Exhibit 10.3
IN THE MATTER OF THE PETITION OF PUBLIC STATE OF
NEW JERSEY
SERVICE ELECTRIC AND GAS COMPANY FOR A
BONDABLE STRANDED COST RATE ORDER IN BOARD OF
PUBLIC UTILITIES
ACCORDANCE WITH N.J.S.A. 48:3-49 ET SEQ. TO
RECOVER ITS BASIC GENERATION SERVICE
TRANSITION COSTS (INCLUDING FEDERAL, STATE
AND LOCAL TAX LIABILITIES ASSOCIATED WITH DOCKET
NO.:
E_______________
SUCH RECOVERY) PROVIDING FOR (1) THE
IMPOSITION OF A NON-BYPASSABLE TRANSITION
BOND CHARGE; (2) THE SALE OF THE RIGHT TO
RECEIVE SUCH CHARGE TO A SPECIAL PURPOSE
PETITION
FINANCING ENTITY; (3) THE ISSUANCE AND SALE
IN A PUBLIC OFFERING OR PRIVATE PLACEMENT
OF NOT MORE THAN $150 MILLION AGGREGATE
PRINCIPAL AMOUNT OF TRANSITION BONDS IN
ONE
OR MORE SERIES WITH A SCHEDULED
AMORTIZATION UPON ISSUANCE OF UP TO FIFTEEN
(15) YEARS; (4) THE USE OF TRANSITION
BOND
PROCEEDS TO REFINANCE OR RETIRE
OUTSTANDING
DEBT AND/OR EQUITY AND (5) THE FORMULA FOR
THE CALCULATION AND ADJUSTMENT OF THE
TRANSITION BOND CHARGE AND MARKET
TRANSITION BOND CHARGE -TAX RELATED
THERETO.
Public Service Electric and Gas Company (the "Petitioner"), a
New
Jersey
corporation organized under the provisions of Chapter 185 of
the
Laws of
1896, as amended and supplemented, with its principal office at
80 Park
Plaza, Newark, New Jersey, respectfully shows that:
1. Petitioner is a public
utility engaged in the electric and gas
distribution business, subject to the jurisdiction of your
Honorable
Board.
2. This Petition for the
issuance of a Bondable Stranded Costs Rate Order
("BSCRO"
or "Financing Order") is filed pursuant to the Electric
Discount
and Energy Competition Act, Chapter 23 of the Laws of 1999,
N.J.S.A.
48:3-49 et seq. (the "EDECA"), as amended by P.L. 2002, Ch. 84
(the "2002
Amendments", and together with the EDECA,
<PAGE>
the
"Act"). Capitalized terms used herein and not specifically
defined
shall have
the meanings as defined in the Act.
3. RECOVERY OF BASIC
GENERATION SERVICE TRANSITION COSTS.
Basic Generation Service ("BGS"), as defined in N.J.S.A.
48:3-51,
is a
regulated electric generation service provided, pursuant to
N.J.S.A.
48:3-57, to any electric utility customer of an electric
utility
that has not chosen an alternative power supplier. BGS
transition
costs ("BGS Transition Costs", as defined in N.J.S.A.
48:3-51)
is the amount by which payments by an electric public utility
for the
procurement of power for BGS and related ancillary and
administrative costs exceed the net revenues from the BGS
charge
established by the Board ("Deferred Balance") pursuant to
N.J.S.A
48:3-57,
during the Transition Period, together with interest on the
Deferred
Balance at the Board-approved rate, that is reflected in a
Deferred
Balance account approved by the Board in an Order addressing
the
electric public utility's rates, stranded costs, and
restructuring
filings
pursuant to the Act. BGS Transition Costs include, but are not
limited to
payments by an electric public utility pursuant to a
competitive procurement process for BGS supply during the
Transition
Period,
and the costs of any such payments used to procure the BGS
supply.
The Transition Period commenced August 1, 1999 and will end
July
31, 2003.
The BGS Transition Costs that are the subject matter of this
Petition
is the Deferred Balance (the "Year Four Deferred Balance")
incurred
by Petitioner for the period August 1, 2002 through July 31,
2003
("Year Four") pursuant to the rate unbundling stranded cost and
restructuring Orders issued by the Board in Docket Nos.
E097070461,
E097070462
and E097070463 dated April 21, 1999 (Summary Order) and
August 24,
1999 (Final Order) (collectively, the "Restructuring Order").
2
<PAGE>
By Order dated December 11, 2001 in Docket Nos. EO01100654,
EO01100655, EO01100656 and EO001100657, the Board approved an
auction
process
for BGS supply, including supply for Year Four, and directed
electric
public utilities, including Petitioner, to make an auction
process
compliance filing ("Compliance Filing") in response thereto. On
December
12, 2001, Petitioner made the Compliance Filing which included,
among
other things, a request for approval of Petitioner's accounting
and cost
recovery proposal for BGS Transition Costs, including, but not
limited
to, a determination (i) that the BGS Deferred Balance will be
determined
as the difference between Petitioner's recorded BGS revenue
and total
BGS Cost, (ii) interest on the Deferred Balance at a monthly
rate based
on the seven (7) year constant maturity treasuries as shown
in the
Federal Reserve Statistical Release on or closest to August 1,
2003 plus
60 basis points and (iii) a presumption of prudence with
respect to
Petitioner's BGS Transition Costs. At its special public
agenda
meeting held on December 14, 2001, the Board approved
Petitioner's Compliance Filing after finding it to be consistent
with
its
December 11, 2001 Order.
On August 28, 2002, Petitioner filed its electric deferral case
("BGS
Deferral Case"), Docket No. ER02080604, with respect to
recovery
of its
Year Four Deferred Balance pursuant to the Restructuring Orders
and the
Board's July 22, 2002 Order Directing Supplemental Testimony
("Testimony Order"). The BGS Deferral Case was transmitted by the
Board
to the New
Jersey Office of Administrative Law ("OAL"), which case was
later
consolidated with Docket No. ER02050303 for separate hearings.
The
Board
also, pursuant to the Testimony Order, retained an independent
auditor
("Independent Auditor") to perform an audit of Petitioner's
Year
Four
Deferred Balance. Public hearings in the BGS Deferral Case were
conducted
by an OAL, Administrative
3
<PAGE>
Law Judge
("ALJ"), on December 10, 11 and 16 of 2002, respectively.
Evidentuary Hearings on the BGS Deferral Case were conducted on
March 3,
5 and 6,
2003.
On June 6. 2003, the ALJ rendered his written decision ("ALJ
Decision")
to the Board, adopting the terms of a settlement among
Petitioner
and certain Parties to the BGS Deferral Case, which ALJ
Decision,
if adopted, will resolve all matters in the consolidated
dockets,
including the BGS Deferral Case. Petitioner is awaiting a final
decision
by the Board ("BGS Cost Order" or "Recovery Order"), including
a finding
that Petitioner's Year Four BGS Transition Costs, were
reasonably
and prudently incurred and that the Year Four Deferred
Balance
upon verification by the Independent Auditor is properly
recoverable by Petitioner, with interest, under the Act . As set
forth
in the ALJ
Decision, Petitioner's Year Four Deferred Balance is
estimated
to be approximately $241.5 million pre-tax at July 31, 2003.
Petitioner
accordingly seeks authority to securitize its verified Year
Four
Deferral Balance.
4. REQUEST FOR BSCRO
The 2002 Amendments, and specifically, N.J.S.A. 48:3-62(c)(3)
authorizes
an electric public utility to securitize the full amount of
its
reasonably and prudently incurred BGS Transition Costs pursuant
to
the
provisions of the Act if the recovery of the BGS Transition
Costs
through
the securitization would provide benefits to ratepayers based
upon the
"criteria" consisting of the lowest transition bond charge
consistent
with market conditions and the terms of the BSCRO when
certified
by the Board's designee.
On September 17, 1999, your Honorable Board issued a BSCRO to
Petitioner
in Docket No. EF99060390 (the "Original Financing Order")
authorizing, among other things, the issuance and sale of up to
$2.525
billion
aggregate principal amount of
4
<PAGE>
Transition
Bonds by a special purpose financing subsidiary of
Petitioner, the sale of Bondable Transition Property and the
imposition
of a
non-bypassable Transition Bond Charge ("TBC"), the imposition of
a
Market
Transition Charge-Tax ("MTC-Tax"), a formula for the
calculation
and
adjustment of the TBC and the MTC-Tax. On January 31, 2001,
PSE&G
Transition
Funding LLC, a subsidiary of Petitioner, issued and sold
$2.525
billion of its Transition Bonds, Series 2001-1 (the "Original
Transition
Bond Transaction"). The terms and conditions approved by your
Honorable
Board in the Original Financing Order are substantially the
same to
those proposed herein.
For purposes of recovering its BGS Transition Costs incurred in
Year Four
("Year Four BGS Transition Costs") by Petitioner pursuant to
the
Restructuring Order and the BGS Cost Order to be issued in the
BGS
Deferral
Case, and pursuant to N.J.S.A. 48:3-62(a), N.J.S.A. 48:3-62(c)
and
N.J.S.A. 48:3-62(g), Petitioner hereby requests the Board to issue
a
BSCRO
authorizing Petitioner to securitize (the "BGS Transition Bond
Transaction") its Year Four BGS Transition Costs, including its net
of
tax Year
Four Deferred Balance incurred with respect to Year Four as
verified
by the Independent Auditor ); to impose a transition bond
charge
("BGS Transition Bond Charge" or "BGS TBC") related thereto;
and
to sell
Petitioner's right to receive the BGS TBC, together with
related
rights, to
a bankruptcy-remote, special purpose financing entity ("SPE")
to be
formed as a subsidiary of Petitioner for such purpose
substantially identical to the SPE authorized in the Original
Financing
Order.
Petitioner also requests approval of a formula ("Formula") for
the
calculation and adjustment of the BGS TBC and the MTC-Tax
related
thereto
substantially identical to the Formula authorized in the
Original
Financing Order which Formula is incorporated herein by
reference
thereto. A
5
<PAGE>
proposed
form of Financing Order, substantially in the form of the
Original
Financing Order will be separately provided to Board Staff by
Petitioner.
The Financing Order will provide, among other things, (i) for
the
imposition
of a non-bypassable TBC as provided in N.J.S.A. 48:3-64(a);
(ii) the
transfer of the BGS Bondable Transition Property (as defined
herein)
related to such TBC to an SPE; (iii) the issuance of transition
bonds
("BGS Transition Bonds") by the SPE up to $150 million
aggregate
principal
amount to recover such BGS Transition Costs, all as further
described
below, and (iv) a determination that the structure and pricing
of the BGS
Transition Bonds be conclusively deemed, as provided in
N.J.S.A
48:3-62(g), as assuring the lowest TBC consistent with market
conditions
and the terms of such BSCRO. In the same manner as authorized
in the
Original Financing Order, Petitioner requests authority to
impose
an MTC-Tax
to recover its Federal Income and State Corporate Business
Tax
associated with the collection of the BGS TBC until the related
BGS
Transition
Bonds and other BGS Transition Costs have been paid in full,
and to
adjust the MTC-Tax in the same manner and at the same time as
the
BGS TBC is
adjusted as described in this Petition.
The entire amount of the net proceeds of the BGS Transition
Bonds
received
by Petitioner shall be utilized by Petitioner to refinance or
retire its
outstanding debt or equity or both.
5. BGS TRANSITION BOND
TRANSACTION
a.
Proposed
Structure
A general
description of the BGS Transition Bond Transaction
structure
follows. The proposed structure is subject to modification
depending
upon the requirements of tax
6
<PAGE>
authorities, input from underwriters in connection with the
marketing of
the BGS
Transition Bonds, and negotiations with nationally recognized
statistical rating organizations (the "Rating Agencies") selected
by
Petitioner
to assign credit ratings to the BGS Transition Bonds. The
proposed
structure is intended to minimize debt service costs and
maximize
ratepayer savings by obtaining the best possible rating for the
BGS
Transition Bonds as asset-backed securities. In the same manner
as
the
Original Financing Transaction, the final structure of the
transaction, pricing and terms of the BGS Transition Bonds will
be
determined
by Petitioner at the time BGS Transition Bonds are priced and
approved
by a designee (the "Designee") of the Board as provided in the
Act and as
described herein.
The Petitioner requests in this current Petition the authority
to
recover
related BGS Transition Costs, including (1) the net amount of
its tax
Year Four Deferred Balance, as verified by the Independent
Auditor;
(2) the costs (currently estimated at $2.7 million) incurred to
issue
Transition Bonds (the "Upfront Transaction Costs"); (3)
principal
and
interest on the Transition Bonds, together with the costs of
paying,
refinancing, administering and servicing, credit enhancing,
overcollateralizing, the Transition Bonds ("Ongoing Transition
Bond
Costs");
and (4) taxes related to securitization, which reflect the
grossed up
revenue requirement associated with the net of tax stranded
costs
being securitized (the "Tax Component"), as more fully
described
herein.
Pursuant to the proposed Financing Order, and as authorized in
the
Original Financing Order, Petitioner requests authority to
recover
from the
proceeds of the BGS Transition Bonds, up to $150 million of its
BGS
Transition Costs, including its Upfront Transaction Costs. The
remaining
BGS Transition Costs, being the Ongoing Transition
7
<PAGE>
Bond
Costs, will be recovered through the assessment and collection
of
the BGS
Transition Bond Charge. In the same manner as authorized in the
Original
Financing Order the BGS Transition Bond Charge will be a
separate,
non-bypassable charge assessed and collected from all
customers
of Petitioner and/or any successor distribution company within
Petitioner's existing service territory as of the date of this
Petition,
except as
provided in N.J.S.A 48:3-77.
The principal asset to be used to support Transition Bonds is
the
BGS
Bondable Transition Property , a property right created under
the
Act, which
includes the irrevocable right to charge and collect
Transition
Bond Charges and to obtain periodic adjustments of such
Transition
Bond Charges, and all revenues, collections, payments, money
and
proceeds thereof. Pursuant to N.J.S.A. 48:3-65 the Financing
Order
and the
Transition Bond Charges are irrevocable upon the Financing
Order
becoming
effective under the Act, and the Financing Order cannot be
rescinded,
altered, repealed, modified or amended by the Board or any
other
governmental entity, nor can it be impaired by the State of New
Jersey, as
provided in N.J.S.A. 48:3-66.
In the same manner as provided in the Original Financing Order
to
implement
the BGS Transition Bond Transaction, Petitioner will form a
new
non-utility, special-purpose bankruptcy-remote entity ("SPE") to
be
wholly-owned by Petitioner, and will provide the capitalization for
such
SPE.
Petitioner will sell the Bondable Transition Property to the SPE
in
the BGS
Transition Bond Transaction which, in accordance with the Act,
will be a
legal true sale and absolute transfer to the SPE. The SPE will
constitute
a financing entity for purposes of the Act. Board approval of
the SPE
and the BGS Transition Bond
8
<PAGE>
Transaction will constitute a finding that the SPE's activities
will not
violate
any affiliate relation standards currently in effect or that
the
Board may
adopt in the future.
In the same manner as provided in the Original Financing Order
to
raise the
funds to pay to Petitioner the purchase price of the BGS
Bondable
Transition Property, the SPE will issue and sell BGS Transition
Bonds. The
SPE will issue the BGS Transition Bonds in the form of
asset-backed securities ("ABS") and sell the securities in a
negotiated,
fully
underwritten public or private offering. All prior
securitizations
of utility
stranded costs or BGS Transition Costs in New Jersey,
including the Original Transition
Bond Transaction approved by your
Honorable
Board in the Original Financing Order, have been or are
proposed
to be structured as ABS and sold on a negotiated basis. To the
extent
that it may be more cost-effective to structure the BGS
Transition
Bond Transaction as a private offering under Rule 144A of the
Securities
and Exchange Commission, Petitioner will do so. The expertise
of an
underwriter is critical to the structuring, pricing and
marketing
of
securities in the ABS market. For such purpose, Petitioner has
engaged
Citigroup Global Markets, Inc. As in the Original Transition
Bond
Transaction, Petitioner continues to believe that a negotiated
sale
will
assure that the Transition Bonds will receive the highest
possible
rating and
will obtain the lowest possible interest and transaction
costs,
ensuring compliance with the requirements of the Act that
Petitioner's customers pay the lowest transition bond charges
consistent
with
market conditions at time of pricing.
In the same manner as provided in the Original Financing Order,
all of the
assets of the SPE, including, without limitation, the BGS
Bondable
Transition Property and the other collateral of the SPE (the
"Other SPE
Collateral"), will be pledged as collateral to
9
<PAGE>
secure the
BGS Transition Bonds. The Other SPE Collateral will include,
without
limitation: (1) the rights of the SPE under the BGS Transition
Bond
Transaction documents, including the purchase agreement by
which
each SPE
acquires the Bondable Transition Property; (2) a servicing
agreement
by which Petitioner or any successor Servicer acts as servicer
of the
Bondable Transition Property; (3) an administration agreement
by
which the
SPE will be administered; (4) various trust accounts of the
SPE into
which the proceeds of BGS TBC, together with the pledged funds
of the
SPE, will be deposited; (5) any investment earnings on amounts
held by
the Bond Trustee; and (6) the equity capital of the SPE.
While the Board is requested to approve BGS Transition Bonds
with
scheduled
amortization upon issuance not exceeding 15 years in
accordance
with N.J.S.A.48: 3-62(d)(3), and with a final legal maturity
of up to
17 years in order to minimize overcollateralization
requirements and to enhance the prospects of securing the
highest
possible
credit rating for the BGS Transition Bonds, Petitioner expects
that the
actual amortization schedule upon issuance and final legal
maturity
of the BGS Transition Bonds will not exceed that of the
Transition
Bonds issued pursuant to the Original Financing Order in the
Original
Transition Bond Transaction. These objectives should result in
lower
interest costs and thus benefit to ratepayers.
In the same manner as provided in the Original Financing Order,
Petitioner
requests that the duration of the MTC-Tax be identical to the
duration
of the Transition Bond Charge. The following schematic
illustrates the proposed transaction:
10
<PAGE>
<TABLE>
<CAPTION>
<S>
<C>
<C>
PARTIES TO TRANSACTION
Sale of BGS Transition
Bonds for cash, pursuant to
-----------------
----------------------------- Underwriting Agreement
|
|
|
SPE
|
-----------------
| PSE&G
|<---------------------------->| PSE&G Securitization
|<--------------------------->|
|
|
| Sale of
rights to BGS | Limited
Liability Company |
| UNDERWRITERS |
|
| Bondable Transition Property | Sole Member, PSE&G
|-----------|
|----------|
|
----------------- for net proceeds
of |
|
| |
-----------------
Transition Bonds
-----------------------------
| |
^
| |
|
|
|
| | Parties to Indenture
|
|
|
----------------- Servicing BGS Bondable
| | governing issuance of
|
|
| Sale
of BGS
|
| Transition Property for servicing | | BGS Transition Bonds;
|
|
| Transition
Bonds for
| SERVICER | fee, pursuant to
Servicing |
| BGS Transition Bonds
|
|
|
cash
| PSE&G |
Agreement
| | secured by
BGS
| |
v
|
|------------------------------------- | Bondable Transition
|
|
-----------------
-----------------
| Property and
Other SPE | |
|
|
|
Collateral
| |
| INVESTORS
|
Administration of SPE for
|
| |
|
|
Administration Fee, pursuant to |
| |
-----------------
-----------------
Administration Agreement
|
-----------------
|
|
|
|
|
| ADMINISTRATOR
|----------------------------------------
|
BOND |
| PSE&G
|
| TRUSTEE
|
|
|
|
|
-----------------
-----------------
</TABLE>
11
<PAGE>
b.
Recovery
of Upfront BGS
Transaction Costs
In the same manner as the Original Financing Transaction, in
order
to issue BGS Transition
Bonds and to produce benefit for its customers,
Petitioner
will incur Upfront Transaction Costs related to the issuance
of BGS
Transition Bonds. Based on the current estimated initial
offering
of $150
million of Transition Bonds, Petitioner currently estimates
that
such
amount will include Upfront Transaction Costs of approximately
$2.5
million
which may vary, in part, based on the factors described below.
Upfront
Transaction Costs of issuing BGS Transition Bonds will include,
among
other items, the underwriting spread, rating agency fees,
accounting
fees, any Securities and Exchange Commission registration
fees
printing and marketing expenses, trustees' fees, legal fees,
the
servicing set-up fee
and the administrative cost of forming the SPE.
In the same manner as provided in the Original Financing
Transaction, the Petitioner requests authority to recover the
Upfront
Transaction Costs from the proceeds of the sale of the BGS
Transition
Bonds and
to include such costs as BGS Transition Costs, the right to
recover
such amounts to constitute a portion of the Bondable Transition
Property.
To the extent prior payment is required, such costs will be
paid by
Petitioner and reimbursed from the proceeds of the BGS
Transition
Bonds.
c.
Ongoing
BGS Transition Bond Costs
Petitioner requests recovery of the Ongoing Transition Bond
Costs
through
the BGS TBC. The primary Ongoing Transition Bond Costs are the
principal
and interest on the BGS Transition Bonds. Other Ongoing
Transition
12
<PAGE>
Bond Costs
include principally the servicing fee (the "Servicing Fee")
paid to
Petitioner, as the Servicer (as defined below) and the ongoing
cost of
credit enhancement and overcollateralization.
In the same manner as provided in the Original Financing Order,
it
is
anticipated that there will be a small amount of additional
Ongoing
Transition
Bond Costs associated with the BGS Transition Bond
Transaction, such as an administration fee, legal and accounting
fees,
directors
or managers' fees, rating agency fees, trustee fees and other
costs of
operating the SPE. These Costs are BGS Transition Costs and
will be
recovered through the BGS TBC in accordance with the Act, and
the right
to recover these costs as BGS Transition Costs will be
included
as a portion of the BGS Bondable Transition Property.
d.
Approval
of Final Terms and Conditions: BGS Transition Bond
Transaction
In the same manner as provided in the Original Financing Order,
upon the
pricing of the BGS Transition Bonds, the Board's Designee under
the Act
will file with the Board a certificate to the effect that the
structure
and pricing of the BGS Transition Bonds assures that
Petitioner's customers pay the lowest BGS TBC consistent with
market
conditions
and the terms of the Financing Order, and approving the terms
and
conditions of the BGS Transition Bonds, including scheduled
amortization up to 15 years and final legal maturities of up to
17
years, as
required to obtain the highest possible credit ratings.
Payments
on the BGS Transition Bonds will be semi-annual or quarterly,
depending
upon input from rating agencies, tax considerations and market
conditions
at the time of the
13
<PAGE>
pricing of
BGS Transition Bonds. Debt service on the BGS Transition
Bonds will
be scheduled upon issuance so that the sum, for each annual
period, of
the Period Payment Requirement (as defined below) and the
associated
MTC-Tax collections will be substantially equal. So long as
the
structure, pricing, terms and conditions meet such parameters,
Petitioner
will be authorized under the Financing Order to undertake the
BGS
Transition Bond Transaction.
In the same manner as provided in the Original Financing Order,
if
the
structure, pricing, terms and conditions meet the requirements
discussed
above, the Company will be authorized under the Financing
Order to undertake the
BGS Transition Bond Transaction. Prior to the
pricing of
the BGS Transition Bonds, the Designee may obtain from the
Board's
financial advisors recent secondary market trading levels of
existing
utility stranded cost securitization bonds, to the extent such
is
available through public sources. To the extent such information
is
available,
it is anticipated that such information may, in part, be
considered
in connection with the pricing of the Transition Bonds. The
Designee
may also conduct conference calls and meetings with the Board's
financial
advisors to discuss the background of the ABS market, current
market
conditions, investor perception of recent utility stranded cost
securitization bond issues,
pricing levels of ABS and recent secondary
market
trading levels, to the extent available. Finally, the Designee
may elect
to be present at pricing, either in person or by telephone.
In the same manner as provided in the Original Financing Order,
not later
than five business days after the issuance and sale of the BGS
Transition
Bonds,
14
<PAGE>
Petitioner
will be required to confirm to the Board, in an ("Issuance
Advice
Letter"), the actual interest rates on the BGS Transition
Bonds,
the
expected principal amortization schedule (the "Expected
Amortization
Schedule")
and the initial BGS Transition Bond Charge and MTC-Tax, which
will be
calculated in accordance with the Formula. The Issuance Advice
Letter
will also include a calculation of the benefit to Petitioner's
Customers
from the issuance of the BGS Transition Bonds as provided in
N.J.S.A.
48:3-62 (c) (3) using the methodology employed in Exhibit A
attached
hereto applied to the actual structure and terms of the
Transition
Bonds. The initial BGS Transition Bond Charge and MTC-Tax
shall
become effective immediately when the Issuance Advice Letter is
filed,
without further action by the Board.
e.
BGS
Transition Bond Charge
In the same manner as provided in the Original Financing Order,
when the
BGS Transition Bond Transaction is completed upon the issuance
of the BGS
Transition Bonds, Petitioner will impose the BGS TBC upon its
ratepayers. While the new BGS TBC will be separate Bondable
Transition
Property
and for purposes of Petitioner's tariff, separate and distinct
from the
Transition Bond Charge ("Original TBC")that the Board
authorized
in the Original Financing Order and that has been imposed
upon
ratepayers as a result of the Original Transition Bond
Transaction,
the
Original TBC and the BGS TBC will be combined for customer
billing
and
administration, provided that such amounts are separately
recorded
on the
books of Petitioner pending payment to the Trustee.
15
<PAGE>
In the same manner as provided in the Original Financing Order,
BGS TBC
will be set by the Formula, from time to time, at a level
intended
to recover the sum of the Ongoing Transition Bond Costs,
including,
without limitation: (i) the principal of (in accordance with
the
Expected Amortization Schedule approved by the Designee at the
time
of pricing
of the BGS Transition Bonds), and interest on, BGS Transition
Bonds
authorized by the Board in the Financing Order; (ii) the costs
of
operating
and administering the SPE; (iii) the costs of servicing the
BGS
Transition Bonds, including servicing and trustee fees, expenses
and
indemnities; (iv) amounts required to fund or replenish the
overcollateralization account in accordance with
overcollateralization
schedule
approved at pricing of the BGS Transition Bonds, including the
reimbursement of any amounts drawn from the capital account, and
(v) the
ongoing
expenses of any other credit enhancement ag
