Bill Text: TX HB4492 | 2021-2022 | 87th Legislature | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to financing certain costs associated with electric markets; granting authority to issue bonds; authorizing fees.

Spectrum: Partisan Bill (Republican 2-0)

Status: (Passed) 2021-06-16 - Effective immediately [HB4492 Detail]

Download: Texas-2021-HB4492-Introduced.html
 
 
  By: Paddie H.B. No. 4492
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the restructuring of certain electric utility
  providers.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 39, Utilities Code, is amended by adding
  Subchapter M to read as follows:
  SUBCHAPTER M. SECURITIZATION OF EXTRAORDINARY COSTS
         Sec. 39.601.  PURPOSE. The purpose of this subchapter is to
  reduce the cost that customers would otherwise experience due to
  the extraordinary costs that electric utilities incurred and may
  incur to secure electric supply and provide service during natural
  and man-made disasters, system failures, and other catastrophic
  events and to restore electric utility systems after such events by
  providing securitization financing enabling electric utilities to
  recover these costs. This financing mechanism will provide rate
  relief to customers by extending the timeframe over which the
  extraordinary costs are recovered from customers and support the
  financial strength and stability of electric utility companies. The
  commission shall determine that securitization provides tangible
  and quantifiable benefits to customers, greater than would have
  been achieved absent the issuance of the bonds. The commission
  shall determine that the structuring and pricing of the bonds
  result in bond charges consistent with the terms of the applicable
  financing order and market conditions at the time of the pricing of
  the bonds. The proceeds of the bonds shall be used solely for the
  purpose of reducing the amount of the regulatory asset determined
  by the commission to be reasonable and other purposes provided
  herein.
         Sec. 39.602.  DEFINITIONS. In this subchapter:
               (1)  "Assignee" means any individual, corporation, or
  other legally recognized entity, including a special-purpose
  entity, to which an interest in transition property is transferred,
  other than as security, including any assignee of that party.
               (2)  "Board" means the board of directors or other
  governing body of an electric utility.
               (3)  "Extraordinary costs and expenses" means:
                     (A)  costs and expenses incurred by the electric
  utility for power and energy purchased during a period of emergency
  in excess of what would have been paid for the same amount of power
  and energy at the average rate paid by the electric utility for
  power and energy purchased during a month outside the period
  emergency;
                     (B)  costs and expenses incurred by the electric
  utility to generate and transmit power and energy during the period
  of emergency (including fuel costs, operation and maintenance
  expenses, overtime costs and all other costs and expenses that
  would not have been incurred but for the extreme weather
  conditions); and
                     (C)  any charges imposed on the electric utility
  or on a power supplier to the electric utility and passed on to the
  electric utility by the applicable regional transmission
  organization or independent system operator, resulting from
  defaults by other market participants in the power pool for costs
  relating to the period of emergency.
               (4)  "Financing order" means an order of the board
  approving the issuance of securitized bonds and the creation of
  transition charges for the recovery of qualified costs.
               (5)  "Financing party" means a holder of securitized
  bonds, including trustees, collateral agents, and other persons
  acting for the benefit of the holder.
               (6)  "Qualified costs" means 100 percent of an electric
  utility's extraordinary costs and expenses together with the costs
  of issuing, supporting, repaying, servicing, and refinancing the
  securitized bonds, whether incurred or paid upon issuance of the
  securitized bonds or over the life of the securitized bonds or the
  refunded securitized bonds, and any costs of retiring and refunding
  the electric u existing debt securities initially issued to finance
  the extraordinary costs and expenses.
               (7)  "Period of emergency" means the period from and
  including 00:00 February [(START DATE)], 2021 to and including
  00:00 February [(END DATE)], 2021.
               (8)  "Securitized bonds" means bonds, debentures,
  notes, certificates of participation or of beneficial interest, or
  other evidences of indebtedness or ownership that are issued by an
  electric utility, its successors or an assignee under a financing
  order, that have a term not longer than [(YEARS)] years, and that
  are secured by or payable, primarily, from transition property and
  the proceeds thereof. If certificates of participation, beneficial
  interest, or ownership are issued, references in this subchapter to
  principal, interest, or premium shall refer to comparable amounts
  under those certificates.
               (9)  "Transition charges" means nonbypassable amounts
  to be charged for the use or availability of electric services,
  approved by the board of the electric utility under a financing
  order to recover qualified costs, that shall be collected by an
  electric utility, its successors, an assignee, or other collection
  agents as provided for in the financing order.
               (10)  "Transition property" means the property right
  created pursuant to this subchapter D, including without
  limitation, the right, title, and interest of the electric utility
  or its assignee:
                     (A)  In and to the transition charges established
  pursuant to a financing order, including all rights to obtain
  adjustments in accordance with Section 39.607 and the financing
  order.
                     (B)  To be paid the amount that is determined in a
  financing order to be the amount that the electric utility or its
  transferee is lawfully entitled to receive pursuant to the
  provisions of this subchapter and the proceeds thereof, and in and
  to all revenues, collections, claims, payments, moneys, or process
  of or arising from the transition charges that are the subject of a
  financing order.
         Sec. 39.603.  FINANCING ORDERS; TERMS. (a) The board shall
  adopt a financing order to recover the electric utility's qualified
  costs on making a finding that the total amount of revenues to be
  collected under the financing order is less than the revenue
  requirement that would be recovered over the remaining life of the
  transition property using conventional financing methods and that
  the financing order is consistent with the standards in Section
  39.601.
         (b)  The financing order shall detail the amount of qualified
  costs to be recovered and the period over which the nonbypassable
  transition charges shall be recovered, which period may not exceed
  [(YEARS)] years.
         (c)  Transition charges shall be collected and allocated
  among customers in such manner as set forth in the financing order.
         (d)  A financing order shall become effective in accordance
  with its terms, and the financing order, together with the
  transition charges authorized in the order, shall thereafter be
  irrevocable and not subject to rescission, reduction, impairment,
  or adjustment or other alteration by further action of the board or
  by action of any regulatory or other governmental body of the State
  of Texas, except as permitted by Section 39.607. A financing order
  issued pursuant to this subchapter shall have the same force and
  effect of a financing order under Title 2, Chapter 39.
         (e)  A financing order may be reviewed by appeal only to a
  Travis County district court by a member of the electric filed
  within 15 days after the financing order is adopted by the board.
  The judgment of the district court may be reviewed only by direct
  appeal to the Supreme Court of Texas filed within 15 days after
  entry of judgment. All appeals shall be heard and determined by the
  district court and the Supreme Court of Texas as expeditiously as
  possible with lawful precedence over other matters. Review on
  appeal shall be based solely on the financing order adopted by the
  board, other information considered by the board in adopting the
  resolutions and briefs to the court and shall be limited to whether
  the financing order conforms to the constitution and laws of this
  state and the United States and is within the authority of the board
  under this subchapter.
         (f)  The board may adopt a financing order providing for
  retiring and refunding securitized bonds on making a finding that
  the future transition charges required to service the new
  securitized bonds, including transaction costs, will be less than
  the future transition charges required to service the securitized
  bonds being refunded. After the indefeasible repayment in full of
  all outstanding securitized bonds and associated financing costs,
  the board shall adjust the related transition charges accordingly.
         Sec. 39.604.  PROPERTY RIGHTS. (a) The rights and interests
  of an electric utility or its subsidiary, affiliate, successor,
  financing party or assignee under a financing order, including the
  right to impose, collect, receive and enforce the payment of
  transition charges authorized in the financing order, shall be only
  contract rights until such property is first transferred or pledged
  to an assignee or financing party, as applicable, in connection
  with the issuance of securitized bonds, at which time such property
  will become "transition property."
         (b)  Transition property that is specified in the financing
  order shall constitute a present vested property right for all
  purposes, including, for the avoidance of doubt, for purposes of
  the contracts and takings clauses of the constitutions and laws of
  this state and the United States, even if the imposition and
  collection of transition charges depends on further acts of the
  electric utility or others that may not have yet occurred.
  Transition property shall exist whether or not transition charges
  have been billed, have accrued, or have been collected and
  notwithstanding the fact that the value or amount of the property is
  dependent on the future provision of service to customers by the
  electric utility or its successors or assigns. Upon the issuance of
  the securitized bonds, the financing order, and satisfaction of the
  requirements of provisions of Section 39.609, the transition
  charges, including their nonbypassability, shall be irrevocable,
  final, non-discretionary and effective without further action by
  the electric utility or any other person or governmental authority.
  The financing order shall remain in effect and the property shall
  continue to exist for the same period as the pledge of the state
  described in Section 39.670.
         (c)  All revenues, collections, claims, payments, moneys, or
  proceeds of or arising from or relating to transition charges shall
  constitute proceeds of the transition property arising from the
  financing order.
         Sec. 39.605.  NO SETOFF. The interest of an assignee or
  pledgee in transition property and in the revenues and collections
  arising from that property are not subject to setoff, counterclaim,
  surcharge, recoupment or defense by the electric utility or any
  other person or in connection with the bankruptcy of the electric
  utility or any other entity. A financing order shall remain in
  effect and unabated notwithstanding the bankruptcy of the electric
  utility, its successors, or assignees.
         Sec. 39.606.  NO BYPASS. A financing order shall include
  terms ensuring that the imposition and collection of transition
  charges authorized in the order shall be nonbypassable and shall
  apply to all customers connected to the electric utility's system
  assets and taking service, whether or not the system assets
  continue to be owned by the electric utility.
         Sec. 39.607.  TRUE-UP. A financing order shall be promptly
  reviewed and adjusted, if after its adoption there are additional
  charges or refunds of extraordinary costs and expenses so as to
  ensure that there is neither an over collection or under collection
  of extraordinary costs and expenses and that collections on the
  transition property will be sufficient to timely make all periodic
  and final payments of principal, interest, fees and other amounts,
  [(and to timely fund all reserve accounts, if any,)] related to the
  securitized bonds. A financing order shall also include a mechanism
  requiring that transition charges be reviewed by the board and
  adjusted at least annually, within 45 days of the anniversary date
  of the issuance of the securitized bonds, to correct any over
  collections or under collections of the preceding 12 months and to
  ensure the expected recovery of amounts sufficient to timely
  provide all payments of debt service and other required amounts and
  charges in connection with the securitized bonds. No governmental
  authority shall have the discretion or authority to disapprove of,
  or alter, any adjustments made or proposed to be made hereunder
  other than to correct computation or other manifest errors.
         Sec. 39.608.  TRUE SALE. An agreement by an electric utility
  or assignee to transfer transition property that expressly states
  that the transfer is a sale or other absolute transfer signifies
  that the transaction is a true sale and is not a secured transaction
  and that title, legal and equitable, has passed to the entity to
  which the transition property is transferred. The transaction shall
  be treated as an absolute sale regardless of whether the purchaser
  has any recourse against the seller, or any other term of the
  parties' agreement, including the seller's retention of an equity
  interest in the transition property, the fact that the electric
  utility acts as the collector of transition charges relating to the
  transition property, or the treatment of the transfer as a
  financing for tax, accounting, financial reporting, or other
  purposes.
         Sec. 39.609.  SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;
  DEFAULT. (a) Transition property does not constitute an account or
  general intangible under Section 9.106, Business & Commerce Code.
  The transfer, sale or assignment, or the creation, granting,
  perfection, and enforcement of liens and security interests in
  transition property are governed by this section and not by the
  Business & Commerce Code. Transition property shall constitute
  property for all purposes, including for contracts securing
  securitized bonds, whether or not the transition property revenues
  and proceeds have accrued.
         (b)  A valid and enforceable transfer, sale or assignment, or
  lien and security interest, as applicable, in transition property
  may be created only by a financing order and the execution and
  delivery of a transfer, sale or assignment, or security agreement,
  as applicable, with a financing party in connection with the
  issuance of securitized bonds. The transfer, sale, assignment, or
  lien and security interest, as applicable, shall attach
  automatically from the time that value is received for the
  securitized bonds and, on perfection through the filing of notice
  with the secretary of state in accordance with the rules prescribed
  under Subsection (d), shall be a continuously perfected transfer,
  sale and assignment or lien and security interest, as applicable,
  in the transition property and all proceeds of the property,
  whether accrued or not, shall have priority in the order of filing
  and take precedence over any subsequent judicial or other lien
  creditor. If notice is filed within 10 days after value is received
  for the securitized bonds, the transfer, sale, or assignment, or
  security interest, as applicable, shall be perfected retroactive to
  the date value was received, otherwise, the transfer, sale or
  assignment, or security interest, as applicable, shall be perfected
  as of the date of filing.
         (c)  Transfer, sale or assignment of an interest in
  transition property to an assignee shall be perfected against all
  third parties, including subsequent judicial or other lien
  creditors, when the financing order becomes effective, transfer
  documents have been delivered to the assignee, and a notice of that
  transfer has been filed in accordance with the rules prescribed
  under Subsection (d); provided, however, that if notice of the
  transfer has not been filed in accordance with this subsection
  within 10 days after the delivery of transfer documentation, the
  transfer of the interest is not perfected against third parties
  until the notice is filed.
         (d)  The secretary of state shall implement this section by
  establishing and maintaining a separate system of records for the
  filing of notices under this section and prescribing the rules for
  those filings based on Chapter 9, Business & Commerce Code, adapted
  to this subchapter and using the terms defined in this subchapter.
         (e)  The priority of a lien and security interest perfected
  under this section is not impaired by any later modification of the
  financing order under Section 39.607 or by the commingling of funds
  arising from transition charges with other funds, and any other
  security interest that may apply to those funds shall be terminated
  when they are transferred to a segregated account for the assignee
  or a financing party. If transition property has been transferred
  to an assignee, any proceeds of that property shall be held in trust
  for the assignee.
         (f)  Securitized bonds shall be secured by a statutory lien
  on the transition property in favor of the owners or beneficial
  owners of securitized bonds. The lien shall automatically arise
  upon issuance of the securitized bonds without the need for any
  action or authorization by the electric utility or the board. The
  lien shall be valid and binding from the time the securitized bonds
  are executed and delivered. The transition property shall be
  immediately subject to the lien, and the lien shall immediately
  attach to the transition property and be effective, binding, and
  enforceable against the electric utility, its creditors, their
  successors, assignees, and all others asserting rights therein,
  irrespective of whether those persons have notice of the lien and
  without the need for any physical delivery, recordation, filing, or
  further act. The lien is created by this subchapter and not by any
  security agreement, but may be enforced by any financing party or
  their representatives as if they were secured parties under Chapter
  9, Business & Commerce Code, and upon application by or on behalf of
  the financing parties, a district court of Travis County may order
  that amounts arising from transition charges be transferred to a
  separate account for the financing parties' benefit.
         (g)  This statutory lien is a continuously perfected
  security interest and has priority over any other lien, created by
  operation of law or otherwise, that may subsequently attach to that
  transition property or proceeds thereof unless the owners or
  beneficial owners of securitized bonds as specified in the trust
  agreement or indenture has agreed in writing otherwise. This
  statutory lien is a lien on the transition charges and all
  transition charge revenues or other proceeds that are deposited in
  any deposit account or other account of the servicer or other person
  in which transition charge revenues or other proceeds have been
  commingled with other funds.
         (h)  The statutory lien shall not adversely be affected or
  impaired by, among other things, the commingling of transition
  charge revenues or other proceeds from transition charges with
  other amounts regardless of the person holding such amounts.
         (i)  The electric utility, any successor or assign of the
  electric utility or any other person with any operational control
  of any portion of the electric utility system assets, whether as
  owner, lessee, franchisee or otherwise and any successor servicer
  of collections of the transition charges shall be bound by the
  requirements of this subchapter and shall perform and satisfy all
  obligations imposed pursuant hereto in the same manner and to the
  same extent as did its predecessor, including the obligation to
  bill, adjust and enforce the payment of transition charges.
         (j)  If a default or termination occurs under the securitized
  bonds, the financing parties or their representatives may foreclose
  on or otherwise enforce their lien and security interest in any
  transition property as if they were secured parties under Chapter
  9, Business & Commerce Code, and upon application by the electric
  utility or by or on behalf of the financing parties, a district
  court of Travis County may order that amounts arising from
  transition charges be transferred to a separate account for the
  financing parties' benefit, to which their lien and security
  interest shall apply. On application by or on behalf of the
  financing parties, a district court of Travis County shall order
  the sequestration and payment to them of revenues arising from the
  transition charges.
         Sec. 39.610.  PLEDGE OF STATE. Securitized bonds are not a
  debt or obligation of the state and are not a charge on its full
  faith and credit or taxing power. The state irrevocably pledges,
  however, for the benefit and protection of assignees, financing
  parties and the electric utility, that it will not take or permit,
  or permit any agency or other governmental authority or political
  subdivision of the state to take or permit, any action that would
  impair the value of transition property, or, except as permitted by
  Section 39.607, reduce, alter, or impair the transition charges to
  be imposed, collected, and remitted to financing parties, until the
  principal, interest and premium, and any other charges incurred and
  contracts to be performed in connection with the related
  securitized bonds have been paid and performed in full. Any party
  issuing securitized bonds is authorized to include this pledge in
  any documentation relating to those bonds.
         Sec. 39.611.  TAX EXEMPTION.  Transactions involving the
  transfer and ownership of transition property and the receipt of
  transition charges are exempt from state and local income, sales,
  franchise, gross receipts, and other taxes or similar charges.
         Sec. 39.612.  NOT PUBLIC UTILITY. An assignee or financing
  party may not be considered to be a public utility, electric utility
  or person providing electric service solely by virtue of the
  transactions described in this subchapter.
         Sec. 39.613.  SEVERABILITY. Effective on the date the first
  securitized bonds are issued under this subchapter, if any
  provision in this title or portion of this title is held to be
  invalid or is invalidated, superseded, replaced, repealed, or
  expires for any reason, that occurrence does not affect the
  validity or continuation of this subchapter, or any other provision
  of this title that is relevant to the issuance, administration,
  payment, retirement, or refunding of securitized bonds or to any
  actions of the electric utility, its successors, an assignee, a
  collection agent, or a financing party, which shall remain in full
  force and effect.
         SECTION 2.  This Act takes effect September 1, 2021.
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