Exhibit 99(b)
STATE OF MICHIGAN
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
In the Matter of the Application of )
Consumers Energy Company for a Financing )
Order Approving the Securitization of its ) Case No. U-12505
Regulatory Assets and other Qualified Costs. )
________________________________________________
APPLICATION FOR FINANCING ORDER
NOW COMES Consumers Energy Company and, pursuant to 2000 PA 141,
2000 PA 142, the Michigan Administrative Procedures Act, MCL 24. 201 et
seq.; MSA 3.560(101) et seq., MCL 460.1 et seq., as amended, and other
applicable law, hereby applies to the Michigan Public Service Commission
for a financing order approving the issuance of securitization bonds for
the qualified costs set forth in this Application and the accompanying
testimony and exhibits, stating as follows:
IDENTITY OF APPLICANT
1. Consumers Energy Company ("Consumers") is an electric utility
company subject to the regulatory authority of the Michigan Public Service
Commission (the "Commission"). Consumers provides electric service in 62
of 68 counties in the Lower Peninsula of the state, serving more than 1.6
million customers in 1,109 incorporated cities, townships and villages, as
set forth at Sheet Nos. A-17.00 et seq. of Consumers' Schedule of Rates
Governing the Sale of Electric Service, M.P.S.C. No. 12- Electric,
Consumers Energy Company.
STATEMENT OF STATUTORY AUTHORITY
2. On June 3, 2000, Governor Engler signed into law 2000 PA 141
("Act 141") and 2000 PA 142 ("Act 142"). These new statutes provide for
the introduction of competition into Michigan's electricity marketplace
and for a method of securitization financing of certain costs designed to
facilitate that fundamental change.
3. Act 141 provides for a rate reduction of 5% for retail
customers of certain electric utilities, including Consumers. SEE, Act
141, Section 10d(1). In order to provide for the specified rate
reduction, Act 141 provides that securitization may be used. SEE, Act
141, Section 10d(4).
4. Act 142 provides that electric utilities may recover
"qualified costs" if the Commission issues a "financing order" approving
the issuance of securitization bonds. SEE, Act 142, Section 10i(1).
These securities are designed to lower the cost of capital of the electric
company, to fund the rate reduction mandated by Act 141, supra, and to
otherwise reduce stranded costs by authorizing the recovery of other costs
that an electric utility would not be likely to recover in a competitive
market.
5. Act 142 defines "qualified costs" as follows:
(g) "Qualified costs" means an electric utility's
regulatory assets as determined by the commission,
adjusted by the applicable portion of related investment
tax credits, plus any costs that the commission determines
that the electric utility would be unlikely to collect in
a competitive market, including but not limited to, retail
open access implementation costs and the costs of a
commission approved restructuring, buyout or buy-down of a
power purchase contract, together with the costs of
issuing, supporting, and servicing securitization bonds
and any costs of retiring and refunding the electric
utility's existing debt and equity securities in
connection with the issuance of securitization bonds.
Qualified costs include taxes related to the recovery of
securitization charges. [Act 142, Section 10h(g).]
6. Act 142, Section 10i(6) requires that the Commission conduct
an "expedited contested case proceeding" to consider the application of an
electric utility for a financing order, and that a determination be made
no later than 90 days after the filing of the application.
REQUEST FOR FINANCING ORDER
ELIGIBILITY FOR FINANCING ORDER.
7. Consumers is an "electric utility" as that term is defined and
used in Act 142.
8. Consumers has incurred "qualified costs" as that term is
defined and used in Act 142 that are eligible for securitization under
that act.
9. Act 142, Section 10i provides in part:
(1) Upon the application of an electric utility,
if the commission finds that the net present value of the
revenues to be collected under the financing order is less
than the amount that would be recovered over the remaining
life of the qualified costs using conventional financing
methods and that the financing order is consistent with
the standards in subsection (2), the commission shall
issue a financing order to allow the utility to recover
qualified costs.
(2) In a financing order, the commission shall
ensure all of the following:
(a) That the proceeds of the securitization bonds
are used solely for the purposes of the refinancing or
retirement of debt or equity.
(b) That securitization provides tangible and
quantifiable benefits to customers of the electric
utility.
(c) That the expected structuring and expected
pricing of the securitization bonds will result in the
lowest securitization charges consistent with market
conditions and the terms of the financing order.
(d) That the amount securitized does not exceed
the net present value of the revenue requirement over the
life of the proposed securitization bonds associated with
the qualified costs sought to be securitized.[ID.]
10. Act 141, Section 10d also governs the issuance of a
financing order by the Commission. That section provides in part:
(4) If the commission authorizes an electric
utility to use securitization financing under section 10i
[of Act 142], any savings resulting from securitization
shall be used to reduce retail electric rates from those
authorized or in effect as of May 1, 2000 as required
under subsection (1). A rate reduction under this
subsection shall not be less than the 5% required under
subsection (1). The financing order may provide that a
utility shall only issue securitization bonds in an amount
equal to or less than requested by the utility, but the
commission shall not preclude the issuance of an amount of
securitization bonds sufficient to fund the rate reduction
required under section 10d(1).[Act 141, Section 10d(4).]
11. As more fully explained in the accompanying testimony and
exhibits which are incorporated herein and made a part hereof by
reference, the securitization proposal set forth in this Application meets
all of the statutory requirements set forth in Act 141 and Act 142.
AMOUNT TO BE SECURITIZED AND RELATED TRANSACTIONS.
12. As more fully explained in the accompanying testimony and
exhibits, Consumers seeks a financing order that will authorize the
securitization of $472,549,237 of qualified costs.
13. Act 142 authorizes an electric utility to assign its rights
in securitization property to another entity and provides certain benefits
and protections. SEE, Act 142, Section 10h(a), Section 10j-o. As more
fully explained in the accompanying testimony and exhibits, Consumers will
create one or more special purpose entities and transfer certain
securitization property for the purpose of minimizing bankruptcy risks to
potential securitization bondholders as much as possible and, thus,
maximizing the ratings on the securitization bond.
14. Within the context of approving the securitization
transaction in the financing order, Consumers specifically requests the
Commission to approve the transactions involving Consumers and the special
purpose entities, as described in the accompanying testimony and exhibits,
and make any financing order issued in this proceeding applicable to any
transferee, successor or assignee of Consumers in accordance with Act 142.
INITIAL IMPLEMENTATION AND TRUE-UP OF SECURITIZATION AND TAX CHARGES.
15. Consumers also requests the Commission to approve the terms
and conditions of the initial implementation of the securitization charges
and tax charges to be collected from Consumers' customers as well as a
periodic true-up mechanism, all as described more fully in the
accompanying testimony and exhibits, and all of which are designed to
result in a "AAA" rating for any securitization bonds issued as the result
of the financing order requested herein. The mechanisms proposed for
initial implementation and periodic true-up would be approved by the
Commission in the financing order issued in this proceeding for inclusion
in Consumers' electric tariff and would thereafter operate without the
need for further Commission order.
USE OF PROCEEDS.
16. Consumers will use proceeds from securitization for
refinancing or retirement of debt or equity as provided in Act 142,
Section 10i(2)(a).
SECURITIZATION SAVINGS.
17. After the 5% rate reduction mandated by Act 141, Section
10d(4), Consumers will have insufficient savings to allocate to the low-
income or energy efficiency fund established by Act 141, Section 10d(6) or
to further rate reductions or stranded cost reductions pursuant to Act
141, Section 10d(5). From any additional savings that become available,
Consumers seeks recovery of certain other qualified costs. Consumers'
testimony and exhibits discuss these qualified costs, the
creation/continuation of the regulatory assets related to these qualified
costs, their amortization, and any accounting and ratemaking treatment
involved.
18. Upon the issuance of a financing order by the Commission,
Consumers will take all other actions necessary to implement the financing
order.
TESTIMONY AND EXHIBITS
19. The testimony and exhibits accompanying this Application,
which are incorporated herein and made a part hereof by reference,
describe more fully the qualified costs sought to be securitized and
recovered and demonstrate the eligibility of these costs for
securitization pursuant to Act 142.
WHEREFORE, Consumers respectfully respects this honorable
Commission to take the following actions:
A. Issue a financing order applicable to Consumers, its
transferees, successors and assignees, pursuant to Act 142 and other
applicable law, authorizing issuance of securitization bonds for the
qualified costs being securitized on terms and conditions substantially
similar to the terms and conditions set forth in the testimony and
exhibits accompanying this Application. Such order shall reserve to
Consumers the sole discretion as to whether and when to proceed with a
securitization transaction.
B. Authorize Consumers in the financing order to impose a
nonbypassable securitization charge payable to the bond trustee pursuant
to Act 142 as a separate item on customer bills, rendered on and after the
issuance of securitization bonds, sufficient to pay the financing charges,
principal and interest and other costs associated with the issuance,
service and/or support of the securitization bonds as described in the
accompanying testimony and exhibits.
C. Authorize Consumers to impose at the same time a nonbypassable
tax charge sufficient for Consumers to pay taxes due on securitization
charge revenues, as more fully explained in the accompanying testimony and
exhibits.
D. Authorize Consumers to include necessary language in its
tariffs to accomplish the imposition of the above-referenced nonbypassable
securitization and tax charges and initially implement and periodically
true-up the charges described above, all as proposed and more fully
explained in the accompanying testimony and exhibits.
E. Authorize Consumers to employ appropriate methodology to
account for the transactions contemplated by the financing order,
including granting any additional accounting authority and ratemaking
treatment, as proposed and more fully explained in the accompanying
testimony and exhibits.
F. Grant to Consumers, pursuant to Act 142, Section 10i(9), the
authority to refund and retire any or all of the securitization bonds that
are issued in this proceeding upon demonstration that securitization
charges to service new securitization bonds, including transaction costs,
will be less than the future securitization charges required to service
the securitization bonds being refunded.
G. Approve transfers of the financing order issued in this
proceeding and rights thereunder to any transferee, successor or assignee
of Consumers in accordance with Act 142.
H. Grant such other and further relief as may be lawful and
appropriate.
Respectfully submitted,
CONSUMERS ENERGY COMPANY
By: /s/Dennis DaPra
_________________
Dennis DaPra
Dated: July 5, 2000
/s/David A. Mikelonis
David A. Mikelonis (P-17709)
John C. Shea (P-36854)
212 West Michigan Avenue
Jackson, Michigan 49201
Attorneys for Consumers Energy Company
Tel: (517) 788-2112
Email address: jcshea@cmsenergy.com
9
STATE OF MICHIGAN
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
In the matter of the application of )
Consumers Energy Company for a Financing )
Order Approving the Securitization of its ) Case No. U-12505
Regulatory Assets and other Qualified Costs. )
_________________________________________________)
VERIFICATION
STATE OF MICHIGAN )
)SS
COUNTY OF JACKSON )
DENNIS DAPRA, being first duly sworn, deposes and says that he is
the Vice President and Controller for Consumers Energy Company, that he
has executed the foregoing Application for and on behalf of Consumers
Energy Company; that he has read the foregoing Application and is familiar
with the contents thereof; that the facts contained therein are true and
correct to the best of his information knowledge and belief; and that he
is duly authorized to execute and file such Application on behalf of
Consumers Energy Company.
/s/Dennis DaPra
___________________
Dennis DaPra
Subscribed and sworn to before me this 5th day of July, 2000.
/s/ Karen E. Kurzynowski
_________________________
Karen E. Kurzynowski
Notary Public, Jackson County, Michigan
My Commission expires: December 7, 2003