State Representative Kristina Daley Roegner (R-Hudson) has announced that the Ohio House of Representatives passed House Bill 364, which establishes standards for the securitization of costs for electric distribution utilities.

Specifically, House Bill 364 would allow electric utilities in Ohio to issue securitization bonds, which are bonds whose interest and principal are secured by a specific charge collected from all utility customers through a non-bypassable charge.

“In these difficult economic times, I am delighted to sponsor this bill, which will help save every Ohioan who pays an electric bill money,” Roegner said. “While the language in the bill is complex, the concept is quite simple. With the provisions in this bill, utilities can exchange high interest debt for low interest debt, the savings then passed on to the customer.”

The following provisions, which are key to achieving AAA ratings for the bonds, would be included:
• The financing order is irrevocable and remains in effect until the bonds are fully paid
• The customer charge is non-bypassable
• Annual automatic true-up adjustments ensure timely and sufficient collection of debt service
• The state pledges not to interfere with the collection of the charges

House Bill 364 will allow utilities to replace high-interest, short-term debt with low-interest, long-term bonds and achieve AAA ratings for their bonds. The benefits of AAA bond ratings are both a lower interest rate and a longer financial term, which will reduce utility and monthly customer rates. The customers will benefit from a reduced carrying cost for the bond versus the utilities’ weighted average cost of capital, translating into lower utility bills.

According to the legislation, the securitization bonds are not the debt of the state and the state does not pledge its credit to support the bonds. The state only pledges that it will not take or permit any action that interferes with the securitization bonds until the bonds are paid in full.

Currently, there are 19 other states that allow securitization bonds for electric utilities: California, Connecticut, Florida, Idaho, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Montana, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Texas, Washington, Wisconsin and West Virginia.

House Bill 364 will now be sent to the Ohio Senate for further consideration.


Post a Comment