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U.S. Code as of:
01/19/04
Section 79z-5c. Exempt telecommunications companies
(a) Definitions
For purposes of this section -
(1) Exempt telecommunications company
The term "exempt telecommunications company" means any person
determined by the Federal Communications Commission to be engaged
directly or indirectly, wherever located, through one or more
affiliates (as defined in section 79b(a)(11)(B) of this title),
and exclusively in the business of providing -
(A) telecommunications services;
(B) information services;
(C) other services or products subject to the jurisdiction of
the Federal Communications Commission; or
(D) products or services that are related or incidental to
the provision of a product or service described in subparagraph
(A), (B), or (C).
No person shall be deemed to be an exempt telecommunications
company under this section unless such person has applied to the
Federal Communications Commission for a determination under this
paragraph. A person applying in good faith for such a
determination shall be deemed an exempt telecommunications
company under this section, with all of the exemptions provided
by this section, until the Federal Communications Commission
makes such determination. The Federal Communications Commission
shall make such determination within 60 days of its receipt of
any such application filed after February 8, 1996, and shall
notify the Commission whenever a determination is made under this
paragraph that any person is an exempt telecommunications
company. Not later than 12 months after February 8, 1996, the
Federal Communications Commission shall promulgate rules
implementing the provisions of this paragraph which shall be
applicable to applications filed under this paragraph after the
effective date of such rules.
(2) Other terms
For purposes of this section, the terms "telecommunications
services" and "information services" shall have the same meanings
as provided in the Communications Act of 1934 [47 U.S.C. 151 et
seq.].
(b) State consent for sale of existing rate-based facilities
If a rate or charge for the sale of electric energy or natural
gas (other than any portion of a rate or charge which represents
recovery of the cost of a wholesale rate or charge) for, or in
connection with, assets of a public utility company that is an
associate company or affiliate of a registered holding company was
in effect under the laws of any State as of December 19, 1995, the
public utility company owning such assets may not sell such assets
to an exempt telecommunications company that is an associate
company or affiliate unless State commissions having jurisdiction
over such public utility company approve such sale. Nothing in this
subsection shall preempt the otherwise applicable authority of any
State to approve or disapprove the sale of such assets. The
approval of the Commission under this chapter shall not be required
for the sale of assets as provided in this subsection.
(c) Ownership of ETCS by exempt holding companies
Notwithstanding any provision of this chapter, a holding company
that is exempt under section 79c of this title shall be permitted,
without condition or limitation under this chapter, to acquire and
maintain an interest in the business of one or more exempt
telecommunications companies.
(d) Ownership of ETCS by registered holding companies
Notwithstanding any provision of this chapter, a registered
holding company shall be permitted (without the need to apply for,
or receive, approval from the Commission, and otherwise without
condition under this chapter) to acquire and hold the securities,
or an interest in the business, of one or more exempt
telecommunications companies.
(e) Financing and other relationships between ETCS and registered
holding companies
The relationship between an exempt telecommunications company and
a registered holding company, its affiliates and associate
companies, shall remain subject to the jurisdiction of the
Commission under this chapter: Provided, That -
(1) section 79k of this title shall not prohibit the ownership
of an interest in the business of one or more exempt
telecommunications companies by a registered holding company
(regardless of activities engaged in or where facilities owned or
operated by such exempt telecommunications companies are
located), and such ownership by a registered holding company
shall be deemed consistent with the operation of an integrated
public utility system;
(2) the ownership of an interest in the business of one or more
exempt telecommunications companies by a registered holding
company (regardless of activities engaged in or where facilities
owned or operated by such exempt telecommunications companies are
located) shall be considered as reasonably incidental, or
economically necessary or appropriate, to the operations of an
integrated public utility system;
(3) the Commission shall have no jurisdiction under this
chapter over, and there shall be no restriction or approval
required under this chapter with respect to (A) the issue or sale
of a security by a registered holding company for purposes of
financing the acquisition of an exempt telecommunications
company, or (B) the guarantee of a security of an exempt
telecommunications company by a registered holding company; and
(4) except for costs that should be fairly and equitably
allocated among companies that are associate companies of a
registered holding company, the Commission shall have no
jurisdiction under this chapter over the sales, service, and
construction contracts between an exempt telecommunications
company and a registered holding company, its affiliates and
associate companies.
(f) Reporting obligations concerning investments and activities of
registered public-utility holding company systems
(1) Obligations to report information
Any registered holding company or subsidiary thereof that
acquires or holds the securities, or an interest in the business,
of an exempt telecommunications company shall file with the
Commission such information as the Commission, by rule, may
prescribe concerning -
(A) investments and activities by the registered holding
company, or any subsidiary thereof, with respect to exempt
telecommunications companies, and
(B) any activities of an exempt telecommunications company
within the holding company system,
that are reasonably likely to have a material impact on the
financial or operational condition of the holding company system.
(2) Authority to require additional information
If, based on reports provided to the Commission pursuant to
paragraph (1) of this subsection or other available information,
the Commission reasonably concludes that it has concerns
regarding the financial or operational condition of any
registered holding company or any subsidiary thereof (including
an exempt telecommunications company), the Commission may require
such registered holding company to make additional reports and
provide additional information.
(3) Authority to limit disclosure of information
Notwithstanding any other provision of law, the Commission
shall not be compelled to disclose any information required to be
reported under this subsection. Nothing in this subsection shall
authorize the Commission to withhold the information from
Congress, or prevent the Commission from complying with a request
for information from any other Federal or State department or
agency requesting the information for purposes within the scope
of its jurisdiction. For purposes of section 552 of title 5, this
subsection shall be considered a statute described in subsection
(b)(3)(B) of such section 552.
(g) Assumption of liabilities
Any public utility company that is an associate company, or an
affiliate, of a registered holding company and that is subject to
the jurisdiction of a State commission with respect to its retail
electric or gas rates shall not issue any security for the purpose
of financing the acquisition, ownership, or operation of an exempt
telecommunications company. Any public utility company that is an
associate company, or an affiliate, of a registered holding company
and that is subject to the jurisdiction of a State commission with
respect to its retail electric or gas rates shall not assume any
obligation or liability as guarantor, endorser, surety, or
otherwise by the public utility company in respect of any security
of an exempt telecommunications company.
(h) Pledging or mortgaging of assets
Any public utility company that is an associate company, or
affiliate, of a registered holding company and that is subject to
the jurisdiction of a State commission with respect to its retail
electric or gas rates shall not pledge, mortgage, or otherwise use
as collateral any assets of the public utility company or assets of
any subsidiary company thereof for the benefit of an exempt
telecommunications company.
(i) Protection against abusive affiliate transactions
A public utility company may enter into a contract to purchase
services or products described in subsection (a)(1) of this section
from an exempt telecommunications company that is an affiliate or
associate company of the public utility company only if -
(1) every State commission having jurisdiction over the retail
rates of such public utility company approves such contract; or
(2) such public utility company is not subject to State
commission retail rate regulation and the purchased services or
products -
(A) would not be resold to any affiliate or associate
company; or
(B) would be resold to an affiliate or associate company and
every State commission having jurisdiction over the retail
rates of such affiliate or associate company makes the
determination required by subparagraph (A).
The requirements of this subsection shall not apply in any case in
which the State or the State commission concerned publishes a
notice that the State or State commission waives its authority
under this subsection.
(j) Nonpreemption of rate authority
Nothing in this chapter shall preclude the Federal Energy
Regulatory Commission or a State commission from exercising its
jurisdiction under otherwise applicable law to determine whether a
public utility company may recover in rates the costs of products
or services purchased from or sold to an associate company or
affiliate that is an exempt telecommunications company, regardless
of whether such costs are incurred through the direct or indirect
purchase or sale of products or services from such associate
company or affiliate.
(k) Reciprocal arrangements prohibited
Reciprocal arrangements among companies that are not affiliates
or associate companies of each other that are entered into in order
to avoid the provisions of this section are prohibited.
(l) Books and records
(1) Upon written order of a State commission, a State commission
may examine the books, accounts, memoranda, contracts, and records
of -
(A) a public utility company subject to its regulatory
authority under State law;
(B) any exempt telecommunications company selling products or
services to such public utility company or to an associate
company of such public utility company; and
(C) any associate company or affiliate of an exempt
telecommunications company which sells products or services to a
public utility company referred to in subparagraph (A),
wherever located, if such examination is required for the effective
discharge of the State commission's regulatory responsibilities
affecting the provision of electric or gas service in connection
with the activities of such exempt telecommunications company.
(2) Where a State commission issues an order pursuant to
paragraph (1), the State commission shall not publicly disclose
trade secrets or sensitive commercial information.
(3) Any United States district court located in the State in
which the State commission referred to in paragraph (1) is located
shall have jurisdiction to enforce compliance with this subsection.
(4) Nothing in this section shall -
(A) preempt applicable State law concerning the provision of
records and other information; or
(B) in any way limit rights to obtain records and other
information under Federal law, contracts, or otherwise.
(m) Independent audit authority for State commissions
(1) State may order audit
Any State commission with jurisdiction over a public utility
company that -
(A) is an associate company of a registered holding company;
and
(B) transacts business, directly or indirectly, with a
subsidiary company, an affiliate or an associate company that
is an exempt telecommunications company,
may order an independent audit to be performed, no more
frequently than on an annual basis, of all matters deemed
relevant by the selected auditor that reasonably relate to retail
rates: Provided, That such matters relate, directly or
indirectly, to transactions or transfers between the public
utility company subject to its jurisdiction and such exempt
telecommunications company.
(2) Selection of firm to conduct audit
(A) If a State commission orders an audit in accordance with
paragraph (1), the public utility company and the State
commission shall jointly select, within 60 days, a firm to
perform the audit. The firm selected to perform the audit shall
possess demonstrated qualifications relating to -
(i) competency, including adequate technical training and
professional proficiency in each discipline necessary to carry
out the audit; and
(ii) independence and objectivity, including that the firm be
free from personal or external impairments to independence, and
should assume an independent position with the State commission
and auditee, making certain that the audit is based upon an
impartial consideration of all pertinent facts and responsible
opinions.
(B) The public utility company and the exempt
telecommunications company shall cooperate fully with all
reasonable requests necessary to perform the audit and the public
utility company shall bear all costs of having the audit
performed.
(3) Availability of auditor's report
The auditor's report shall be provided to the State commission
not later than 6 months after the selection of the auditor, and
provided to the public utility company not later than 60 days
thereafter.
(n) Applicability of telecommunications regulation
Nothing in this section shall affect the authority of the Federal
Communications Commission under the Communications Act of 1934 [47
U.S.C. 151 et seq.], or the authority of State commissions under
State laws concerning the provision of telecommunications services,
to regulate the activities of an exempt telecommunications company.
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