AN ACT ESTABLISHING A CODE OF CONDUCT FOR THE TRANSACTIONS BETWEEN NATURAL GAS DISTRIBUTION COMPANIES AND THEIR AFFILIATES.

AN ACT ESTABLISHING A CODE OF CONDUCT FOR THE TRANSACTIONS BETWEEN NATURAL GAS DISTRIBUTION COMPANIES AND THEIR AFFILIATES.

This bill requires the Department of Public Utility Control (DPUC) to establish a code of conduct setting minimum standards for transactions between gas companies and their affiliates. The bill gives DPUC various investigative powers regarding affiliates and their transactions with gas companies. It allows DPUC to issue enforcement orders against entities subject to the code, including cease and desist orders, and impose civil penalties of up to $ 10,000 per violation of the code. DPUC must adopt regulations by November 1, 2009 establishing the code and related accounting and reporting requirements and procedures.

Under the bill, DPUC must establish a code of conduct setting standards for gas company transactions with its affiliates to achieve specified goals. The bill defines a “gas company affiliate” as an entity or class of entities that (1) is under the control of a gas company holding company or (2) DPUC determines is liable to have a less than arm's length relationship with a gas company that makes it necessary to protect gas company ratepayers.

The code must set minimum standards for gas company transactions with their affiliates. The code must provide rules:

1. for when the purchases or sales of goods or services between a gas company and an affiliate should be by written contract based on such factors as the nature, value, and term of the purchase or sale and

2. with respect to sharing or giving access to certain types of customer identifying or commercially sensitive information to affiliates that may differ between regulated and unregulated affiliates.

1. a system of records and reporting for transactions between a gas company and its affiliates and

2. a standard for avoiding conflicts of interest between a gas company and affiliates.

1. that transactions between the company and its affiliate do not have an improper and adverse impact on the company's costs or revenue, on customer rates and charges, or on the quality of service provided by the company;

2. that gas company ratepayers do not subsidize affiliate operations;

3. fair, appropriate, and equitable standards for purchases, sales, leases, asset transfers, and cost or profit-sharing transactions or any type of financing or encumbrance involving a gas company and its affiliates; and

4. that gas supply and distribution services are provided by a gas company in an appropriate manner to affiliates and nonaffiliates alike.

Finally, the code must establish standards to ensure that any payment by a gas company to any affiliate or from any affiliate to a gas company is appropriate and reasonable.

The code cannot prohibit communications needed to restore gas service or prevent or respond to emergencies.

The bill requires any method for allocating costs between a gas company and other companies under the control of the same holding company currently approved by, or under current orders issued by, the Securities and Exchange Commission or the Federal Energy Regulatory Commission under relevant federal law to be entitled to a rebuttable presumption of reasonableness. (By law, charges must be reasonable in order to be recoverable in rates. ) Under the bill, charges rendered to a gas company by an affiliate that is a traditional centralized service company must be at cost. They also must be entitled to a rebuttable presumption of reasonableness.

DPUC, on its own motion, may investigate a gas company's compliance with the code. DPUC must conduct these investigations as contested cases, a quasi-judicial proceeding.

1. summon witnesses from an affiliate with which a gas company has had direct or indirect transactions;

2. examine the affiliate under oath; and

3. order production, inspection, and audit of its books, records, or any type of information that the department has reason to believe has or will have adverse impact on the gas company.

Proprietary commercial and financial information of affiliates is subject to the protections under the Freedom of Information Act, as DPUC considers appropriate.

Each gas company must submit to DPUC records and information on affiliate transactions as DPUC requires, at intervals it requires, and in the form it specifies.

Yea

Nay

(02/26/2009)