HF 653

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to utilities; enacting Minnesota Public Utilities Holding Company Act;
amending Minnesota Statutes 2006, sections 216B.02, subdivision 4; 216B.49,
subdivision 3; proposing coding for new law in Minnesota Statutes, chapter
216B.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2006, section 216B.02, subdivision 4, is amended to read:

Subd. 4.

Public utility.

"Public utility" means persons, corporations, new text begin holding
companies, new text end or other legal entities, their lessees, trustees, and receivers, now or hereafter
operating, maintaining, or controlling in this state equipment or facilities for furnishing
at retail natural, manufactured, or mixed gas or electric service to or for the public or
engaged in the production and retail sale thereof but does not include (1) a municipality
or a cooperative electric association, organized under the provisions of chapter 308A,
producing or furnishing natural, manufactured, or mixed gas or electric service or (2) a
retail seller of compressed natural gas used as a vehicular fuel which purchases the gas
from a public utility. Except as otherwise provided, the provisions of this chapter shall
not be applicable to any sale of natural, manufactured, or mixed gas or electricity by a
public utility to another public utility for resale. In addition, the provisions of this chapter
shall not apply to a public utility whose total natural gas business consists of supplying
natural, manufactured, or mixed gas to not more than 650 customers within a city pursuant
to a franchise granted by the city, provided a resolution of the city council requesting
exemption from regulation is filed with the commission. The city council may rescind
the resolution requesting exemption at any time, and, upon the filing of the rescinding
resolution with the commission, the provisions of this chapter shall apply to the public
utility. No person shall be deemed to be a public utility if it furnishes its services only to
tenants or cooperative or condominium owners in buildings owned, leased, or operated
by such person. No person shall be deemed to be a public utility if it furnishes service
to occupants of a manufactured home or trailer park owned, leased, or operated by such
person. No person shall be deemed to be a public utility if it produces or furnishes service
to less than 25 persons.

Sec. 2.

Minnesota Statutes 2006, section 216B.49, subdivision 3, is amended to read:

Subd. 3.

Commission approval required.

It shall be unlawful for any public
utility deleted text begin organized under the laws of deleted text end new text begin operating in new text end this state to offer or sell any security deleted text begin or deleted text end ,
deleted text begin if organized under the laws of any other state or foreign country, deleted text end new text begin to pay a dividend, or new text end to
subject property in this state to an encumbrance for the purpose of securing the payment
of any indebtedness unless the deleted text begin security issuance deleted text end new text begin transaction new text end of the public utility shall
first be approved by the commission. Approval by the commission shall be by formal
written order.

Sec. 3.

new text begin [216B.512] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For the purposes of sections 216B.512 to 216B.5165, the
following terms have the meanings given them in this section.
new text end

new text begin Subd. 2. new text end

new text begin Affiliated interest. new text end

new text begin "Affiliated interest" has the meaning given under
section 216B.48.
new text end

new text begin Subd. 3. new text end

new text begin Beneficial owner. new text end

new text begin (a) "Beneficial owner" means, with respect to a security,
any person who in any way has the unconditional power to vote or receive the economic
gains or losses of the security.
new text end

new text begin (b) "Beneficial owner" does not mean any person holding the security for another
person, including but not limited to any of the following:
new text end

new text begin (1) the trustee of a qualified employee plan;
new text end

new text begin (2) the trustee of a stock purchase plan or a dividend reinvestment plan;
new text end

new text begin (3) a pledgee;
new text end

new text begin (4) a nominee;
new text end

new text begin (5) a broker or an agent; or
new text end

new text begin (6) an underwriter for the first 40 days following acquisition of securities from an
issuer if the securities are held in the underwriter's own account.
new text end

new text begin Subd. 4. new text end

new text begin Commercial building. new text end

new text begin "Commercial building" means any building that
is used primarily for carrying out any business, including but not limited to a nonprofit
business, and any building that is used primarily for manufacturing or producing products,
raw materials, or agricultural commodities.
new text end

new text begin Subd. 5. new text end

new text begin Company. new text end

new text begin "Company" means any partnership, corporation, S corporation,
joint-stock company, limited liability company, limited liability partnership, limited
partnership, business trust, or organized group of persons, whether incorporated or not,
and any receiver, trustee, or other liquidator of such an entity or group of persons.
"Company" does not include a municipality, a cooperative electric association, or other
political subdivision.
new text end

new text begin Subd. 6. new text end

new text begin Form a holding company. new text end

new text begin "Form a holding company" means any of
the following:
new text end

new text begin (1) as a beneficial owner, to take, hold, or acquire five percent or more of the
outstanding voting securities of a public utility with the unconditional power to vote
those securities; or
new text end

new text begin (2) to exchange or convert 50 percent or more of the outstanding voting securities of
(i) a public utility, other than a municipality or other political subdivision or a transmission
company, for or into the voting securities of a company organized, created, appointed, or
formed by or at the direction of the public utility or (ii) a subsidiary of such company.
new text end

new text begin Subd. 7. new text end

new text begin Holding company. new text end

new text begin (a) "Holding company" means:
new text end

new text begin (1) any person that, in any chain of successive ownership, directly or indirectly
as a beneficial owner, owns, controls, or holds five percent or more of the outstanding
voting securities of a public utility affiliate, with the unconditional power to vote such
securities; or
new text end

new text begin (2) any person that the commission determines, after investigation and hearing,
directly or indirectly exercises, alone or under an arrangement or understanding with one
or more persons, such a controlling interest over the management or policies of a public
utility as to make it necessary or appropriate in the public interest or for the protection of
the utility's consumers or investors that the person be subject to this section.
new text end

new text begin (b) "Holding company" does not include a company that owns, operates, manages,
or controls a telecommunications carrier or telephone company as defined in section
237.01 unless such company also owns, operates, manages, or controls a public utility.
new text end

new text begin Subd. 8. new text end

new text begin Holding company system. new text end

new text begin "Holding company system" means a holding
company and any public utility with which the holding company is an affiliated interest
and all of the holding company's and public utility's affiliated interests.
new text end

new text begin Subd. 9. new text end

new text begin Generation assets. new text end

new text begin "Generation assets" means assets that are classified
as electric generation assets on the books of account of a public utility, as determined
by the commission.
new text end

new text begin Subd. 10. new text end

new text begin Nonutility affiliate. new text end

new text begin "Nonutility affiliate" means a company in a holding
company system that is not a public utility.
new text end

new text begin Subd. 11. new text end

new text begin Person. new text end

new text begin "Person" means an individual or company.
new text end

new text begin Subd. 12. new text end

new text begin Public utility affiliate. new text end

new text begin "Public utility affiliate" means a company that is
in a holding company system and that is a public utility.
new text end

new text begin Subd. 13. new text end

new text begin Public utility affiliate employee. new text end

new text begin "Public utility affiliate employee"
means any individual who is in the regular employ of a public utility affiliate, except any
officer or director and any officer's or director's incidental supporting staff.
new text end

new text begin Subd. 14. new text end

new text begin Securities. new text end

new text begin "Securities" has the meaning given it under section 216B.49,
subdivision 1.
new text end

new text begin Subd. 15. new text end

new text begin Subsidiary. new text end

new text begin "Subsidiary" means a company of which a majority of the
assets or a majority of the shares with voting rights are owned, directly or indirectly, by
another company.
new text end

new text begin Subd. 16. new text end

new text begin Transmission company. new text end

new text begin "Transmission company" has the meaning
given in section 216B.02, subdivision 10.
new text end

Sec. 4.

new text begin [216B.5125] HOLDING COMPANY FORMATION.
new text end

new text begin Subdivision 1. new text end

new text begin Commission certificate of approval. new text end

new text begin No person may form a holding
company unless the person has received a certificate of approval from the commission
in accordance with this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Information for certificate. new text end

new text begin An application for a certificate of approval to
form a holding company is complete if it contains all of the following information:
new text end

new text begin (1) the names and corporate relationships of all companies that will be in the holding
company system and the name of the applicant and any parent or subsidiary corporation of
the applicant;
new text end

new text begin (2) a description of how the applicant plans to form the holding company, including
if available at the time of application:
new text end

new text begin (i) copies of the organizational documents associated with the holding company
formation, including articles of incorporation or amendments to the articles of
incorporation of all companies that will be in the holding company system; and
new text end

new text begin (ii) copies of any filings, including securities filings, related to the formation of the
holding company made with any agency of this state or the federal government;
new text end

new text begin (3) the costs and fees attributable to the formation of the holding company;
new text end

new text begin (4) the method by which management, personnel, property, income, losses, costs,
and expenses will be allocated within the holding company system between public utility
affiliates and nonutility affiliates;
new text end

new text begin (5) a copy of any proposed agreement between a public utility affiliate and any person
with which it will be an affiliated interest at the time the holding company is formed;
new text end

new text begin (6) an identification of all public utility assets or information in existence at the time
of formation of the holding company, such as customer lists, that the applicant plans to
transfer to or permit a nonutility affiliate to use, including a description of the proposed
terms and conditions under which the assets or information will be transferred or used; and
new text end

new text begin (7) a copy of a financial forecast showing the capital requirements of every public
utility affiliate which will be within the holding company system, including for each
public utility affiliate on an annual basis for ten years following the year of application:
new text end

new text begin (i) projected capital requirements;
new text end

new text begin (ii) sources of capital;
new text end

new text begin (iii) an itemization of major capital expenditures;
new text end

new text begin (iv) projected capital structure;
new text end

new text begin (v) an estimated amount of retained earnings available for nonutility purposes; and
new text end

new text begin (vi) the assumptions underlying the information included in the financial forecast
required under clause (7).
new text end

new text begin Subd. 3. new text end

new text begin Application sufficiency. new text end

new text begin No later than 45 days after the commission
receives an application for a certificate of approval to form a holding company, the
commission shall determine whether the application is complete as specified under
subdivision 2. If the commission determines that the application is complete, the
commission shall docket the application for a determination under this section. If
the commission determines the application to be incomplete, the commission shall
notify the applicant in writing of its determination, identify any part of the application
that the commission has determined to be incomplete, and state the reasons for such
determination. An applicant may supplement and refile an application that the commission
has determined to be incomplete under this subdivision. There is no limit on the number
of times an applicant may refile an application under this section prior to a determination
under subdivision 5. If the commission fails to make a determination regarding the
completeness of an application within 45 days after the application had been filed, the
application is deemed to be complete.
new text end

new text begin Subd. 4. new text end

new text begin Hearing. new text end

new text begin The commission shall hold a hearing concerning an application
for a certificate of approval to form a holding company under this section.
new text end

new text begin Subd. 5. new text end

new text begin Decision. new text end

new text begin No later than 120 days after an application has been docketed
under subdivision 3, the commission shall issue its findings of fact, conclusions of law,
and order approving or rejecting the application. The commission shall issue a certificate
of approval to form a holding company unless it finds that the formation of the holding
company would materially harm the interests of utility consumers or investors. The
commission, in issuing a certificate of approval under this section, may only impose
terms, limitations, or conditions on approval that are consistent with and necessary to
satisfy the requirements in section 216B.5135.
new text end

new text begin Subd. 6. new text end

new text begin Modifications. new text end

new text begin At any time subsequent to the time the commission
approves the formation of a holding company under subdivision 5, the commission may,
after notice and opportunity for hearing, modify any term, limitation, or condition imposed
under subdivision 5 or add any term, limitation, or condition under subdivision 5. Any
term, limitation, or condition modified or added under this subdivision must be consistent
with and necessary to satisfy the requirements of section 216B.5135.
new text end

Sec. 5.

new text begin [216B.513] TAKEOVERS AND CAPITAL IMPAIRMENT.
new text end

new text begin Subdivision 1. new text end

new text begin Takeovers. new text end

new text begin No person may take, hold, or acquire, directly or
indirectly, more than ten percent of the outstanding voting securities of a holding company,
unless the commission has determined, after investigation and an opportunity for hearing,
that the taking, holding, or acquiring is in the best interests of utility consumers, investors,
and the public.
new text end

new text begin Subd. 2. new text end

new text begin Capital impairment. new text end

new text begin If the commission finds that the capital of any
public utility affiliate will be impaired by the payment of a dividend, the commission
may, after an investigation and opportunity for hearing, order the public utility affiliate
to limit or cease the payment of dividends to the holding company until the potential for
impairment is eliminated.
new text end

Sec. 6.

new text begin [216B.5135] REGULATION OF HOLDING COMPANY SYSTEMS.
new text end

new text begin Subdivision 1. new text end

new text begin Regulatory limitation. new text end

new text begin No holding company and no nonutility
affiliate is subject to any regulatory power of the commission except under this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Records. new text end

new text begin The commission has full access to any book, record, document,
or other information relating to a holding company system to the extent that the
information is relevant to the performance of the commission's duties under this chapter or
any other statute applicable to the public utility affiliate. The commission may require a
holding company to keep any record or document that is necessary for the commission
to perform its duties under this section and that is consistent with generally accepted
accounting and record-keeping practices of the particular type of business involved.
new text end

new text begin Subd. 3. new text end

new text begin Lending prohibited. new text end

new text begin No public utility affiliate may lend money to any
holding company or to any nonutility affiliate in the holding company system.
new text end

new text begin Subd. 4. new text end

new text begin Obligation guarantees prohibited. new text end

new text begin No public utility affiliate may
guarantee the obligations of any holding company or any nonutility affiliate in the holding
company system.
new text end

new text begin Subd. 5. new text end

new text begin Subsidization prohibited. new text end

new text begin No nonutility activity of any holding company
or nonutility affiliate may be subsidized materially by the consumers of any public utility
affiliate in the holding company system. No public utility activity of any holding company
or public utility affiliate may be subsidized materially by the nonutility activities of the
holding company or any of its nonutility affiliates.
new text end

new text begin Subd. 6. new text end

new text begin Impairment of operations prohibited. new text end

new text begin No holding company system may
be operated in any way that materially impairs the credit, the ability to acquire capital on
reasonable terms, or the ability to provide safe, reasonable, reliable, and adequate utility
service of any public utility affiliate in the holding company system.
new text end

new text begin Subd. 7. new text end

new text begin Transfer of confidential information restricted. new text end

new text begin No public utility may
transfer to any nonutility affiliate in the holding company system any confidential public
utility information, including but not limited to customer lists, that will be transferred or
used for any nonutility purpose unless the public utility has applied for and received the
written approval of the commission for the transfer. The commission may not approve
any transfer that would foster unfair or discriminatory business practices, or that would
destroy or hamper competition through conduct that violates sections 325D.49 to 325D.66
or any other applicable state or federal antitrust law. Any commission-approved transfer
requires the authorization of the customer before it becomes effective.
new text end

new text begin Subd. 8. new text end

new text begin Separate organization. new text end

new text begin Every holding company, and every affiliate within
a holding company system, must be a separately organized company.
new text end

new text begin Subd. 9. new text end

new text begin Transfer of real property restricted. new text end

new text begin No public utility affiliate may
transfer, sell, or lease to any nonutility affiliate in a holding company system any real
property which is held or used for provision of utility service except by public sale or
offering to the highest qualified bidder.
new text end

new text begin Subd. 10. new text end

new text begin Dissolution requirements. new text end

new text begin No holding company system may take any
action to terminate its interest in a public utility affiliate without notice to and approval
of the commission. If the commission grants approval, it may impose conditions with
respect to the division and allocation of plant, equipment, resources, and any other asset
necessary to protect the interests of utility consumers and investors and the public. If a
holding company system terminates its interest under this subdivision in all of its public
utility affiliates, no company remaining in the holding company system is subject to
any regulatory power of the commission.
new text end

new text begin Subd. 11. new text end

new text begin Assets recorded. new text end

new text begin The assets of every company in a holding company
system must be as recorded on the books of accounting record of the company, net of any
applicable valuation accounts, including but not limited to accumulated depreciation and
allowance for uncollectible accounts, as of the end of the prior year.
new text end

new text begin Subd. 12. new text end

new text begin Affiliate employee services regulated. new text end

new text begin (a) No public utility affiliate may
permit the use of any public utility affiliate employee's services by any nonutility affiliate
in a holding company system except by contract or arrangement. Any such contract or
arrangement, or amendment thereto, made or entered into for the use of any public utility
affiliate employee's services by a nonutility affiliate must have prior written approval
of the commission before it is effective.
new text end

new text begin (b) The commission shall approve the contract or arrangement if it is established
upon investigation that the nonutility affiliate will compensate the public utility affiliate
for the use of the employee's services at the fair market value of the employee's services
and that the nonutility affiliate's use of the employee's services will not result in unjust
discrimination against, or have an anticompetitive impact on, any competitor of the
nonutility affiliate.
new text end

new text begin (c) The commission may not approve the contract or arrangement if it determines
that the potential burden of administering the contract or arrangement is greater than the
potential benefits to the public utility affiliate's customers or if it determines that the
public utility affiliate has not minimized the use of such employees by nonutility affiliates
in the holding company system.
new text end

new text begin Subd. 13. new text end

new text begin Property transactions regulated. new text end

new text begin (a) In this subdivision, "property"
means any equipment, facilities, property, or other nonmonetary item of value except real
property and utility service that is provided by the public utility affiliate on the same terms
or conditions to all consumers in the same class. No public utility affiliate may sell, lease,
or transfer to, or exchange with, any nonutility affiliate in a holding company system
any property, except by contract or arrangement. Any such contract or arrangement,
or amendment thereto, made or entered into for the sale, use, transfer, or exchange of
any public utility affiliate's property by a nonutility affiliate must have the prior written
approval of the commission before it is effective.
new text end

new text begin (b) The commission shall approve the contract or arrangement if it establishes upon
investigation that the nonutility affiliate will compensate the public utility affiliate for
selling, leasing, or transferring to, or exchanging with, the nonutility affiliate any property
at the fair market value of the property and that the nonutility affiliate's acquisition or lease
of the property will not result in unjust discrimination against, or have an anticompetitive
impact on, any competitor of the nonutility affiliate.
new text end

new text begin (c) The commission may not approve the contract or arrangement if it determines
that:
new text end

new text begin (1) the potential burden of administering the contract or arrangement is greater than
the potential benefits to the public utility affiliate's customers; or
new text end

new text begin (2) the public utility affiliate has not minimized selling, leasing, or transferring
property to, or exchanging property with, nonutility affiliates in the holding company
system.
new text end

Sec. 7.

new text begin [216B.514] LOAN AND INVESTMENT RESTRICTIONS FOR
OFFICERS; PENALTY.
new text end

new text begin Subdivision 1. new text end

new text begin Prohibited arrangements with officers and directors. new text end

new text begin Except
under rules prescribed by the commission, no public utility or holding company may lend
funds or credit to any of its officers or directors by any of the means described in clauses
(1) to (3) and a public utility may not lend funds or credit to any corporation, except a
public utility subject to the regulatory powers of the commission, if the corporation holds,
directly or indirectly through any chain of ownership, five percent or more of the voting
stock of the public utility or renders any managerial, supervising, engineering, legal,
accounting, or financial service to the public utility, by any of the following means:
new text end

new text begin (1) becoming surety, guarantor, or endorser upon any obligations, contingent or
otherwise, of the officer, director, or corporation;
new text end

new text begin (2) loaning funds, securities, or other like assets to the officer, director, or
corporation; or
new text end

new text begin (3) purchasing in the open market, or otherwise, any obligation upon which the
officer, director, or corporation may be liable solely or jointly with others.
new text end

new text begin Subd. 2. new text end

new text begin Void agreements. new text end

new text begin Any contract made in violation of this section is
void and subject to cancellation and recoupment by action at law. If a contract is made
contrary to the provisions of this section, the commission, after notice and hearing, may
order the public utility or holding company to take steps within 30 days to recover the
funds or assets thus illegally loaned or transferred by action at law or other proceedings
that will effectively release the public utility or holding company from the contract
as surety, guarantor, or endorser.
new text end

new text begin Subd. 3. new text end

new text begin Penalty. new text end

new text begin Any director, treasurer, or other officer or agent of a public utility
or holding company who makes or votes to authorize a transaction in violation of this
section may be fined not more than $10,000.
new text end

new text begin Subd. 4. new text end

new text begin Application. new text end

new text begin The provisions of this section apply and extend to the
renewal or extension of existing contracts.
new text end

Sec. 8.

new text begin [216B.5145] REPORTING REQUIREMENTS.
new text end

new text begin (a) No more than ten business days after a holding company forms, organizes,
or acquires a nonutility affiliate, the holding company shall notify the commission of
the formation, organization, or acquisition and shall provide the commission with the
following information:
new text end

new text begin (1) the name, identification of officers, and corporate relationship of the nonutility
affiliate to the holding company and utility affiliate;
new text end

new text begin (2) a copy of any proposed agreement or arrangement between the nonutility affiliate
and the public utility affiliate;
new text end

new text begin (3) a brief description of the nature of the business of the nonutility affiliate,
including its most recent annual financial statement; and
new text end

new text begin (4) as of the last day of the calendar year immediately preceding the date of the
notification under this section, the total amount of assets held by the nonutility affiliate,
the amount of those assets located within this state, the total number of employees, and
the total number of employees located within this state.
new text end

new text begin (b) The holding company shall report the information required under this section
to the commission annually no later than March 31. The information must be available
to the public upon filing.
new text end

Sec. 9.

new text begin [216B.515] ASSET REQUIREMENTS.
new text end

new text begin The sum of the assets of all nonutility affiliates in a holding company system may
not exceed:
new text end

new text begin (1) 25 percent of the assets of all public utility affiliates in the holding company
system engaged in the generation, transmission, or distribution of electric power;
new text end

new text begin (2) a percentage of the assets as determined by the commission, which may be more
but may not be less than 25 percent, of all public utility affiliates in the holding company
system engaged in providing utility service other than the generation, transmission, or
distribution of electric power; and
new text end

new text begin (3) for any public utility affiliate that is in the holding company system and that
engages in the provision of more than one type of utility service, a percentage of assets
equal to the amount of the public utility affiliate's assets devoted to public utility service,
other than the generation, transmission, and distribution of electric power, multiplied by a
percentage as determined by the commission, which may be more but may not be less than
25 percent, plus 25 percent of all remaining assets of the public utility affiliate.
new text end

Sec. 10.

new text begin [216B.5155] INVESTIGATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Investigation initiation, hearing, remedy. new text end

new text begin The commission, on its
own motion or, at its discretion, upon the complaint of any person, may, after reasonable
notice and an opportunity for hearing, conduct an investigation to determine if any practice
of a holding company system violates any provision of sections 216B.512 to 216B.5156.
On finding after investigation, notice, and opportunity for hearing that any practice of any
company in a holding company in a holding company system violates any provision of
sections 216B.512 to 216B.5156, the commission, by order or otherwise, shall direct the
company to modify or cease the practice and order any other appropriate relief.
new text end

new text begin Subd. 2. new text end

new text begin Protecting interests of utility investors and consumers. new text end

new text begin After
investigation and a hearing, the commission may order a holding company to terminate
its interest in a public utility affiliate on terms adequate to protect the interests of public
utility investors and consumers and the public if the commission finds, based upon clear
and convincing evidence, that termination of the interest is necessary to protect the
interests of utility investors in a financially healthy utility and consumers in reasonably
adequate utility service at just and reasonable rates.
new text end

Sec. 11.

new text begin [216B.5156] PRIVATE CAUSE OF ACTION.
new text end

new text begin Any company in a holding company system that does, causes, or permits to be done
any prohibited action under sections 216B.512 to 216B.5155 or fails to comply with any
term, limitation, or condition imposed under sections 216B.512 to 216B.5155 is liable to
any person injured thereby in treble the amount of damages sustained in consequence of
the prohibited action or failure to comply.
new text end

Sec. 12.

new text begin [216B.5165] INTERVENOR AUTHORITY.
new text end

new text begin The commission, the department, and the attorney general may intervene in any
proceeding before any state or federal agency or court before which an application or issue
related to sections 216B.512 to 216B.5156 is pending.
new text end

Sec. 13.

new text begin SHORT TITLE.
new text end

new text begin Minnesota Statutes, sections 216B.512 to 216B.5156, may be cited as the Minnesota
Public Utilities Holding Company Act.
new text end

Sec. 14. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 13 are effective the day following final enactment.
new text end