Section 407-720-4 - External Funding RequiredA. General. In order to meet future OPEB payment obligations, each utility must establish and make contributions to an independent external trust fund.B. External Fund Requirements. The following requirements shall apply when a utility chooses to use an external funding vehicle for its OPEB obligations: i The utility is required to maximize its use of tax-advantaged funding structures to the fullest extent permitted by law, unless a waiver is granted by the Commission.ii Unless prohibited by IRS tax codes, when current tax deductions are not available for some portion of currently funded amounts, deferred income tax accounting must be followed for the tax effects of such transactions.iii The trustee of the external fund must be independent of the utility and shall be authorized to make only those investments which are consistent with sound investment policies for funds of this nature.iv Funding must occur at least annually, but may occur at more frequent intervals if the utility determines that to be more cost-effective over the life of the plan.v No contributions shall be required to be made to the trust fund when the value of the assets in the fund exceed the net present value of the OPEB obligation.vi Should a utility realize a gain or loss on the settlement or curtailment of an OPEB obligation, it must seek and receive express Commission approval before any accounting entry is made with respect to the gain or loss, or before any disposition is made of the funds in the trust.vii To the extent permitted by law and by the terms of the external trust, refunds to customers, pursuant to a Commission approved plan, may be required in the event that the funds are not needed to pay future OPEB obligations to retirees.C. Internal Funding Requirements A utility may seek a waiver from the Commission that permits the utility to internally fund all or a portion of its OPEB-related costs. The Commission will approve such waiver if:
1 The Commission determines that substantial evidence exists that indicates that internal-funding is the least-cost option for the utility; or,2 The Commission determines that special circumstances exist that make it appropriate for the utility to internally fund. These special circumstances may include, but are not limited to, the following factors: a) The relatively small size of the utility's SFAS 106 funds and accruals; b) The utility's relationship with larger affiliates who do not externally fund; c) The utility's employee demographics and union status; d) Administrative costs; and e) The limited availability of external funding vehicles.65- 407 C.M.R. ch. 720, § 4