20.40.02.06

.06 Utility Loans or Debt Guarantees to an Affiliate.

A. This regulation does not apply to a utility's participation in a cash management or money pool subject to federal regulation.

B. Except as provided under §C of this regulation, a utility may make a loan or provide a debt guarantee to its affiliate.

C. Restrictions on Loans or Debt Guarantees.

(1) If a loan or guarantee by a utility to its affiliate creates a reasonable likelihood that the utility's cost of capital, creditworthiness, or ability to provide regulated service will be adversely affected in a material manner, a utility may not:

(a) Lend money to its affiliate; or

(b) Guarantee the debt of its affiliate.

(2) New Loan or Debt Guarantee.

(a) If a new loan or debt guarantee by a utility to its affiliate is in excess of $25,000,000 or 2 percent of the equity capital of the utility, whichever is greater, or the loan causes the utility's proprietary capital ratio to fall below 30 percent, the utility shall inform the Commission that it is making the loan or guarantee at least 90 days before the transaction is closed.

(b) If, within 90 days of receiving the notice under §C(2)(a) of this regulation, the Commission finds that the loan or guarantee creates a reasonable likelihood that the utility's cost of capital, creditworthiness, or ability to provide regulated service will be adversely affected, it may disapprove the loan or guarantee.

(c) If the Commission does not act within 90 days of receiving notice of the loan or guarantee, the utility may undertake the loan or guarantee.

D. A utility loan under this regulation shall include an interest rate equal to the:

(1) Fair market interest rate at the time of execution of the loan; or

(2) Rate directed or approved by a federal agency having jurisdiction over the loan.

E. Loan or Guarantee—Annual Report.

(1) A utility shall file an annual report of a loan or guarantee to an affiliate for the period ending December 31 of each year by April 30 of the following year.

(2) The report required by §E(1) of this regulation shall contain the following minimum information for each loan or guarantee, as applicable:

(a) Dollar amount of any loan or guarantee;

(b) Terms of loan payment;

(c) Call provision on a loan;

(d) Name of the corporate record keeper;

(e) Credit agency analysis;

(f) Insurance cost; and

(g) Default terms.