(a) Certification to Securities and Exchange Commission. Upon
request by a holding company which is exempt under §3 of the Public Utility
Holding Company Act of 1935, codified at 15 United States Code 79, the commission
may certify to the Securities and Exchange Commission (SEC) that the commission
has the authority and resources to protect ratepayers and that it intends
to exercise its authority over holding companies owning both a jurisdictional
electric utility and a foreign utility company (FUCO) under the safe harbor
provisions of subsection (c) of this section or the case-by-case review provisions
of subsection (d) of this section. The commission may also notify the SEC
that a previously-issued certification regarding a requesting holding company
will be ineffective prospectively.
(b) Policy goals. The commission will seek to protect the public
interest in having electricity service available to all citizens of the state
at just, fair, and reasonable rates that are unaffected by investments by
exempt holding companies in foreign utility companies (FUCOs), while avoiding
strictures that would place exempt holding companies at a competitive disadvantage
in international markets. The commission will consider these policy goals
in each decision whether to issue a certification or to notify the SEC that
a previously-issued certification is prospectively withdrawn.
(c) Safe harbor investments. The following safe harbor provisions
shall be applicable to investments in FUCOs by exempt holding companies that
are affiliated with electric utilities subject to the regulatory jurisdiction
of the commission:
  (1) The commission shall certify to the SEC that the commission
has the authority and resources to protect ratepayers subject to its jurisdiction
and that it intends to exercise its authority, provided that all holding companies
of electric utilities that are subject to the regulatory jurisdiction of this
commission shall have filed with the commission corporate undertakings, signed
under oath by an authorized executive officer of the holding company agreeing
to adhere to the covenants and to make the filings specified in paragraph
(2) of this subsection.
  (2) The holding company shall adhere to the following
covenants:
    (A) That any indebtedness incurred in relation to the acquisition
by the holding company, or by any affiliate of the electric utility, of an
ownership interest in a FUCO will be without recourse to the electric utility;

    (B) That the electric utility, the holding company, or any
affiliate of the electric utility will not enter into any agreements under
the terms of which the electric utility is obligated to commit funds in order
to maintain the financial viability of a FUCO or an affiliate of the electric
utility investing in a FUCO;
    (C) That the electric utility will not provide, directly or
indirectly, any guarantees or other forms of credit support for any funds
borrowed by the holding company or an affiliate of the electric utility in
connection with the acquisition of any ownership interest in a FUCO;
    (D) That the electric utility, the holding company, or any
affiliate of the electric utility will not make any investment in a FUCO under
circumstances in which the electric utility would be liable for the debts
and/or liabilities of the FUCO incurred as a result of acts or omissions of
the FUCO;
    (E) That the electric utility will maintain and provide a copy
to the commission of its accounting policies and procedures that assure that
the electric utility is adequately and fairly compensated by the holding company
or an affiliate of the electric utility for any use of the electric utility's
assets or personnel in furtherance of a FUCO;
    (F) That the holding company provides the commission reasonable
access to books and records and financial statements, or copies thereof, of
the FUCO or other affiliate doing business with the FUCO, in English and stated
in United States dollars, as the commission may request to:
      (i) review transactions between the electric utility and such
FUCO or affiliate pursuant to the Public Utility Regulatory Act §14.154;
and
      (ii) review transactions between any affiliate and the FUCO
if such affiliate also has transactions directly or indirectly with the electric
utility;
    (G) That the holding company will file with the commission
quarterly a report listing the total amount of the aggregate investments by
the holding company and its subsidiaries and the percentage of the holding
company's consolidated net worth, from the company's most recent SEC form
10-Q, represented by such investments;
      (i) "Aggregate investment" means all amounts invested, or committed
to be invested, in exempt wholesale generators located outside the United
States (foreign EWGs) and FUCOs, for which there is recourse, directly or
indirectly, to the holding company. Among other things, the term shall include
preliminary development expenses that culminate in the acquisition of a foreign
EWG or a FUCO.
      (ii) Such report shall be filed no later than ten days following
the filing of the 10-Q for the quarter.
    (H) That in the event the holding company anticipates making
any investment in a FUCO that would result in the aggregate investment as
defined in subparagraph (G) of this paragraph of such holding company exceeding
30% of the consolidated net worth of such holding company, the holding company
shall so advise the commission before a final commitment to ownership of such
FUCO is made;
    (I) That the electric utility will provide, by March 31 of
each year, a copy of the electric utility's three-year cash flow forecast;

    (J) That the holding company will provide to the commission
all SEC forms for reporting information related to foreign EWG and FUCO investments,
no later than ten days after such forms are provided to the SEC;
    (K) That the holding company will promptly notify the commission
whenever any of the following occurs:
      (i) It is unable to provide the certifications, undertakings,
or documents provided for in this paragraph;
      (ii) The aggregate investment exceeds 30% of consolidated net
worth;
      (iii) The holding company's operating losses attributable to
its direct or indirect investments in foreign EWGs and FUCOs exceeded 5.0%
of consolidated retained earnings during the previous four quarters; and

    (L) That the holding company will comply with the informational
filing requirements of subsection (d) of this section in connection with a
contemplated investment in a FUCO, unless the commission finds good cause
not to require the holding company to provide such additional information.

(d) Other Investments. For any occasion for which a holding
company has undertaken to notify the commission of an event specified in subsection
(c)(2)(H) or (K) of this section, the following provisions apply:
  (1) The holding company shall provide the following information,
to the extent such information is reasonably available at the time of submission
of the filing, at least 30 days before the date when it anticipates making
a final commitment to ownership of a FUCO not already covered by a certification
letter:
    (A) A description of the proposed investment, including a description
of the FUCO assets being acquired, their geographical location, the form of
the investment (partnership, joint venture, direct purchase, etc.), the holding
company's percentage share of the investment, a description of how the investment
will fit into the corporate subsidiary structure, and any other information
reasonably necessary in the opinion of the holding company to provide a complete
overview of the nature of the proposed investment;
    (B) Any financial requirements and/or commitments by the holding
company or the electric utility that will be made or assumed as a result of
this investment; this information should include, but is not limited to, an
estimate of the amount of equity capital to be invested;
    (C) Any debt obligations resulting from this investment which
will provide recourse to the holding company or the electric utility;
    (D) The holding company's general corporate objectives regarding
diversification and foreign utility investments, and the specific objectives
of the proposed FUCO investment;
    (E) A statement that the electric utility has effective written
policies and accounting procedures which insure that any use by the FUCO of
assets or personnel of an affiliate of the electric utility, or other transactions
between the FUCO and an affiliate of the electric utility shall not negatively
affect Texas ratepayers; and a statement that the electric utility will demonstrate
in each subsequent rate proceeding before the commission, and each subsequent
audit, that no FUCO investment increased the cost of capital or revenue requirement
of the electric utility;
    (F) A calculation, based on the holding company's most recent
SEC Form 10-Q, of aggregate consolidated holding company investments as defined
in subsection (c)(2)(G) of this section as a percentage of consolidated holding
company net worth, stated both before and after all asset transfers from any
affiliate of the electric utility to FUCOs at fair market value;
    (G) A statement that the holding company will provide to the
commission all SEC forms for reporting information related to foreign EWG
and FUCO investments, no later than ten days after such forms are provided
to the SEC; and
    (H) Responses to questions, if any, contained on a commission
prescribed form.
  (2) The notification prescribed in this subsection
may be submitted less than 30 days before the date when the holding company
anticipates making a final commitment to ownership of a FUCO not already covered
by a certification letter upon a showing of good cause. Good cause for purposes
of the preceding sentence shall be deemed to include, without limitation,
a representation that the holding company lacked the information required
to make a submission at an earlier date or a representation that making the
submission at an earlier date would have unreasonably jeopardized the ability
of the holding company to go forward with the contemplated investment.
  (3) In its review of the information provided pursuant
to this section, the commission will consider, among other things, the number
and magnitude of prior FUCO investments by the holding company, including
the diversity among the countries in which such investments are located and
other differences between such investments, and the magnitude of the proposed
investment and its effect on the diversity of the portfolio.
(e) Post-investment reporting. The electric utility shall comply
with the following post-investment reporting obligations:
  (1) With respect to any investment in a FUCO for which an informational
filing was made pursuant to subsection (d)(1) of this section, the electric
utility or holding company shall notify the commission no later than ten days
after the holding company makes a final commitment to ownership of a FUCO
that such a commitment has been made. Such notice shall include any material
corrections, additions, and supplementation of previously-provided information;
and
  (2) For any FUCO investment covered by a certification,
the electric utility or holding company shall notify the commission no later
than 30 days after any material change in the circumstances or nature of an
investment in a FUCO. Such notice shall include all appropriate corrections,
additions, and supplementation of previously-provided information. A material
change would include, but is not limited to, any change that would have an
adverse impact of greater than 1.0% of consolidated net worth most recently
reported; full or partial divestiture of the investment; a catastrophic event
that destroys a significant amount of FUCO property or results in loss of
life that could result in a significant liability claim; a change in the laws
or government policy having a material impact on the FUCO; or an event which
would place a significant restriction on the repatriation of earnings of the
FUCO.
  (3) Unless included in SEC reports, each exempt utility
holding company which directly or indirectly holds an interest in FUCOs or
foreign EWGs shall provide the following information: A consolidating statement
of income of the exempt holding company and its subsidiary companies for the
last calendar year, together with a consolidating balance sheet of the exempt
holding company and its subsidiary companies as of the close of such calendar
year.
    (A) The information shall be provided in English, monetary
amounts in U.S. dollars, and according to generally accepted accounting principles.

    (B) Such information must be received by the commission annually
no later than March 15.
(f) Commission standards for granting or maintaining certification.

  (1) In general, the commission will issue and continue certification
when the aggregate investment in FUCOs and foreign EWGs is less than 30% of
the holding company's consolidated net worth, and the company has satisfactorily
provided the information and assurances set out in the preceding subsections.

  (2) With respect to any investment in a FUCO for which
an informational filing was made pursuant to subsection (d)(1) of this section,
the commission shall determine on a case by case basis whether to issue a
certification to the SEC or maintain a previously issued certification. The
commission shall endeavor to make such a determination prior to the date when
the holding company anticipates having to make a final commitment to ownership
of the FUCO. If the commission determines that it does not intend Cont'd...