.1 PSNH's Conformed Settlement Agreement ***D 3.1.2 PSNH's Motion to the New Hampshire Public Utilities Commission for Findings of Fact and for Issuance of Finance Order *D 3.2.1 PSNH's Settlement Order ****D 3.2.2 Finance Order of the New Hampshire Public Utilities Commission ****D 3.2.3 Order of the New Hampshire Public Utilities Commission Addressing the Conformed Settlement Agreement ****D 3.3.1 Application of PSNH to the Maine Public Utilities Commission for the Approval of Reorganization ****D 3.3.2 Maine Public Utilities Commission Approval of Reorganization ***F Opinion of Counsel **G Financial Data Schedules *H Proposed Form of Notice ***H 1 Amended and Restated Proposed Form of Notice II. The following exhibits are filed herewith (exhibit numbers correspond to those contained in the Application): D 3.2.2 Finance Order of the New Hampshire Public Utilities Commission. D 3.2.3 Order of the New Hampshire Public Utilities Commission Addressing the Conformed Settlement Agreement. D 3.3.1 Application of PSNH to the Maine Public Utilities Commission for the Approval of Reorganization. D 3.3.2 Maine Public Utilities Commission Approval of Reorganization. SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned companies have duly caused this statement to be signed on their behalf by the undersigned thereunto duly authorized. THE CONNECTICUT LIGHT AND POWER COMPANY By: /s/Randy A. Shoop Randy A. Shoop Treasurer WESTERN MASSACHUSETTS ELECTRIC COMPANY PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE By: /s/Randy A. Shoop Randy A. Shoop Assistant Treasurer - Finance Date: October 20, 2000 EX-99.1 2 0002.txt EXHIBIT D 3.2.2 - NHPUC FINANCE ORDER EXHIBIT D 3.2.2 Public Utilities Commission DE 99-099 PSNH Proposed Restructuring Settlement Order Addressing Financing Issues Order No. 23,550 September 8, 2000 Douglas L. Patch, Chairman Susan S. Geiger, Commissioner Nancy Brockway, Commissioner DE 99-099 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE Proposed Restructuring Settlement Order Addressing Financing Issues O R D E R N O. 23,550 September 8, 2000 APPEARANCES: Robert A. Bersak, Esq., Gerald M. Eaton, Esq. and Sulloway & Hollis by Martin L. Gross, Esq. for Public Service Co. of New Hampshire; Foley, Hoag & Eliot, LLP by James K. Brown, Esq., Stephen J. Judge, Esq. and Wynn E. Arnold, Esq. of the New Hampshire Attorney General's Office for the Governor of New Hampshire, the Governor's Office of Energy and Community Services and the New Hampshire Attorney General; Mark W. Dean, Esq. of Dean, Rice & Kane, for New Hampshire Electric Cooperative; Seth Shortlidge, Esq. and Lisa Shapiro of Gallagher, Callahan & Gartrell, for Wausau Papers; Rep. Jeb Bradley, member of the Legislature, pro se; Rep. Gary Gilmore, member of the Legislature, pro se; Connie Rakowsky, Esq. of Orr & Reno P.A. for the Granite State Hydro Association and individual hydroelectric facilities; David W. Marshall, Esq. for the Conservation Law Foundation; John Ryan, Esq. for the Community Action Program; Alan Linder, Esq. of New Hampshire Legal Assistance, for the Save Our Homes Organization; James Rubens for THINK - New Hampshire; Pentti Aalto for PJA Energy Systems Designs; Peter H. Grills, Esq. and Elizabeth I. Goodpaster, Esq. of O'Neill, Grills & O'Neill, for the City of Manchester; Susan Chamberlin, Esq. of Donahue, Tucker & Ciandella, for the City of Concord; Carlos A. Gavilondo, Esq. for Granite State Electric/New England Power Company; Robert A. Olson, Esq. of Brown, Olson, and Wilson representing six wood-fired power plants; Steven, V. Camerino, Esq. of McLane, Graf, Raulerson & Middleton, for Great Bay Power Corp. and the City of Claremont; Timothy W. Fortier for the Business & Industry Association of N.H.; James A. Monahan and Andrew Weissman, Esq. of Morrison & Foerster, L.L.P. for Cabletron Systems, Inc.; Joshua L. Gordon, Esq. and Robert A. Backus, Esq. For the Campaign for Ratepayers' Rights; Robert Upton II, Esq. of Upton, Sanders & Smith for the Towns of Bow, New Hampton, Gorham, Hillsboro and Franklin; Robert P. Cheney, Jr., Esq. of Sheehan Phinney Bass + Green P.A. representing JacPac Foods, Ltd.; Mary Metcalf for Seacoast Anti- Pollution League; James T. Rodier, Esq. for Consumers Utility Service Cooperative and Freedom Partners, LLC; Michael W. Holmes, Esq. and Kenneth Traum of the Office of Consumer Advocate representing Residential Ratepayers; John E. McCaffrey, Esq. of Morrison & Hecker, LLP for PUC Staff advocates; Lynmarie Cusack, Esq. of the NH Public Utilities Commission for PUC Settlement Staff, and Larry Eckhaus, Esq. for the Staff of the New Hampshire Public Utilities Commission. I. INTRODUCTION This Order addresses Public Service Company of New Hampshire's ("PSNH") Motion for Findings of Fact and Issuance of a Finance Order, filed with the New Hampshire Public Utilities Commission ("Commission") in this docket on June 23, 2000. This Motion, and its accompanying proposed finance order, was filed in response to the Commission's directive to PSNH to file a request for a finance order pursuant to which rate reduction bonds would be issued, and to include a proposed form of order. See General Counsel letter of June 12, 2000. The scope of this Order is confined to addressing the relief requested in PSNH's Motion. The companion order issued today in this docket, Order No. 23,549, addresses all other remaining issues in this case, and contains a more complete recitation of the procedural history and positions of the parties. As stated in the Motion, the securitization by PSNH of certain of its stranded costs as contemplated by (i) RSA Chapter 369-A, (ii) 1999 N.H. Laws 289, (iii) the "Agreement to Settle PSNH Restructuring" dated August 2, 1999 requires the prior approval by the Commission in the form of a finance order. PSNH asserts that the finance order must contain provisions that maximize the likelihood of achieving "triple-A" ratings on the RRBs and enhance the marketability of the Rate Reduction Bonds ("RRBs"). Accordingly, PSNH included in its filing a proposed detailed description (the "Transaction Description") of PSNH's proposed RRB transaction (the "RRB Transaction"), together with requested findings (the "Findings") and orders and approvals (the "Orders and Approvals"). PSNH requests that the Commission, among other things: (i) approve the issuance of RRBs in an amount not greater than $573 million; (ii) establish the charge from which the RRBs will be repaid; (iii) approve the organization and capitalization of a special purpose financing entity, to which the RRB Charge and other related rights will be sold; (iv) provide for the periodic adjustment of the RRB Charge via a true-up mechanism; (v) approve the general structure of the RRB Transaction and terms of the RRBs; (vi) approve the servicing of the RRB Charge by PSNH, as the initial servicer for the RRB Property, or any successor servicer, under a servicing agreement; (vii) declare that the Finance Order shall be irrevocable as provided in RSA Chapter 369-B; (viii) find the RRB Charge to be just and reasonable; and (ix) find and declare the issuance of the Finance Order to be consistent with the public good. Hearings on this matter and the remaining outstanding issues were held on July 6 and 7, 2000, during which PSNH presented a panel of witnesses who testified in support of its Motion. An opportunity to cross-examine the panel and provide responsive testimony was provided to all parties. Other than the issue of the appropriate level of securitization, which is addressed by the Commission in today's companion order, objections to the relief requested by PSNH's Motion were raised in the post hearing briefs filed by Wausau Papers of New Hampshire ("Wausau") and Great Bay Power Corporation ("Great Bay"). Wausau objects to PSNH's Motion, including the proposed finance order, on grounds that it would violate the unambiguous terms of RSA 369-B and result in an unconstitutionally vague decision. Wausau argues that PSNH's description of the procedures and methodologies it is asking the Commission to approve make it impossible for the Commission to determine with certainty what it is approving. Further, it alleges that a finance order with such vague references to testimony for describing essential terms will be unconstitutionally vague because it will fail to apprise a person of the circumstances upon which the RRB charge will be assessed. Wausau recommends that the Commission explicitly state the terms, procedures and methodologies it is approving, and that the Commission should limit the scope of the post finance order modifications (as a result of negotiations with the rating agencies) to those outlined in Exhibit F-12. Great Bay raises several objections. First, Great Bay claims that RSA 369-B is unconstitutional, but it does not discuss the issue, asserting that the Commission has previously determined that it has no jurisdiction to determine the constitutionality of legislation. Second, Great Bay argues that approval of PSNH's finance proposal would require the Commission to abrogate its responsibility to review the prudence of the utility's expenditures and result in an improper delegation of authority to the State Treasurer. Great Bay points out that PSNH's securitization proposal seeks broad authority to change the terms of the proposed transaction, and seeks approval of terms before the specific amounts or nature of the expenditures are known. Further, Great Bay submits that the proposed finance order allows rating agencies to dictate additional requirements, such as further conditions to be imposed upon a third party supplier seeking to provide billing services. Great Bay argues that RSA 369-B:5, XI, which provides the Treasurer with oversight authority does not require wholesale abrogation of regulatory oversight as, it alleges, is proposed by PSNH. PSNH, according to Great Bay, is proposing that the Commission improperly divest itself of jurisdiction with regard to any matters once the finance order is issued, unless and only if the Treasurer files a complaint. Great Bay submits that the Treasurer's role, as proposed by PSNH, is supposed to constitute part of this proceeding, yet she is not an intervenor, and there is no role provided for any other party in the oversight process. Great Bay also argues that PSNH is requesting that the Commission rule ex ante that numerous expenditures, agreements and actions yet to be known (or, in the case of the Servicing Agreement and Administration Agreement yet to be filed) are reasonable, and that this approach will deny due process for any of the parties participating in the case. In a similar vein, Great Bay argues that PSNH's proposed financing order would result in the Commission's delegating to private rating agencies numerous important matters that could affect the terms of the financing transactions being approved, the cost of those transactions ultimately borne by ratepayers, and the terms on which competitive suppliers may participate in New Hampshire's electric market. On August 28, 2000 the Commission's General Counsel notified the parties by letter that it was necessary to convene a technical session to address certain questions and to obtain clarification on certain portions of the proposed finance order. The State Treasurer was invited to attend the session in respect of her obligations under RSA 369-B:5, IX. Prior to the technical session, the General Counsel circulated to the parties a revised draft of the proposed finance order. The technical session was held on August 31, 2000. As part of the technical session, parties were given an opportunity to submit written comments upon the revised draft proposed finance order by September 1, 2000. Written comments were submitted by Governor's Office of Energy and Community Service ("GOECS"), PSNH, Wausau, and the State Treasurer. As described in greater detail below, we grant PSNH's Motion in most material respects. The Commission finds, however, that there is some merit to the arguments of Wausau and Great Bay concerning the proposed finance order. Therefore, the Commission has not approved the form of proposed finance order originally submitted by PSNH. The order below, consisting of the Transaction Description, Findings and Approvals and Authorizations, has been crafted to more closely adhere to the requirements of RSA Chapter 369-B with respect to the terms and conditions of rate reduction financing, and more precisely define the scope of the necessary flexibility PSNH will have to negotiate the final terms of the bond issuances. In addition, the authority and responsibilities of the Commission and the State Treasurer during and subsequent to the transaction are more clearly spelled out. II. TRANSACTION DESCRIPTION A. The Original Proposed Settlement and the April 19 Order The "Agreement to Settle PSNH Restructuring" dated August 2, 1999 (the "Original Proposed Settlement" or "OPS"), was entered into by and among the Governor of New Hampshire, GOECS, the Office of the Attorney General, the Settlement Staff of the Commission, PSNH, and Northeast Utilities ("NU") "to provide a resolution of all major issues pertaining to PSNH in the electric industry restructuring proceeding of the Commission in Docket No. DR 96-150, as well as in the other dockets and pending litigation described in Section XV" of the OPS. OPS at 1:11. Among its most significant provisions, the OPS provided that the Commission "will be requested, subject to final action by the Legislature as provided in 1999 N.H. Laws 289:3, II" to approve the issuance of rate reduction bonds ("RRBs") to finance a portion of the PSNH's stranded assets. OPS at 61:1754. The OPS asserted that: "securitization is a useful tool for lowering customers' bills and maximizing customer benefits"; it "will allow PSNH to reduce its cost of capital, thereby significantly reducing rates for customers"; and it was a "pivotal element of the settlement" accounting for approximately 4 to 8.2 percentage points of the OPS's proposed 18.3% rate reduction. OPS at 60:1709-1718. NHPUC Order No. 23,443 at 136. Securitization is the financing of a specific asset or pool of assets, through the issuance of securities, frequently referred to as "asset-backed securities." For debt service and repayment of principal, these securities rely solely on the revenue stream underlying the asset or pool of assets, and, as a result, their ratings are dependent upon the predictability or volatility of that associated cash flow. PSNH Witness Englander, Direct Testimony, Phase I, Ex. 6 (hereinafter "Phase I, Ex.6") at 4:15. The parties to the OPS agreed to support legislation that would allow PSNH to securitize a portion of its stranded costs by issuing RRBs. OPS at 60:1725. The OPS provided that passage of acceptable legislation and successful completion of the proposed RRB issue was a condition to implementing the agreement. OPS at 60:1717. The OPS also provided that "the New Hampshire State Treasurer, or other State official designated by the State Treasurer, shall have oversight over the terms and conditions of the RRB issue, including, but not limited to tax aspects and such other arrangements to which the parties may mutually agree, to assure that PSNH exercises fiscal prudence, and achieves the lowest overall cost for the RRBs." OPS at 68:1940. The OPS stated that the Commission would be requested to approve the issuance of $725 million of RRBs to securitize a like amount of the following stranded costs: Seabrook Over-Market Generating Assets (NAEC) $506 million Millstone 3 Over-Market Generating Assets 84 million Acquisition Premium 74 million Acquisition Premium FAS 109 44 million Financing Costs 17 million Total $725 million In its Order No. 23,443 dated April 19, 2000 (the "April 19 Order"), the Commission approved the OPS, subject to the settling parties accepting a number of conditions. Among its findings, the Commission, after careful examination of the record, found that securitization would offer significant cost savings to PSNH's customers. April 19 Order at 200. However, as prescribed in the April 19 Order, the Commission also found that, because of their continuing amortization, and as a result of Competition Day , occurring on or after July 1, 2000 rather than January 1, 2000 as originally modeled, the net book balances of the four stranded assets proposed to be securitized Seabrook Over-Market Generating Assets (NAEC), Millstone 3 Over-Market Generating Assets, Acquisition Premium, and Acquisition Premium - FAS 109 will be approximately $37 million less than the balances assumed and proposed to be securitized in the OPS, as set forth above. April 19 Order at 202. Accordingly, the Commission found that the total level of securitization should be reduced by $37 million, and approved a securitization level of $688 million, including up to $17 million for financing costs. April 19 Order at 283. Following the issuance of the April 19 Order, PSNH notified the Commission of its contingent acceptance of the Commission's conditions for approval of the OPS. PSNH Response to Order No. 23,443, filed May 1, 2000. PSNH responded that it would accept a "cap on securitization to an amount up to $688 million" and that it would "agree to calculate the maximum amount of securitization based upon estimated financial results reconciled to our best-estimate of Competition Day." PSNH Response at 4. Attachment A to PSNH's Response, at page 27, indicated an estimated securitized amount of $575 million. The other parties to the OPS notified the Commission of their acceptance of all of the Commission's conditions. See "Acceptance of Conditions by the Governor's Office of Energy and Community Services and Settling Staff," filed May 1, 2000. Requests for Rehearing, Reconsideration or Clarification of the April 19 Order were filed by: the Towns of Bow, Hillsboro, and Gorham, the City of Franklin and the Village Precinct of New Hampton; Great Bay Power Corporation; Freedom Partners, L.L.C.; Wausau Papers of New Hampshire, Inc.; Cabletron Systems, Inc.; the Office of consumer Advocate, on behalf of itself and EnerDev, Inc., and Granite State Taxpayers, Inc.; the Business & Industry Association of New Hampshire; and the Campaign for Ratepayers Rights, on behalf of itself and Granite State Taxpayers, Inc., THINK-NH, and New Hampshire Public interest Research Group. These motions are addressed in the accompanying Order on Rehearing, issued today by the Commission. B. Legislation 1. 1999 N.H. Laws 289 1999 N.H. Laws 289:3, I, effective July 16, 1999, required the Commission to hold hearings to review any compliance filing under RSA 374-F or settlement proposal that included a securitization proposal. It also required that the Commission, as part of any order addressing the compliance filing or settlement proposal, make a determination as to: whether the securitization proposal contained therein will result in benefits to customers that are substantially consistent with the principles set forth in RSA 374-F:3, RSA 369-A:1, X and RSA 369-A:1, XI; and, whether the rate reduction bonds issued pursuant to the securitization proposal would be successfully traded at favorable rates on the existing securitization market. The Commission was also authorized to issue an order on a settlement proposal that included a conditional securitization proposal for legislative review. Under 1999 N.H. Laws 289:3, II, the Commission was prohibited from permitting the issuance of rate reduction bonds without legislative authorization. In addition, this section provided that any Commission determination regarding securitization would not create a presumption of legislative approval of the necessary authorization to use securitization, and that any Commission conditional order would not become effective until the passage of enabling legislation. 2. 2000 N.H. Laws 249 Following the issuance of the April 19 Order, the General Court enacted 2000 N.H. Laws 249, effective June 12, 2000. This legislation, among other things, creates a new chapter RSA Chapter 369-B which, in the Declaration of Purpose and Findings, finds that implementation of the securitization proposal contained in the OPS, subject to the conditions listed in the April 19 Order, and as further modified by such chapter, will result in benefits to customers that are substantially consistent with the principles contained in RSA 374-F:3, RSA 369-A:1, X and RSA 369-A:1, XI. RSA 369-B:1,VII. RSA Chapter 369-B provides a comprehensive framework for stranded cost securitization and empowers the Commission to issue finance orders approving securitization, subject to the requirements and conditions set forth therein. (a) Limitations on Issuance of RRBs The authority of an electric utility to issue RRBs, once approval from the Commission has been obtained, expires on December 31, 2002. RSA 369-B:5, I. The use of proceeds from the issuance of the RRBs is also strictly limited: they shall only be applied for the purposes approved in the finance order. RSA 369-B:5, II. RRBs issued according to the provisions of RSA Chapter B shall not constitute a debt or liability of the state or any political subdivision thereof, or a pledge of the full faith and credit of the state or any political division thereof, and shall be payable only from the funds provided for, as described below. RSA 369-B:5, IV. RRBs shall mature at the times provided in the finance order, but not later than 14 years after Competition Day. RSA 369-B:5, VIII. (b) Limitation on Aggregate Amount of Securitization, Issuance and Redemption Cost Recovery With Respect to PSNH RSA 369-B:3, IV(b) provides that the Commission may only authorize the issuance of not more than $670 million in rate reduction bonds as part of a settlement to implement restructuring within the service territory of PSNH. It also requires that a financing order may not be issued by the Commission unless it is able to find that PSNH has committed to reducing the maximum amount of financing costs and costs of any premiums associated with the retirement of debt and preferred stock that may be recovered from customers to $15 million. Pursuant to RSA 369-B:3, V, finance orders issued by the Commission that are consistent with RSA Chapter 369-B shall become effective without further action by the General Court. (c) RRB Costs, Charges and Property RRB Costs are costs incurred by and obligations of an electric utility, and designated as such by the Commission, and may include, but not be limited to: (i) expenditures incurred in respect of generation assets, entitlements and acquisition premiums, (ii) expenditures incurred in respect to the buyout, buydown, restructuring, or renegotiation of power purchase obligations, (iii) expenditures incurred in respect to regulatory assets, (iv) expenditures incurred to refinance or retire existing debt or existing equity capital of the electric utility and any costs related thereto, (v) amounts necessary to recover federal or state taxes actually paid by an electric utility, which tax liability recovery is modified by the transactions approved in a finance order issued by the Commission pursuant to RSA Chapter 369-B, and (vi) reasonable costs, as approved by the Commission, relating to the issue, servicing, or refinancing of RRBs under the provisions of RSA Chapter 369-B, including, without limitation, principal and interest payments and accruals, sinking fund payments, debt service and other reserves, costs of credit enhancement, indemnities, if any, owed to the State or the trustee for the RRBs, issuance costs and redemption premiums, if any, and all other reasonable fees, costs, and charges in respect of RRBs. RSA 369-B:2, XIV. The RRB Charge is the portion of the retail electric service rate designated to recover RRB Costs. It is to be assessed on a per kilowatt-hour basis, shall be non-by-passable, and assessed against all "retail customers" of the electric utility distribution system taking "retail electric service." The RRB Charge must be sufficient to recover all RRB Costs approved by the Commission, including the payment of principal, premium, if any, interest, credit enhancement and all other fees costs, and charges of the RRBs. RSA 369-B:2, XII; RSA 369-B:4, I, II and IV. The RRB Charge may vary by cost of service, by customer class, and between special contract customers. RSA 369-B:2, XIII. The RRB Charge is Part 1 of the stranded cost recovery charge ("SCRC") described in the OPS and the April 19 Order. The RRB Charge is to be adjusted periodically, but not less frequently than semi-annually nor more frequently than monthly, as specified in the finance order. RSA 369-B:4, III. (See the description of the "True-Up Mechanism" below). RRB Property is an irrevocable vested property right created by the Commission in a finance order issued under authority of RSA Chapter 369-B. It includes the right to all revenues, collections, claims, payments, money or proceeds arising from the RRB Charge authorized to be imposed and collected pursuant to such finance order. RSA 369-B:2, XV. The RRB Property right shall continue to exist until the RRBs, the RRB Costs and any arrearages are paid in full. RSA 369-B:6, I. (d) State Pledge Not to Impair Rights Pursuant to RSA Chapter 369-B, the State of New Hampshire has pledged, contracted and agreed with the owners of the RRB Property and holders of and trustees for RRBs that neither the State, nor any of its agencies, including the Commission, will limit, alter, amend, reduce or impair the RRB Charge, RRB Property, this Finance Order or any rights hereunder or thereunder, or ownership thereof or security interest therein, until the RRBs, including all principal, interest, premium, costs and arrearages thereon, are fully met and discharged, unless adequate provision is made by law for the protection of the owners, holders and trustees. RSA 369-B:6, II. (e) Sale of RRB Property RRB Property may be sold to an affiliate or one or more financing entities (hereinafter known as a "special purpose financing entity" or "SPE") that make that property the basis for the issuance of the RRBs. RSA 369-B:6, III. The sale or transfer of the RRB Property shall be treated as a "true sale" or absolute transfer, if the parties to the transfer expressly so state in the governing documentation, and the transaction is approved by the Commission in a finance order and is made in connection with the issuance of the RRBs. RSA 369-B:6, V. If any interest in RRB Property is sold or assigned by the utility, the Commission will require the utility to contract with the SPE that it will continue to operate its system to provide service to its retail customers, will collect the RRB Charge for the benefit and account of the SPE, and will remit the amount of the RRB Charge so collected to the account for the SPE. RSA 369-B:6, IV. A SPE or other assignee shall not be considered an electric utility solely by virtue of its acquisition of an interest in RRB Property in the manner described above. Id. The characterization of the transfer of the RRB Property as a "true sale" will not be impaired or negated notwithstanding any contrary treatment of such transfer for accounting, tax or other purposes. RSA 369-B:6, V. The finance order will remain in effect notwithstanding any bankruptcy, reorganization or insolvency proceeding involving the transferor of the RRB Property. Id. The interest of the transferee or assignee in the RRB Property is not subject to setoff, counterclaim, surcharge, or defense by the electric utility or any other person, or in connection with the bankruptcy of the electric utility or any other person. RSA 369-B:6, VIII. (f) Effect of Municipalization Pursuant to RSA 369-B:4, VIII, in the event of municipalization of a portion of PSNH's service territory, the Commission shall, in matters over which the Federal Energy Regulatory Commission does not have jurisdiction, or has jurisdiction but chooses to grant jurisdiction to the State, determine, to a just and reasonable extent, the consequential damages such as stranded investment in generation, storage, or supply arrangements resulting from the purchase of plant and property from PSNH and RRB Costs, and shall establish an appropriate recovery mechanism for such damages. Any such damages shall be established, and shall be allocated between the RRB Charge and PSNH's other rates and charges, in a just and reasonable manner. C. The Conformed Settlement Agreement and the September 8 Order In order to comply with the Commission's procedural letter dated June 12, 2000 (the "Procedural Letter"), PSNH and the other parties to the OPS submitted to the Commission the "Agreement to Settle PSNH Restructuring" dated August 2, 1999, conformed as of June 23, 2000 (the "Conformed Settlement Agreement"). The Conformed Settlement Agreement reflects compliance with the various changes accepted by such parties during the course of the initial hearings in this matter, the conditions set forth in the April 19 Order accepted by such parties, and the new conditions and requirements set forth in RSA Chapter 369-B. In its Order No. 23,549, dated September 8, 2000 (the "September 8 Order" and, together with the April 19 Order the "Settlement Orders"), the Commission approved the Conformed Settlement Agreement and modified the April 19 Order, taking into account, in each case, the enactment into law of RSA Chapter 369-B. D. Proposed RRB Transaction PSNH requests that this Finance Order, among other things, approve the following aspects of its proposed RRB Transaction, and find that they are consistent with achieving the highest rating and therefore the lowest cost on the RRBs. This proposed structure is subject to certain limited modifications, as described below, subsequent to the issuance of this finance order, to allow for negotiations with rating agencies that will assign credit ratings to the RRBs, tax authorities, and market conditions at the time the RRBs are issued. The final structure will be determined at the time the RRBs are priced, subject to meeting certain requirements regarding the all-in cost and the weighted average life of the RRBs, the exercise of fiscal prudence and achievement of the lowest overall cost, and remaining substantially and materially consistent with the transaction structure described herein and approved by the Commission. During the hearings on this matter, PSNH provided its estimation of the overall cost, calculating an effective rate 7.52 percent on the RRBs assuming a RRB coupon rate of 7 percent, a term of 12 years, overcollateralization of 0.50 percent, 5 percent interest on the overcollateralization account, ongoing transaction costs of $220,000 per year, and $17,000,000 of issuance costs (including call premiums to retire debt and preferred stock). Phase I, Ex. 66 (Response to HD-08, Q-RR-001). As provided in RSA 369-B:5, IX, the State Treasurer shall oversee the terms and conditions of the RRB issuances. As provided in RSA 369-B:6, I, the Commission has the authority to initiate such other proceedings, hold such other hearings, and take such other actions as may be necessary to implement, protect, and preserve the value of this finance order, the RRB Charge specified herein, and the RRB Property. Pursuant to the Settlement Orders and RSA 369-B:3, IV(b), PSNH will securitize not greater than $670 million of its overall stranded costs, minus $6 million for each month from October 1 to Competition Day, and including $15 million of financing and debt retirement premium costs. The maximum amount of each of the four categories of stranded costs that may be securitized is as follows: Seabrook Over-Market Generating Assets (NAEC) $494 million Millstone 3 Over-Market Generating Assets 64 million Acquisition Premium and FAS 109 97 million Financing and Debt Retirement Premium Costs 15 million Total $670 million PSNH will recover such amount together with the other, ongoing RRB Costs from its retail customers through an RRB Charge. PSNH's right to collect the RRB Charge is irrevocable as provided in RSA 369-B:3, II, and the charge itself is non-bypassable to PSNH's retail customers pursuant to RSA 374-F:3, XI(d), RSA 369-B:2, XIII, and RSA 369-B:4, IV. The RRB Property is the principal asset securing the RRBs and represents a continuously existing current and irrevocable vested property right created pursuant to RSA 369-B:6, I. 1. Formation/Capitalization of SPE and Sale of RRB Property PSNH will cause the organization of a bankruptcy-remote SPE as a Delaware limited liability company authorized to acquire RRB Property and to issue RRBs. Phase I, Ex. 6 at 17:25; Tr. 7/6/00 at 235:18. As a limited liability company, it will be wholly-owned by PSNH. In order for the SPE to remain "bankruptcy-remote" from PSNH, the fundamental organizational documents of the SPE shall impose significant limitations upon its activities and the ability of PSNH to take actions as the holder of the equity interest therein. The SPE shall be formed for the limited purpose of acquiring the RRB Property and Other SPE Collateral (defined below) and issuing and selling the RRBs. It shall not be permitted to engage in any other activities, and shall have no assets other than the RRB Property and Other SPE Collateral. The SPE shall be managed by a board of managers, trustees or directors, with rights and authority similar to that of a board of directors of a corporation. As long as the RRBs remain outstanding, PSNH shall be required to cause the SPE to have at least two managers, trustees or directors with no affiliation with PSNH, out of a total board of not more than five members. Without the consent of these independent parties, the SPE shall be unable to (a) amend provisions of fundamental organizational documents which ensure the bankruptcy-remoteness of such SPE, (b) institute bankruptcy or insolvency proceedings or to consent to the institution of bankruptcy or insolvency proceedings against it, or (c) dissolve, liquidate or wind up the SPE. Other provisions may also be included to support the bankruptcy-remote character of the SPE as required by the rating agencies. PSNH will capitalize the SPE in an amount anticipated to be at least 0.50% of the initial principal balance of RRBs. Phase I, Ex. 6 at 17:29. This capitalization is required in order that PSNH may treat the RRB issuance by the SPE as debt for tax purposes, and it also provides a source of credit enhancement. The SPE will enter into an administration agreement (the "Administration Agreement") with PSNH, pursuant to which PSNH shall perform administrative services and provide facilities for the SPE to ensure that it is able to perform such day-to-day operations under the RRB Transaction documents. A draft of the Administration Agreement was provided by PSNH in response to Q-RR-004, Ex. F-17. The Administration Agreement incorporates provisions to ensure that PSNH will be paid a fee (the "Administration Fee") as consideration for the performance of such services and providing such facilities, as described in Attachment 2 to the Issuance Advice Letter (as defined below). PSNH shall sell all of its rights in the RRB Property to the SPE, expressly stating in the transfer's governing documentation that it is a sale or other absolute transfer from PSNH to the SPE. Pursuant to RSA 369-B:6, V, this transfer shall be treated as an absolute transfer of all of PSNH's right, title and interest to the SPE, as a true sale. As an absolute transfer or true sale of RRB Property to the bankruptcy-remote SPE, and as provided in RSA 369-B:6, VIII, in the event of a PSNH bankruptcy, the RRB Property owned by the SPE will not become a part of the PSNH bankruptcy estate and PSNH creditors will have no recourse to the RRB Property or RRB Charge. Phase I, Ex. 6 at 18:10. 2. Issuance of RRBs The SPE will issue and sell RRBs to capital market investors in one or more series, each of which may be offered in one or more classes having a different principal amount, term, interest rate and amortization schedule. Phase I, Ex. 6 at 19:4-12. The form, interest rate (whether fixed or variable), amortization schedule, classes, number and determination of credit ratings and other characteristics of RRBs will be determined by PSNH at or before the time of pricing based on then-current market conditions, with the objective being to achieve the all-in lowest cost financing possible, while remaining consistent and in accord with the terms and conditions of the Conformed Settlement Agreement, the Settlement Orders and RSA Chapter 369-B. Under certain circumstances, the RRBs may be subject to redemption prior to maturity and may be refinanced through a subsequent issuance of RRBs to the extent such refinancing would result in a lower interest cost associated with the RRBs refinanced. Any such refinancing would require a new finance order. The all-in cost of the RRBs, calculated in accordance with Exhibit 1 attached to this Finance Order, shall be at least 100 basis points less than PSNH's Pre-Tax Revenue WACC (as defined in Exhibit 2 attached to this Finance Order) as of the date the RRBs are priced. In addition, the weighted average life of all series of RRBs, calculated in accordance with Exhibit 3 attached to this Finance Order, shall be not less than 5 years and not more than 10 years. The State Treasurer, with input and advice from such advisors as she may select, shall oversee the development and determination of the final structure, documentation and terms of the RRBs, and shall notify PSNH and the Commission, as provided in this Finance Order, of the results of her oversight and her conclusions with respect thereto. Upon final determination of all terms of the RRBs, and prior to their issuance, PSNH will file an issuance advice letter substantially in the form of Attachment MAE-1 to Phase I, Ex.6 (the "Issuance Advice Letter"). The RRBs will be non-recourse to PSNH and its assets, and, as provided in RSA 369-B:5, IV, shall not be secured by a pledge of the general credit, full faith or taxing power of the State of New Hampshire or any agency or subdivision of the State of New Hampshire. The RRBs will be secured by the assets of the SPE, including the RRB Property as well as all other assets of the SPE (the "Other SPE Collateral"). The Other SPE Collateral includes (i) the rights of the SPE under all RRB Transaction documents such as the purchase agreement by which the SPE acquires all rights in the RRB Property (including any interest rate swap agreements or other hedging agreements entered into with respect to any variable rate RRBs), and including the servicing agreement (the "Servicing Agreement") by which PSNH, or any successor servicer, acts as servicer for the RRB Property (the "Servicer"), (ii) the Collection Account (as described below) and funds held therein, including the capital of the SPE, and (iii) certain investment earnings on amounts held in the Collection Account. It is expected that the RRBs will be rated by one or more recognized rating agencies. The targeted ratings on the RRBs will be triple-A. Because each class of RRBs will likely receive principal payments at different times, each will have different expected and legal final maturity dates. The RRBs will have legal final maturities not longer than 14 years, in accordance with RSA 369-B:5, VIII, with expected final maturities no more than 12 years from the date of issuance. The RRBs are expected to be sold at or near par value and will not in any event be sold for more than par value. Bondholders will receive interest payments on the RRBs not less frequently than semiannually. The RRBs will not be subordinated to the claims of any creditors or the equity owner of the SPE (other than for payments of trustee, servicing, and other specified transaction-related fees). RRBs will be repaid through the collection of the RRB Charge from all retail customers, by PSNH or any successor to the PSNH distribution system or any other successor Servicer. The SPE will transfer the proceeds from the issuance of the RRBs, net of its transaction expenses, if any, to PSNH as consideration for the transfer of the RRB Property to the SPE. If variable rate RRBs are issued, the SPE shall enter into an interest rate swap agreement or other hedge arrangement whereby the SPE would make fixed payments to a counterparty, and the counterparty would make variable rate payments to the SPE who would remit or credit such amounts to RRB holders. In this case, the fixed rate payments would be used to calculate the RRB Charge. This protects the SPE and retail customers against the risk that interest rate fluctuations would cause variable rates to exceed the fixed rates that were used to calculate the RRB Charge. To the extent that the variable rate of the RRBs ever exceeds the fixed rate that was used to calculate the RRB Charge, such a mechanism will absorb the rate increase that would otherwise be required to fully pay the interest on the RRBs. Phase I, Ex. 6 at 22:20. The RRBs may only be variable-rate instruments if such issuance will result in a lower all-in cost associated with the RRBs. Id. at 22:14. 3. The RRB Charge The RRB Charge will be calculated and set at levels intended to provide for the full recovery of payments of interest, principal and premium, if any, on the RRBs, in accordance with the expected amortization schedule determined at the time of offering, any credit enhancement, including overcollateralization, and any ongoing related fees, costs, and expenses (including, but not limited to, periodic rating agency fees, accounting fees, legal fees, the Servicing Fee, the Administration Fee, trustee fees, contingent indemnity obligations in the RRB Transaction documents, servicer and trustee expenses and any operating expenses of the SPE), based upon assumptions including sales forecasts, payment and charge-off patterns, and lags between RRB Charge billing and collection by the Servicer (the required periodic payment of such, including deficiencies on past due amounts for any reason, the "Periodic RRB Payment Requirements" and collectively, the "Total RRB Payment Requirements"), calculated pursuant to the methodology set forth in the Issuance Advice Letter. Phase I, Ex. 6 at 24:26 and 25:9. Prior to the issuance of each series of RRBs, PSNH will file an Issuance Advice Letter with the Commission, which will set forth the final structure and repayment terms of the RRB Transaction, the total principal amount and pricing of the RRBs, the initial RRB Charge, the overcollateralization amount (described below) and targeted transaction subaccount balances (described below), the capital contribution amount, the frequency of the true-ups and dates of true-up filings and the actual transaction costs. Such filing is not a condition to the authority to issue RRBs. The RRB Charge is expected to be collected over 12 years such that the principal and interest and other costs associated with RRBs are fully paid by the end of the 12th year. However, in the event that the RRBs have not been fully repaid by the end of the 12th year, the RRB Charge may be billed and collected for an additional 2 years (or, if earlier, through the date on which the RRB Costs have been fully paid). This additional period of up to 2 years is a form of credit enhancement that helps achieve triple-A ratings on the RRBs and which is expected to have no cost to retail customers (i.e., in the expected case, the RRBs are paid in 12 years). Tr. 7/6/00 at 237:11. As provided in RSA 369-B:4, V, the RRB Charge will be included as a component of the unbundled SCRC line item on a retail customer's bill and will be footnoted as such and may include reference to it being sold to the SPE. 4. Servicing of RRBs After the issuance of the RRBs, PSNH will act as the Servicer for the RRB Property on behalf of the SPE, and will be responsible for calculating, billing, collecting, and remitting the RRB Charge. RSA 368-B:6, IV. PSNH, therefore, will carry out billing and collection activities both as Servicer with respect to the RRB Charges' on behalf of the SPE and RRB holders' and as principal with respect to its own charges to be paid by such customers, including Part 2 and Part 3 of the SCRC. As Servicer, PSNH will also be obligated to retain all books and records regarding the RRB Charge, subject to the right of the SPE, and the trustee for the RRBs and the Commission to inspect those records. PSNH may not resign as Servicer or transfer its servicing obligations (except to a successor to its distribution system), although the RRB holders may remove PSNH as Servicer and appoint a successor Servicer, subject to the approval of the Commission, under the Servicing Agreement pursuant to this Finance Order, RSA 369-B:6, I, and the RRB Transaction documents. As consideration for its servicing responsibilities, PSNH or any successor Servicer will receive a market-based periodic servicing fee (the "Servicing Fee"), as described in Phase I, Ex. 6, which will be recovered through the RRB Charge. The Servicing Fee will be equal to 0.25% of the outstanding principal balance of the RRBs if PSNH is the Servicer. For any successor Servicer, the Servicing Fee will be no more than 1.5% of the outstanding principal balance of the RRBs if the successor Servicer is not billing the RRB Charge in conjunction with other charges. If the successor Servicer is billing the RRB Charge in conjunction with other electric service charges, then the Servicing Fee payable to such successor Servicer will be 0.25% of the outstanding principal balance (equal to the fee payable to PSNH as initial servicer). PSNH (or any successor Servicer) will bill and collect the RRB Charge from PSNH's retail customers. Phase I, Ex. 6 at 34:5-22. In accordance with RSA 369-B:4, IV, any retail customer that fails to pay any RRB Charge will be subject to disconnection of service to the same extent that such customer would, under applicable law and regulations, be subject to disconnection of service for failure to pay any other charge payable to an electric utility. PSNH or any successor Servicer will periodically remit (as frequently as required by the rating agencies but not less frequently than monthly) actual collections of RRB Charges to the SPE. PSNH testified that it anticipated being required by the rating agencies to remit such actual collections of the RRB Charge to the SPE on a daily basis. Tr. 10/29/99 at 233:14. To the extent PSNH or any successor Servicer may be permitted to remit such RRB Charge collections to the SPE less frequently than daily, it may be required by the Commission to provide data showing the calculation of the customer daily remittances, timing of remittances to the SPE and the then applicable short-term interest rate to determine the amount of income earned by PSNH or its successor in its capacity as Servicer. Such income may be imputed in calculating and reconciling the SCRC pursuant to Section V.B.4 of the Conformed Settlement Agreement. To the extent estimation of collections of the RRB Charge is required, PSNH will design a methodology that will be satisfactory to the rating agencies, and which will approximate most closely actual collections. The SPE will use the RRB Charge remittances to make payments of Periodic RRB Payment Requirements. In accordance with RSA 369-B:7, VI and VIII, in the event of default by any Servicer in payment of the RRB Charges to an SPE, the Commission will, upon application by (a) the trustees or holders of the RRBs, (b) such SPE or its assignees or (c) pledgees or transferees of the RRB Property, order the sequestration and payment to or for the benefit of such SPE or such other party of revenues arising with respect to the RRB Property. This will provide additional certainty that the RRB Charges will benefit the owner of the RRB Property and serve to enhance the credit quality of the RRBs. Phase I, Ex. 6 at 34:30. Unless a successor Servicer is not billing the RRB Charge in conjunction with other charges, the Servicer will allocate amounts collected from each retail customer on a pro rata basis among the SCRC and the Delivery charge, system benefits charge, energy consumption tax, Hydro-Quebec support payments, and, if applicable, the transition or default service charges as these charges are identified in Section V of the Conformed Settlement Agreement. Such amounts so allocated to the SCRC shall, in accordance with the Conformed Settlement Agreement, in turn be allocated pro rata among the RRB Charge, or Part 1 of the SCRC, and to any remaining portion of the SCRC not the subject of a finance order (i.e., Parts 2 and 3 of the SCRC, as described in the Conformed Settlement Agreement). 5. Third Party Suppliers The Commission shall not permit, approve or require the billing, collection and remittance of RRB Charges by a Third Party Supplier (a "TPS") within the PSNH service territory for remittance to PSNH as Servicer (or to any successor Servicer), in whole or in part, unless the following minimum requirements apply: The TPS must provide PSNH (or any successor Servicer) with total monthly kWh usage information in a timely manner for the Servicer to fulfill its obligations, as such information is the basis of such remittance. PSNH (or any successor Servicer) will be entitled, within seven days after a default by the TPS in remitting any RRB Charges billed, to assume responsibility for billing all charges for services provided by PSNH (or any successor Servicer), including the RRB Charges, or to switch responsibility to a third party, which must meet the criteria herein described. If and so long as a TPS does not maintain at least a triple-B long-term unsecured credit rating from Moody's Investors Service or Standard & Poor's Rating Services, such TPS shall maintain, with the Servicer or as directed by the Servicer, a cash deposit or comparable security equal to at least one month's maximum estimated collections of RRB Charges, in a form and manner as agreed upon by PSNH (or any successor Servicer) and the TPS. In the event of a default in the remittance of RRB Charges by a TPS, such amount will be included in the periodic adjustment of the RRB Charge as described in the PSNH Testimony. The TPS must agree to remit the full amount of RRB Charges it bills to retail customers, regardless of whether payments are received from such retail customers, within 15 days of its or PSNH's (or any successor Servicer's) bill for such charges. The foregoing requirements may be modified in accordance with the terms of the RRB financing documents, subject to approval by the Commission, and written confirmation from each rating agency then maintaining a rating on the RRBs that such change will not adversely affect the ratings then outstanding on the RRBs. 6. Credit Enhancement; Overcollateralization and True-Up Credit enhancement is typically necessary in securitization transactions to provide rating agencies and investors with added confidence that principal and interest will be paid. Phase I, Ex. 6 at 25:28. In order for the RRBs to receive triple-A ratings, the exposure to losses due to, among other things, sales of energy below those projected, longer-than-expected delays in bill collections, and higher-than-estimated uncollectible accounts, must be minimized. Id. at 26:7. This will be accomplished with various forms of credit enhancement, including the various components of the Collection Account and the "True-Up Mechanism" summarized below. The RRB Charge collections will be deposited into a Collection Account, which will be comprised of a General Subaccount (which will hold the collections with respect to principal, interest, fees, and expenses) and at least three other subaccounts the Overcollateralization Subaccount (which will hold the Overcollateralization amount described below), the Capital Subaccount (which will hold the initial capital contribution to the SPE), and the Reserve Subaccount (which will hold any excess collections of RRB Charges as described below). Id. at 26:24-28:13. RRB Charge collections in excess of Periodic RRB Payment Requirements will be allocated (a) to the Capital Subaccount to the extent the amount therein has been reduced to below the initial capital contribution, (b) to the Overcollateralization Subaccount up to the required level established at issuance by the rating agencies and (c) to the Reserve Subaccount any remaining amounts. To the extent that RRB Charges are insufficient to make scheduled Periodic RRB Payment Requirements during any period, the accounts will be drawn upon in the following order (a) the Reserve Subaccount, (b) the Overcollateralization Subaccount and (c) the Capital Subaccount. A more detailed description of the Collection Account allocation procedure is set forth in Phase I, Ex. 6 at 28:16-30:8. The RRB Charge will be calculated (both initially and as a result of the "True-Up Mechanism" described below) to recover an amount in excess of the amounts needed to make payments of principal, interest, fees and expenses on RRBs (such amount, "Overcollateralization"). Id. at 27:20. The actual amount of Overcollateralization required to achieve the highest credit rating will be finalized prior to the issuance of the RRBs and will depend primarily on rating agency requirements and tax considerations, but is currently expected to be at least 0.50% of the initial principal amount of the RRBs. Id. at 27:29. The Overcollateralization will be collected "pro rata" over time and deposited to the Overcollateralization Subaccount such that the amount therein will accumulate over time in accordance with a schedule set forth at issuance. Id. at 28:1. PSNH will file adjustments, up or down, to the RRB Charge pursuant to a true-up mechanism established in accordance with RSA 369-B:4, III and as described in Phase I, Ex. 6 at 30:9-32:31 (the "True-Up Mechanism"). The True-Up Mechanism is a periodic adjustment to the RRB Charge which is designed to account for any previous or projected over- or under-collections of the RRB Charge. At least semi-annually and as frequently as monthly, PSNH will request an RRB Charge adjustment such that, during the period for which that RRB Charge will be billed, RRB Charge collections will be sufficient to (a) pay principal and interest on the RRBs in accordance with the expected amortization schedule, (b) maintain the Overcollateralization Subaccount balance at the required levels, (c) restore the capital contribution to the Capital Subaccount to the extent it has been drawn upon to make payments on RRBs and (d) pay fees and expenses related to RRBs, including any ongoing fees and expenses associated with any other credit enhancement. Any amounts on deposit in the Reserve Subaccount at the time that PSNH calculates a periodic RRB Charge adjustment, will be incorporated in such adjustment. PSNH, as initial Servicer (or any successor Servicer), intends to account for, and ultimately credit to retail customers, any amounts remaining in the Collection Account, with the exception of the amount remaining in the Capital Subaccount, after the RRBs are paid in full and the Total RRB Payment Requirements have been discharged. Such amounts will be released to the SPE free and clear of any lien in the favor of the RRB trustee upon retirement of the RRBs and discharge of the Total RRB Payment Requirements. These amounts will be credited to retail customers through a subsequent ratemaking proceeding or such other manner as the Commission may direct at that time. Not later than thirty days prior to each semiannual anniversary of the RRB Transaction closing, PSNH as Servicer (or any successor Servicer) will file with the Commission a periodic RRB Charge true-up advice letter ("Routine True-up Letter", a form of which was included as Attachment 3 to Phase I, Ex. 6). Further, to the extent required by the rating agencies (and also to the extent described in the Conformed Settlement Agreement prior to the Recovery End Date, ("RED", as defined in the Conformed Settlement Agreement)), PSNH may file Routine True-Up Letters, as frequently as monthly, in addition to the Routine True-Up Letter filed prior to each semiannual anniversary of the RRB Transaction. Absent manifest error in the Routine True-Up Letter, the resulting upward or downward adjustments to the RRB Charge will be effective: (i) in the case of any semiannual adjustment, on the ensuing semiannual anniversary of the RRB Transaction closing; or (ii) in the case of a more frequent adjustment, immediately upon the filing of the applicable Routine True-Up Letter. In addition, PSNH seeks Commission authorization that whenever it is determined that the methodology used to calculate RRB Charge adjustments requires modification to more accurately project and generate adequate RRB Charge collections, a non-routine true-up letter ("Non-Routine True-Up Letter") may be filed, with the resulting RRB Charge adjustment (reflecting such modification to the methodology or model) only to be effective upon review and approval by the Commission that such adjustment is necessary to ensure the timely recovery of all RRB Costs that are the subject of this Finance Order, with such review and determination to occur within 60 days of such filing. RSA 369-B:4, III. Both Routine True-Up Letters and Non-Routine True-Up Letters may be filed through the legal final maturity date. Pursuant to the Conformed Settlement Agreement and RSA 369-B:3, IV(b)(9), the SCRC, averaged over all customers (including Part 1, the RRB Charge), shall not exceed 3.40 cents/kWh. If the RRB Charge is increased or decreased pursuant to the True-Up Mechanism, the SCRC, averaged over all customers, will remain capped at 3.40 cents/kWh. Thus, any increase in the RRB Charge will result in an adjustment to the Part 3, and, if necessary or if the RED has occurred, Part 2 components of the SCRC. Unless PSNH's unsecured debt achieves investment grade ratings, PSNH may be required by the rating agencies to obtain a letter of credit or other credit enhancement to protect against any cash collection losses resulting from the temporary commingling of funds. If (and for so long as) such credit enhancement is required, the RRB Costs and the RRB Charge will be adjusted accordingly to cover the cost of such enhancement. 7. Tax Considerations The possibility that the Internal Revenue Service (the "IRS") would assess income taxes when this Finance Order is issued or when PSNH receives the initial proceeds from the RRBs, rather than when the RRB Charge revenues are collected, is an issue to PSNH associated with financing the RRB Costs. In addition to having tax consequences, this would also significantly affect the economics of issuing the RRBs, as the benefits of the RRB Transaction depend largely upon recognizing taxable income in respect of RRB Costs as RRB Charges are paid by retail customers, rather than being accelerated into current income upon the issuance of the RRBs. Phase I, Ex. 6 at 36:25. PSNH has submitted a private letter ruling request to the IRS seeking confirmation that (a) the issuance of this Finance Order by the Commission authorizing the collection of RRB Charges will not result in gross income to PSNH; (b) the issuance of RRBs by the SPE will not result in gross income to PSNH; and (c) RRBs will be treated as obligations of PSNH for tax purposes. If the RRB Transaction results in current income taxation, the benefits of the RRB Transaction would be substantially reduced. Should the IRS choose not to provide a ruling, or rule adversely, PSNH would reassess the RRB Transaction and, if possible, modify it to eliminate the risk of current taxation. Based upon favorable IRS rulings previously issued in respect of several previous RRB transactions, PSNH anticipates a favorable ruling. Id. at 37:14. Under RSA 369-B:5, IV and VI, the RRBs will be treated as notes or bonds of a political subdivision of the State for purposes of the interest and dividends tax imposed under RSA Chapter 77, but will not constitute in any way a debt or liability of the State or of any political subdivision thereof and shall not constitute a pledge of the full faith and credit of the State or any of its political subdivisions. 8. Accounting and Financial Reporting The amount financed through the RRB Transaction is expected to be recorded in accordance with generally accepted accounting principles ("GAAP") as long-term debt on the balance sheet of the SPE for financial reporting purposes. PSNH, the SPE, and the holders of RRBs will expressly agree pursuant to the terms of the applicable documents to treat the RRBs as debt of the SPE secured by, among other things, the RRB Property and the Other SPE Collateral. Because PSNH either will wholly-own or become the sole beneficial owner of the SPE, it is required that the SPE be consolidated with PSNH for financial reporting purposes under GAAP. Therefore, the SPE's debt will appear on the consolidated balance sheet of PSNH in its annual and quarterly financial filings to the Securities and Exchange Commission. Phase I, Ex. 6 at 36:8. The RRB Transaction is not expected to impact PSNH's credit ratings, as it is expected that the rating agencies will determine that the RRBs, which are not supported by PSNH's general revenue stream, and not collateralized by the assets of PSNH, do not affect PSNH's creditworthiness. Id. at 36:18. Therefore, it is anticipated that the rating agencies will exclude the RRBs as debt of PSNH for purposes of calculating financial ratios. 9. True-Sale Opinion and Collection Shortfalls Rating agencies will require acceptable opinions of bankruptcy counsel at the time the RRBs are issued for assurance that the SPE and the RRB Property will be bankruptcy-remote from PSNH. As described above, to obtain such opinions, the transfer of the RRB Property from PSNH to an SPE must constitute a legal "true sale" such that if PSNH were to become the subject of a bankruptcy or insolvency case, the RRB Property would not be part of PSNH's bankruptcy estate and therefore would not be subject to the claims of PSNH's creditors. Id. at 36:13. RSA 369-B:6, V expressly provides that transfers of RRB Property, as described in that section and as approved in a finance order, shall be treated for all purposes as an absolute transfer as a true sale. In addition, the RRBs will be non-recourse to PSNH and its assets, other than the RRB Property sold to an SPE and the Other SPE Collateral. Another element of the bankruptcy analysis focuses on the separate legal status of PSNH and the SPE. Although PSNH either will wholly-own or become the sole beneficial owner of the SPE, the RRB Transaction will be structured so that, in the event of a bankruptcy of PSNH, the SPE's separate legal existence would be respected and the assets and liabilities of the SPE would remain separate from the estate of PSNH. The structural elements supporting such separate existence include, without limitation, requirements that the SPE be adequately capitalized, that PSNH be adequately compensated on an arms-length basis for the servicing functions it performs in billing, collecting, and remitting the RRB Charges, and that PSNH and the SPE take certain steps to ensure that creditors are not misled as to their separate existence. These structural protections are important because, without such protections, a bankruptcy court might invoke the doctrine of "substantive consolidation" and disregard the SPE's separate existence. Substantive consolidation is an equitable doctrine in bankruptcy cases that allows courts to disregard the separate existence of two or more affiliated entities to ensure the equitable treatment of all creditors and to maximize creditor recoveries. When entities are "substantively consolidated" in a bankruptcy proceeding, their assets and liabilities are pooled, thereby eliminating intercompany claims, and claims of third-party creditors against any of those entities are generally treated as claims against the common pool of assets created by consolidation. In order to preserve the bankruptcy-remote status of the SPE and the true-sale nature of the RRB Property and Other SPE Collateral once it is transferred to the SPE, PSNH cannot have any claim against the RRB Charges. In its capacity as Servicer, PSNH will bill RRB Charges along with other charges for services rendered to retail customers obligated to pay such charges. Amounts collected from a retail customer which are allocated to the SCRC in accordance with the Conformed Settlement Agreement and this Finance Order shall, in accordance with the Conformed Settlement Agreement and this Finance Order, in turn be allocated pro rata to the RRB Charge (Part 1 of the SCRC) and to any remaining portion of the SCRC not the subject of a finance order (Parts 2 and 3 of the SCRC). If PSNH collects less than the full amount that is billed to such customers, it is not permitted, in the allocation of such collections, to favor itself over the SPE, as owner of the RRB Property. 10. Use of Proceeds PSNH will use the proceeds of securitization in such manner as the Commission approves in this Finance Order, but intends generally to provide for the following: payment of transaction costs; payment of taxes; reduction of capitalization and payment of call and tender premiums and refinancing costs associated therewith; and provision for the required buy-down of the Seabrook Power Contract with North Atlantic Energy Corporation ("NAEC") and other purchased power obligations, including the prefunding of decommissioning costs. The following represents a preliminary estimate of the use of proceeds: Buyout of Power Purchase Obligations $329 million Retire PSNH Capital 326 million Financing and Debt Retirement Premium Costs 15 million Total Use of Proceeds $670 million PSNH shall deploy the total proceeds received related to restructuring, including those arising from asset sales, in a manner that will provide the greatest possible savings to retail customers. Because the timing and amount of such proceeds is not yet known, and market conditions at the time of repurchase cannot be predicted with certainty, the amounts listed above are subject to change. III. FINDINGS Based on the foregoing, the Commission hereby FINDS: Overall Findings 1. The issuance of this Finance Order, the implementation of the securitization transaction described above in the Transaction Description and the consummation of the RRB Transaction in accord thereof, are consistent with the public good and will result in benefits to retail customers that are substantially consistent with the principles contained in RSA 374-F:3 and RSA 369-A:1, X, with RSA 369-A:1, XI, and with RSA Chapter 369-B. 2. The issuance of this Finance Order is pursuant to a petition by PSNH and hearings on that petition in this proceeding. 3. The issuance of this Finance Order is in the public interest as set forth in RSA 369-B:1, IX. 4. The issuance of this Finance Order, the implementation of securitization and the consummation of the RRB Transaction will permit any RRBs issued pursuant to the RRB Transaction to be traded successfully at favorable rates on the existing securitization market in accordance with 1999 N.H. Laws 289:3, I, which the Commission interprets to mean sold at favorable rates into the capital markets. Findings Regarding Authority and Procedures 5. The issuance of this Finance Order is part of a settlement approved by the Commission under RSA Chapter 374-F to implement electric utility restructuring within the service territory of PSNH. 6. The Commission has conducted the procedures and investigations in this proceeding and issued this Finance Order pursuant to 1999 N.H. Laws 289:3 and RSA Chapter 369-B. Findings Regarding the Establishment of the RRB Costs 7. Pursuant to the Commission's determination in the September 8 Order that PSNH may securitize up to $670 million of its stranded costs (consisting of Seabrook Over-Market Generating Assets (NAEC), Millstone 3 Over-Market Generating Assets, Acquisition Premium and FAS 109, and Financing and Debt Retirement Premium Costs), this entire amount is eligible to be considered "RRB Costs" within the meaning of RSA 369-B:2, XIV, is reasonable and is eligible to be funded with the proceeds of the RRBs issued under the authority of this Finance Order. 8. The up-front and ongoing transaction costs, the cost of any credit enhancement associated with the RRB Transaction, the cost of any swap agreement or hedge transaction related to the RRBs, and any other fee, cost or expense in respect of the RRBs as described in the Transaction Description, are "RRB Costs" within the meaning of RSA 369-B:2, XIV, are reasonable and are eligible to be financed through the issuance of the RRBs, in accordance with this Finance Order. 9. All RRB Costs may be recovered through the RRB Charge, to be assessed against and collected from all of PSNH's retail customers taking retail electric service. Findings Regarding the RRB Charge 10. The RRB Charge to be established, adjusted, maintained and collected from all retail customers during the term that the RRBs are outstanding in accordance with the terms of the Conformed Settlement Agreement, the Settlement Orders and RSA Chapter 369-B, and as described in the Transaction Description, is just and reasonable. This ultimate finding is based upon the totality of evidence presented on the record of this proceeding. This ultimate finding is also based upon the Commission's specific reliance upon sworn representations of NU and PSNH witnesses during the hearing on this matter that if, because of PSNH's conduct, the actual RRB Charge or RRB Transaction is found to differ in a significant, material or unreasonable way from the terms of this Finance Order, the Conformed Settlement Agreement, the Settlement Orders or RSA Chapter 369-B, the Commission will have the jurisdiction and authority with respect to PSNH or its successors to take such remedial rate-making measures as necessary in order to protect the public interest and to restore the equitable, appropriate and balanced result previously determined to exist. The evidence presented also supports the following specific findings. The RRB Charge: (a) will be a non-bypassable, nondiscriminatory, appropriately structured charge of limited duration; (b) will be a monthly usage-based charge to be stated on each retail customer's monthly bill; (c) will be in an amount necessary and sufficient to provide for the full recovery and payment of the Total RRB Payment Requirements; and (d) will be a component of the SCRC. 11. The procedures and methodologies for adjusting the RRB Charge as necessary to ensure the timely recovery of all RRB Costs during the term that the RRBs are outstanding, as set forth in the Transaction Description, are just and reasonable, will serve to reconcile the actual RRB Charge collected with the RRB Charge expected to have been collected during the relevant prior periods in a manner such that the adjusted RRB Charge will be sufficient to provide for the full recovery of the Total RRB Payment Requirements in accordance with the Conformed Settlement Agreement, the Settlement Orders, and this Finance Order, and comply with RSA 369-B:4, III. 12. The procedures and methodologies for ensuring that the RRB Charge is collected from all retail customers that obtain retail electric service from other electricity service providers, as described in the Transaction Description, are reasonable and will be sufficient to provide for the full recovery of the Total RRB Payment Requirements in accordance with the Conformed Settlement Agreement, the Settlement Orders, RSA 369-B:4, IV and this Finance Order. 13. The procedures and methodologies for allocating amounts collected from retail customers that purchase or otherwise obtain back-up, maintenance, emergency or other delivery or energy service, on a pro rata basis among the SCRC and the Delivery Charge, system benefits charge, energy consumption tax, Hydro-Quebec support payments, and, if applicable, the transition or default service charges as these charges are identified in Section V of the Conformed Settlement Agreement and other rates and charges, as described in the Transaction Description and PSNH's Retail Delivery Service Tariff as filed with the Commission in this proceeding, are reasonable. 14. The range of rates projected for the RRB Charge, based on evidence in the record concerning estimated interest costs, electricity costs, other economic factors, and the procedures and methodologies for establishing rates more generally set forth in the Conformed Settlement Agreement and the Settlement Orders, are equitable, affordable and appropriate and reasonably balance the competing interests of consumers and RRB investors so that RRB investors will realize a reasonable return and retail customers will not suffer any undue burden. 15. The assumptions and projections upon which the RRB Charge and projections as to future RRB Charges are based, including but not limited to the load forecast and the projection of wholesale electric prices, are reasonable. 16. The Commission finds that the SCRC, averaged over all customers (including the RRB Charge), will not exceed 3.40 cents/kWh. Findings Regarding the Issuance of the RRBs 17. The issuance of the RRBs pursuant to the terms of this Finance Order is reasonable and consistent with the public good. 18. The Commission finds that in order to obtain the highest rating on the RRBs as possible, commensurate with achieving the lowest overall cost for the RRBs consistent with market conditions then in existence, it is necessary, reasonable and consistent with RSA Chapter 369-B that PSNH be afforded a reasonable degree of flexibility in establishing the terms and conditions of the RRB issuances with respect to the following matters, as long as the resulting issuance is consistent with the Transaction Description and Settlement Orders: (a) The amount of the initial capitalization of the SPE; (b) The form, interest rate (whether fixed or variable), price, amortization schedule, number of series, number of classes and their principal amount, and determination of credit ratings and other characteristics of RRBs; (c) The all-in cost of the RRBs, provided that as calculated in accordance with Exhibit 1 attached to this Finance Order, the all-in cost shall be at least 100 basis points less than PSNH's Pre-Tax Revenue WACC (as defined in Exhibit 2 attached to this Finance Order) as of the date the RRBs are priced. In addition, the weighted average life of all series of RRBs, calculated in accordance with Exhibit 3 attached to this Finance Order, shall be not less than 5 years and not more than 10 years; (d) The rating agencies from which it will seek ratings for the RRBs, the number of ratings agencies from which ratings shall be sought, and the actual ratings level targeted; (e) The issuance of variable-rate RRBs, provided that a fixed-interest rate payment must be used to calculate the RRB Charge, and if such variable-rate issuance will result in a lower all-in cost associated with the RRBs; (f) The Servicing Fee for any successor Servicer, if such Fee will be no more than 1.5% of the outstanding principal balance of the RRBs if the successor Servicer is not billing the RRB Charge in conjunction with other charges; (g) The number of subaccounts of the Collections Account into which the RRB Charge collections will be deposited; (h) The actual amount of Overcollateralization and other credit enhancement; (i) Whether it is necessary to obtain a letter of credit or other credit enhancement to protect against any cash collection losses resulting from the temporary commingling of funds; and (j) Such other up-front and ongoing transaction costs, as described in the Transaction Description, as may be required by the rating agencies and tax authorities. 19. The RRB Transaction is necessary to achieve the overall reduction in rates intended by the Conformed Settlement Agreement, the Settlement Orders and RSA Chapter 369-B. 20. The RRBs will be non-recourse to PSNH and its assets, but will be secured by a pledge of all right, title, and interest of the SPE in its RRB Property and Other SPE Collateral. 21. The determinations by PSNH concerning the final terms and conditions of the RRBs shall be subject to the oversight of the State Treasurer. The State Treasurer's oversight shall be part of this docket and not a separate proceeding. The State Treasurer's oversight over the terms and conditions of the RRB issuance shall be governed by the terms of this Finance Order and, pursuant to RSA 369-B:5, XI, shall not be governed by the provisions of RSA Chapter 541 or RSA Chapter 541-A. 22. In accordance with RSA 369-B:5, IV and VI, RRBs issued pursuant to this Finance Order will be treated as notes or bonds of a political subdivision of the State for purposes of the interest and dividends tax imposed under RSA Chapter 77, but will not constitute a debt or liability of the State or of any political subdivision thereof, and will not constitute a pledge of the full faith and credit of the State or any of its political subdivisions. In accordance with RSA 369-B:5, V, the issuance of RRBs pursuant to this Finance Order will not in any way obligate the State or any political subdivision thereof to make appropriations for payment thereof. Findings Regarding the Establishment of RRB Property 23. The RRB Charge constitutes "RRB Property" within the meaning of RSA 369-B:2, XV and will represent a current and irrevocable vested property right including, without limitation, the right, title and interest of PSNH or the SPE in and to all revenues, collections, claims, payments, money or proceeds of or arising from the RRB Charges authorized pursuant to this Finance Order to recover the RRB Costs, and to all rights to obtain adjustments to the RRB Charge pursuant to the terms of this Finance Order. As provided in RSA 369-B:2, XV, "RRB Property" shall constitute a current and irrevocable vested property right, notwithstanding the fact that the value of such property right may depend upon electricity usage or the performance of certain services. 24. Pursuant to RSA 369-B:6, II, the State of New Hampshire has pledged, contracted and agreed with the owners of the RRB Property and holders of and trustees for RRBs that neither the State, nor any of its agencies, including the Commission, will limit, alter, amend, reduce or impair the RRB Charge, RRB Property, this Finance Order or any rights hereunder or thereunder, or ownership thereof or security interest therein, until the RRBs, including all principal, interest, premium, costs and arrearages thereon, are fully met and discharged, unless adequate provision is made by law for the protection of the owners, holders and trustees. 25. The RRB Charge imposed, and the RRB Property established, pursuant to this Finance Order will be irrevocable, and the prohibition established in RSA 369-B:3, II against any rescission, alteration, or amendment of this Finance Order or the taking of any other action, directly or indirectly, to revalue or revise the RRB Charge or the RRB Costs will be binding upon the Commission and any successor thereto. 26. The owner of the RRB Property will have the right to recover an aggregate amount equal to the Total RRB Payment Requirements until the RRBs (or any refunding RRBs authorized by the Commission) have been discharged in full through continued assessment, collection, and remittance of RRB Charges from all retail customers taking retail electric service. Findings Regarding the SPE and the Sale of the RRB Property to the SPE 27. The organization and capitalization of the SPE in accordance with the Transaction Description or as may be required by the rating agencies and tax authorities will, along with other measures, enable the RRBs to receive the highest investment ratings and therefore be issued at the lowest possible cost under then-current market conditions. 28. The SPE is a "financing entity" within the meaning of RSA 369-B:2, VI. 29. The sale and transfer of the RRB Property to the SPE pursuant to this Finance Order is reasonable. In accordance with RSA 369-B:6, V, the sale and transfer of the RRB Property by PSNH to the SPE pursuant to this Finance Order shall be treated as an absolute transfer of all of PSNH's right, title, and interest, as a legal true sale, and not as a pledge or other financing, of the RRB Property, in each case notwithstanding the following, which are hereby determined not to affect such absolute transfer and legal true sale: (i) any contrary treatment of such transfer for accounting, tax or other purposes, (ii) certain indemnities (including mandatory redemption or repurchase obligations related thereto) provided for in the RRBs or in the RRB transaction documents, (iii) PSNH's collection of RRB Charges pursuant to the Servicing Agreement authorized by this Finance Order, or (iv) PSNH's providing any credit enhancement to the SPE as described in the Transaction Description. 30. PSNH's proposed use of the proceeds from the sale of the RRB Property to the SPE as described in the Transaction Description constitutes permissible uses of such proceeds in accordance with RSA 369-B:5, II. Findings Regarding Related Agreements and Accounting and Collections 31. PSNH is authorized to enter into a Servicing Agreement and Administration Agreement with the SPE to consummate the RRB Transaction and to implement this Finance Order, as described in the Transaction Description. Such Servicing and Administration Agreements shall be in substantially the same form in material respects as those submitted as Exhibit F-17 in this docket. PSNH shall file a copy of the executed Servicing and Administration Agreements with the Commission within three business days of their effective dates. 32. Based upon PSNH's accounting and billing information systems capabilities, the proposed billing, collection and remittance of actual RRB Charges is reasonable. To the extent estimation of RRB Charge collections is required for remittance to the SPE, such estimation methodology will be subject to rating agency approval and, prior to the issuance of RRBs, the oversight of the State Treasurer. 33. The RRB Charge billing, collection, and remittance procedures to be imposed upon any approved TPS, as set forth in the Transaction Description, are commercially reasonable and comply with the provisions of RSA 369-B:4, IV. The Commission finds that the billing, collection and remittance of RRB Charges by a TPS may increase the risk of shortfalls in the RRB Charge collections. The Commission also finds that the risk of interruption may increase the risk to investors, potentially reducing the credit ratings and increasing the cost of the RRBs. Tr. 7/06/00 at 134-137; 190-192. The standards for such procedures set forth in the Transaction Description are consistent with those imposed by public utility commissions in connection with recent securitization approvals of similar size and complexity. See Re Public Service Electric and Gas Company, 197 PUR4th 102 (NJBPU, September 17, 1999); Re Boston Edison Company, 193 PUR4th 274 (MDTE, April 2, 1999). 34. PSNH's plan to account for, and ultimately credit to ratepayers, any amounts remaining in the Collection Account, with the exception of the amount remaining in the Capital Subaccount, after the RRBs are paid in full and the Total RRB Payment Requirements have been discharged is reasonable and is in accordance with RSA Chapter 369-B. Findings Regarding PSNH's Use of Proceeds 35. The use of proceeds by PSNH, as long as deployed in a manner that: (i) will maximize the savings to retail customers; (ii) is consistent with the goals and objectives described at the July 6-7, 2000 hearings; and (iii) will be applied to the three "use of proceeds" categories described in the Transaction Description is just and reasonable. Any subsequent review by the Commission of the use of proceeds by PSNH shall not suspend the effectiveness of this Finance Order. Findings Required by RSA 369-B:3, IV(b) 36. The RRBs authorized by this Finance Order are consistent with the Settlement Orders. 37. This Finance Order is consistent with the conditions set forth in RSA 369-B:3, IV(b). 38. This Finance Order satisfies the conditions and requirements of RSA 369-B:3, IV and the other requirements of RSA Chapter 369-B. 39. PSNH satisfactorily committed in writing by June 30, 2000 to all of the conditions set forth in RSA 369-B:3, IV(b), including those regarding customer savings included in RSA 369-B:3, IV(b)(3). Findings Regarding Investment in NU Money Pool 40. It is in the public interest to permit PSNH to invest in the Northeast Utilities ("NU") Money Pool once the write-offs associated with the Conformed Settlement Agreement have been taken. However, if the Conformed Settlement Agreement is terminated, it is in the public interest for such restriction to remain in effect until such time as the Commission orders otherwise. Accordingly, it is in the public interest for the restriction on such investment that was extended by the Commission in PSNH's most recent financing case, Docket No. DE 00-016, in Order No. 23,416, issued March 1, 2000, to terminate upon the taking of such write-offs. This determination is subject to the provisions of RSA 365:28. Findings Regarding Application of Restructuring Payments by NAEC 41. Utilizing the proceeds received from PSNH in connection with the restructuring of the Seabrook Power Contract, it is in the public interest to permit NAEC to repay up to $135 million in First Mortgage Bonds and up to $200 million in Term Notes to most efficiently reduce its costs, and to issue a dividend to NU or repurchase NAEC common stock from NU. IV. APPROVALS and AUTHORIZATIONS Based on the foregoing, the Commission hereby GRANTS the following Approvals and Authorizations: Overall Approval 1. PSNH is authorized to consummate the RRB Transaction upon the authority granted in this Finance Order without further action or order by this Commission. 2. The issuance of this Finance Order, the implementation of the securitization proposal and the consummation of the RRB Transaction are consistent with the public good, will result in benefits to retail customers that are substantially consistent with the principles contained in RSA 374-F:3 and RSA 369-A:1, X, with RSA 369-A:1, XI and with RSA Chapter 369-B, will permit any RRBs issued pursuant to the RRB Transaction to be traded at favorable rates on the existing securitization market in accordance with 1999 N.H. Laws 289:3, I, which the Commission interprets to mean sold at favorable rates into the capital markets, and are hereby approved. This Finance Order is approved under the authority of and issued pursuant to RSA Chapter 369-B. 3. This Finance Order and the RRB Charge authorized to be imposed and collected pursuant to this Finance Order shall be irrevocable and neither this Commission nor any successor thereto shall take any action to rescind, alter or amend this Finance Order or otherwise to, directly or indirectly, revalue or revise for ratemaking purposes the RRB Costs, or the costs of providing, recovering, financing, or refinancing the RRB Costs, determine that such RRB Charge is unjust or unreasonable, or in any way reduce or impair the value of the RRB Property either directly or indirectly by taking such RRB Charge (other than the portion of such RRB Charge constituting a servicing fee payable to PSNH) into account when setting other rates for PSNH, nor shall the amount of revenues arising with respect to the RRB Charge be subject to reduction, impairment, postponement or termination. Approval Regarding the Establishment of the RRB Costs 4. The Commission approves and designates as RRB Costs, within the meaning of RSA 369-B:2, XIV: (i) an amount no greater than $670 million of PSNH's stranded costs and up-front transaction costs, as detailed in this Finance Order and described in the Transaction Description, and approved in the Settlement Orders; and (ii) ongoing transaction costs, the cost of any credit enhancement associated with the RRB Transaction, the cost of any swap agreement or hedge transaction related to the RRBs, and any other fee, cost or expense in respect of the RRBs as described in the Transaction Description. Approvals Regarding the RRB Charge 5. The RRB Charge to be established, adjusted, maintained and collected from all retail customers taking retail electric service during the term that the RRBs are outstanding in accordance with the terms of the Conformed Settlement Agreement, the Settlement Orders, RSA Chapter 369-B, the Transaction Description, and the Findings is just and reasonable and is hereby approved. 6. The initial RRB Charge, as determined in accordance with the Transaction Description, the Settlement Orders and RSA Chapter 369-B, and to be filed in the Issuance Advice Letter, substantially in the form of Attachment MAE-1 to Phase I, Ex. 6, is just and reasonable and is hereby approved. Such initial RRB Charge will be effective upon such filing. 7. The procedures and methodologies set forth in this Finance Order for adjusting the RRB Charge during the term that the RRBs are outstanding, as described in the Transaction Description, are just and reasonable, and are hereby approved. 8. The procedures and methodologies set forth in this Finance Order for ensuring that the RRB Charge is collected from all retail customers that obtain retail electric service from other electricity service providers, as described in the Transaction Description, is just and reasonable, and is hereby approved. 9. The procedures and methodologies for allocating amounts collected from retail customers that purchase or otherwise obtain back-up, maintenance, emergency or other delivery or energy service, on a pro rata basis among the SCRC and the Delivery Charge, system benefits charge, energy consumption tax, Hydro-Quebec support payments, and, if applicable, the transition or default service charges as these charges are identified in Section V of the Conformed Settlement Agreement, and other rates and charges, as described in the Transaction Description and PSNH's Retail Delivery Service Tariff as filed with the Commission in this proceeding, are reasonable, and such procedures and methodologies are hereby approved. 10. The SCRC, averaged over all customers (including the RRB Charge), shall not exceed 3.40 cents/kWh. Approvals Regarding the Issuance of the RRBs 11. Subject to Approval No. 13 below, the issuance of the RRBs substantially in accordance with the Transaction Description, including but not limited to the terms and amounts of the RRBs, the expected and legal final maturities of the RRBs of up to 12 and 14 years respectively, the up-front and ongoing transaction costs expected to be incurred in issuing the RRBs, the costs of any credit enhancements, and the uses of the proceeds from the issuance of the RRBs, is reasonable and consistent with the public good, and is hereby approved. 12. Subject to Approval No. 13 below, and as long as consistent with Finding No. 18, above, the final terms and conditions of the RRBs authorized by this Finance Order, including but not limited to the schedule of principal amortization, credit enhancement, frequency of principal or interest payments, the interest rates on the RRBs and manner of setting such interest rates (fixed or variable), redemption features, the manner of sale of the RRBs, the number and determination of credit ratings and all other terms and conditions of the RRBs, the approval of final transaction documents, and certain up-front and ongoing transaction costs, shall, to the extent consistent with the provisions of this Finance Order, be determined by PSNH at the time RRBs are priced and after input from the rating agencies, tax authorities, the underwriters, and the State Treasurer. This procedure for issuing the RRBs, based on current market conditions and directed to achieve the lowest overall cost possible, including the filing of the Issuance Advice Letter, in accordance with this Finance Order is reasonable and consistent with the public good, and is hereby approved. 13. PSNH is authorized to consummate the issuance of the RRBs in one or more series upon such terms as may be established by or on behalf of PSNH at the time of issuing such securities, so long as (a) the all-in cost of the RRBs, calculated in accordance with Exhibit 1 attached to this Finance Order, is at least 100 basis points less than PSNH's Pre-Tax Revenue WACC (as defined in Exhibit 2 attached to this Finance Order) as of the date that the RRBs are priced, and (b) the weighted average life of all series of RRBs, calculated in accordance with Exhibit 3 attached to this Finance Order, is not less than 5 years and not more than 10 years. 14. The determinations by PSNH concerning the final terms and conditions of the RRBs shall be subject to the oversight of the State Treasurer. PSNH shall cooperate with the State Treasurer and her advisers throughout the entire process of issuing the RRBs, including but not limited to providing the State Treasurer and her advisers with drafts of all documents pertaining to the issuance of the RRBs and an opportunity to comment on such documents as well as such other information and materials as the State Treasurer or her advisers may reasonably request. 15. The State Treasurer shall provide a report of the results and conclusions of her oversight activities to the Commission and PSNH (the "Report") within 90 days after the RRB issuance. 16. If, at any time (but not later than two business days prior to the closing for the RRBs) the State Treasurer concludes that PSNH has failed to exercise fiscal prudence or to achieve the lowest overall cost for the RRBs, the State Treasurer shall promptly notify the Commission and PSNH in writing of such conclusion (the "State Treasurer's Preliminary Conclusion"). Such written notice shall include in reasonable detail the basis for the State Treasurer's Preliminary Conclusion. Such notification by the State Treasurer to the Commission and PSNH shall not suspend the effectiveness of this Finance Order. 17. If the State Treasurer (i) shall have delivered to the Commission and PSNH a written notice pursuant to Approval No. 16 above and (ii) concludes that PSNH caused the RRBs to be issued without adequately addressing the State Treasurer's Preliminary Conclusion (the "State Treasurer's Final Conclusion"), the State Treasurer shall include in its Report in reasonable detail the basis for the State Treasurer's Final Conclusion. Such filing by the State Treasurer with the Commission shall not suspend the effectiveness of this Finance Order. 18. Upon receipt of the Report, delivered pursuant to Approval No. 17 above and containing therein the State Treasurer's Final Conclusion, the Commission may conduct such further proceedings as it deems appropriate to determine if, as a result of PSNH's failure to adequately address the State Treasurer's Preliminary Conclusion, PSNH failed to exercise prudence and achieve the lowest overall cost for the RRBs. If the Commission so determines that PSNH failed to exercise fiscal prudence or to achieve the lowest overall cost for the RRBs, the Commission may reduce Part 3 of the SCRC by the Present Value (as defined in the Conformed Settlement Agreement) of the excess costs, if any, that the Commission determines were incurred as a result of such failure. Such further proceedings shall not suspend the effectiveness of this Finance Order. 19. In accordance with RSA 369-B:5, IV and VI, RRBs issued pursuant to this Finance Order will be treated as notes or bonds of a political subdivision of the State for purposes of the interest and dividends tax imposed under RSA Chapter 77, but will not constitute a debt or liability of the State or of any political subdivision thereof, and will not constitute a pledge of the full faith and credit of the State or any of its political subdivisions. In accordance with RSA 369-B:5, V, the issuance of RRBs pursuant to this Finance Order will not in any way obligate the State or any political subdivision thereof to make appropriations for their payment. Approvals Regarding the Establishment of the RRB Property 20. The creation and establishment for the benefit of PSNH (or any assignee in accordance with the terms of this Finance Order) of the RRB Property is hereby approved. Such RRB Property, constituted and effective in accordance with RSA 369-B:2, XV, will be entitled to all treatment and rights accorded to RRB Property under RSA Chapter 369-B. 21. The RRB Property established by this Finance Order will represent a continuously existing current and irrevocable vested property right in accordance with the provisions of RSA 369-B:2, XV and RSA 369-B:6, I for all purposes, including for the purpose of contracts relating to or securing the RRBs, whether or not the revenues and proceeds arising with respect to the RRB Charge have accrued at the time of this Finance Order, and will include, without limitation, the right, title, and interest in and to all revenues, collections, claims, payments, money, or proceeds of or arising from or constituting (a) the RRB Charge authorized by this Finance Order including the initial RRB Charge set forth in the Issuance Advice Letter as may be adjusted from time to time in order to recover RRB Costs and to generate amounts sufficient to discharge an amount equal to the sum of the Periodic RRB Payment Requirements, for the period which such RRB Charge will be billed, as found and authorized herein, and (b) all rights to obtain periodic adjustments and non-routine adjustments to the RRB Charge in accordance with the True-Up Mechanism. 22. The RRB Property created and established by this Finance Order will constitute a current and irrevocable vested property right of the owner thereof or its assignee or transferee, which continuously exists with all of the rights and privileges of RSA 369-B:2, XV, RSA 369-B:6, and RSA 369-B:7 until the owner or its assignee or transferee has received RRB Charges sufficient to discharge the Total RRB Payment Requirements in full. Such property right may not be limited, altered, amended, reduced, or impaired by any subsequent actions of the State, any of its agencies, including the Commission, PSNH or any third party, and shall, to the fullest extent permitted by law, be enforceable against PSNH, its successors and assigns, and all other third parties, including judicial lien creditors, claiming an interest therein by or through PSNH or its successors or assigns. Nothing in this paragraph shall preclude such limitation, alteration, amendment, reduction, or impairment if and when adequate provision shall be made by law for the protection of the owner of the RRB Property or its assignee or transferee. Approvals Regarding the Establishment of the SPE 23. The creation of a bankruptcy-remote SPE in accordance with the Transaction Description, to which the RRB Property subject to this Finance Order is to be sold, is hereby approved. 24. The initial capitalization by PSNH of the SPE, in accordance with the Transaction Description and Findings, is hereby approved. Approvals Regarding the Sale and Assignment of the RRB Property 25. The sale or assignment, without recourse, by PSNH of all of its right, title and interest in the RRB Property to the SPE, and the acquisition of such RRB Property by the SPE, in accordance with the Transaction Description is hereby approved. 26. The sale by PSNH of the RRB Property to the SPE in accordance with the Transaction Description will be pursuant to and governed by RSA 369-B:6, III and V, and, accordingly, will be treated as an absolute transfer of all of PSNH's rights, title, and interest, as a legal true sale, and not as a pledge or other financing, of the RRB Property, in each case notwithstanding the following, which are hereby determined not to effect such absolute transfer and legal true sale: (i) any contrary treatment of such transfer for accounting, tax or other purposes, (ii) certain indemnities (including mandatory redemption or repurchase obligations related thereto) provided for in RRBs or in the RRB Transaction Documents, (iii) PSNH's collection of the RRB Charge pursuant to the Servicing Agreement authorized by this Finance Order, or (iv) PSNH's providing any credit enhancement to such SPE as described in the Transaction Description. 27. Upon the effectiveness of the sale and assignment of the RRB Property, the SPE, as owner of the RRB Property, and the holders of the RRBs, or any trustee acting therefor, will be entitled to rely on and shall be entitled to the benefit of the pledge, contract and agreement of the State of New Hampshire set forth in RSA 369-B:6, II, and the SPE is hereby authorized to include this pledge, contract, agreement and acknowledgment of the State in any contracts with current or prospective holders, or any trustee therefor, of the RRBs, or in any documentation relating to the RRBs. 28. Upon the effectiveness of the sale and assignment of the RRB Property: (i) the SPE shall have all of the rights originally held by PSNH with respect to such RRB Property, including, without limitation, the right to exercise any and all rights and remedies, including the right to authorize the Servicer to disconnect service (including backup service) to the extent permitted by RSA 369-B:4, IV, and applicable regulations, to assess and collect any amounts payable by any customer in respect of such RRB Property, notwithstanding any objection or direction to the contrary by PSNH, as initial Servicer, or any successor Servicer, and (ii) any payment by any customer to the SPE shall discharge such customer's obligations in respect of such RRB Property to the extent of such payment, notwithstanding any objection or direction to the contrary by the Servicer. 29. Upon the effectiveness of the sale and assignment of the RRB Property to the SPE, PSNH or any successor Servicer shall not be entitled to recover RRB Charges other than for the benefit of the SPE or its successor, in accordance with RSA 369-B:6, IV and PSNH's or any successor's duties as Servicer of such RRB Property as authorized by this Finance Order. Approvals Regarding the Establishment of a Statutory Security Interest in the RRB Property 30. Pursuant to RSA 369-B:7, VIII, upon the effective date of this Finance Order, there shall exist a statutory first priority lien on all RRB Property then existing or thereafter arising pursuant to the terms of this Finance Order. 31. Such lien shall secure all obligations, then existing or subsequently arising, to the holders of RRBs, the trustee or representative for such holders and the SPE and shall arise by operation of law automatically without any action on the part of PSNH or any other person. Such lien shall be valid, perfected, and enforceable upon the effectiveness of this Finance Order without any further public notice. PSNH does expect to file financing statements with respect to the RRB Property which will constitute a protective filing pursuant to RSA 369-B:7, VIII. If the RRB Property subject to this Finance Order is transferred and sold to more than one SPE, any collections in respect of the undivided beneficial interests in RRB Charges related to such RRB Property will be allocated pro rata among such undivided beneficial interests to give effect to the pari passu first priority statutory liens on the SPE's portion of the RRB Property subject to this Finance Order. 32. The pledge by the SPE of all of its interest in the RRB Property and the Other SPE Collateral, to secure RRBs issued in connection with such pledge, is hereby approved. Approvals Regarding Third Party Suppliers 33. Any TPS that may be permitted to collect RRB Charges shall (i) meet the creditworthiness criteria to be established by the Commission and, at a minimum, the criteria set forth and approved in this Finance Order; and (ii) comply with the billing, collection and remittance procedures and information access requirements and such other procedures contained in the RRB Transaction documents as the rating agencies may require, once such additional procedures are approved by the Commission. 34. The RRB Charge billing, collection, and remittance procedures to be imposed upon any approved TPS, as set forth in the Transaction Description, and found, in Finding No. 33, above, to be commercially reasonable and in compliance with the provisions of RSA 369-B:4, IV, are hereby approved. Approval Regarding Swap and Hedge Transactions 35. Subject to Approval No.13 above, the implementation of swap agreements or other hedge transactions in connection with the RRBs consistent with the Transaction Description and Findings, above, is consistent with the public good and is hereby approved. Interest payments made to a counterparty of a swap agreement or hedge transaction, and the costs of implementing such transaction, shall constitute "RRB Costs" within the meaning of RSA 369-B:2, XIV, shall be calculated in and recovered through the RRB Charge, and shall be entitled to all the rights and protections under this Finance Order and RSA Chapter 369-B as other RRB Costs, just as if the RRBs were fixed rate instruments and these amounts were directly due to holders of the RRBs. Approvals Regarding Servicing and Collection Procedures, and Accounts 36. The Servicing Agreement, to the extent it is substantially consistent in material respects with the description of such agreement in the Transaction Description and the draft submitted as part of Ex. F-17, under which PSNH will agree to continue to operate its distribution system to provide service to retail customers, to bill and collect RRB Charges for the benefit and account of such SPE or its assigns, and to account for and remit these amounts to or for the account of such SPE or its assigns, including the amount of the Servicing Fee imposed thereunder, is reasonable and consistent with the public good, and is hereby approved. Pursuant to RSA 369-B:6, IV, PSNH shall enter into the Servicing Agreement, and any successor Servicer shall be required to enter into a similar Servicing Agreement. 37. The RRB Charge billing, collection and remittance procedures, as described in the Transaction Description, subject to rating agency approval to the extent estimation of RRB Charge collections is required, are reasonable, consistent with the public good and are hereby approved. 38. In the event of a default by a Servicer in remittance of RRB Charges, the Commission will, in accordance with RSA 369-B:7, VI and VIII, upon application by (i) the trustee or holders of the RRBs, (ii) the trustee for the SPE or its assignees, or (iii) pledgees or transferees of the RRB Property, order the sequestration and payment to or for the benefit of the pledgees or transferees of the revenues arising with respect to the RRB Property. 39. In the event of a default by a Servicer under any Servicing Agreement with respect to RRBs, the SPE or the trustees or representatives of the holders of RRBs may appoint a successor Servicer for the RRB Property, subject to the approval of the Commission, who shall promptly assume billing responsibilities for RRB Charges. The Commission shall act on an expedited basis within 30 days to approve such successor Servicer. Such successor Servicer shall assume all rights and obligations under RSA Chapter 369-B and this Finance Order as though it were the Servicer at the time such RRBs were issued. 40. The Servicer will allocate amounts collected from each retail customer on a pro rata basis among the SCRC and the Delivery charge, system benefits charge, energy consumption tax, Hydro-Quebec support payments, and, if applicable, the transition or default service charges as these charges are identified in Section V of the Conformed Settlement Agreement. Such amounts so allocated to the SCRC shall, in accordance with the Conformed Settlement Agreement, in turn be allocated pro rata among the RRB Charge, or Part 1 of the SCRC, and to any remaining portion of the SCRC not the subject of a finance order (i.e., Parts 2 and 3 of the SCRC, as described in the Conformed Settlement Agreement). 41. A successor Servicer may not replace PSNH as Servicer in any of its servicing functions with respect to the RRB Charge and the RRB Property authorized by this Finance Order unless (i) such replacement is requested by RRB holders, (ii) such replacement will not cause the then current credit ratings on RRBs to be withdrawn or downgraded, or (iii) the successor Servicer is the successor to PSNH's distribution system. 42. Regardless of who is responsible for billing of the RRB Charge, the RRB Charge will be assessed against and collected from all PSNH's retail customers taking retail electric service. Any retail customer will continue to be responsible for payment of the RRB Charge billed, but not yet remitted, to the Servicer to the extent such customer has not paid the RRB Charge billed to it. 43. In the event of a failure of any retail customer to pay the RRB Charge, the Servicer or any approved TPS is authorized to disconnect retail electric service to such customer in accordance with RSA 369-B:4, IV and applicable regulations. 44. PSNH, as initial Servicer, or any successor Servicer, shall be entitled to an annual Servicing Fee. The Commission approves the Servicing Fee as follows: As initial Servicer, PSNH will be paid a Servicing Fee equal to 0.25% of the outstanding principal balance of the RRBs, which fee will be included in the calculation of the RRB Charge. A successor Servicer will be paid a Servicing Fee equal to no more than 1.5% of the outstanding principal balance of the RRBs, if such successor Servicer is not billing the RRB Charge in conjunction with other charges. If the successor Servicer is billing the RRB Charge in conjunction with other electric service charges, then the Servicing Fee payable to such successor Servicer will be 0.25% of the outstanding principal balance (equal to the fee payable to PSNH as initial Servicer). 45. PSNH, as initial Servicer, may not voluntarily resign its duties as Servicer without prior written approval of the Commission. In any event, PSNH shall not resign as Servicer if such resignation would result in the reduction or withdrawal of the credit rating for the RRBs. 46. The establishment and procedures for maintenance of the Collection Account, the General Subaccount, the Capital Subaccount, and the Reserve Subaccount in accordance with the Transaction Description are reasonable, consistent with the public good and are hereby approved. 47. Any amounts accounted for in the Reserve Subaccount, which represent collections in excess of the fully funded credit enhancement reserves, at the time that PSNH calculates a periodic RRB Charge adjustment, will be incorporated in such adjustment, in accordance with RSA 369-B:4, III. PSNH, as initial Servicer (or any successor Servicer), shall account for, and ultimately credit to retail customers, any amounts remaining in the Collection Account after the RRBs are paid in full, such as any overcollateralization amounts, including interest earnings thereon, or RRB Charge collections that remain after the Total RRB Payment Requirements have been discharged. Such amounts will be released to the SPE, upon retirement of the RRBs and discharge of the Total RRB Payment Requirements. These amounts will be credited to retail customers through a subsequent ratemaking proceeding or such other manner as the Commission may direct at that time. Approval Regarding Municipalization 48. Pursuant to RSA 369-B:4, VIII, in the event of the municipalization of a portion of PSNH's service territory, the Commission shall, in matters over which the Federal Energy Regulatory Commission does not have jurisdiction, or has jurisdiction but chooses to grant jurisdiction to the State, determine, to a just and reasonable extent, the consequential damages such as stranded investment in generation, storage, or supply arrangements resulting from the purchase of plant and property from PSNH and RRB Costs, and shall establish an appropriate recovery mechanism for such damages. Any such damages shall be established, and shall be allocated between the RRB Charge and PSNH's other rates and charges, in a just and reasonable manner. Approval Regarding Administration Agreement 49. The Administration Agreement, to the extent it is substantially consistent in material respects with the description of such agreement in the Transaction Description and the draft submitted as part of Exhibit F-17, under which PSNH shall perform administrative services and provide facilities for the SPE to ensure that it is able to perform such day-to-day operations under the RRB Transaction documents, including the amount of the Administration Fee (which shall be an annual amount not to exceed 0.01% of the original principal balance of the RRBs and which will be included in the calculation of the RRB Charge), is reasonable and consistent with the public good, and is hereby approved. Approval Regarding Financial Accounting Treatment 50. The financial accounting treatment proposed by PSNH for the RRBs and the RRB Transaction, as described in the Transaction Description, is reasonable, consistent with the public good, and is hereby approved. Approvals Regarding Reports 51. At least three business days in advance of the RRB issuance, PSNH shall file with the Commission, for informational purposes, an Issuance Advice Letter setting forth the final structural details of the RRBs, including the repayment terms (in accordance with the expected amortization schedule), the initial RRB Charge, the amount necessary for credit enhancement, the identification of the SPE, and the transaction costs of issuance. Such filing shall not be a condition to the effectiveness of this Finance Order or the issuance of the RRBs. 52. Within 90 days following the RRB issuance, and within 60 days of the end of each fiscal quarter thereafter until the proceeds have been applied in full, PSNH shall file with the Commission a report showing the use of RRB proceeds in compliance with this Finance Order. Such filing shall not be a condition to the effectiveness of this Finance Order or the issuance of RRBs. Approval Regarding Conditions Required Under RSA 369-B:3, IV(b) 53. In accordance with RSA 369-B:3, IV(b), this Finance Order is subject to the following conditions: (1) (A) From Competition Day until initial transition service end day (as defined in RSA 369-B:2, VII), PSNH shall supply transition service and default service in its retail electric service territory. After initial transition service end day, any provider or providers of transition service shall have been chosen through a competitive bid process, administered by the Commission, to provide such service. The Commission may, if it finds it to be in the public interest, divide the competitive bid process into multiple categories or multiple competitive bids; (B) (i) Transition service for residential customers, street lighting customers, and general delivery service rate G customers shall be available until 24 months after initial transition service end day. From Competition Day until initial transition service end day, the price of transition service for these customers shall be $0.044 per kilowatt-hour. From initial transition service end day to 12 months after initial transition service end day, the price of transition service for these customers shall be $0.044 per kilowatt-hour, or the competitively bid price for transition service, whichever is less. From 12 months after initial transition service end day to 24 months after initial transition service end day, the price of transition service for these customers shall be $0.046 per kilowatt-hour, or the competitively bid price for transition service for these customers, whichever is less. If the competitively bid price exceeds these fixed prices, the differences shall be reconciled for these customers in the manner prescribed in the OPS; (ii) At the end of the transition service period, up to 25 percent of the residential customers, street lighting customers, and general delivery service rate G customers who have not chosen a competitive supplier may be assigned randomly to registered competitive suppliers other than the transition service supplier or suppliers, if the Commission finds such random assignment to be in the public interest. The Commission shall develop procedures and regulations for this assignment process. Any random assignment must be affirmatively approved by an individual customer; (C) Transition service for all other customers shall be available until 12 months after initial transition service end day. From Competition Day to initial transition service end day, the price of transition service for these customers shall be $0.044 per kilowatt-hour. From initial transition service end day to 12 months after initial transition service end day, the price of transition service for these customers shall be the competitively bid price for transition service; (D) Any difference between the price of transition service from Competition Day to initial transition service end day and PSNH's actual, prudent and reasonable costs of providing such power shall first be separated between the 2 groups of customers described in RSA 369-B:3, IV(b)(1)(B) and (b)(1)(C), used first to offset any differences described in RSA 369-B:3, IV(b)(1)(B), and the net then reconciled for each group of customers either by changing the Recovery End Date, or by decreasing the SCRC, as the Commission finds to be in the public interest; (E) The Commission shall retain the authority to reject any or all bids for transition service at its sole discretion if it finds such action to be in the public interest. Except as specifically provided in this section, the Commission shall not accept any bid or implement any pricing strategy for transition service that creates any deferrals; (F) The selection of a provider or providers of default service prior to 24 months after initial transition service end day may be combined with the selection of a provider or providers of transition service to the extent that the Commission finds it to be in the public interest; (2) No amount shall be securitized which was not listed as part of the $688,000,000 proposed for securitization in the April 19 Order, as reduced by any subsequent amortization; (3) Customer savings shall be not less than the total amount of $450,000,000, excluding savings from rate reduction financing and merger savings, including the $367,000,000 contained in the OPS and the $6,200,000 resulting from the settlement of issues pertaining to New Hampshire Electric Cooperative, Inc. A commitment by PSNH to all of the following actions shall be deemed to satisfy this condition: (A) PSNH shall credit customers with the higher return associated with accumulated deferred income taxes (ADITs) as proposed in PSNH's May 1, 2000 filing; (B) PSNH shall credit customers with the value derived from using its own assets to provide transition service for a period of 9 months; (C) PSNH shall extend from 30 months to 33 months the period during which the delivery service charge, exclusive of Hydro Quebec transmission support payments, is fixed at 2.8 cents per kilowatt-hour; (D) PSNH shall absorb the first $7,000,000 of difference of costs that results in the event that transition service costs during the 12 months following the initial transition service end day exceed the transition service price for that 12 months, as provided in RSA 369-B:3, IV(b)(1)(B)(i); (E) PSNH shall reduce the maximum amount of necessary and prudent costs associated with the issuance of and closing on the securitization financing and any premiums associated with the retirement of debt and preferred stock from these proceeds that may be recovered from $17,000,000 to $15,000,000. PSNH shall include in its costs the first $700,000 of the costs of the office of the State Treasurer related to reviewing and issuing the RRBs; (F) PSNH agrees to move the Recovery End Date to one month earlier than it would otherwise be; and (G) PSNH agrees that if Competition Day has not occurred by October 1, 2000, then effective October 1, 2000 PSNH shall temporarily reduce its current effective total rates (base rates plus FPPAC rates) by 5 percent across the board until either Competition Day or April 1, 2001, whichever occurs earlier. (4) In the event that PSNH or its parent company is acquired or otherwise sold or merged: (A) Such merger, acquisition, or sale shall be subject to the jurisdiction of the Commission under RSA Chapter 369, RSA Chapter 374, RSA Chapter 378 or other relevant provisions of law, and the merger, acquisition, or sale shall be approved only if it is shown to be in the public interest; (B) In recognition of the extraordinary benefits provided to PSNH from rate reduction financing, should PSNH or its parent company be acquired or otherwise sold or merged, such merger, acquisition or sale shall be subject to the jurisdiction of the Commission under the standard set forth in the OPS. The Commission may approve such a merger if such approval results in the receipt by PSNH customers of a just and reasonable amount of the cost savings that result from such merger, acquisition or sale. (C) No acquisition premium paid by an acquiring company for the assets or securities of any acquired company, resulting from any such merger, acquisition or sale, may in any way increase rates at any time from what they would have been without the acquisition premium; (5) The delivery service charge, exclusive of the Hydro Quebec transmission support payments, shall be fixed for a period of 33 months from Competition Day at $0.028 per kilowatt-hour; (6) The total system benefits charge shall be fixed at $0.002 per kilowatt-hour for 33 months from Competition Day divided between low-income assistance and energy efficiency/conservation programs. In the event that the Commission finds that a significant amount of unencumbered dollars have accumulated in either program, and are not needed for program purposes, the Commission shall refund such unencumbered dollars to ratepayers in a timely manner; (7) All currently existing opportunities shall be continued for retail customers to generate or acquire electricity for their own use, other than through retail electric service, without an exit fee; (8) To the maximum extent allowed by federal law, non-discriminatory, open access to PSNH's transmission system shall be available to customers, electricity suppliers, marketers, aggregators, and municipal electric utilities, with charges based only on rates set by federal regulations, plus the actual cost of service for any services not subject to federal price regulation plus, for retail customers, applicable SCRCs, RRB Charges, systems benefits charges, and taxes; (9) The SCRC, averaged over all customers, shall not exceed $0.0340 per kilowatt-hour. Any changes in the delivery service charge, SCRC, transition service charge, systems benefits charge, or any other charge between the estimated amounts in the First Settlement Order and 24 months after Competition Day shall be applied as an equal change in the cost per kilowatt-hour for all rate classes to which they apply; (10) The Commission shall not order changes in the total rates of customers taking service under special contracts approved pursuant to RSA 378:18 for the duration of those special contracts in effect as of May 1, 2000. Special contract customers selecting option 2 of the Original Settlement Agreement shall have the energy charges under the contract reduced by the initial transition service price; (11) During any sale of electricity generation assets required by this settlement, neither PSNH, nor any affiliate of PSNH, nor any company that would become an affiliate of PSNH if an announced merger, acquisition or sale were to be consummated, may bid for those assets; (12) During any competitive bid process to determine a provider or providers of transition service, or of default service to any customer belonging to a rate class that at the time of service is eligible to receive transition service, neither PSNH, nor any affiliate of PSNH, nor any company that would become an affiliate of PSNH if an announced merger, acquisition or sale were to be consummated, may bid to provide such service; (13) The Commission shall administer the liquidation of any electricity generation assets required to be sold by the settlement. Any sale of assets located in the state of New Hampshire that are administered by the Commission pursuant to this paragraph shall be conducted in this state. The Commission shall select the independent, qualified asset sale specialist who will conduct the asset sale process. PSNH shall be allowed to comment prior to the selection of any such specialist; (14) The Commission shall administer any competitive bid process for transition service or default service required by the settlement; (15) Subject to the approval of the Federal Energy Regulatory Commission, in the event that the Commission either rejects a proposed sale of Seabrook, or fails to act on such application within 180 days after NAEC's proposed sale application is filed with the Commission, and the failure of the sale is through no fault of NU or PSNH, NAEC's return on equity shall be increased from 7 percent to 150 basis points more than the average 10-year Treasury bond yield for the preceding 6 months, but not less than 7 percent nor more than 11 percent, and then readjusted accordingly at the end of every 6 month period; and (16) This Finance Order shall not be final or effective until PSNH and NU have agreed to dismiss with prejudice on Competition Day PSNH's and NU's claims and causes of action in all pending litigation associated with the implementation of RSA Chapter 374-F, including civil action No. 97-97-JD (New Hampshire) / 97-121 L (Rhode Island). Approval Regarding Investment in NU Money Pool 54. PSNH is authorized to invest in the NU Money Pool once the write-offs associated with the Conformed Settlement Agreement have been taken, and, accordingly, the restriction on such investment that was extended by the Commission in PSNH's most recent financing case, Docket No. DE 00-016, in Order No. 23,416, issued March 1, 2000, shall terminate upon the taking of such write-offs. This approval is subject to the provisions of RSA 365:28. Approval Regarding Application of Restructuring Payments by NAEC 55. Pursuant to Section VIII.K of the Conformed Settlement Agreement, NAEC is authorized to repay up to $135 million in First Mortgage Bonds and up to $200 million in Term Notes to most efficiently reduce its costs, and to issue a dividend to NU or repurchase NAEC common stock from NU. V. ORDER Based on the foregoing, it is hereby ORDERED, that PSNH's Petition for Issuance of a Finance Order is APPROVED, as modified by and subject to the terms of the Transaction Description contained herein, and consistent with the Findings and Approvals and Authorizations granted. By order of the Public Utilities Commission of New Hampshire this eighth day of September, 2000. Douglas L. Patch Susan S. Geiger Nancy Brockway Chairman Commissioner Commissioner Attested by: Debra Howland Acting Executive Director EXHIBIT 1 ALL-IN COST All-in Cost computation: The all-in cost will be the internal rate of return of the series of cashflows beginning with the initial principal balance, followed by the Periodic RRB Payment Requirement to be paid at each payment date. All computations will be based on a 30/360 day-count convention and semi-annual compounding. For all-in cost, solve for r. r = all-in cost p = scheduled principal payment i = scheduled interest payment f = overcollateralization (net of interest earnings) and fees and expenses (excluding servicing fees) P = initial issuance amount t = payment period (which, in the case of the first or last payment period, may be more or less than a full period) T = total number of payment periods n = number of payment periods in a year (e.g. for semiannual payments, n=2) Illustrative Example: Assumptions Issuance amount: $100mm Issuance date: 1/1/2000 Final maturity: 1/1/2004 Payment dates: January 1st every year Coupon: 7.5% per annum Overcollateralization $0.04 mm (net of interest earnings) and fees and expenses per annum (excluding servicing fees) Principal Payment Schedule: Payment Date Principal Payment Principal Ending ($mm) Balance ($mm) Issuance date - 100 1/1/2001 10 90 1/1/2002 20 70 1/1/2003 30 40 1/1/2004 40 - Total $100 - Calculation Payment (t) Payment (p) Principal (i) Interest (f)(p)+(i)(f) Date Period Payment ($mm) Payment Overco- ($mm) ($mm) collateral -ization Fees, and Expenses ($mm) 1/1/2001 1 10.00 7.50 0.04 17.54 1/1/2002 2 20.00 6.75 0.04 26.79 1/1/2003 3 30.00 5.25 0.04 35.29 1/1/2004 4 40.00 3.00 0.04 43.04 Total 100.00 Payments are annual so n = 1. 17.54 + 26.79 + 35.29 + 43.04 y 100 = 0 (1+r)1 (1+r)2 (1+r)3 (1+r)4 Solve for r. All-in cost = r = 7.55% EXHIBIT 2 PRE-TAX REVENUE WACC As used in this Finance Order, "Pre-Tax Revenue WACC" shall mean, as of any date, PSNH's "ROR" (rate of return) set forth in its most recent filing with the Commission pursuant to Docket No. IR 90-218, multiplied by the applicable "GRCF" (gross revenue conversion factor) filed with the Commission pursuant to Docket No. DR 97-059, calculated in accordance with the following example:13 Calculation of ROR Capital Structure 3/31/99Begin 3/31/00End of Average % Embedded ROR Average ning of Period Period(000s) (000s) Cost (000s) Long Term Debt $516,485 $516,485 $516,485 39.40% 8.24% 3.25% Preferred Stock 75,000 50,000 62,500 4.77% 9.54% 0.46% Issued Common Equity 701,652 761,821 731,737 55.83% 9.62% 5.37% Total $1,293,137 $1,328,306 $1,310,722 100.00% 9.07% Capitalization Calculation of Embedded Cost Total Cost of Long Term Debt $42,539/ $516,485 = 8.24% Preferred Dividends Declared $5,963/ $ 62,500 = 9.54% ROE Calculation $70,396/ $731,737 = 9.62% (Earnings for (Average Common Common) Equity) (Net Income ROE), Calculation of Pre-Tax Revenue WACC ROR GRCF Pre-Tax Revenue WACC Long Term Debt 3.25% 1.0000 3.25% Preferred Stock Issued 0.46% 1.5489 0.70% Common Equity 5.37% 1.5489 8.32% Total 12.27% Pre-Tax Revenue WACC = 12.27% EXHIBIT 3 WEIGHTED AVERAGE LIFE Weighted Average Life (WAL) computation: To calculate the WAL of the RRBs, sum the product of each principal payment with the number of days between the corresponding principal payment date and the RRB issuance date (based on a 360-day year and 30-day months). Then, divide this sum by the product of the total principal amount of the RRBs and 360 to calculate the WAL in years. p = scheduled principal payment d = payment date I = issuance date t = payment period (which, in the case of the first or last payment period, may be more or less than a full period) P = initial issuance amount T = total number of payment periods Note: (dt-I) represents days from and excluding issuance date (I) to and including payment date (dt), based on a 360-day year of twelve 30-day months. Illustrative Example: Assumptions Issuance amount: $100mm Issuance date: 1/1/2000 Final maturity: 1/1/2010 Payment dates: January 1st every year Principal Payment Schedule: Payment Date Principal Payment Principal Ending ($mm) Balance ($mm) Issuance date - 100 1/1/2001 5 95 1/1/2002 5 90 1/1/2003 5 85 1/1/2004 5 80 1/1/2005 5 75 1/1/2006 10 65 1/1/2007 10 55 1/1/2008 15 40 1/1/2009 20 20 1/1/2010 20 - Total $100 Calculation Payment Date (t) Payment (pt) Principal (dt-I) Days Between pt(dt-I) Period Payment ($mm) Issuance Date and Payment Date 1/1/2001 1 5 360 1,800 1/1/2002 2 5 720 3,600 1/1/2003 3 5 1,080 5,400 1/1/2004 4 5 1,440 7,200 1/1/2005 5 5 1,800 9,000 1/1/2006 6 10 2,160 21,600 1/1/2007 7 10 2,520 25,200 1/1/2008 8 15 2,880 43,200 1/1/2009 9 20 3,240 64,800 1/1/2010 10 20 3,600 72,000 Total 100 253,800 = 7.05 years Footnotes FN1 See OPS at 61:1755 and at Appendix C thereto. The first two assets listed above Seabrook Over-Market Generating Assets (NAEC) and Millstone 3 Over-Market Generating Assets are amortizing assets. The amount shown for each such asset is its estimated balance as of January 1, 2000, as set forth in the OPS. The amount shown for the fifth asset listed above Financing Costs is the parties' agreed-upon maximum amount of financing costs to be securitized pursuant to the OPS. OPS at 19:520. In accordance with the OPS, the amounts of the third and fourth assets listed above Acquisition Premium and Acquisition Premium - FAS 109 are measured as the difference between $725 million and the amount of the other three assets listed. OPS at 19:523. Thus, in accordance with the OPS, these amounts would increase as the amount of each of the first two amortizing assets decreases, and would also increase if the actual amount of financing costs is less than $17 million, so that the total amount to be securitized would remain equal to $725 million. FN2 Competition Day is defined in RSA 369-B:2, III, which in turn references the definition provided in the OPS ("Competition Day"). FN3 Out of 39 conditions contained in the April 19 Order, PSNH requested rehearing with respect to one that it did not unconditionally accept, and sought clarification and modification of several others. FN4 The $670 million securitization limitation is set forth in RSA 369-B:3, IV(b). RSA 369-B:3, IV(b) also provides that such limitation shall be reduced by $6 million for each month from October 1, 2000 to Competition Day. The $15 million limit on the recovery of financing costs and costs of premiums associated with retirement of debt and preferred stock is set forth in RSA 369-B:3, IV(b)(3)(E). PSNH shall include within this cap on cost recovery the first $700,000 of the costs of the office of the State Treasurer. Thus, to the extent that the State Treasurer incurs costs of $700,000 or more, PSNH's recovery of its costs will be limited to $14.3 million. RSA 369-B:3, IV(a) authorizes $130 million in RRBs to finance renegotiated agreements of existing power purchase obligations requiring PSNH to purchase power from six wood-to-energy facilities and one trash-to-energy facility. This amount is in addition to the $670 million securitization level authorized in RSA 369-B:3, IV(b). FN5 The definitions of "retail customers" and "retail electric service" set forth in RSA 369-B:2, XI and XII are incorporated herein. FN6 In its Response to Order No. 23,443 dated May 1, 2000 (the "Response to April 19 Order"), PSNH proposed to securitize stranded costs in an amount not greater than $575 million, including financing costs of $17 million. See Response to Order No. 23,443, Attachment A, p. 11. This proposal was further reduced by PSNH to not greater than $573 million to comply with the $15 million limit on securitizable financing and debt retirement premium costs set forth in RSA 369-B:3, IV(b)(3)(E). During the July 7, 2000 hearing, the GOECS and Settlement Staff provided testimony recommending that the finance order authorize the issuance of the full amount authorized by the Legislature, giving the Company the discretion to issue whatever amount it determined was most appropriate, and having the Commission review the prudence of the Company's decision at a later time. The final securitization amount will be determined immediately prior to RRB issuance and will reflect asset amortizations, actual financing costs, and the effect of the cost recovery limitations required by RSA 369-B:3, IV(b)(3)(E). FN7 The reference to "exit fees" on pages 1 and 3 of Attachment MAE-1 will be eliminated in the final form of the Issuance Advice Letter. FN8 RSA 369-B:4, V provides that the finance order shall specify how amounts collected from a retail customer shall be allocated between the RRB Charge and other rates and charges. FN9 The actual use of proceeds amount will be adjusted, as necessary, to reflect the final securitization amount. See supra note 6 and accompanying text. FN10 See supra notes 1, 4 and 6 and accompanying text. FN11 The method herein for calculating all-in cost is consistent with the Conformed Settlement Agreement, in which the term "All-In Cost" is defined as "The cost of the RRBs, including the coupon rate, any discounts or premiums, ongoing fees, the overcollateralization account, [SPE] expenses, any letter of credit costs, but excluding servicing fees." FN12 All numbers are for illustration purposes only. FN13 Although taken from PSNH's actual May 1, 2000 filing with the Commission pursuant to Docket No. IR 90-218, all numbers are for illustration purposes only. FN14 The "ROE Calculation" shall equal the lesser of (i) PSNH's actual ROE (as calculated above) and (ii) the 11.00% ROE allowed by the Commission in Docket No. DR 97-059. FN15 All numbers are for illustration purposes only. EX-99.2 3 0003.txt EXHIBIT 3.2.3 - NHPUC ORDER RE CONFORMED SETTLEMEMT AGMNT EXHIBIT 3.2.3 Public Utilities Commission DE 99-099 PSNH Proposed Restructuring Settlement Order Addressing Motions for Clarification and Rehearing, Amended Settlement Agreement and Financing Issues Order No. 23,549 September 8, 2000 Douglas L. Patch, Chairman Susan S. Geiger, Commissioner Nancy Brockway, Commissioner TABLE OF CONTENTS DE 99-099 Public Service Company of New Hampshire Proposed Restructuring Settlement Order Addressing Motions for Clarification and Rehearing, and Conformed Settlement Agreement O R D E R N O. 23,549 September 8, 2000 APPEARANCES: Robert A. Bersak, Esq., Gerald M. Eaton, Esq. and Sulloway & Hollis by Martin L. Gross, Esq. for Public Service Co. of New Hampshire; Foley, Hoag & Eliot, L.L.P. by James K. Brown, Esq., Stephen J. Judge, Esq. and Wynn E. Arnold, Esq. of the New Hampshire Attorney General's Office for the Governor of New Hampshire, the Governor's Office of Energy and Community Services and the New Hampshire Attorney General; Mark W. Dean, Esq. of Dean, Rice & Kane, for New Hampshire Electric Cooperative; Seth Shortlidge, Esq. and Lisa Shapiro of Gallagher, Callahan & Gartrell, for Wausau Papers; Rep. Jeb Bradley, member of the Legislature, pro se; Rep. Gary Gilmore, member of the Legislature, pro se; Connie Rakowsky, Esq. of Orr & Reno P.A. for the Granite State Hydro Association and individual hydro-electric facilities; David W. Marshall, Esq. for the Conservation Law Foundation; John Ryan, Esq. for the Community Action Program; Alan Linder, Esq. of New Hampshire Legal Assistance, for the Save Our Homes Organization; James Rubens for THINK - New Hampshire; Pentti Aalto for PJA Energy Systems Designs; Peter H. Grills, Esq. and Elizabeth I. Goodpaster, Esq. of O'Neill, Grills & O'Neill, for the City of Manchester; Susan Chamberlin, Esq. of Donahue, Tucker & Ciandella, for the City of Concord; Carlos A. Gavilondo, Esq. for Granite State Electric/New England Power Company; Robert A. Olson, Esq. of Brown, Olson, and Wilson representing six wood-fired power plants; Steven V. Camerino, Esq. of McLane, Graf, Raulerson & Middleton, for Great Bay Power Corp. and the City of Claremont; Timothy W. Fortier for the Business & Industry Association of N.H.; James A. Monahan and Andrew Weissman, Esq. of Morrison & Foerster, L.L.P. for Cabletron Systems, Inc.; Joshua L. Gordon, Esq. and Robert A. Backus, Esq. For the Campaign for Ratepayers' Rights; Robert Upton II, Esq. of Upton, Sanders & Smith for the Towns of Bow, New Hampton, Gorham, Hillsboro and Franklin; Robert P. Cheney, Jr., Esq. of Sheehan Phinney Bass & Green P.A., representing JacPac Foods, Ltd.; Mary Metcalf for Seacoast Anti-Pollution League; James T. Rodier, Esq. for Consumers Utility Service Cooperative and Freedom Partners, LLC; Michael W. Holmes, Esq. and Kenneth Traum of the Office of Consumer Advocate representing Residential Ratepayers; John E. McCaffrey, Esq. of Morrison & Hecker, LLP for PUC Staff Advocates; Lynmarie Cusack, Esq. of the NH Public Utilities Commission for PUC Settlement Staff, and Larry Eckhaus, Esq. for the Staff of the New Hampshire Public Utilities Commission. This order decides various motions for clarification and rehearing of our April 19, 2000 Order, Order No. 23,443 (referred to hereinafter as either Order No. 23,443 or the April 19 Order), which approved with conditions a Settlement Agreement in this Docket. This order also approves the Conformed Settlement Agreement filed June 23, 2000, with certain modifications. A separate Financing Order for the issuance of Rate Reduction Bonds (RRBs) is issued contemporaneously herewith. The original Settlement Agreement, that is the subject of Order No. 23,443, involved a comprehensive proposal designed to resolve the outstanding issues surrounding the restructuring of the state's largest electric utility, Public Service Company of New Hampshire (PSNH), pursuant to the Electric Utility Restructuring Act, RSA 374-F and its mandate for retail competition in the sale of electricity. The approval with conditions of the Settlement Agreement was intended to foster the conclusion of ongoing federal litigation between PSNH and the Commission over restructuring issues, and to resolve numerous open dockets that concern related subjects. A. Background In Order No. 23,443, the Commission set out a detailed history of the proceedings that led to the controversies over PSNH's restructuring, and of the procedural history of this docket through the date of that Order. That procedural history is incorporated herein by reference and is updated below. B. Post-Order Filings and Proceedings On May 1, 2000, PSNH submitted its response to Order No. 23,443, as required in that Order. PSNH accepted the bulk of the conditions set forth in Order No. 23,443, provided conditional acceptance of other conditions, set forth a new proposal regarding Transition Service and did not accept the condition concerning reduction of Part 3 stranded costs by $78.6 million. On May 1, 2000, PSNH also submitted a Motion for Rehearing of Order No. 23,443. On May 1, 2000, the Governor's Office of Energy and Community Services (GOECS) and Settling Staff submitted their responsive filing as required by Order No. 23,443. On May 3, 2000, the Commission issued an Order of Notice establishing a procedural schedule culminating in a hearing on PSNH's Motion for Rehearing and requesting that PSNH respond to certain questions concerning its May 1, 2000 filings. On May 4, 2000, the Towns of Bow, Hillsboro and Gorham, the City of Franklin and the Village Precinct of New Hampton filed a Motion for Clarification of Order No. 23,443, seeking two modifications or clarifications concerning the application of employee protections required by the original proposed Settlement Agreement to hydro-electric plants that might be purchased by municipalities. On May 8, 2000, GOECS filed a letter commenting preliminarily on PSNH's May 1, 2000 Motion for Rehearing, PSNH's May 1, 2000 compliance filing, and the Commission's May 3, 2000 Order of Notice regarding the PSNH filings. On May 8, 2000, Great Bay Power Corporation filed its Objection to PSNH's Motion for Rehearing and Response to PUC Order. On May 12, 2000, Great Bay Power Corporation filed Comments Regarding PSNH's Motion for Rehearing and Response to Order No. 23,433. On May 15, 2000, the Governor's Office of Energy and Community Services and Settlement Staff of the Public Utilities Commission filed more extensive comments Regarding PSNH's Motion for Rehearing and Response to Order No. 23,443. On May 17, 2000, the Commission held a hearing on the issues presented in PSNH's Motion for Rehearing and its Response to Order No. 23,443, insofar as the Response did not expressly accept the conditions set forth in Order No. 23,443. On May 19, 2000, Motions for Rehearing or Reconsideration were filed by (1) CRR, Granite State Taxpayers, Inc. THINK-NH, and NH Public Interest Research Group, Inc., (2) Freedom Partners, LLC (Freedom), (3) the OCA, EnerDev, Inc., and Granite State Taxpayers, Inc., (4) Wausau Papers of NH, Inc., (5) Cabletron Systems, Inc. (Cabletron), (6) Great Bay Power Corporation (Great Bay), and (7) the Business and Industry Association (BIA). On May 24, 2000, the Director of the New Hampshire Division of Air Resources filed a letter informing the Commission of minor technical inaccuracies concerning environmental issues found in Order No. 23,443. On May 26, 2000, PSNH filed its Objection to the Motions for Rehearing from Great Bay, OCA, EnerDev, Inc, Granite State Taxpayers, Inc., CRR, Granite State Taxpayers, Inc., Think-NH, NHPIRG, Inc., Cabletron Systems, Inc., and Freedom Energy Partners L.L.C. On May 26, 2000, Settlement Staff and GOECS filed their Objection to Intervenors' Motions for Rehearing and Motions for Reconsideration. By letter dated June 8, 2000, Freedom advised the Commission that, because of the likely passage of Senate Bill 472 (SB 472), which addressed conditions for approval of PSNH restructuring financing, Freedom would withdraw Paragraphs 1 through 7 of its Motion for Reconsideration pertaining to Transition Service. Paragraphs 8 through 12 were not withdrawn, according to Freedom, because those paragraphs pertain to the Commission's statutory and constitutional authority and responsibilities in conducting a utility rate case in accordance with Appeal of Richards 134 N.H. 148 (1991). On June 12, 2000, SB 472 was enacted as Chapter 249 of the Laws of 2000. Among other things, Chapter 249 set out a comprehensive scheme for the issuance of rate reduction bonds (RRBs) to "securitize" stranded cost obligations of consumers under a PSNH restructuring. The legislation includes fifteen findings of fact, some of which contain declarations as to the consistency of various components of the Settlement Agreement and our April 19 Order with legislative determinations of the public interest, as set out in earlier restructuring statutes, and as further determined in the balance of the legislation. To some extent, such findings of public interest gave more specific content to earlier legislative directives to the Commission regarding standards for approval of PSNH's restructuring plan. The legislation also conditioned the Commission's authority to approve rate reduction bonds, such that approval of securitization for PSNH would require certain alterations to the Settlement Agreement and the April 19 Order. On June 12, 2000, the Commission through its General Counsel advised the parties that, in light of the enactment into law of SB 472, and assuming it is the intent of PSNH to continue to seek approval of the Settlement Agreement at issue in this docket, the Commission had determined that it was necessary for PSNH, GOECS and Settlement Staff to provide the Commission with several filings, no later than June 23, 2000. PSNH was directed to inform the Commission whether the new statutory provisions would alter in any way the Company's pending Motion for Rehearing, and, if so, to file an update of its response to Order No. 23,443, to include the Company's response to legislated conditions to rate reduction bond financing. PSNH, the State Parties and the Attorney General were directed to file a revised Settlement Agreement reflecting compliance with the various changes accepted by the signatories during the course of the hearings, with Order No. 23,443 conditions, and with requirements set forth in SB 472. PSNH was required to file a request, within this docket, for a finance order pursuant to which RRBs would be issued, including a proposed form of financing order. Parties other than PSNH that had filed motions for clarification or rehearing were directed to file a statement as to the effect, if any, of the revised Settlement Agreement or the new statutory provisions, by July 5, 2000. On June 23, 2000, PSNH filed the Conformed Agreement to Settle PSNH Restructuring (hereinafter referred to as Conformed Agreement, CSA) in compliance with the requirements set forth in the June 12 Notice. That filing also contained a Motion for Findings of Fact and for Issuance of Finance Order, a description of the proposed rate reduction bond transaction to be included in a finance order, (attachment A), proposed findings to be included in a finance order (attachment B) and proposed orders and approvals to be included in the finance order (attachment C). On June 23, 2000, Cabletron filed its Motion to Withdraw its May 19, 2000 Motion for Rehearing and its May 24, 2000 Motion of Concurrence with Great Bay Power Corporation, the Office of the Consumer Advocate, and the Campaign for Ratepayer's Right's Motion for Rehearing. Similarly, Wausau Papers withdrew its Motion for Rehearing on July 5, 2000. On June 29, 2000, Great Bay filed its Objection to PSNH's Motion for Findings of Fact and for Issuance of Finance Order. On July 5, 2000, Great Bay advised the Commission that it continues to seek a ruling on its Motion for Rehearing as submitted. On June 30, 2000, Campaign for Ratepayers Rights, Granite State Taxpayers, Inc. THINK-NH and NH Public Interest Research Group, Inc. (CRR et al ), filed an Amended Motion For Rehearing, requesting that they be allowed to amend their previously-filed Motion for Rehearing to contain the issues raised in Cabletron's May 19, 2000 Motion for Rehearing. On July 5, 2000, PSNH objected to this Amended Motion for Rehearing. On July 5, 2000, the OCA filed a letter in response to the Commission letter of June 12, 2000, declining to withdraw its Motion for Rehearing, or alternatively, in the event the Commission has concluded the Rate Agreement is a contract, requesting that the Commission specify the facts in its order that comply with the Supreme Court's decision in In Re New Hampshire Public Utilities Commission Statewide Restructuring, 143 N.H. 233 (1998). On July 6 and 7, 2000, the Commission held hearings on the revised Settlement Agreement and proposed financing order. On July 24, 2000, PSNH, OCA, GOECS and Settling Staff, Representative Bradley, Great Bay, and Wausau Papers filed post-hearing briefs on PSNH's proposed compliance filing and/or financing order. On July 28, 2000, CRR filed a request to be permitted to comment late on the issue of the level of securitization, and included its comments on this topic. On August 11, 2000, counsel for the State of New Hampshire Treasurer filed a letter disagreeing with PSNH's assertion in record responses that the Treasurer would oversee the use of RRB proceeds by PSNH. On August 23, 2000, Cabletron and other parties wrote to urge the Commission to issue outstanding Orders on Rehearing and Securitization Financing in DE 99-099 by September 1, 2000. On August 28, 2000, the Commission received a similar letter from Senator Beverly Hollingworth. On August 28, 2000, the Commission's General Counsel notified the parties by letter that it was necessary to convene a technical session to address certain questions and to obtain clarification on certain portions of the proposed finance order. That technical session was held on August 31, 2000 at which time PSNH requested that it be allowed to file written comments on the proposed finance order. Those comments were filed on September 1, 2000. In three of the motions for rehearing or reconsideration, the objection is posed that the April 19 Order determined stranded cost recovery or transmission and distribution rates, or both, without sufficient factual basis or analysis, in contravention of the restructuring statutes and contrary to applicable ratemaking standards. The particular claims vary from party to party, but all share a fundamental concern about the legal standard that determined the Commission's findings and analysis in the April 19 Order. Specifically, Great Bay, Freedom, and the OCA, joined by EnerDev, Inc. and Granite State Taxpayers, argue variously that the Commission was obliged to conduct a "used and useful" analysis to determine what plant costs included in stranded cost recovery would have been recoverable under traditional ratemaking, was obliged to examine whether the rates proposed under the April 19 Order were lower than those that would have been obtained in a traditional rate case, was obliged to determine whether the Rate Agreement was a contract, and otherwise to have included in the benchmarking comparison of the Settlement Agreement a detailed determination of each of the dockets subsumed under the Settlement Agreement as well as numerous specific theories for alternative ratemaking. Great Bay specifically objected that the April 19 Order failed to review capital additions made after the effective date of RSA 374-F and thus did not preclude the unlawful inclusion of such costs in stranded cost recovery (SCR), and that it failed to ensure that construction work in progress (CWIP) is excluded from transmission and distribution (T&D) rates notwithstanding the use of projections on which to set rates. Great Bay further complained that the Commission did not apply any standard to approve the delivery rate proposed in the Settlement Agreement, failed to set a reasonable rate of return for T&D costs, failed to apply PSNH's actual capital structure in setting delivery rates, and failed to use actual cost data to set the delivery rate. Great Bay objects to the stranded cost recovery charge (SCRC) on the grounds that it employs a fixed cost of capital out into the future, and cannot be reconciled with the requirement that rates of return reflect actual capital costs as they change from time to time. Finally, Great Bay and OCA argue that the Commission's benchmarking analysis was flawed because it failed to contain a determination of the outcome of each of the specific cases subsumed under the Settlement Agreement. Neither Great Bay's objection to the level of analysis in the April 19 Order, nor those of the other parties noted, were withdrawn after the passage of SB 472. GOECS and Settling Staff filed an objection to the various motions for rehearing on May 26, 2000. In its Objection, GOECS and Settling Staff first set out the standard of review for considering a motion for rehearing. They state that in New Hampshire, rehearing may only be granted for "good cause," and the Court has defined "good cause" to mean new evidence that could not have been provided at the original hearing, citing Appeal of Gas Service, Inc., 121 N.H. 797 (1981). They further state that our Supreme Court has held that the purpose of rehearing is "to direct attention to matters said to have been overlooked or mistakenly conceived in the original decision, and thus invites reconsideration upon the record upon which that decision rested," citing Dumais v. State Personnel Commission, 118 N.H. 309, 312 (1975)[citations omitted]. GOECS and Settling Staff assert that the moving parties have failed to assert good cause to set aside or vacate Order No 23,433. According to GOECS and Settling Staff, the moving parties have failed to demonstrate that the Order is contrary to law, or that a clear preponderance of the evidence demonstrates that it is unjust or unreasonable, citing Appeal of Ashland Electric Department, 141 N.H. 336 (1996). According to GOECS and Settling Staff, the assertion of CRR et al that the stranded cost recovery is greater in the April 19 Order than allowed by RSA 374-F:3, XII lacks merit. For example, the assertion that Section XII(d) requires that stranded costs be "reconciled ... from time to time," ignores the fact that the language of the restructuring principles is expressly framed as guidelines, and that the various policy goals contained in Section XII require a reasonable balancing by the Commission. With regard to the arguments of OCA et al that the "clear intent of the legislation" was to insure that the settlement offers ratepayers at least as many benefits as full litigation of all the dockets would provide, GOECS and Settling Staff point out that, if that were the case, the Legislature would simply have forbidden settlements, which by definition are an alternative to full litigation. GOECS and Settling Staff note that the ultimate test of such a settlement is whether the result is "just and reasonable and serves the public interest," citing N.H. Admin. Rule Puc 203.09(a). GOECS and Settling Staff further cite the Commission's findings in the April 19 Order that "the rate decrease benefits achieved under the Settlement Agreement are greater than those that are likely to be achieved under the business-as-usual scenarios," citing Order No. 23,443 at 182. With regard to OCA's criticism that the Commission did not determine whether the Rate Agreement is a contract, GOECS and Settling Staff argue that this question is the subject of federal litigation, and could not be meaningfully addressed by the Commission in this proceeding without revealing its litigation strategy. They further argue that the OCA failed to state how the Commission's benchmarking analysis would have been changed had the Commission determined whether the Rate Agreement is a contract. Even if the Rate Agreement were found not to be a contract, recoverability of stranded costs would remain an issue, according to GOECS and Settling Staff. Addressing Great Bay's arguments, GOECS and Settling Staff first assert that Great Bay did not support its claim that capital additions made after the date of the restructuring statute were unnecessary, in the face of PSNH's prima facie case justifying their inclusion in stranded costs. They further argue that the complaint of Freedom and Great Bay that the Commission failed to apply the "used and useful" standard ignores the fact that whether an asset is used and useful can change with circumstances over time, and therefore is not permanent, and should not be used as a standard in this proceeding. GOECS and Settling Staff call Mr. McCluskey's "used and useful" method "untested in New Hampshire," and assert that even if the Commission had accepted this approach, there was no showing that the "excess capacity" status would continue over time. GOECS and Settling Staff argue that the Commission rejected Mr. McCluskey's approach, in light of the permanent resolution of restructuring that the settlement offers. With regard to Great Bay's argument that each area of controversy be fully litigated before any settlement is approved, GOECS and Settling Staff assert that this view is counter to the very nature of settlements. They further argue that the moving parties had an opportunity to show that various elements of stranded costs should not be recovered, and they have failed to do so. GOECS and Settling Staff also counter Great Bay's argument that the Commission failed to apply a statutory or constitutional standard in approving the delivery rate. They state that the Commission went to great lengths to analyze the reasonableness of the delivery rate proposed in the Settlement Agreement. They state that the entire benchmarking analysis conducted by the Commission was based on traditional ratemaking principles. They further assert that there is nothing in the record to support Great Bay's specific claim that the rates approved in the April 19 Order include CWIP. Likewise, they state, Great Bay failed to support its assertion that the Commission did not make a finding as to the adequacy of the capital structure of PSNH under the Settlement Agreement. With regard to Freedom's allegation that the rates approved in the Settlement Agreement are exploitative, GOECS and Settling Staff argue that the benchmarking analysis supported the Commission's finding that the overall settlement supports a result that is in the public interest, and an overall rate that is just and reasonable, citing 1999 N.H. Laws 289:4 and RSA 378:28; Federal Power Commission v. Hope Nat. Gas Co., 320 U.S. 591 (1944). In their Brief filed July 24, 2000, GOECS and Settling Staff addressed the statutory framework in which our review of the Conformed Settlement Agreement must take place. GOECS and Settling Staff argue that the August 2, 1999 Settlement Agreement has been modified twice, first by the Commission and then by the Legislature. According to GOECS and Settling Staff, the Legislature amended some of the Commission's amendments, while still capturing value comparable to that which the Commission added to the original Agreement. With certain minor changes, GOECS and Settling Staff argue that the proposed Finance Order and the Conformed Settlement Agreement are in the public interest, and that the changes incorporated therein as a result of SB 472 achieve the balancing required by the Commission in Order No. 23,443. They urge the Commission to so find, particularly as there was no evidence submitted in the July hearings to the contrary. GOECS and Settling Staff argue that, even if the PSNH Motion for Rehearing is granted with respect to certain identified tax issues, the Conformed Settlement Agreement is in the public interest. They note that PSNH has submitted an exhibit quantifying the value of the Company's undertakings required by SB 472 as a condition of securitization, and that the midpoint of the range of value is $474,000,000 (Exh. F-23), which, they state, is fully consistent with the outcome the Commission required in its April 19 Order. GOECS and Settling Staff note that the Commission has previously held that "in determining whether the result is in the public interest, there is no formulaic principle," citing Order No. 23,443 at 182. GOECS and Staff urge that, in the rebalancing that the Commission undertakes as it considers the Conformed Settlement Agreement, the Commission take into account the fact that the Settlement Agreement achieves all the objectives of the Commission and the Legislature. PSNH objected to the various motions for rehearing of the stranded cost recovery charge and delivery service charges, stating that none of the motions present good reason for rehearing Order No. 23,443, and that granting any of the motions would unnecessarily create further delays in this proceeding, and harm the state's economy, and cause a continued burden on the state's citizens, commerce and industry. These various objections to the sufficiency of the Commission's analysis and findings in support of the April 19 Order are not persuasive, for the following reasons. First, we are not required by statute to conduct a traditional rate case to determine this case. We are specifically authorized to resolve this docket through adjudicated settlement, rather than through full litigation of each specific claim. The Court has also determined that we are not bound to use any given ratemaking methodology to set rates, as long as the resulting rates are just and reasonable. With respect to the restructuring legislation which governed our determination in this case, RSA 374-F does not contain a mathematical formula for balancing its twelve interdependent principles in the fashion proposed by the moving parties, and permits us to award stranded costs that are "substantially consistent" with the statutory guidelines. Finally, to the extent prior law could be interpreted as requiring such an approach, SB 472 has superceded that law, and explicitly mandates the result we reach today. The overarching standards of the restructuring legislation, and the statutory standards for sufficiency of Commission ratemaking decisions, do not require that the Commission determine the outcome using any specific methodology, so long as the stranded cost recovery result is "equitable, appropriate and balanced," the settlement is "in the public interest," and the rates are "just and reasonable." Support for the authority that the Commission need not resolve these outstanding matters using traditional cost-of-service analysis is found in the New Hampshire Supreme Court's decision in Appeal of Richards 134 N.H. 148 (1991). In that case, the Court determined that a traditional ratemaking approach was not required, by statute or the federal Constitution, to analyze the rate plan before the Commission. Most significantly, the Court noted the well-established principle set out in Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591 (1944) that "the methodology used to set rates is irrelevant. . . . Instead, it is the result reached that is important: '[i]f the total effect of the rate order cannot be said to be unjust or unreasonable, judicial inquiry is at an end.'" 134 N.H. at 164, quoting Hope, 320 U.S. at 602. The adjudicated settlement proceeding here, and the benchmarking analysis conducted by the Commission at the Legislature's direction, constitute such a constitutionally permissible means. The April 19 Order was issued in the context of a settlement, albeit one objected to by a number of parties, and the Legislature has specifically authorized and directed the Commission to consider a negotiated settlement of the pending litigation and restructuring issues. See, e.g., RSA 374-F:4, V (stranded cost charges may be established through an adjudicated settlement proceeding), RSA 369-A:1, IV (structured financing may be considered in the context of settlement agreements), and 1999 N.H. 289:3, I (Commission may hold hearings to review any settlement proposal that includes securitization). All of these statutes were enacted subsequent to the more general provisions of RSA 374-F, the "used and useful" statute (RSA 378:28), and the special contract statute (RSA 378:18-a) that some parties have alleged were violated by the Commission's order, and as subsequent acts of the Legislature that deal with a subject in a more specific way, the later legislative acts must control. Board of Selectmen v. Planning Board, 118 N.H. 150, 152; Petition of Public Service Co. of New Hampshire, 130 N.H. 265, 283 (1988). The New Hampshire Administrative Procedure Act, which governs the procedures the Commission must adhere to in carrying out its responsibilities, provides that "informal settlement of matters by nonadjudicative processes is encouraged." RSA 541-A:38. The authority of the Commission to discharge its responsibilities through the consideration and review of negotiated settlements extends to its duties to implement retail choice in the electric utility industry. With respect to the Rate Agreement in particular, the New Hampshire Supreme Court's decision with respect to certain transferred questions of law in In re New Hampshire Public Utilities Commission Statewide Electric Utility Restructuring Plan, 722 A.2d 483, 143 N.H. 233 (No. 98-114, issued December 23, 1998) found that "the PUC must consider State obligations under RSA chapter 362-C and the rate agreement, if any, when determining whether, and to what extent, PSNH receives an award of stranded costs." 722 A.2d at 488, 143 N.H. at 238. The Supreme Court also found that while it must consider the State's obligations in its analysis, the PUC can award only those stranded costs that comport with the standards mandated by the Legislature in RSA 374-F:4, V and VI. Id. We do not believe that the requirement to "consider" the State's obligations requires us to rule definitively as to the legal nature of those obligations prior to awarding recovery of stranded costs. Rather, the overriding consideration is that we achieve a result that is in the public interest by only allowing a charge for the recovery of costs that is "equitable, appropriate and balanced," and that the end result, the ultimate rate charged, is just and reasonable. The various claims as to the nature of the State's obligations are certainly part of the calculus we must apply in balancing the interests of the customer and the utility as required by RSA 363:17-a, and, as we discussed in our April 19 Order, we have done so. Subsequent to the Supreme Court's decision in In re NHPUC, RSA 374-F:4, V was amended by the insertion of "or adjudicated settlement" following "rate case" in the first sentence. See Laws of 1999, Chapter 289:6, effective July 16, 1999. This change provided the Commission the express authority to establish a stranded cost charge in the context of its review of a settlement. To the extent that any question remained after the Supreme Court's decision in In re NHPUC, the Legislature has removed it by virtue of its passage of SB 472, which contains explicit findings approving the overall structure of the Settlement Agreement and many specific details in the Settlement Agreement, including those complained of in the motions for rehearing. We find that this statute and the earlier amendment to RSA 374-F contained in the Laws of 1999, Chapter 289:6, allow the Commission as part of its review of a settlement to resolve the questions concerning the nature of the State's obligations to PSNH under the Rate Agreement. It would be contradictory and illogical to find that a settlement of claims as to the contractual nature of the Rate Agreement, which is necessary and fundamental to the settlement of the question of the appropriate stranded cost recovery charge (which we have the authority to approve), must be rejected, and can only be resolved by an explicit Commission ruling on the nature of those claims. If the Legislature had intended our authority to be so circumscribed, it could have made this an express requirement, and provided that a settlement of claims for stranded cost recovery may only be accepted by the Commission after it has completed its ruling on the claims with regard to the Rate Agreement. In fact, the Legislature did the opposite: its requirement that the Commission pursue appropriate litigation as to whether the 1989 Rate Agreement is a contract and as to whether PSNH and NU may have breached any such contract applies only if PSNH does not accept the conditions contained in RSA 369-B:3, IV(b). See, 2000 N.H. Laws, Chapter 249:6, III. It is also necessary to point out, contrary to the arguments of some parties, that the conclusion as to what stranded assets are to be recovered from ratepayers or will remain the responsibility of the Company and its investors does not flow automatically from a determination as to whether the Rate Agreement is or is not a contract. RSA 374-F:3, XII(c)(4) provides that a utility's obligation to mitigate its stranded costs requires "[a] reasonable amount of retirement, sale or write-off of uneconomic or surplus assets, including regulatory assets not directly related to the provision of service." (Emphasis supplied.) There is no legislative mandate that all regulatory assets or surplus capacity (i.e., capacity not "used and useful") be excluded from stranded cost recovery. Thus, even assuming the Rate Agreement is not a contract, the argument that the Acquisition Premium is not "used and useful" and, therefore, should be completely eliminated from rates suffers from an incomplete analysis. The reasonableness of such a result would have to be reviewed. In addition, the Legislature's recent securitization statute explicitly includes acquisition premiums among the utility costs that can be the subject of securitized stranded cost recovery. RSA 369-B:2, XIV(a). We therefore find that we are not required by either RSA 374-F:3, RSA 374-F:4 or the Supreme Court's determination in In re NHPUC to first decide whether the Rate Agreement is or is not a contract before we authorize PSNH to collect a stranded cost recovery charge. The objecting parties have also argued that the standards set forth in RSA 374-F:3 and RSA 374-F:4 impose a strict definition of and limitation upon stranded cost recovery. The Commission does not interpret the provisions of RSA 374-F:3, XII and RSA 374-F:4, V as being as prescriptive as the objecting parties assert. The requirement that the SCRC be "substantially consistent", RSA 374-F:4, III, with the interdependent principles of the Restructuring Act gives the Commission discretion to act within certain limits, as long as the end result is consistent with the public interest. See RSA 374-F:4, VIII (a). Finally, to determine whether the rates resulting from the Settlement Agreement were just and reasonable, and in the public interest, the Commission employed the benchmarking analysis required by the restructuring statute. 1999 N.H. Laws 289:4. As we noted in the April 19 Order, the Legislature did not specify the time period over which the analysis was to be conducted, other than limiting the length of Transition Service and demanding "near term" rate relief. In the absence of a legislatively-determined horizon for benchmarking purposes, we found it appropriate in our detailed revenue requirements modeling to "look out over a period that is long enough to capture events that are certain, but short enough to avoid the difficulty associated with predicting the long-term future." Order No. 23,443 at 178. We chose a period ending in 2007, around the Recovery End Date. Id. In forecasting revenue requirements for more than seven years, and doing so under a number of scenarios, a sound analysis can only achieve a certain level of precision. As we noted, by definition the benchmarking exercise involves uncertainty. Id., at 169. None of the objections posed by the various moving parties, claiming the Commission failed to track traditional ratemaking methods precisely, takes into account the limits to analytical precision imposed by the fact that the benchmarking analysis, unlike that of traditional ratemaking, looks several years out into the future. Traditional ratemaking tools, based on the analysis of a historic test year, are tied closely to the historic books of account, and forecasts are employed only so long into the future as necessary to get a feel for the likely cost of capital requirements over the (short) period rates may be in effect. By contrast, the benchmarking analysis must make a number of assumptions about the likely path of future events, and project their impact on the likely costs of doing business over the period of analysis. The test year accounting results of the Company are some evidence, but by no means the only evidence, of these likely future costs. They are merely a starting point, and cannot control the outcome in a deterministic fashion. Also, since benchmarking deals with the future, it necessarily considers future plant additions, and some assumption as to whether they will in fact be reflected in rates under "business as usual," that is, assuming no CWIP and a reflection of their costs in rates when and if the plant additions are made. The Legislature intended us to approve a settlement if the two paths (Settlement Agreement and benchmark), over time, were sufficiently close that the Settlement Agreement was reasonable. This we have done. Such a forward-looking analysis is different from approving CWIP. The Legislature does not require that we determine that the Settlement Agreement meets every component of every restructuring principle guiding us in approving a restructuring package. The movants, to the degree they attack individual components of the Settlement Agreement (as conformed pursuant to the directives of the April 19 Order and today's order) misapprehend what has been accomplished by our order. The restructuring legislation required a balancing of concerns, as did the consideration and evaluation of this comprehensive Settlement Agreement, and no one of those concerns can be isolated and held up as essential to the justness and reasonableness of the outcome, as the motions for rehearing seek to do. And where one restructuring principle must be balanced against another, the statutory scheme contains an implicit requirement for the exercise of Commission discretion in weighing the application of the principles to the Settlement Agreement's terms. See, e.g., RSA 374-F:1, III, RSA 374-F:4, VIII (a). Our benchmarking analysis provided a sound basis for determination of the underlying merits of the rate plan contained in the Settlement Agreement. We note also the broad scope of authority of the Commission, through its acceptance or modification of the Settlement cited elsewhere in this Order, to completely and finally resolve, with respect to PSNH, Docket DR 96-150, the federal litigation and the other dockets listed in Section XV of the Agreement. The Motions for Rehearing and Reconsideration fail to adequately consider the effect of SB 472 in specifying the extent to which the April 19 Order is consistent with the legislative determination of the public interest and complies with its restructuring directives in RSA Chapter 374-F and RSA Chapter 369-A. Chapter 249 of the Laws of 2000 creates a comprehensive and extremely detailed scheme for authorizing PSNH to refinance its debt through securitization as part of a larger restructuring plan to create retail competition for its customers. The Commission's April 19 Order is an intricate and essential part of that scheme; the April 19 Order is referred to no less than ten times throughout the statute and in many instances the Commission's findings and conclusions are incorporated within the statute's express provisions. The portion of Chapter 249 codified at RSA 369-B:3, IV that authorizes the Commission to issue finance orders for PSNH, directs that such finance orders must be consistent with 16 specific conditions, several of which contain numerous subparts. These conditions relate to the details in the Settlement Agreement and April 19 Order concerning PSNH's rates (including the level and term of the delivery service charge and total system benefits charge), customer savings, calculation of the Recovery End Date (RED), transition service, merger issues, and divestiture, to name a few. Thus, for the Commission to implement the provisions of our April 19 Order, which requires approval of a financing order approving securitization and the issuance of Rate Reduction Bonds, we are required by RSA 369-B:3, IV to include conditions that either reaffirm or substantively modify several aspects of our April 19 Order. In so requiring, the Legislature effectively revised our April 19 Order and, subject to those revisions, expressly found that Order (and the details therein) to be consistent with the principles contained in RSA 374-F:3, RSA 369-A:1, X and RSA 369-A:1, XI. For example, pursuant to RSA 369-B:3, IV(b)(5), the delivery service charge is to be fixed, on average, at $0.028 per kWh for a period of 33 months. In order to issue a finance order for PSNH, the Commission first must find that this condition is met. If this, and all the other conditions of the April 19 Order and RSA Chapter 369-B are met, then the Legislature has determined that the finance order which is subsequently issued approving and implementing the securitization proposal in the Settlement Agreement "will result in benefits to customers that are substantially consistent with the principles contained in RSA 374-F:3 and RSA-A:1, X and with RSA 369-A:1, XI." RSA 369-B:1, VII. This means, quite literally, that the PSNH delivery service charge fixed, on average, at $0.028 per kWh for 33 months, as approved in the April 19 Order and reaffirmed and revised in today's order, is expressly found to be consistent with all the restructuring policy principles of RSA 374-F, such as Customer Choice, Regulation and Unbundling of Services and Rates, Open Access to Transmission and Distribution Facilities, Benefits to All Customers, Full and Fair Competition, Near Term Rate Relief and Administrative Process. Any attack now on the Commission's approval of the delivery service charge, whether it be allegations that the process was an improper departure from traditional rate-making standards, an alleged failure to determine whether the rate base which formed the basis for the delivery rate contained CWIP, or a supposed failure to conduct any analysis as to what constitutes a reasonable rate of return on T&D plant and to calculate the delivery rate using actual cost data, all of which we disagree with, is of no consequence, as the resulting rate is now mandated by statute and found to be "beneficial to customers," and "in the public interest." The same rationale applies as well to each of the following issues either addressed in the April 19 Order, or revised by RSA Chapter 369-B: PSNH's supplying of transition and default service during the initial transition service period; the rate of transition service during the initial and subsequent periods; the reconciliation of excess of bid price over fixed price for transition service, including PSNH's absorption of the first $7 million of that difference; the assignment of residential customers to registered competitive suppliers; the term of transition service; the amount of stranded costs that may be securitized; the minimal level of customer savings; the rate associated with the credit to customers of the ADITs; the maximum of issuance and debt premium costs PSNH may recover; the calculation of RED; the five percent temporary rate reduction effective October 1, 2000; the terms of the jurisdiction and authority of the Commission over a merger, acquisition or sale involving PSNH or its parent; the prohibition of recovery of an acquisition premium from a merger, acquisition or sale in a way that increases rates; the level of the system benefits charge; prohibition against an exit fee; open access to PSNH's transmission system; the cap on the SCRC; the total rates of customers taking service under special contracts; the Commission's administration of the liquidation of PSNH's generation assets and bid process for transition service; and the timing of PSNH's agreement to dismiss the federal litigation involving the Commission. Accordingly, to the extent that parties' motions for rehearing implicitly or explicitly contest any of these provisions by relying on statutory provisions that have been superceded by Chapter 249's specific conditions and instructions to the Commission, and ignore that Chapter's affirmation and revision of the April 19 Order, those motions must be denied. See, e.g., Colby v. Broderick, 96 N.H. 316, 317 (1950) (["w]hen the legislature makes a revision of the subject matter of a statute and by the new statute designs a complete scheme, so much of the former statutes as are not mentioned, although not expressly repealed, are deemed to be superceded.") Thus, we reaffirm our determination, made at the outset of this case and again in the April 19 Order, that we were not required by RSA 374-F to proceed with the ISC rehearing or base rate proceeding at the same time we considered this Settlement Agreement. See Order No. 23,299 issued September 16, 1999 at 37. We also find that we have the authority to resolve all of the pending matters at issue in this docket in the context of an adjudicated settlement. We reject the assertion that we must determine that the Rate Agreement is or is not a contract, in order to determine the proper stranded cost recovery for the Company. We clarify that we have not determined whether the Rate Agreement constitutes a contract. We affirm the benchmarking analysis performed in the April 19 Order, and reject the assertion that we were required to conduct the particular analyses at the level of detail and as constrained by historic cost data, as demanded by the objecting parties as a precondition to our determination of the just and reasonable level of rates. In light of the legislative directives contained in the Laws of 2000, Chapter 249, we affirm that the conformed Settlement Agreement complies with the statutory conditions and the Stranded Cost Recovery therein is therefore "equitable, appropriate and balanced," and that the conformed Settlement Agreement is "in the public interest." In addition to the statutory arguments Great Bay makes, it also argues that the Commission's fixing of the Stranded Cost Recovery rate of return for the entire period of the SCRC, failure to apply the actual capital structure to PSNH, and failure to provide an analysis that demonstrates that the delivery rate yields not more than a reasonable rate of return, all run afoul of the constitutional test for what constitutes just and reasonable rates. Great Bay Motion for Reconsideration at 4, 6. Aside from whether this Commission may or must consider the constitutionality of statutes governing our jurisdiction, Public Service Co. of N.H., 71 NHPUC 581, 582 (1986), Great Bay's Motion and objection fail, because Great Bay does not accurately state the constitutional test. As we discussed above, the New Hampshire and United States constitutions do not require a particular ratemaking methodology. They require that the resulting rates be just and reasonable. Our benchmarking analysis, the results of which were confirmed by the Legislature in Chapter 249 of the Laws of 2000, establishes that the rates resulting from the Settlement Agreement, as amended to conform with this Commission's Orders and the legislation, are just and reasonable and do not constitute exploitative rates. Petition of Public Service Company of New Hampshire, 130 N.H. 265, 274 (1988). CRR, Granite State Taxpayers, THINK-NH and NHPIRG seek rehearing on the grounds that stranded cost recovery is an unconstitutional taking of consumers' private property without just compensation, and that any SCRC for an acquisition premium is an unconstitutional fictitious capitalization. CRR et al Motion for Rehearing at 2, 16. With respect to the takings argument, CRR et al essentially argue that stranded cost recovery is a payment to the utility in return for which there is no commensurate obligation of the utility to serve the public. They argue that the assessment of stranded costs serves no utility purpose, that there is no rational nexus between costs and benefits. CRR et al further argue that if funds are to be taken from the public to settle the federal lawsuit, encourage PSNH to withdraw its objections to restructuring, and compensate PSNH for historic costs stranded by state law, they must come from tax revenues, not rates, else the Settlement Agreement will violate the state constitution's requirement of equal taxation. According to CRR et al, the Legislature is powerless to overcome these constitutional requirements by statute. In a related but distinct argument, CRR et al point to the New Hampshire constitutional prohibition on fictitious capitalization of corporations, N.H. Const. Pt. II, Art 83. They claim that securities backed by stranded cost recovery rights, rather than real assets, are the "watered securities" to which the constitution refers. Thus, they conclude, Article 83 prohibits the issuance of rate reduction bonds to pay for stranded cost recovery. PSNH filed a short pleading objecting to this and all other motions for rehearing. GOECS and Settlement Staff object to these arguments of CRR et al with respect to the constitutionality of stranded cost recovery. In their Objection, GOECS and Settling Staff analyze and distinguish the cases cited by CRR et al for the proposition that the Commission and the Legislature lack authority to award stranded cost recovery or securitize cost recovery. Putting aside the Commission's historic view that it lacks the authority to determine the constitutionality of state statutes, Public Service Co. of N.H., 71 NHPUC 581, 582 (1986), we deny the Motion of CRR et al for reconsideration of the SCRC on the cited grounds. The award of stranded cost recovery is an exercise of ratemaking, under legislative guidelines, not a taking; it fulfills the public purpose of restructuring the electric industry and the provision of service to PSNH customers, and the investments recovered via stranded cost recovery and securitization represent historic costs of service, or lawfully-awarded acquisition premium costs. As GOECS and Settling Staff state in their Objection to Motions for Rehearing, by definition "stranded costs" were incurred in the public service or they would not be deemed recoverable under the existing regulatory structure. See RSA 378:27 and 28. The cases cited by CRR et al are not applicable to PSNH's proposed restructuring plan, because they deal with expenditures that enabled a utility to serve only private individuals or industry. The Settlement Agreement provides for recovery of costs that, arguably, could have been recovered by PSNH in the ordinary course of ratemaking. The balancing of the equities, as performed initially by the Commission in our April 19 Order and as rebalanced by the Legislature in Chapter 249 of the 2000 Laws of New Hampshire, effectively removed from the overall allowance for stranded cost recovery those costs that the Legislature considered inappropriate for utility cost recovery. Whether or not CRR et al agree with the legislative policy, 374-F and associated statutes make clear that an "equitable, appropriate and balanced" amount of stranded costs are legitimate utility costs recoverable in rates. For the reasons stated in the Settling Staff and GOECS Objection, the remaining arguments by CRR et al as to the constitutionality of the Order under a takings theory or a "fictitious capitalization" theory are without merit. CRR et al moved on June 30, 2000 to be permitted to amend their May 19, 2000 Motion for Rehearing, to add the issues raised in Cabletron's May 19, 2000 Motion for Rehearing. Cabletron withdrew its Motion for Rehearing on June 22, 2000. CRR claims now that it was aware of the issues Cabletron was going to file in its May 19 Motion, and did not raise the same issues, but instead relied on Cabletron's pleading. Now that Cabletron has withdrawn its Motion, CRR submits that it is in the position of not having issues it would have otherwise raised now not properly before the Commission for consideration. Consistent with their prior expectation that the Cabletron issues would be considered by the Commission, CRR wishes to have the Commission address the Cabletron issues. They further state that the Commission had presumably been "working on Cabletron's motion for rehearing for over a month before Cabletron withdraw [sic] them," and therefore reinstatement of the issues by CRR would not prejudice the Commission, or any other party. PSNH objects to the Motion of CRR et al to amend its Motion for Rehearing, stating that "CRR's failure to timely raise the issues contained in Cabletron's Motion for Rehearing...cannot be cured by the filing of an Amended Motion for Rehearing seventy five days after the issuance of Order No. 23,443." Objection at 2. PSNH further argues that the Supreme Court has repeatedly held that there is no jurisdiction to consider issues for which rehearing is not properly sought according to the statutory prerequisites. We agree with the Company that CRR's Motion was not timely filed. CRR et al could have filed even a brief statement on May 19, 2000, asserting that they joined in Cabletron' s Motion. This they did not do. Compare the action of one of the movants, Granite State Taxpayers, in joining the Motion for Rehearing filed by the OCA and EnerDev. The Motion of CRR et al to amend their Motion for Rehearing to assert the arguments put forth by Cabletron on May 19, 2000 and withdrawn by Cabletron on June 22, 2000, is denied. The Towns ask that we clarify the provisions of Order No. 23,443 with regard to employee protections at hydro facilities that they may wish to purchase. They first ask that we clarify the provision on p. 231 to the effect that municipalities should be subject to the same provisions on employee protections as other bidders. They argue that PSNH does not assign its employees to any specific hydro facility. They argue that if a town purchases less than the full complement of facilities and is required to provide the same employment protections and benefits as PSNH is proposing to establish for its other employees, it will be necessary to assign specific employees to specific facilities. They ask that PSNH be ordered to assign its hydro plant employees by facility, stating which employees by name are assigned to each station, and further that the Commission state whether Order No. 23,443 would be satisfied by the employment of any such PSNH employees, assigned to a particular hydro facility by any entity with whom a municipality may contract for maintenance and operations, provided such entity grants the same employment protections and benefits PSNH proposes to establish in the fossil/hydro auction. Whether the Town's first request is treated as a motion for clarification, or more accurately as a motion for rehearing, it is denied. There was substantial evidence at the hearings in this docket to the effect that PSNH's practice of not assigning specific plant employees to specific hydro facilities, but rather creating a hydro team with responsibility for all the hydro facilities, is the most efficient method of assigning personnel to these facilities. The Towns did not offer evidence that rebuts this fact, and do not attempt to do so at this point. The Commission has no basis to require the break-up of the team and the reassignment of its members to individual plants. As to the Town's request that we clarify the means by which the Towns, as prospective purchasers of the hydro plants, may meet their obligations with respect to employee protections, we grant the motion for clarification. The employee protection obligations spelled out in Order No. 23,443 can be met by a Town contracting with an entity for operations and maintenance of a facility it may purchase, if such entity grants the same employee protections and benefits as are contained in PSNH's commitment, approved in Order No. 23,443. Great Bay requests that we rehear the April 19 Order to require PSNH to unbundle its transmission and distribution. Motion for Rehearing at 5. Great Bay also argues that PSNH's Amended Settlement Agreement cannot be accepted because PSNH has failed to comply with the statutory requirement of RSA 374-F, made more urgent and strengthened by RSA 369-B:3, IV (b) (8), to unbundle its system, so as to provide open access to its transmission system. Post-Order Brief at 6. PSNH filed an objection to the Motion on May 26, 2000, arguing that Great Bay does not state a good reason to rehear the April 19 Order, that granting any of the motions would cause delay, harm the state's economy, and cause a continued burden on the state. GOECS and Settlement Staff argue that Great Bay's concern regarding the unbundling of transmission rates was amply addressed in the testimony of the Settling Staff, and the Commission's Order is otherwise supported in the record. Great Bay has not persuaded us that we must reconsider the April 19 Order, or reject the Amended Settlement Agreement, on account of their provision for unbundling T&D rates in the next rate case, or earlier at the Commission's determination. As we noted in the April 19 Order, PSNH does not have the data readily available to unbundle the T&D portion of its rates. April 19 Order at 255. The statutory requirement for open access to PSNH's transmission system, RSA 369-B:3, IV(b)(8), can be met before unbundling is completed. The statutory requirement that unbundling be accomplished as soon as is "practical", RSA 374-F:4, I, will be met, before the next rate case, by continued Commission oversight of unbundling possibilities, and at the latest, in the next rate case. We continue to view accomplishing the overall purpose of the statute, getting to Competition Date, as more pressing than perfecting this one aspect of the overall package of restructuring reforms at this time. Accordingly, Great Bay's Motion for reconsideration with respect to T&D unbundling is denied without prejudice. Throughout the hearings on the revised Settlement Agreement and the subsequent filings, PSNH has argued that it should have discretion to determine the level of securitization necessary and appropriate to maximize the benefits to shareholders and customers, within the $670 million securitization cap contained in RSA 369-B:3, IV (b). In support of its argument, PSNH cites the fact that the date of the offering is still unknown and since the stranded costs are being amortized, the Company cannot establish the amount of the RRBs to be issued until it knows when this will occur. PSNH also cites its desire to restructure its capital structure by returning to more normal levels of debt and equity; however, until the cash on hand is known, PSNH cannot determine what range of securitization is optimal. It also indicated that the level of securitization will affect the Company's financial ratios and its ability to achieve an investment grade rating. In its brief (at p. 8), the Company concludes that the Commission should do what it has done historically and grant the Company the discretion to determine the most reasonable and prudent amount of securitization, subject to a review under the prudence standard set forth in the Settlement Agreement. (The Settlement Agreement at p. 8 defines "prudence" as follows: The standard of care which qualified utility management would be expected to exercise under the circumstances that existed at the time the decision in question had to be made. In determining whether a decision was prudently made, only those facts known or knowable at the time of the decision can be considered.) CRR, in its post-hearing submission, supported the position of PSNH, though for different reasons, and said that securitization should be minimized. Great Bay argued that PSNH was proposing to ask the Commission to divest itself of all jurisdiction over the issuance of RRBs once the finance order is issued, including the ability to make an after the fact prudence review. As noted above, this does not appear to be PSNH's position. Representative Bradley indicated that PSNH's request to securitize $573 million is a reasonable request since fewer dollars would be guaranteed by customers. He said that the Commission is authorized to determine an amount lower than $670 million based upon what the Commission finds to be in public interest. GOECS and the Settling Staff argued that PSNH's proposed level of securitization may not maximize customer benefits. Although they agreed that the effect of delay has been to lower the appropriate level of securitization and that an appropriate goal of restructuring should be to keep PSNH financially healthy, they argued that PSNH had not persuaded them that the $573 million ceiling on securitization was appropriate. They argued that the proposed cap does not sufficiently take customers' interests into account. They, therefore, asserted that the Finance Order should authorize the issuance of the full $670 million authorized by the Legislature, giving the Company discretion to issue whatever it believed to be an appropriate level, but that the Company's decision should be subject to a prudence review at a later time. The OCA, in its post-hearing brief, said that while it agreed with GOECS that the basic obligation of PSNH should be to minimize customer costs consistent with maintaining an investment grade rating, the Commission may not want to direct PSNH to finance more of its stranded costs than it is willing to. The OCA argued that the burden of proof should remain on the issuer to prove that the amount is proper and said this should be demonstrated in PSNH's next rate case. Although considerable time was spent on this issue during the hearings, as we read and understand the positions of the parties reflected in the post-hearing briefs, we do not believe that the parties are in significant disagreement on this issue. Most parties seem to agree that PSNH ought to have discretion on the amount that should be securitized, subject to a later prudence review by the Commission. The only difference between PSNH and GOECS and the Settling Staff seems to be on the securitization cap. GOECS and the Settling Staff would have us authorize the full $670 million, while PSNH seemed to argue throughout the proceeding that the amount should be capped at $573 million. In its post-hearing brief, however, PSNH did not argue specifically for a cap of $573 million. In fact, PSNH's argument for discretion in determining the appropriate amount does not seem at odds with the argument in GOECS and Settling Staff's brief that the Commission should authorize PSNH to issue up to $670 million in RRBs and order the Company, in determining the actual amount, to use its discretion, subject to a later prudence review by this Commission. After considering all of the arguments on this issue, we have decided that it would be best to give PSNH considerable latitude within the bounds of the law, subject to a later prudence review to determine whether the amount PSNH chose was reasonable at the time that it was required to make its decision. This means, as specifically provided for in RSA 369-B:3, IV (b), that it will be authorized to issue an aggregate principal amount of not more than $670,000,000, minus $6,000,000 for each month from October 1, 2000 to Competition Day (C-Day). In doing so, we expect the Company to manage its affairs in the most reasonable and prudent manner, in the traditional sense of those words, and subject to a traditional prudence standard. We believe that the definition of "prudence" contained in the Settlement Agreement is consistent with the prudence standard that this Commission and the courts have traditionally applied. Five hundred and seventy-three million dollars, or something less by the time C-Day arrives, may very well be the optimum amount when all of the factors that must be weighed in arriving at the appropriate amount are considered. We cannot know that optimum amount now; that is a determination to be made when the time arrives. We note that, as argued by CRR and Representative Bradley, there is a trade-off between lowering rates through securitization and shifting cost recovery risk from the company on to the customer. Giving the Company discretion, within the bounds authorized by the Legislature and the requirements of prudence, seems to us to allow the appropriate level of flexibility, considering the possibility of changing circumstances between the time of our hearings on these issues, when the record was established, and the time when the bonds are issued. One related issue concerns renegotiation of existing power purchase arrangements with the small power producers (SPPs) made in accordance with state or federal mandates and the issuance of RRBs to finance renegotiated agreements. In the purpose and findings section of the recently enacted legislation, Chapter 249 of the Laws of 2000, the Legislature said that renegotiation of the power purchase obligations with the six wood-to-energy facilities and the one trash-to-energy facility "is in the public interest in order to reduce the cost to ratepayers..." and that "the sharing of the benefits among ratepayers and all of the parties involved in the renegotiations is in the public interest." RSA 369-B:1, XI. The Legislature also authorized the issuance of RRBs up to $130,000,000 to finance renegotiated agreements. RSA 369-B:3, IV(a). One other provision of the new legislation states that an electric utility that renegotiates a commission order providing for qualifying facility power sales or power purchase agreement under RSA 363-A:4-c (which as written appears to apply only to five of the wood-fired facilities, not all six wood-to-energy facilities and not the one trash-to-energy facility that are specifically mentioned in RSA 369-B:3, IV(a)) shall be entitled to retain up to 20 percent of the savings resulting from the renegotiation subject to order of the Commission. RSA 362-A:4-d. In Order No. 23,443, the Commission noted that the Settlement Agreement allowed for the recovery of the power purchases made in accordance with state or federal mandates and we approved that provision of the Settlement Agreement. In Order No. 23,443, the Commission also said, however, that PSNH and the SPPs should try to reach new agreements as soon as possible, that we would allow PSNH to use an appropriate level of securitization to effectuate either the buydowns or buyouts, and that the potential savings of renegotiated agreements would decrease with the passage of time. The Commission allowed PSNH to retain 20 percent of the savings due to agreements reached between PSNH and the SPPs before the end of one year from the date of that order (April 19, 2000) that were approved by the Commission, and said that thereafter PSNH's share would fall to 10 percent for one additional year. We have not been asked to reconsider or clarify this portion of the Order, but we do want to note that the addition of RSA 362-A:4-d noted above and the time limits for the issuance of rate reduction bonds contained in RSA 369-B:5, I (December 31, 2002) may have an impact on how the incentive mechanism which we enunciated in our April 19 Order will ultimately work. In addition, the legislation has increased the amount available for securitization related to the renegotiations from what would have been available under our April 19 Order. For now, however, we want to take this opportunity to once again strongly encourage PSNH to attempt to renegotiate these purchase power arrangements as soon as possible for the benefit of ratepayers and, with the incentive noted above, shareholders. In its initial filing, PSNH argued that its Hydro-Quebec (HQ) transmission support payments were a stranded cost. However, in Order No. 23,443, the Commission found that the power purchase agreements associated with PSNH's entitlements on the Hydro-Quebec inter-tie were ending, and therefore, concluded that the transmission support payments should be categorized as transmission-related rather than generation-related. The Commission denied, without prejudice, PSNH's request to recover the HQ support payments as stranded costs. In Order No. 23,443, we required PSNH to provide a schedule of the actual costs of its transmission support payments over the last three years and file a proposal to recover its Hydro-Quebec transmission support costs, including a means to account for any revenue offsets. On May 1, 2000, the Company filed a proposal that used HQ-related revenues as an offset to Part 3 stranded costs. During the July 7, 2000 hearing, the Company's witness, Mr. Hall, further clarified the Company's proposal. Under the proposal, the Company will credit any revenue received from the Hydro-Quebec line during the 33 month Initial Delivery Charge Period against Part 3 stranded costs. The treatment of any HQ-related revenue received following the 33 month IDCP would be determined by the Commission as part of the post-IDCP rate case. We have reviewed the Company's proposal and find it an appropriate methodology for the duration of the IDCP. Consistent with our decision in Order No. 23,443, we will make a future determination as to the proper treatment of the HQ-related revenue at the time of the rate case following the IDCP. PSNH proposed to add $0.0013 per kWh to the average delivery service charge to recover the transmission support payments. In addition, the Company proposed to credit Part 3 stranded costs for any revenues it might receive from usage of the line. After reviewing the calculation of the $0.0013 per kWh average charge for recovery of the transmission support payments, we will approve it for the IDCP subject to reflection of over- or under-recoveries in Part 3 stranded costs. During the rate case to follow the IDCP, as indicated in our April 19 Order, we will entertain a proposal from PSNH for treatment of the HQ facility and expenses and revenues going forward from that time. In the Conformed Settlement Agreement, PSNH proposed to allocate these HQ-related costs based on the delivery service charge and to recover them on a per kWh basis. In addition, the Company proposed to roll the HQ-related costs into the delivery charge, rather than bill them as a stand-alone surcharge. The OCA opposed PSNH's cost allocation proposal, arguing that it would unfairly burden residential customers. In its brief, the OCA commented that, although the Commission previously denied stranded cost recovery of a buyout, the Commission did not indicate that it was unreasonable for rate design purposes to consider on-going HQ costs as an above-market or stranded type cost. Making an analogy to the Commission's treatment of on-going QF commitments, the OCA proposed that on-going HQ costs and revenues should be recovered in a way similar to the way other stranded costs are allocated and recovered by class, not the way distribution costs are allocated and recovered per class. OCA Brief at 2. We have examined the proposals of PSNH and OCA, and note that RSA 369-B:3, IV (b) (9), requires that any changes in the delivery service charge, stranded cost recovery charge, transition service charge, systems benefit charge, or any other charge between the estimated amounts in our April 19 Order and 24 months after C-Day shall be applied as an equal cents per kWh for all rate classes to which they apply. We find that this provision controls our decision. We therefore reject the cost allocation proposals of both PSNH and OCA and find, instead, that these HQ-related costs must be allocated on an equal $0.0013 per kWh basis to all customers. We direct the Company to reflect our findings and modify its proposed tariff accordingly. We find merit in minimizing the complexity of customer bills, and therefore, will allow PSNH to combine the HQ-related cost component with the delivery charge. In its May 1, 2000 Response to Order No. 23,443, PSNH said that it accepted the nuclear decommissioning condition which the Commission imposed on the Settlement Agreement, subject to one clarification: PSNH wanted the Commission to say that if it approves the sale of NAEC's share of Seabrook in a manner that requires PSNH to prepay the present value of NAEC's share of decommissioning funds based on the nuclear decommissioning charge then in effect, then the part of the condition requiring an appropriate mechanism to adjust decommissioning costs downward prior to the facility shutdown would not be required. As further clarified in Mr. Long's testimony at the May 17, 2000 hearing and through Mr. Bersak's response to questions from the Commission's General Counsel at the July 7, 2000 hearing, PSNH is asking that the Commission remain flexible and open to the possibility of a prefunding of the NAEC share of decommissioning expenses as part of the divestiture of Seabrook. See Rehearing Tr. May 17 at p. 32 et seq, and 71, and Finance Order Tr. July 7 at p. 184 et seq. Great Bay, in its Motion for Rehearing of May 19, 2000, argued that the Commission's treatment of decommissioning gives a competitive advantage to the purchaser of NAEC's Seabrook interest relative to Great Bay by almost completely relieving that purchaser of any obligation to pay its pro rata share of decommissioning costs, while still requiring Great Bay to pay the decommissioning cost. According to Great Bay, this would violate the New Hampshire Constitution's entitlements to equal protection of the law and free and fair competition. Great Bay also argued that a resolution of the decommissioning issues with regard to Great Bay would result in a significantly higher sale price for NAEC's Seabrook interest and thus the Commission's order was not consistent with the statutory requirement that PSNH take all steps to mitigate stranded costs. Great Bay further stated that it did not agree with the Commission's determination that it lacked the authority under RSA 162-F to adopt the proposal put forth by Great Bay and said the Commission should reconsider that determination. In Comments of GOECS and Settling Staff in Response to the PSNH Filings dated May 15, 2000, the State Team argued that the Commission's requirement that any excess decommissioning funding be returned to ratepayers may cause a depression in the value customers could receive as a result of the divestiture, by removing the incentive a buyer of Seabrook may have to save on costs. They also pointed out that the one-way rachet contained in the Commission's order whereby customers can pay less, but not more, for decommissioning than those estimates currently approved by the NDFC could cost a buyer an unknown amount in decommissioning expenses, thus creating a substantial risk for the potential buyer that would result in a lower offer price for Seabrook. The State Team recommended allowing for the Settlement Agreement's treatment of Seabrook decommissioning to apply "to the extent that it is consistent with New Hampshire law as of the time of divestiture." Having considered the issues raised in the motions cited above, we have decided to clarify Order No. 23,443 as requested by the State Team. We agree with PSNH that there should be flexibility in how the divestiture of Seabrook is structured so that the maximum value can be obtained for the NAEC share of Seabrook, thereby reducing stranded costs as much as possible. This flexibility, however, must necessarily be limited by the laws relating to nuclear decommissioning funds then in effect. We have suggested in the past, and continue to suggest, that it would be appropriate for the Legislature to review and update the laws relating to nuclear decommissioning to meet the changes resulting from the deregulation of the industry and divestiture of generating facilities. We note that, at its most recent meeting, the Nuclear Decommissioning Finance Committee stated that it intended to participate in a discussion with the Legislature about changes to these statutes. We support this effort. In the meantime, it is important to be open to a number of possible resolutions of this issue, though we recognize that until the law is changed the flexibility of PSNH and ultimately our flexibility will be dictated by the then current law. Without a specific divestiture proposal before us, we are reluctant to opine any further on what would or would not be consistent with the current law and we remain hopeful that the current law can be amended, as noted above. In light of this clarification, we do not see Great Bay's claims of a violation of equal protection and free and fair trade under the New Hampshire Constitution as being ripe since we do not know what final form any prefunding or other proposal that may be part of the divestiture will take, nor are we certain what the state of the law will be at that point in time. We stand by our analysis of the Great Bay proposal included in Order No. 23,443; we are not persuaded by any of its arguments that we should reconsider our analysis of its proposal or our lack of authority to grant the relief it has requested. The legislation creating the Energy Consumption Tax provides that the tax shall replace the existing Franchise Tax and shall take effect "30 days after the public utilities commission shall certify to the commissioner of revenue administration that it has begun implementing such [industry restructuring plan] order." 1997 N.H. Laws 367:6, I. We note that our Staff has met with the Department of Revenue Administration (DRA) and PSNH as to the implementation of the Consumption Tax, and the possibility that our notification to DRA of the commencement of industry restructuring and Competition Day may not coincide. It is our understanding that this possibility may lead to an over- or under-collection of taxes by PSNH since the Company's computerized unbundling of bills at Competition Day will automatically begin billing the Consumption Tax when it may be too soon to begin doing so under the procedure established by state law. In order that such a transition from the Franchise Tax to the Consumption Tax be handled properly as to collections from customers, we hereby direct PSNH to file a proposal for accounting for the potential difference that may result in the billing change-over, so that it may be deferred for later credit to customers. a. PSNH's Motion In its May 1, 2000 Motion for Rehearing, PSNH requests that the Commission reconsider one condition contained in Order No. 23,443. The Motion indicates that PSNH's position with respect to the rest of the conditions set forth in Order 23,443 is contained in a separate document filed contemporaneously with the Motion for Rehearing, but that PSNH's commitment to that position is contingent in part upon the Commission's decision on the instant Motion for Rehearing. More specifically, PSNH's Motion requests that the Commission reconsider and amend Section VII(F)(3) of Order No. 23,443, which discusses regulatory liabilities and orders Part 3 stranded costs to be reduced by $78.6 million. The order states that a $65.6 million generation-related regulatory liability accrued under FAS 109 and a $13 million deferred receivable from North Atlantic Energy Corporation (NAEC) are not stranded costs and would be credited to customers under traditional ratemaking. Accordingly, the Order reduced Part 3 stranded costs by $78.6 million to reflect a credit of those amounts. See DE 99-099, Order No. 23, 443, p. 191 (April 19, 2000). In support of its Motion, PSNH argues that: the Commission has mischaracterized the $65.6 million amount as generation-related because $13.6 million of that amount is related to transmission and distribution and should therefore continue to be accounted for in a traditional manner (i.e. returned to customers over the live of the T & D assets); the remaining $52 million of generation-related regulatory liability, if credited to customers immediately, would place the company in violation of Internal Revenue Code tax normalization requirements; and that the $13 million characterized in the order as a deferred receivable is not a regulatory liability, but is merely one of two off-setting bookkeeping entries reflecting future tax obligations of PSNH and is not an amount that PSNH customers would ever receive. In support of its first two arguments, PSNH submitted the affidavit of John P. Stack, Executive Director-Corporate Accounting and Taxes for both Northeast Utilities and Public Service Company of New Hampshire. PSNH also submitted a private letter ruling issued by the Internal Revenue Service to another taxpayer. Mr. Stack's affidavit states that if the Commission were to order an immediate return of the excess deferred income taxes (EDIT) and investment tax credits (ITC) which comprise the $65.6 million in question, PSNH would be in violation of Internal Revenue Tax Code provisions which require that such credits be made to customers over the life of the asset from which the tax benefits were derived. Mr. Stack's affidavit also indicates that the penalty for such a violation would "create a tax problem of great enormity, resulting in significant harm to both PSNH and its customers." Motion of Public Service Company of New Hampshire for Rehearing of Order 23,443, Attachment A, p. II. (May 1, 2000). The affidavit described this tax problem as "PSNH's inability to continue to use accelerated tax depreciation for its utility assets," the elimination of the opportunity to use such ITC that remains unutilized by PSNH, and the repayment of ITC which has been used since 1994 to the present. In his oral testimony at the May 17, 2000 hearing on PSNH's Motion, Mr. Stack essentially provided the same information contained in his written affidavit. He also provided additional details concerning the above-referenced adverse tax consequences to ratepayers. In addition, the oral testimony of PSNH Witness Michael Mahoney at the May 17 hearing supported the portion of PSNH's Motion that concerned the treatment of the $13.6 million EDIT and ITC associated with T & D assets. See Rehearing Transcript, May 17, 2000, pp. 135-137. No party objected to the ruling sought in PSNH's Motion. However, comments filed on May 15, 2000 by GOECS and Settling Staff indicate that they believed the original Settlement Agreement contained value over time attributable to EDIT and ITC and that resolution of an IRS issue that arose after the Settlement Agreement was negotiated should not diminish the negotiated value of that settlement. b. Analysis and Findings The Commission is somewhat troubled by PSNH's failure to raise its arguments concerning the alleged mischaracterization of the $78.6 million of regulatory liabilities and the possible consequences of an immediate return of these amounts to consumers prior to the issuance of the April 19 Order. The proposed treatment of these amounts was raised in the pre-filed direct testimony of Staff Advocate witness Mr. McCluskey, and Mr. McCluskey testified during the hearings in this docket in January 2000. Yet PSNH did not cross-examine Mr. McCluskey on this issue, did not rebut his recommendations through its own rebuttal witnesses, and did not address this matter at all in its brief. Where an issue in a proceeding has a potentially significant impact upon rates, such as the possible complete loss of the use of accelerated depreciation for utility assets, we believe that it is incumbent upon the utility to respond to the matter during the hearing in a manner that affords the Commission and all intervenors the opportunity to fully explore and question the respective positions. Certainly, the Commission's ability to achieve a balanced and equitable result in the complex matters before it is somewhat dependent upon the parties' cooperation in developing a complete factual record. A utility's failure in this regard, where it has adequate notice and opportunity to respond, may result in the Commission determining that the utility has waived its right to raise the issue on rehearing. Nonetheless, in the present case, we will grant the relief requested in the Motion for Rehearing. In the rehearing of this issue, PSNH argued, and no party rebutted, that the consequences of immediate return of these amounts is severe: loss of the use of accelerated tax depreciation. While it may be possible that such a result may not ultimately occur, the risk exists. Most compelling though, is the intervening event of the Legislature's passage of SB 472, which contains an explicit determination of the level of customer savings that the PSNH settlement must realize in order to satisfy the overall principles and goals of electric restructuring, and a specific set of actions that will be deemed to satisfy that condition. PSNH has committed to satisfy each and every one of those conditions, and we therefore find that it is no longer necessary to require the reduction of the Part 3 stranded costs by $78.6 million in order to achieve the appropriate balance to stranded cost recovery. This balance is achieved, as the Legislature has determined, by the satisfaction of the numerous conditions in RSA 369-B:3, IV(b). The Commission has received a number of rate design/cost-of-service related motions or requests for clarification or reconsideration since issuance of our April 19 Order. The BIA questioned the change to the Stranded Cost Recovery Charge (SCRC) contained in Order No. 23,443 for lack of an evidentiary basis and proposed that the Commission revisit the allocation of the SCRC in a future rate proceeding to ensure that the SCRC is consistent with applicable law and regulatory practice. The BIA sought rehearing to ascertain whether Order No. 23,443 binds future rate design outcomes due to the methodology described in the order, especially as it relates to SCRC. Others, such as CRR, Granite State Taxpayers, THINK-NH, and NHPIRG, in their Motion for Rehearing, assert that the SCRC is neither fair nor non-discriminatory because it is a different rate charged various classes of customers and was improperly based on distribution-related costs that should not affect the allocation of generation-related stranded costs. By its July 24, 2000 Post Hearing Brief, Wausau Papers of New Hampshire objects to PSNH's Motion for Findings of Fact and For Issuance of Finance Order, including the Proposed Finance Order, because Wausau believes that PSNH's Proposed Finance Order violates RSA 369-B and therefore the proposed finance order by PSNH cannot be adopted. Wausau is joined by Great Bay in this view. Wausau and Great Bay argue that the Proposed Finance Order provides PSNH with too much discretion as to what it may modify regarding the structure of the RRB transactions as PSNH negotiates with rating agencies and tax authorities. For its support, Wausau cites RSA 369-B as unambiguously specifying under what terms and conditions the RRB charge may be assessed and collected. Specifically, Wausau asserts that the RRB charge can only be collected based on the actual retail usage of a customer and that the RRB charge must be assessed on a per kWh basis. Wausau also discusses the PUC's authority to allow PSNH to collect back-up, maintenance and emergency service subject to the limitation in RSA 369-B:4,VI, which prohibits any charge that is designed to "create a charge similar to or has the same effect as an exit fee." In Wausau's opinion, allocations between the RRB and other charges is permissible, but any allocation must be based on the actual per kWh usage of the retail customer. We begin our consideration of the above mentioned requests and motions with the observation that our April 19 Order devoted a considerable amount of attention and analysis to these important issues, and did so based on the extensive record that had been created in the proceeding. Therefore, the argument by BIA that the record for our change to the SCRC lacked an evidentiary basis is without merit. In as much as BIA's request would appear more like a request for clarification than a rehearing request, such clarification is hereby given. We see no need to grant rehearing for that request, however. BIA seeks to know whether our April 19 Order binds future rate design proceedings. As we have stated previously in this order, it does not. The claim by CRR et al, that the SCRC is discriminatory and unfair, ignores the Commission's analysis of the testimony presented by PSNH and that of OCA's witness, Dr. Stutz, who examined each component of the stranded costs. Based on the extensive record on this issue, the Commission found that melding PSNH's mechanism with that of an equal-cents-per-kWh approach better approximated the expected results of a cost-of-service study. April 19 Order at 209. Moreover, as we stated in our April 19 Order, we have the authority to resolve all pending matters in this proceeding in the context of an adjudicated settlement proceeding, including the allocation of SCRC by class. Finally, we point out to CRR et al, that the Legislature in its passage of RSA 369-B has confirmed the SCRC approved in our April 19 Order. We believe the concerns Wausau alludes to in its Motion for Findings of Fact and For Issuance of Finance Order are addressed adequately in the Finance Order which accompanies this order. As Great Bay has raised similar concerns in its Brief Regarding Financing Phase of Proceeding, they also are addressed in the Finance Order. In its May 1, 2000 compliance letter, PSNH accepted the Commission's adjustment to the SCRC class rate methodology proposed by PSNH. In our April 19 Order, the Commission found that for the initial delivery charge period, the SCRC would be based on adjusting the SCRC halfway between the methodology proposed by PSNH and OCA's equal cents per kWh approach. PSNH sought a clarification from the Commission that PSNH would still have the flexibility to address certain inter-class transition rate problems that were part of its initial rate design proposals. Specifically, PSNH seeks clarification that the Commission's April 19 Order should be "interpreted to mean that the residential class should receive the approximate percent decrease shown in Section P (10) of the order, but that there is rate design flexibility with respect to the percent decrease applied to all other classes as long as the overall average decrease is at the level determined by the Order." Ex. R-1 at 6. We agree that a certain level of flexibility is warranted to ease transitions as commercial and industrial customers move from one rate class to another. We expect PSNH to elaborate on how it will accomplish those rate transitions in its compliance tariff filing. The Office of Consumer Advocate (OCA) requests that the Commission require that C-Day occur immediately following securitization. OCA argues that "(a)ny delay will provide significant benefits to PSNH beyond those envisioned in Commission orders and legislation at the expense of ratepayers." OCA Brief at 2. In support of this request, the OCA notes that according to the relevant provisions of the revised Settlement Agreement, several conditions must be met before C-Day can occur. One of those conditions is securitization. The OCA argues that because the revised Settlement Agreement does not indicate that C-Day will occur immediately following securitization, there is a possibility that securitization could occur but that competition could be delayed indefinitely because of delays in achieving other conditions listed in Section XVI of the revised Settlement Agreement such as obtaining necessary regulatory approvals. Id., p. 1. In effect, the OCA argues that a delayed C-Day under this scenario would result in PSNH receiving the benefit of securitization while its customers wait for the benefit of competition. The OCA also states that, during the hearing on the revised Settlement Agreement, PSNH was reluctant to formally eliminate from the Settlement Agreement those conditions that might possibly delay C-Day beyond the time that securitization occurs. Id., p.2. The revised Settlement Agreement defines Competition Day as "(t)he date upon which all PSNH retail customers will be able to choose a Competition Supplier of energy. More specifically, Competition Day is the first day of the month following the month in which the conditions contained in Section XVI are satisfied." Agreement to Settle PSNH Restructuring, Conformed as of June 23, 2000, p. 5. Notwithstanding the fact that the revised Settlement Agreement (at pages 4 to 5) purports that it is conformed to reflect the requirements of Chapter 249 of the Session Laws of 2000, the definition of Competition Day set forth above does not include the wording of Laws of 2000, Chapter 249, Section 7, I which states that "(c)ompetition day for PSNH as defined in RSA 369-B:2, III shall be not later than October 1, 2000, unless the commission finds due to circumstances beyond its control that further delay is in the public interest." Section XVI of the revised Settlement Agreement sets forth six conditions which must be met to the satisfaction of all parties as a conditions precedent to implementing the revised Settlement Agreement. Id., pp. 75-76. One of those conditions is that PSNH must close on the issuance of the Rate Reduction Bonds, and another is that all necessary final approvals, without condition or modification, of other jurisdictional matters must be obtained, as required, from the Federal Energy Regulatory Commission, the Securities and Exchange Commission, the Nuclear Regulatory Commission, and the Connecticut Department of Public Utility Control. Id., p. 76. While the OCA asserts that "experience indicates it is clearly possible that there will be conditions or modifications by other jurisdictions that could hold up 'C' day", OCA Brief at 2, PSNH's President and CEO, Gary Long testified that it is not PSNH's "intent to issue rate reduction bonds without C-day happening soon thereafter." Transcript, July 7, 2000, Day II, p. 128. In light of Mr. Long's testimony concerning PSNH' s intent regarding the timing of C-Day, we will order PSNH to implement the provisions of the revised Settlement Agreement consistent with that stated intent. In addition, the definition of Competition Day found at page 5 of the revised Settlement Agreement shall be amended to reflect the provisions of Laws of 2000, Chapter 249:7, I. On May 19, 2000, the New Hampshire Department of Environmental Services (DES) filed a letter alerting the Commission to certain minor technical inaccuracies concerning environmental issues, found in Order No. 23,443 on pages 267 and 268. These errors and inaccuracies relate to the date on which certain controls were stated to have been installed, the timing of certain reductions in pollutants, and the extent to which PSNH was first in the world in implementing certain controls. DES did not send this letter to all the parties. The record does not support all the corrections that DES proposes to make, and the correction of the inaccuracies cited would not affect the Commission's disposition of this matter. In any event, rather than reopening the record to clear up any remaining discrepancies, we will leave the April 19 Order as is, acknowledging the possibility that there are some inadvertent and non-substantive errors in our factual description of the history and status of pollution control at PSNH plants. The May 15, 2000 Comments of the Governor's Office of Energy and Community Services and the Settling Staff raises a concern about the use of monitoring funds during the Initial Delivery Charge period. The original Settlement Agreement provides for monitoring funds up to $350,000 per year. GOECS and Settling Staff state that the $350,000 was never intended to be used for auction administration and oversight, but rather for determining such things as whether customer and line service standards were being met, stranded costs were trued-up and allocated correctly, and whether the costs of generation before divestiture were properly identified and allocated. GOECS and Settling Staff point out that auction-related costs could easily exceed the $350,000 amount; it was their intention that auction oversight costs would be funded separately and the costs would be netted against the auction proceeds. We agree with GOECS and Settling Staff's position on the importance of monitoring various operations and cost allocations during the Initial Delivery Charge period; however, we will not specify now whether the $350,000 per year as proposed in the original Settlement Agreement should be used solely for monitoring. The Commission will evaluate its needs in regard to the use of those funds periodically and make determinations appropriate to those needs based on that assessment. We point out that the original Settlement Agreement and the Conformed Settlement Agreement are silent as to what happens to the funds if they are not fully expended in a particular period. To preserve the benefits of this negotiated fund, we expect that any monitoring funds not expended in a given year will be carried forward. Order No. 23,443 issued on the original Settlement Agreement in this docket contained several conditions that the Commission found necessary to meet the various statutory prerequisites for a resolution of PSNH restructuring issues. In that Order, we determined that "to provide a more appropriate balance to this agreement, and fully satisfy these requirements, certain parts of the Settlement Agreement must be amended..." Order No. 23,443 at p. 189. In its May 1, 2000 filings, PSNH responded to the conditions set forth in Order No. 23,433 by accepting the bulk of them, suggesting an alternative approach to transition service and moving for reconsideration only of the condition regarding the reduction of Part 3 stranded costs as that reduction relates to EDIT and ITC. One of the conditions for implementing the original Settlement Agreement contained in that document, and which the Commission left unchanged in its April 19 Order is that legislation must be enacted allowing the securitization of assets and the issuance of rate reduction bonds in a manner that is fully consistent with the Settlement Agreement. Chapter 249 of the Laws of 2000, enacted June 12, 2000, constitutes that legislation, and the Conformed Settlement Agreement dated June 23, 2000, recognizes this at page 71. The Conformed Settlement Agreement also purports "to reflect changes and corrections made during hearings before the New Hampshire Public Utilities Commission in docket DE 99-099, the requirements of Chapter 249 of the Session Laws of 2000 and Order No. 23,443 of the New Hampshire Public Utilities Commission." Agreement to Settle PSNH Restructuring, Conformed as of June 23, 2000, p. 1. Certain sections of Laws of 2000, Chapter 249, have been codified as RSA 369-B. In RSA 369-B:1, VII, the Legislature made an express finding that implementation of PSNH's securitization proposal that was the subject of the Commission's April 19 Order, subject to the conditions listed in that Order and as further modified by Chapter 249 of the Laws of 2000, will result in benefits to customers that are substantially consistent with the principles contained in RSA 374-F:3 and RSAs 369-A:1,X and XI. Under the portion of Chapter 249 that has been codified as RSA 369-B:1, IX, the Legislature found that it is in the public interest if the Commission issues a finance order that is subject to the conditions and requirements of Chapter 249 and is otherwise substantially consistent with RSAs 374-F:3 and 369-A:1. Thus, the Legislature has found that a finance order that is subject to all of the conditions and requirements of Chapter 249, RSA 374-F:3 and RSA 369-A:1 is in the public interest. Since the Legislature has also found (at RSA 369-B:1, VII) that PSNH's securitization proposal as approved in the Commission's April 19 Order and as modified by applying all of the conditions in Chapter 249 will be substantially consistent with RSA 374-F:3 and RSA 369-A:1, X and XI, the public interest burden set forth in RSA 369-B:1, IX will be met if the Commission issues an order that conforms to the requirements of Chapter 249. The Legislature has effectively required that the Commission modify several provisions of its April 19 Order by conditioning the Commission's ability to issue a finance order upon the Commission's inclusion in such order of several specific provisions that relate not merely to financing or securitization but also to: rate design, price and provisioning of transition service, assignment to customers post-transition period, amount of customer savings, merger issues, system benefits charge, special contract issues and commission responsibilities for divestiture and transition service, to name a few. Thus, while the Legislature did not explicitly state that it was compelling the Commission to amend its April 19 Order, Chapter 249 effectively produces that result. The Legislature was undoubtedly aware that a finance order is an essential prerequisite to implementing restructuring for PSNH under the Settlement Agreement and under our April 19 Order, and therefore it is reasonable to infer that it is in the public interest to approve a Settlement Agreement that conforms to all of the provisions of Chapter 249 that purport to be requirements for a finance order, but which also addresses and alters substantive provisions of the April 19 Order that relate to matters other than financing. We may also presume that the Legislature made these determinations in light of the alternatives, particularly the risk that without legislation confirming the Settlement Agreement, albeit with modifications, no restructuring settlement would be possible, and continued litigation before the Commission and the Courts would be inevitable. At the hearing on the Conformed Settlement Agreement, PSNH submitted an "errata sheet" dated July 5, 2000 and entitled "Additional Changes to "Agreement to Settle PSNH Restructuring" as conformed to June 23, 2000." This document, Exhibit F-7, contains changes to the Conformed Settlement Agreement (Exhibit F-2), made by the Settling Parties as the result of technical sessions held on June 29 and 30, 2000. Based upon the record of this proceeding, and in light of the passage of Chapter 249 of the Laws of 2000, we find it in the public interest to approve the Conformed Settlement Agreement as further modified by the so-called "errata sheet" subject to the following: 1. Because the definition of Competition Day found in Section II of the Conformed Settlement Agreement does not reflect the language contained in the Laws of 2000, Chapter 249:7, I, it shall be modified to read as follows: The date upon which all PSNH retail customers will be able to choose a Competition Supplier of energy. More specifically, Competition Day is the first day of the month following the month in which the conditions contained in Section XVI are satisfied and shall not be later than October 1, 2000, unless the commission finds due to circumstances beyond its control that further delay is in the public interest. 2. Lines 2103 to 2105 of the Conformed Settlement Agreement shall be modified to read as follows: The PUC's approval of this Agreement shall endure so long as necessary to fulfill the express objectives of this Agreement to the extent indicated in Chapter 249 of the Laws of 2000. We have opined previously on this subject in Orders No. 23,346 at pages 8-11 (November 16, 1999) and No. 23,443 at pages 276-278 (April 19, 2000). Apart from our consideration of Chapter 249 of the Laws of 2000, we see no reason to depart from our previous position on this matter. Accordingly, we will interpret this language in a manner that is consistent with the authority of the Commission and it shall not create any greater binding or precedential effect than that which is normally accorded a final order of the Commission except insofar as Chapter 249 of the Laws of 2000 indicates otherwise. Finally, as part of its compliance filing, we will require PSNH to file a final Settlement Agreement that reflects the changes required by this Order. At the July 7, 2000 hearing, counsel for GOECS and for SOHO raised questions concerning elements of the tariff filed along with the Conformed Settlement Agreement. Between them, they questioned (a) the insertion of the qualifier "willful" as a limitation on the Company's liability in the case of its negligence, (b) the inclusion of a $5 fee for changing to transition or to default service, or between suppliers, in contrast to Granite State Electric Company's provision for charging competitive suppliers, (c) the unavailability of Transition Service to low-income customers not receiving LIHEAP who have previously left Transition Service and wish to return, and (d) the Company's offering of collection services to competitive suppliers. Additional issues were clarified at the hearing through introduction of two errata sheets by the Company. The low-income Transition Service availability term noted by GOECS and SOHO was amended during the hearings by language negotiated between GOECS and PSNH, which was entered into the record as Exhibit F-20. Under this revised language, the Company agrees that a customer who has been certified to be eligible for the Statewide Electric Assistance Program, as approved by the Commission in Docket 96-150, or eligible for other appropriate means-tested programs, may return to Transition Service, even if they are not currently recipients of aid under such programs. We accept this amendment to the proposed tariff. At the hearing, the Company objected to examination on the remaining topics, as no party had raised them in their motions for rehearing. The Commission ruled that it was out of order to pursue these topics at this time. We will permit the parties to raise these questions once the Company has filed its Compliance Tariff in this docket, and will determine at that time whether, how and when to consider the changes requested by GOECS and SOHO. The Compliance Tariff referred to above must take into account and reflect the provisions of this Order, the Finance Order, the Provisions of the April 19 Order that have not been modified by either of these orders, and Chapter 249 of the Laws of 2000. In conclusion, we wish to once again thank all of the parties and members of our Staff involved in this phase of the proceeding. Although there are still many issues to address as we move forward with restructuring, we consider the completion of this phase to be a critical step toward the implementation of electric restructuring for PSNH. Based upon the foregoing, it is hereby ORDERED, that all motions for rehearing and/or reconsideration and clarification are Denied except as otherwise noted; and it is FURTHER ORDERED, that Public Service Company of New Hampshire revise its Conformed Settlement Agreement to comply with our findings as discussed above and file both clean and red-lined copies with the Commission by September 22, 2000; and it is FURTHER ORDERED, that Public Service Company of New Hampshire, after consulting with Staff, file a tariff, on or before September 29, 2000, that complies with this Order, the Finance Order, the Provisions of the April 19 Order that have not been modified by either of these orders, and Chapter 249 of the Laws of 2000. By order of the Public Utilities Commission of New Hampshire this eighth day of September, 2000. Douglas L. Patch Susan S. Geiger Nancy Brockway Chairman Commissioner Commissioner Attested by: Claire D. DiCicco Assistant Secretary To the extent that the requirement of RSA 374-F:3, XII(c)(4) that only a reasonable amount of surplus assets be written off may be in conflict with the prohibition in RSA 378:28 against including in permanent rates a return on plant not found to be "used and useful," we believe that Chapter 374-F prevails. As the Supreme Court discussed in In re NHPUC, "when conflict exists between two statutes, [the] later statute prevails." 722 A.2d at 488, 143 at 238, quoting from Petition of Public Service Company of New Hampshire, 130 N.H. 265, at 283 (1988). EX-99.3 4 0004.txt EXHIBIT D 3.3.1 - PSNH APPLICATION TO MAINE PUC EXHIBIT D 3.3.1 September 22, 2000 Hand Delivered Dennis L. Keschl, Administrative Director Maine Public Utilities Commission 242 State Street State House Station 18 Augusta, ME 04333-0018 Dear Mr. Keschl: I write on behalf of Public Service Company of New Hampshire ("PSNH") to request approval, pursuant to 35-A M.R.S.A. Section 708, of a reorganization that will occur upon the creation by PSNH of a wholly-owned subsidiary limited liability company (referred to hereinafter as "SPE"). The creation of SPE is an integral part of the restructuring of the electric utility industry in New Hampshire, and is required in connection with the securitization of stranded costs and the issuance of rate reduction bonds. The proposed industry restructuring is the product of legislation and a Settlement Agreement designed to reduce PSNH's rates, negotiated by PSNH and its parent, Northeast Utilities, the Governor of New Hampshire, the Governor's Office of Energy and Community Services, New Hampshire's Office of Attorney General, and the Staff of the New Hampshire Public Utilities Commission. Implementation of the Settlement Agreement will provide sizable near-term rate reductions for PSNH customers. The rate decrease results from an agreed-upon write-off by PSNH of approximately $367 million, a sharing of the risk of recovery of stranded costs by PSNH, the sale at auction of PSNH's generating assets, and the issuance of rate reduction bonds in an amount not exceeding $670 million. PSNH's customers will have the opportunity to lower their electric energy costs even further, by choosing a competitive energy supplier. The New Hampshire Public Utilities Commission approved the issuance of the rate reduction bonds and related transactions by "Order Addressing Financing Issues dated September 8, 2000" ("Finance Order") (copy printed from the internet is attached). A simplified description of the proposed securitization follows: Upon creation of SPE, PSNH will transfer into SPE "Rate Reduction Bond Property," an irrevocable vested property right created by the Commission in the Finance Order, which includes the right to all revenues, collections, claims, payments, money or proceeds arising from the Rate Reduction Bond Charge authorized by the Finance Order. SPE will then issue not more than $670 million of rate reduction bonds ("RRBs") secured by Rate Reduction Bond Property. The RRBs will be repaid through the collection of an RRB charge from all retail customers of PSNH. PSNH will use the proceeds from the transfer of the Rate Reduction Property to SPE to retire existing debt, and the Company will be recapitalized. PSNH ratepayers will benefit from the retirement of existing, higher cost, debt. Accordingly, PSNH rates will be significantly lower than they would be if the transaction did not occur. This Commission has historically granted exemptions or approvals to PSNH for various reorganizations and the issuance of securities. Recent examples include Docket No. 90-093, the proceeding involving PSNH's bankruptcy Plan of Reorganization, and Docket No. 98-182, wherein the Commission by Order dated March 31, 1998 exempted PSNH from the approval requirements of Sections 708, 901 and 1101 for any "issuance of securities, including the granting of any mortgage on or security interest in PSNH's properties in Maine or elsewhere...so long as PSNH is incorporated under the laws of a state other than the State of Maine and the issuance is approved by the agency regulating public utilities in that state." Most recently, in Docket No. 2000-46, the Commission granted Section 708 approval to the merger of Northeast Utilities and Consolidated Edison, Inc. In its March 17, 2000 Order, the Commission noted that: PSNH's contacts with the state of Maine are extremely limited. While it owns and operates certain transmission and distribution plant in Maine, it does not provide retail service to any customers in Maine nor does it receive any compensation in Maine as a result of the properties it owns in Maine. Our primary interest is in assuring that PSNH maintains its T&D plant in Maine in a safe and reasonable manner. Because PSNH's contacts are so limited, we believe we can adequately discharge our responsibilities under Section 708 by approving the merger upon the condition that the merger be approved by the New Hampshire Public Utilities Commission and the Federal Energy Regulatory Commission. PSNH's contacts with the state of Maine have not changed since the Commission's Order in 2000-46. The principles supporting the Commission's decision in that case apply with equal force here. Indeed, since the purpose of the transaction is to benefit New Hampshire ratepayers, this Commission can adequately discharge its responsibilities under Section 708 by approving the reorganization caused by the creation of wholly-owned SPE in light of the New Hampshire Commission's Finance Order of approval. For the reasons set forth above, PSNH requests that the Commission issue an order, as soon as possible, approving the transaction under Section 708. I appreciate the Commission's attention to this request. If you need further information, please do not hesitate to contact me. Sincerely, Jerrol A. Crouter cc: Joanne B. Steneck, Esq. Public Advocate Catherine E. Shively, Esq. EX-99.4 5 0005.txt EXHIBIT D 3.3.2 - MAINE ORDER EXHIBIT D 3.3.2 STATE OF MAINE Docket No. 2000-803 PUBLIC UTILITIES COMMISSION October 3, 2000 PUBLIC SERVICE COMPANY OF ORDER NEW HAMPSHIRE, Request For Approval Of Reorganization WELCH, Chairman; NUGENT and DIAMOND, Commissioners I. SUMMARY Pursuant to 35-A M.R.S.A. Section 708, we approve a reorganization that will occur when Public Service Company of New Hampshire (PSNH) creates a wholly-owned, limited liability company (referred to herein as SPE). Creation of SPE is required in connection with the securitization of PSNH's stranded costs and the issuance of rate reduction bonds, which are integral parts of the restructuring of the electric industry in New Hampshire. II. DISCUSSION AND DECISION On September 22, 2000, PSNH requested our approval of a reorganization in which it will create a wholly-owned limited liability company, SPE. This Commission has previously determined that PSNH is a "public utility" in Maine subject to the jurisdiction of the Maine Public Utilities Commission because PSNH owns property in Maine, which is defined as "transmission and distribution plant" under 35-A M.R.S.A. Section 102(20-A). This primarily consists of transmission lines. See Public Service Co. of New Hampshire, Request for Exemption of 35-A M.R.S.A. Section 708(2)(A), Docket No. 2000-46 (Mar. 17, 2000) (listing PSNH's T & D properties in Maine). Under 35-A M.R.S.A. Section 708, the Commission must approve utility reorganizations. No reorganization may be approved unless the Commission finds that "the reorganization is consistent with the interests of the utility's ratepayers and investor." Also in approving any reorganization, the Commission must assure that "the ability of the utility to provide safe, reasonable and adequate service is not impaired." 35-A M.R.S.A. Section 708(2)(A)(4). Creation of the SPE subsidiary is an integral part of the electric industry restructuring that resulted from legislation and a settlement agreement negotiated by PSNH, the Governor of New Hampshire, various New Hampshire agencies and the staff of the New Hampshire Public Utilities Commission. The New Hampshire Public Utilities Commission approved the settlement and recently issued an order that will allow the reorganization to take place. Public Service Company of New Hampshire, DE 99-099, Order No. 23,550, Proposed Restructuring Settlement, Order Addressing Financing Issues (Sept. 8, 2000). As noted above, PSNH's contacts with the State of Maine are extremely limited. While it owns and operates certain transmission and distribution plant in Maine, it does not provide retail service to any customers in Maine nor does it receive any compensation in Maine as a result of the properties it owns in Maine. Our primary interest is in assuring that PSNH maintains its T&D plant in Maine in a safe and reasonable manner. Because PSNH's contacts are so limited, we believe we can adequately discharge our responsibilities under section 708 by approving the reorganization based on the New Hampshire Public Utilities Commission's approval. We expect that the reorganization will not affect PSNH's ability to maintain its T&D plan in Maine in a safe and reasonable manner and in accordance with the National Electric Safety Code, as required by 35-A M.R.S.A. Section 2305-A(2). Accordingly, we approve the reorganization as described in PSNH's request dated September 22, 2000. Dated at Augusta, Maine, this 3rd day of October, 2000. BY ORDER OF THE COMMISSION Dennis L. Keschl Administrative Director COMMISSIONERS VOTING FOR: Welch Diamond COMMISSIONER ABSENT: Nugent NOTICE OF RIGHTS TO REVIEW OR APPEAL 5 M.R.S.A. Section 9061 requires the Public Utilities Commission to give each party to an adjudicatory proceeding written notice of the party's rights to review or appeal of its decision made at the conclusion of the adjudicatory proceeding. The methods of review or appeal of PUC decisions at the conclusion of an adjudicatory proceeding are as follows: 1. Reconsideration of the Commission's Order may be requested under Section 1004 of the Commission's Rules of Practice and Procedure (65-407 C.M.R.110) within 20 days of the date of the Order by filing a petition with the Commission stating the grounds upon which reconsideration is sought. 2. Appeal of a final decision of the Commission may be taken to the Law Court by filing, within 30 days of the date of the Order, a Notice of Appeal with the Administrative Director of the Commission, pursuant to 35-A M.R.S.A. Section 1320(1)-(4) and the Maine Rules of Civil Procedure, Rule 73, et seq. 3. Additional court review of constitutional issues or issues involving the justness or reasonableness of rates may be had by the filing of an appeal with the Law Court, pursuant to 35-A M.R.S.A. Section 1320(5). Note: The attachment of this Notice to a document does not indicate the Commission's view that the particular document may be subject to review or appeal. Similarly, the failure of the Commission to attach a copy of this Notice to a document does not indicate the Commission's view that the document is not subject to review or appeal. -----END PRIVACY-ENHANCED MESSAGE-----