Bill Text: HI SB2922 | 2024 | Regular Session | Amended
Bill Title: Relating To Public Utilities.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2024-04-26 - Received notice of change in Senate conferees (Sen. Com. No. 790). [SB2922 Detail]
Download: Hawaii-2024-SB2922-Amended.html
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THE SENATE |
S.B. NO. |
2922 |
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THIRTY-SECOND LEGISLATURE, 2024 |
S.D. 2 |
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STATE OF HAWAII |
H.D. 3 |
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A BILL FOR AN ACT
RELATING TO PUBLIC UTILITIES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the risk of catastrophic wildfires has increased, making it imperative that electric utilities develop, implement, and administer effective plans for wildfire risk mitigation. Electric utilities should develop, implement, and administer wildfire protection plans, and, through a public process, the public utilities commission should review and approve such plans.
The legislature also finds that a resilience working group, convened throughout 2019 and 2020, sought to identify and prioritize resilience threat scenarios and potential grid impacts; identify key customer and infrastructure sector capabilities and needs following a severe event and loss of power; identify gaps and priorities in grid and customer capabilities following a severe event and loss of power; provide recommendations and inputs for investor-owned utility grid planning to address resilience needs; and recommend additional grid and customer actions to close gaps and capabilities following severe events. The resilience working group identified wildfires as one of five types of severe events of utmost importance to consider for achieving a resilient grid and provided resilience options for utilities to consider.
The legislature further finds that securitization may be the most efficient, least costly way to finance wildfire risk mitigation costs and expenses. Utility rate securitization transactions have an extensive track record of success. Bonds securitized by rates receive investment grade credit ratings from credit rating agencies and thus provide a means of securing capital at a lower interest rate than those currently available to utilities, in particular utilities without an investment grade credit rating.
The purpose of this Act is to:
(1) Create a process whereby electric utilities develop and submit effective risk-based wildfire protection plans to the public utilities commission for approval and the commission evaluates those plans and either approves them or does so with modifications;
(2) Create a process whereby electric utilities are able to timely recover the prudently incurred costs and expenses of developing, implementing, and administering wildfire protection plans and ensure those costs and expenses are not borne disproportionately by any particular consumer or county; and
(3) Require public utilities to report wildfires caused by or occurring in connection with their operations.
SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:
"PART . WILDFIRE PROTECTION AND MITIGATION
§269-A Definitions. As used in this part:
"Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the recovery bonds or to mitigate the risk of an increase in interest rates.
"Assignee" means a legally recognized entity:
(1) To which an electric utility assigns, sells, or transfers, other than as security, all or a portion of the electric utility's interest in or right to wildfire protection property; or
(2) Who acquires, by way of assignment or otherwise, all or a portion of the wildfire protection property following the exercise of remedies upon a default.
"Assignee" includes a corporation, limited liability company, general partnership or limited partnership, public authority, trust, financing entity, or any other legal entity to which an assignee assigns, sells, or transfers, other than as security, its interest in or right to wildfire protection property.
"Bond" means any bond, note, certificate of participation or beneficial interest, or other evidence of indebtedness or ownership that is issued by the financing entity under a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance financing costs of any wildfire protection costs, and that are directly or indirectly secured by or payable from wildfire protection property.
"Catastrophic wildfire" means any wildfire in the State that damaged or destroyed more than five hundred residential or commercial structures.
"Commission" means the public utilities commission.
"Consumer" means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electric utility, or any other party.
"Electric utility" means an electric utility company that is engaged in the production, transmission, or distribution of electricity.
"Financing costs" means the costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the commission in a financing order. "Financing costs" may include any of the following:
(1) Principal, interest, and redemption premiums that are payable on bonds;
(2) A payment required under an ancillary agreement;
(3) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;
(4) Taxes, franchise fees, or license fees imposed on the wildfire protection charge, or otherwise resulting from the collection of the wildfire protection charge, in any such case whether paid, payable, or accrued;
(5) Costs related to issuing and servicing bonds or the application for a financing order, including without limitation servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order; and
(6) Other costs as specifically authorized by a financing order.
For purposes of this definition and subject to section 269-G(c), an entity to which an electric utility sells, assigns, or pledges all or a portion of the electric utility's interest in recovery property may include any governmental entity that is able to issue recovery bonds that are exempt from federal tax pursuant to section 103 of the Internal Revenue Code of 1986, as amended, including the State or a political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision; provided that the recovery bonds issued shall not constitute a general obligation of the State or any political subdivision thereof or any department, agency, or instrumentality of the State or political subdivision and shall not constitute a pledge of the full faith and credit of the entity or of the State or any political subdivision thereof, but shall be payable solely from the funds provided under this part.
"Financing party" means any holder of recovery bonds, any party to or beneficiary of an ancillary agreement, and any trustee, collateral agent, or other person acting for the benefit of any of the foregoing.
"Fixed recovery tax amounts" means those nonbypassable rates and other charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state taxes associated with wildfire protection charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of bonds.
"Governmental financing entity" means the State or a political subdivision thereof or any department, agency, or instrumentality of the State or a political subdivision to which an electric utility has assigned or pledged its interest in wildfire protection property as security for the payment of debt service on bonds, and related administrative costs and funding of reserves, issued by the governmental financing entity; provided that the bonds issued by the governmental financing entity shall not constitute a general obligation of the entity or of the State or any political subdivision of the State and shall not constitute a pledge of the full faith and credit of the governmental financing entity or of the State or any political subdivision of the State, but shall be payable solely from the funds provided under this part.
"True-up adjustment" means a formulaic adjustment to the wildfire protection charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the wildfire protection charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of wildfire protection costs over the authorized repayment term.
"Wildfire protection charge" means the nonbypassable fees and charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are authorized by section 269-E and in a financing order authorized under this part to be imposed on and collected from all existing and future consumers of a financing entity or any successor to recover both of the following:
(1) Financing costs specified in the financing order; and
(2) The costs of recovering, financing, or refinancing wildfire protection costs through a wildfire protection plan approved by the commission in the financing order, including the costs of servicing and retiring bonds.
"Wildfire protection costs" means any capital costs and operation and maintenance expenses related to the development, implementation, and administration of a wildfire protection plan prepared pursuant to section 269-C. "Wildfire protection costs" does not include any penalties levied against an electric utility pursuant to section 269-D. "Wildfire protection costs" may also include any of the following:
(1) Catastrophic wildfire costs or expenses authorized by the commission in a financing order for recovery;
(2) Federal and state taxes associated with recovery of the amounts pursuant to paragraph (1);
(3) Financing costs; and
(4) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electric utility in using proceeds of bonds to acquire outstanding securities of the electric utility, as authorized by the commission in a financing order.
"Wildfire protection plan" means the risk-based wildfire protection plan mandated by section 269-C and approved by the commission.
"Wildfire protection property" means the property right created pursuant to this part, including without limitation the right, title, and interest of the electric utility, financing entity, or its assignee:
(1) In and to the wildfire protection charge established pursuant to a financing order, including the right to impose, bill, collect, and receive such fixed recovery charges under the financing order and all rights to obtain adjustments to the wildfire protection charge in accordance with section 269-E and the financing order; and
(2) To be paid the amount that is determined in a financing order to be the amount that the electric utility or its assignee is lawfully entitled to receive pursuant to this part and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire protection charge that is the subject of a financing order.
"Wildfire protection property" does not include a right to be paid fixed recovery tax amounts. "Wildfire protection property" shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the electric utility, the electric utility performing certain services.
§269-B Electric utility workshops. The commission may periodically convene workshops to help electric utilities develop and share information for the identification, adoption, and implementation of best practices regarding wildfires, including but not limited to risk-based wildfire protection and risk-based wildfire mitigation procedures and standards.
§269-C Wildfire protection plans. (a) Each electric utility shall have and operate in compliance with a risk-based wildfire protection plan, which shall be filed with and evaluated by the commission. The wildfire protection plan shall be based on reasonable and prudent practices, which may be identified through workshops convened by the commission pursuant to section 269-B, regulatory proceedings conducted by the commission, and commission standards adopted by rule or order. The electric utility shall design the wildfire protection plan to protect public safety, reduce risk to electric utility customers, and promote resilience of the Hawaii electric system to wildfire damage. Each electric utility's wildfire protection plan shall, at a minimum:
(1) Account for the responsibilities of persons responsible for executing the wildfire protection plan;
(2) Describe the objectives of the wildfire protection plan;
(3) Identify areas that are subject to a heightened risk of wildfire and are:
(A) Within the right of way or legal control or ownership of the electric utility; and
(B) Outside the right of way or legal control or ownership of the electric utility but within a reasonable distance, as determined by the commission, of the electric utility's generation or transmission assets;
(4) Identify a means for mitigating wildfire risk that reflects a reasonable balancing of mitigation costs, continuity of reliable service, and reduction of wildfire risk;
(5) Identify preventive actions and programs that the electric utility shall carry out to minimize the risk of electric utility facilities causing wildfires;
(6) Identify the metrics the electric utility intends to use to evaluate the wildfire protection plan's performance and the assumptions that underlie the use of those metrics;
(7) Describe how the application of previously identified metrics to previous wildfire protection plan performances has informed the wildfire protection plan;
(8) After seeking information from state and local entities, identify a protocol for the deenergizing of power lines and adjusting of power system operations to mitigate wildfires, promote the safety of the public and first responders, and preserve health and telecommunications infrastructure;
(9) Describe appropriate and feasible procedures for notifying a customer who may be impacted by the deenergizing of power lines. The procedures shall consider the need to notify, as a priority, critical first responders, health care facilities, operators of wastewater and water delivery infrastructure, and operators of telecommunications infrastructure;
(10) Describe the procedures, standards, and time frames that the electric utility shall use to inspect electric utility infrastructure in areas that the electric utility identifies under paragraph (3), including whether those procedures, standards, and time frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;
(11) Describe the procedures, standards, and time frames that the electric utility will use to carry out vegetation management in areas that the electric utility identifies under paragraph (3), including whether those procedures, standards, and time frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;
(12) Include a list that identifies, describes, and prioritizes wildfire risks, and drivers for those risks, throughout the electric utility's service territory, including all relevant risk and risk mitigation information as may be required by guidance or rules adopted by the commission;
(13) Describe how the wildfire protection plan accounts for risks the electric utility identifies under paragraph (12);
(14) Include a showing that the electric utility has an adequately sized and trained workforce to promptly restore service after a wildfire, taking into account employees of other utilities pursuant to mutual aid agreements and employees of entities that have entered into contracts with the electric utility;
(15) Identify the estimated development, implementation, and administration costs for the wildfire protection plan;
(16) Identify the timelines, as applicable, for development, implementation, and administration of any aspects of the wildfire protection plan;
(17) Describe how the wildfire protection plan is consistent with the electric utility's other hazard mitigation and grid hardening plans, including plans to prepare for, and to restore service after, a wildfire, including workforce mobilization and prepositioning equipment and employees;
(18) Identify community outreach and public awareness efforts that the electric utility will use before, during, and after a wildfire;
(19) Describe the processes and procedures the electric utility will use to do all of the following:
(A) Monitor and audit the implementation of the wildfire protection plan;
(B) Monitor the effectiveness of the wildfire protection plan and the wildfire protection plan's implementation and identify areas for improvement; and
(C) Monitor and audit the effectiveness of electrical line and equipment inspections, including inspections performed by contractors, carried out under the wildfire protection plan and other applicable statutes and rules of the commission;
(20) Demonstrate elements of data governance, including enterprise systems, as may be required by guidance or rules adopted by the commission;
(21) Include any modifications to paragraphs (1) to (20); and
(22) Other information as required by the commission.
(b) Each electric utility shall regularly update its wildfire protection plan on a schedule determined by the commission.
(c) To develop the wildfire protection plan, the electric utility may consult with and consider information from federal, state, local, and other expert entities.
(d) The commission, in consultation with the department of land and natural resources, Hawaii emergency management agency, and local emergency services agencies, shall evaluate each electric utility's wildfire protection plan and plan updates through a public process.
(e) No more than ninety days after the last party filing, and no more than a total of one hundred eighty days after the initial filing in the docket or non-docketed case related to the commission's evaluation of a wildfire protection plan or plan update from an electric utility, the commission shall approve or approve with conditions the wildfire protection plan or plan update if the commission finds that the wildfire protection plan or plan update is based on reasonable and prudent practices and designed to meet all applicable rules and standards adopted by the commission. The commission may, in approving the wildfire protection plan or plan update with conditions, direct the electric utility to make modifications to the wildfire protection plan or plan update that the commission believes represent a reasonable balancing of mitigation costs with the resulting reduction of wildfire risk based on the information provided by the electric utility and based on best practices. The commission shall issue a decision explaining any such directed modifications at the time the commission approves the wildfire protection plan or plan update. Such decision shall include a determination of the reasonable costs to develop, implement and administer the wildfire protection plan or plan update. The commission shall establish a mechanism to allow timely and prompt recovery of such costs in rates, which shall be incremental to the rates the electric utility is otherwise authorized to charge.
(f) The electric utility shall track the costs that it actually incurs to develop, implement, and administer the wildfire protection plan. In the electric utility's wildfire protection plan update, the electric utility shall report on the costs as actually incurred for the most recent past period for which the information is available.
If the actual costs are less than the amounts that the commission determined were reasonable in its decision under subsection (e), the commission shall direct the electric utility to refund or credit the costs to ratepayers.
If the actual costs are equal to or greater than the amounts that the commission determined were reasonable in its decision under subsection (e), the commission shall not direct the electric utility to refund to ratepayers the amount the commission previously determined was reasonable but may disallow the recovery from ratepayers of any additional costs the commission finds unreasonable.
(g) So long as the electric utility has not acted in a manner that constitutes wilful misconduct, bad faith, or reckless disregard of the electric utility's obligations, in each case, in compliance with any applicable wildfire protection plan, no electric utility shall be civilly liable for the death of or injury to persons, or property damage, as a result of:
(1) Any act taken in accordance with a wildfire protection plan or plan update approved by the commission under this part; or
(2) Any failure to take an action proposed by an electric utility in a wildfire protection plan or plan update and thereafter removed from the wildfire protection plan or plan update by modification of the commission.
(h) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the commission or its agents and employees, the State, the commission commissioners, or the commissioners' representatives for the death of or injury to persons, or property damage, for any action taken by such in the performance of their powers and duties under this part.
(i) The commission shall, as appropriate, adopt rules or issue orders for the implementation of this section. The rules or orders may include but need not be limited to procedures and standards regarding data governance, risk-based decision-making, vegetation management, public power safety shutoffs and restorations, pole materials, circuitry, and monitoring systems.
§269-D Penalties. (a) In addition to any other penalties provided by law, a failure by an electric utility to comply with an approved wildfire protection plan or part of an approved wildfire protection plan shall be subject to a civil penalty, as determined by the commission. Imposition of penalties pursuant to this section shall otherwise be in accordance with section 269-28 and all applicable administrative rules. All moneys collected under this section shall be deposited into the public utilities commission special fund. The commission shall utilize performance based regulation to develop financial penalties and incentives tied to compliance with and performance under an approved wildfire protection plan.
(b) Any determination by the commission that the electric utility materially failed to comply with an approved wildfire protection plan or part of an approved wildfire protection plan, and any imposition of a civil penalty, will be inadmissible in any lawsuit or other action against the electric utility seeking compensation for the alleged death of or injury to persons, or property damage. In any action seeking to hold an electric utility civilly liable for the death of or injury to persons, or property damage, no inference of liability may be drawn solely based on a failure by the electric utility to adhere to the requirements of an approved wildfire protection plan.
§269-E Applications to issue bonds and authorize wildfire protection charges. (a) An electric utility may apply to the commission for one or more financing orders to issue bonds to recover any wildfire protection costs, each of which authorizes the following:
(1) The imposition, charging, and collection of a wildfire protection charge, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire protection charge in accordance with a true-up adjustment mechanism under this part in amounts sufficient to pay the principal of and interest on bonds and all related financing costs on a timely basis;
(2) The creation of wildfire protection property under the financing order; and
(3) The imposition, charging, and collection of fixed recovery tax amounts to recover any portion of the electric utility's federal and state taxes associated with those wildfire protection charges and not financed from the proceeds of bonds.
(b) The application shall include all of the following:
(1) The principal amount of the bonds proposed to be issued and the selection of a financing entity;
(2) An estimate of the date each series of bonds is expected to be issued;
(3) The expected term, which shall include a scheduled final payment date not to exceed thirty years, and a legal final maturity that may be longer, subject to rating agency and market conditions, during which the wildfire protection charge associated with the issuance of each series of bonds is expected to be imposed and collected;
(4) An estimate of the financing costs associated with the issuance of each series of bonds;
(5) An estimate of the amount of the wildfire protection charge revenues necessary to pay principal and interest on the bonds and related financing costs as set forth in the application and the calculation for that estimate;
(6) A proposed design of the wildfire protection charges, and a proposed methodology for allocating the wildfire protection charge among customer classes;
(7) A description of the true-up adjustment for the adjustment of the wildfire protection charge to correct for any overcollection or undercollection of the wildfire protection charge, and to otherwise ensure the timely payment of principal and interest on the bonds and related financing costs; and
(8) Any other information required by the commission.
(c) The commission shall issue an approval or denial of any application for a financing order filed pursuant to this section within ninety days of the last filing in the applicable docket.
(d) In exercising its duties under this section, the commission shall consider:
(1) Whether the wildfire protection costs to be financed by any bonds to be issued are just and reasonable;
(2) Whether the recovery of such costs is consistent with the public interest;
(3) Whether the terms and conditions of any bonds to be issued, including without limitation interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application, are just and reasonable;
(4) Whether the recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would result in net savings to consumers and reduce, to the maximum extent possible, the rates on a present value basis that consumers would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electric utility's updated overall corporate debt and equity costs in the ratio approved by the commission at the time of the financing order; provided that the commission may hire and rely upon a financial advisor in connection with this determination; provided that the financial advisor shall not direct how the recovery bonds are placed to market; and
(5) Any other factors that the commission deems reasonable and in the public interest.
The electric utility may request the determination specified in this section by the commission in a separate proceeding, in an existing proceeding, or both. If the commission makes the determination specified in this section, the commission shall establish, as part of the financing order, a procedure for the electric utility to submit applications from time to time to request the issuance of additional financing orders designating wildfire protection charges and any associated fixed recovery tax amounts as recoverable. The electric utility may submit an application with respect to wildfire protection costs that an electric utility has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an agreement. The commission shall, within one hundred twenty days of the filing of that application, issue a financing order, if the commission determines that the amounts identified in the application are wildfire protection costs.
At the option of the electric utility, the electric utility may include in its application for a financing order a request for authorization to sell, transfer, assign, or pledge recovery property to a governmental financing entity if the electric utility expects recovery bonds issued by a governmental financing entity would result in a more cost efficient means, taking into account all financing costs related to the recovery bonds, than using another financing entity to issue recovery bonds to finance the same recovery costs, taking into account the costs of issuing the other financing entity's bonds. If an electric utility exercises this option, the commission may hire and rely upon a financial advisor in connection with the commission's review; provided that the financial advisor shall not direct how the recovery bonds are placed to market.
(e) The commission shall not issue a financing order to the extent that the wildfire protection charges under all financing orders issued under this part constitute more than five per cent of the average residential customer bill, calculated at the time of the last such financing order. This provision shall not affect any financing order previously issued under this part.
(f) Wildfire protection charges shall be imposed only on existing and future consumers in the utility service territory. Consumers within the utility service territory of the electric utility that is subject to the financing order shall continue to pay wildfire protection charges until the bonds and associated financing costs are paid in full by the financing entity or, in the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt of proceeds by the assignee in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding.
(g) The wildfire protection charge and any associated fixes recovery tax amounts shall be collected by a financing entity or its successors, in accordance with subsection (i), in full through a surcharge, fee, or charge that is separate and apart from the financing entity's rates.
(h) An electric utility may exercise the same rights and remedies under its tariff and applicable law and regulation based on a consumer's nonpayment of the wildfire protection charge as it could for a consumer's failure to pay any other charge payable to that electric utility.
(i) The commission may establish in a financing order an effective mechanism that ensures recovery of wildfire protection costs through nonbypassable wildfire protection charges from existing and future consumers in the utility service territory. The wildfire protection charge and any associated fixed recovery tax amounts may be a usage-based surcharge, a flat user fee, or a charge based upon customer revenues as determined by the commission for each customer class in any financing order. Consumers shall be required to pay those charges until:
(1) The bonds and all associated financing costs are paid in full; or
(2) In the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt of proceeds by such assignee in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding, at which time those charges shall be terminated.
A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the electric utility or the commencement of any judicial or nonjudicial proceeding on the financing order. Wildfire protection charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subsection (n).
(j) The commission shall issue financing orders in accordance with this part to facilitate the recovery, financing, or refinancing of wildfire protection costs. A financing order may be adopted only upon the application of the electric utility and shall become effective in accordance with its terms only after the electric utility files with the commission the electric utility's written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between wildfire protection charges, any associated fixed recovery tax amounts, and other charges.
(k) Notwithstanding any other law, and except as otherwise provided in section 269-G(e), with respect to wildfire protection property that has been made the basis for the issuance of bonds and with respect to any associated fixed recovery tax amounts, the financing order, the wildfire protection charges, and any associated fixed recovery tax amounts shall be irrevocable. The State and its agencies, including the commission, pledge and agree with bondholders, the owners and assignees of the wildfire protection property, and other financing parties that the State and its agencies will not take any action listed in this subsection. This subsection shall not preclude limitation or alteration if full compensation is made by law for the full protection of the wildfire protection property collected pursuant to a financing order and of the bondholders and any assignee or financing party entering into a contract with the electric utility. The prohibited actions shall be the following:
(1) Alter the provisions of this part, which authorize the commission to create an irrevocable contract right or chose in action by the issuance of a financing order, to create wildfire protection property, and make the wildfire protection charges imposed by a financing order irrevocable, binding, nonbypassable charges for all existing and future consumers;
(2) Take or permit any action that impairs or would impair the value of wildfire protection property or the security for the bonds or revise the wildfire protection costs for which recovery is authorized;
(3) In any way impair the rights and remedies of the bondholders, assignees, and other financing parties;
(4) Except for changes made pursuant to the formula-based true-up mechanism authorized under subsection (n), reduce, alter, or impair wildfire protection charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related bonds have been paid and performed in full or, in the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default under the terms of the bonds, until the receipt of proceeds by such assignee in an amount sufficient to repay principal and interest on the bonds that would have accrued had they remained outstanding.
(l) Under a financing order, the bonds may be issued in one or more series, and the electric utility shall retain sole discretion to cause bonds to be issued, including the right to defer or postpone such issuance, assignment, sale, or transfer.
(m) Neither financing orders nor bonds issued under this part shall constitute a general obligation of the State or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but shall be payable solely from the wildfire protection property provided under this part. All bonds shall contain on the face thereof a statement to the following effect: "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest and premium on, this bond.".
The issuance of bonds under this part shall not directly, indirectly, or contingently obligate the State or any political subdivision thereof to levy or to pledge any form of taxation or to make any appropriation for their payment.
(n) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within ninety days of the application. Any wildfire protection charges authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to wildfire protection charges, which shall be made at least annually and may be made more frequently. The electric utility shall make a filing with the commission to implement any true-up adjustment, and the review by the commission of these filings shall be limited to mathematical and clerical errors. Within thirty days after receiving an electric utility's filing of a true-up adjustment, the commission's review of the filing shall be limited to mathematical or clerical errors as determined in accordance with any true-up adjustment formulas set forth in the applicable financing order. The commission shall either approve the filing or inform the electric utility of any mathematical or clerical errors in its calculation. If the commission informs the electric utility of mathematical or clerical errors in its calculation, the electric utility shall correct its error and refile its true-up adjustment. The timeframes previously described in this subsection shall apply to a refiled true-up adjustment.
(o) Wildfire protection charges are wildfire protection property when, and to the extent that, a financing order authorizing the wildfire protection charges has become effective in accordance with this part, and the wildfire protection property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property shall continuously exist for the period and to the extent provided in the financing order, but in any event until the bonds are paid in full, including all principal; premiums, if any; and interest with respect to the bonds, and all other financing costs are paid in full or, in the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt by such assignee of proceeds in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding. A financing order may provide that the creation of wildfire protection property shall be simultaneous with the sale of the wildfire protection property to an assignee as provided in the application of the pledge of the wildfire protection property to secure the bonds.
(p) Any successor to a financing entity shall be bound by the requirements of this part and shall perform and satisfy all obligations of, and have the same rights under a financing order as, and to the same extent as, the financing entity.
§269-F Bonds; issuance; wildfire protection property interests. (a) The electric utility may sell and assign all or portions of its interest in wildfire protection property to one or more financing entities that make that wildfire protection property the basis for issuance of bonds, to the extent approved in a financing order. The electric utility or financing entity may pledge wildfire protection property as collateral, directly or indirectly, for bonds to the extent approved in the pertinent financing orders providing for a security interest in the wildfire protection property, in the manner set forth in this section. In addition, wildfire protection property may be sold or assigned by either of the following:
(1) The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default under the terms of the recovery bonds; or
(2) Any person acquiring the wildfire protection property after a sale or assignment pursuant to this part.
(b) To the extent that any interest in wildfire protection property is sold, assigned, or is pledged as collateral pursuant to subsection (a), the commission shall authorize the electric utility to contract with the financing entity and its assignees that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the wildfire protection charges for the benefit and account of the financing entity or its assignees, and will account for and remit these amounts to or for the account of the financing entity or its assignees. Contracting with the financing entity or its assignees in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of the electric utility's services are provided to a consumer by any person or entity other than the electric utility in whose service territory the consumer is located, that person or entity shall collect the wildfire protection charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the electric utility, financing entity, or assignees with the associated revenues remitted solely for such person's benefit as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this part, on any person or entity responsible for billing, collection, and other related services, including without limitation collection of the wildfire protection charges and any associated fixed recovery tax amounts, that are the subject of the financing order.
(c) The financing entity may issue bonds upon approval by the commission in a financing order. Bonds shall be nonrecourse to the credit or any assets of the electric utility, other than the wildfire protection property as specified in that financing order.
(d) Wildfire protection property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of wildfire protection charges depend on the electric utility continuing to provide services or continuing to perform its servicing functions relating to the collection of wildfire protection charges or on the level of future service consumption. Wildfire protection property shall exist whether or not the wildfire protection charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the wildfire protection property, or amount of the wildfire protection property, is dependent on the future provision of service to consumers. All wildfire protection property specified in a financing order shall continue to exist until the bonds issued pursuant to a financing order and all associated financing costs are paid in full or, in the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt by such assignee of proceeds in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding.
(e) Wildfire protection property, wildfire protection charges, and the interests of an assignee, bondholder, or financing entity, or any pledgee in wildfire protection property and wildfire protection charges shall not be subject to setoff, counterclaim, surcharge, recoupment, or defense by the electric utility or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate of the electric utility, or any other entity.
(f) Notwithstanding any other law to the contrary, any requirement under this part or a financing order that the public utilities commission takes action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order.
§269-G Security interests in wildfire protection property; financing statements. (a) A security interest in wildfire protection property is valid and enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the wildfire protection property perfected in the manner described in this section, and attaches when all of the following have taken place:
(1) The commission has issued a financing order authorizing the wildfire protection charge included in the wildfire protection property;
(2) Value has been given by the pledgees of the wildfire protection property; and
(3) The pledgor has signed a security agreement covering the wildfire protection property.
(b) A valid and enforceable security interest in wildfire protection property is perfected when it has attached and when a financing statement has been filed with the bureau of conveyances naming the pledgor of the wildfire protection property as "debtor" and identifying the wildfire protection property.
Any description of the wildfire protection property shall be sufficient if it refers to the financing order creating the wildfire protection property. A copy of the financing statement shall be filed with the commission by the electric utility that is the pledgor or transferor of the wildfire protection property, and the commission may require the electric utility to make other filings with respect to the security interest in accordance with procedures that the commission may establish; provided that the filings shall not affect the perfection of the security interest.
(c) A perfected security interest in wildfire protection property shall be a continuously perfected security interest in all wildfire protection property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Wildfire protection property shall constitute property for all purposes, including for contracts securing bonds, whether or not the wildfire protection property revenues and proceeds have accrued.
(d) Subject to the terms of the security agreement covering the wildfire protection property and the rights of any third parties holding security interests in the wildfire protection property, the validity and relative priority of a security interest created under this section shall not be defeated or adversely affected by the commingling of revenues arising with respect to the wildfire protection property with other funds of the electric utility, or by any security interest in a deposit account of that electric utility perfected under chapter 490, article 9, into which the revenues are deposited.
Subject to the terms of the security agreement, upon compliance with the requirements of section 490:9-312(b)(1), the pledgees of the wildfire protection property shall have a perfected security interest in all cash and deposit accounts of the electric utility in which wildfire protection property revenues have been commingled with other funds; provided that the perfected security interest shall be limited to an amount no greater than the amount of the wildfire protection property revenues received by the electric utility within twelve months before:
(1) Any default under the security agreement; or
(2) The institution of insolvency proceedings by or against the electric utility, less payments from the revenues to the pledgees during that twelve-month period.
(e) If default occurs under the security agreement covering the wildfire protection property, the pledgees of the wildfire protection property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under chapter 490, article 9, and shall be entitled to foreclose or otherwise enforce their security interest in the wildfire protection property, subject to the rights of any third parties holding prior security interests in the wildfire protection property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the wildfire protection property that, in the event of default by the electric utility in payment of wildfire protection property revenues, the commission and any successor thereto, upon the application by the pledgees or assignees, including assignees under section 269-H of the wildfire protection property, and without limiting any other remedies available to the pledgees or assignees by reason of the default, shall order the sequestration and payment to the pledgees or assignees of wildfire protection property revenues. Any financing order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the wildfire protection property. Any surplus in excess of:
(1) Amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the bonds, and associated financing costs arising under the security agreement; or
(2) In the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding,
shall be remitted to the debtor or to the pledgor or transferor.
(f) Sections 490:9-204 and 490:9-205 shall apply to a pledge of wildfire protection property by the electric utility, an affiliate of the electric utility, or a financing entity.
§269-H Transfers of wildfire protection property. (a) A transfer of wildfire protection property by the electric utility to an assignee or to a financing entity, or by an assignee of the electric utility or a financing entity to another financing entity, which the parties in the governing documents have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the wildfire protection property, other than for federal and state income and franchise tax purposes.
(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the assignee shall not be affected or impaired by, among other things, the occurrence of any of the following:
(1) Commingling of wildfire protection charge revenues with other amounts;
(2) The retention by the seller of either of the following:
(A) A partial or residual interest, including an equity interest, in the financing entity or the wildfire protection property, whether direct or indirect, subordinate or otherwise; or
(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of wildfire protection charge;
(3) Any recourse that an assignee may have against the seller;
(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller;
(5) The obligation of the seller to collect wildfire protection charges on behalf of an assignee;
(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purpose; or
(7) Any true-up adjustment of the wildfire protection charge as provided in the financing order.
(c) A transfer of wildfire protection property shall be deemed perfected against third parties when both of the following occur:
(1) The commission issues the financing order authorizing the wildfire protection charge included in the wildfire protection property; and
(2) An assignment of the wildfire protection property in writing has been executed and delivered to the assignee.
(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement with the bureau of conveyances in accordance with chapter 490, article 9, part 5, naming the assignor of the wildfire protection property as debtor and identifying the wildfire protection property shall have priority. Any description of the wildfire protection property shall be sufficient if it refers to the financing order creating the wildfire protection property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures the commission may establish, but these filings shall not affect the perfection of the transfer.
§269-I Successor requirements; default. (a) Any successor to an electric utility subject to a financing order, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall be bound by the requirements of this part. The successor of the electric utility shall perform and satisfy all obligations of the electric utility under the financing order, in the same manner and to the same extent as the electric utility, including the obligation to collect and pay the wildfire protection charge to any financing party as required by a financing order or any assignee. Any successor to the electric utility shall be entitled to receive any fixed recovery tax amounts otherwise payable to the electric utility.
(b) The commission may require in a financing order that if a default by the electric utility in remittance of the wildfire protection charge collected arising with respect to wildfire protection property occurs, the commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire protection charge collected arising with respect to the wildfire protection property. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the electric utility.
§269-J Severability. If any provision of this part is held to be invalid or is superseded, replaced, repealed, or expires for any reason:
(1) That occurrence shall not affect any action allowed under this part that is taken prior to that occurrence by the commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and
(2) The validity and enforceability of the rest of this part shall remain unaffected."
SECTION 3. Section 269-9, Hawaii Revised Statutes, is amended to read as follows:
"§269-9 Report accidents. (a)
Every public utility shall report to the public utilities commission all
accidents and wildfires potentially caused by or occurring in connection
with [its] the public utility's operations and service[, and
the]. The commission shall
investigate the causes of [any]:
(1) Any
accident [which results] that resulted in the loss of
life[,]; and
(2) Any wildfires that:
(A) May have been caused by a public utility;
(B) Destroyed a significant amount of public utility equipment; or
(C) Resulted in the loss of life.
The
commission may investigate any other accidents [which] that,
in [its] the commission's opinion, require investigation.
(b) The public utility's reporting of an accident or wildfire under this section shall not be admissible evidence in any judicial, administrative, or other governmental proceeding for purposes of establishing that the wildfire was caused by the public utility."
SECTION 4. Chapter 269-17, Hawaii Revised Statutes, is amended to read as follows:
"§269-17
Issuance of securities. A public utility corporation or a
financing entity may, on securing the prior approval of the public
utilities commission, and not otherwise, except as provided in section
269-E, issue stocks and stock certificates, bonds, notes, and other
evidences of indebtedness, payable at periods of more than twelve months after
the date thereof, for the following purposes and no other, namely: for the acquisition of property or for the
construction, completion, extension, or improvement of or addition to its facilities
or service, or for the discharge or lawful refunding of its obligations or for
the reimbursement of moneys actually expended from income or from any other
moneys in its treasury not secured by or obtained from the issue of its stocks
or stock certificates, or bonds, notes, or other evidences of indebtedness, for
any of the aforesaid purposes except maintenance of service, replacements, and
substitutions not constituting capital expenditure in cases where the
corporation has kept its accounts for such expenditures in such manner as to
enable the commission to ascertain the amount of moneys so expended and the
purposes for which the expenditures were made, and the sources of the funds in
its treasury applied to the expenditures.
As used [herein,] in this section, "property"
and "facilities"[,] mean property and facilities used in all
operations of a public utility corporation whether or not included in its
public utility operations or rate base.
A public utility corporation may not issue securities to acquire
property or to construct, complete, extend or improve or add to its facilities
or service if the commission determines that the proposed purpose will have a
material adverse effect on its public utility operations.
All stock and every stock certificate, and
every bond, note, or other evidence of indebtedness of a public utility
corporation not payable within twelve months, issued without an order of the
commission authorizing the same, then in effect, shall be void."
SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 6. In codifying the new part added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating and referring to the new sections in this Act.
SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 8. This Act shall take effect on July 1, 3000.
Report Title:
Wildfires; Mitigation; Protection; Public Utilities Commission; Electric Utilities; Securitization; Wildfire Protection Plans; Wildfire Reporting; Public Utilities
Description:
Creates a
process for electric utilities to develop and submit wildfire protection plans
to the Public Utilities Commission for approval and allow the recovery of
related costs and expenses through securitization, while avoiding a
disproportionate impact on a specific ratepayer or county. Requires public utilities to report wildfires
potentially caused by or occurring in connection with their operations. Effective 7/1/3000. (HD3)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
