Bill Text: TX HB4492 | 2021-2022 | 87th Legislature | Engrossed
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-Engrossed.html
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-Engrossed.html
By: Paddie | H.B. No. 4492 |
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relating to securitizing costs associated with electric markets; | ||
granting authority to issue bonds. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Chapter 31, Utilities Code, is amended by adding | ||
Subchapter C to read as follows: | ||
SUBCHAPTER C. SECURITIZATION CORPORATION | ||
Sec. 31.101. PURPOSE. (a) The purpose of this subchapter | ||
is to create a corporation dedicated to financing costs that are | ||
eligible for securitization as provided by Subchapter M, Chapter | ||
39, to securitize costs not securitized under Subchapter D, Chapter | ||
41. An entity authorized to securitize costs under Subchapter M, | ||
Chapter 39, subject to any other requirements applicable to the | ||
authorization, may request that the Texas Electric Securitization | ||
Corporation conduct the financing on behalf of the entity. | ||
(b) The Texas Electric Securitization Corporation is | ||
created under this subchapter as a special purpose public | ||
corporation and instrumentality of the state for the essential | ||
public purpose of providing a lower-cost financing mechanism for | ||
securitization in the manner provided by this subchapter. | ||
(c) Bonds issued under this subchapter will be the | ||
obligation solely of the issuer and the corporation as borrower, if | ||
applicable, and will not be a debt of or a pledge of the faith and | ||
credit of the state. | ||
(d) Bonds issued under this subchapter shall be nonrecourse | ||
to the credit or any assets of the state and the commission. | ||
Sec. 31.102. DEFINITIONS. In this subchapter: | ||
(1) "Corporation" means the Texas Electric | ||
Securitization Corporation. | ||
(2) "Issuer" means the corporation or any other | ||
corporation, public trust, public instrumentality, or entity that | ||
issues bonds approved by a financing order. | ||
Sec. 31.103. CREATION OF CORPORATION. (a) The corporation | ||
is a nonprofit corporation and instrumentality of this state, and | ||
shall perform the essential governmental function of financing | ||
eligible costs in accordance with this subchapter. The corporation: | ||
(1) shall perform only functions consistent with this | ||
subchapter; | ||
(2) shall exercise its powers through a governing | ||
board; | ||
(3) is subject to the regulation of the commission; | ||
and | ||
(4) has a legal existence as a public corporate body | ||
and instrumentality of the state separate and distinct from the | ||
state. | ||
(b) Assets of the corporation may not be considered part of | ||
any state fund. The state may not budget for or provide any state | ||
money to the corporation. The debts, claims, obligations, and | ||
liabilities of the corporation may not be considered to be a debt of | ||
the state or a pledge of its credit. | ||
(c) The corporation must be self-funded. Before the | ||
imposition of charges to recover securitized amounts, the | ||
corporation may accept and expend for its operating expenses money | ||
that may be received from any source, including financing | ||
agreements with the state, a commercial bank, or another entity to: | ||
(1) finance the corporation's obligations until the | ||
corporation receives sufficient property to cover its operating | ||
expenses as financing costs; and | ||
(2) repay any short-term borrowing under any such | ||
financing agreements. | ||
(d) The corporation has the powers, rights, and privileges | ||
provided for a corporation organized under Chapter 22, Business | ||
Organizations Code, subject to the express exceptions and | ||
limitations provided by this subchapter. | ||
(e) An organizer selected by the executive director of the | ||
commission shall prepare the certificate of formation of the | ||
corporation under Chapters 3 and 22, Business Organizations Code. | ||
The certificate of formation must be consistent with the provisions | ||
of this subchapter. | ||
(f) State officers and agencies are authorized to render | ||
services to the corporation, within their respective functions, as | ||
may be requested by the commission or the corporation. | ||
(g) The corporation or an issuer may: | ||
(1) retain professionals, financial advisors, and | ||
accountants the corporation or issuer considers necessary to | ||
fulfill the corporation's or issuer's duties under this subchapter; | ||
and | ||
(2) determine the duties and compensation of a person | ||
retained under Subdivision (1), subject to the approval of the | ||
commission. | ||
(h) The corporation is governed by a board of five directors | ||
appointed by the commission for two-year terms. | ||
(i) An official action of the board requires the favorable | ||
vote of a majority of the directors present and voting at a meeting | ||
of the board. | ||
Sec. 31.104. POWERS AND DUTIES OF CORPORATION. (a) The | ||
corporation, in each instance subject to the prior authorization of | ||
the commission, shall participate in the financial transactions | ||
authorized by this subchapter. The corporation may not engage in | ||
business activities except those activities provided for by this | ||
subchapter and those ancillary and incidental to those activities. | ||
The corporation or an issuer may not apply proceeds of bonds or | ||
charges to a purpose not specified in a financing order, to a | ||
purpose in an amount that exceeds the amount allowed for the purpose | ||
in the order, or to a purpose in contravention of the order. | ||
(b) The board of the corporation, under the provisions of | ||
this subchapter, may employ or retain persons as are necessary to | ||
perform the duties of the corporation. | ||
(c) The corporation may: | ||
(1) acquire, sell, pledge, or transfer property as | ||
necessary to effect the purposes of this subchapter and, in | ||
connection with the action, agree to such terms and conditions as | ||
the corporation deems necessary and proper, consistent with the | ||
terms of a financing order: | ||
(A) to acquire property and to pledge such | ||
property, and any other collateral: | ||
(i) to secure payment of bonds issued by the | ||
corporation, together with payment of any other qualified costs; or | ||
(ii) to secure repayment of any borrowing | ||
from any other issuer of bonds; or | ||
(B) to sell the property to another issuer, which | ||
may in turn pledge that property, together with any other | ||
collateral, to the repayment of bonds issued by the issuer together | ||
with any other qualified costs; | ||
(2) issue bonds on terms and conditions consistent | ||
with a financing order; | ||
(3) borrow funds: | ||
(A) from an issuer of bonds to acquire property, | ||
and pledge that property to the repayment of any borrowing from an | ||
issuer, together with any related qualified costs, all on terms and | ||
conditions consistent with a financing order; or | ||
(B) for initial operating expenses; | ||
(4) sue or be sued in its corporate name; | ||
(5) intervene as a party before the commission or any | ||
court in this state in any matter involving the corporation's | ||
powers and duties; | ||
(6) negotiate and become a party to contracts as | ||
necessary, convenient, or desirable to carry out the purposes of | ||
this subchapter; and | ||
(7) engage in corporate actions or undertakings that | ||
are permitted for nonprofit corporations in this state and that are | ||
not prohibited by, or contrary to, this subchapter. | ||
(d) The corporation shall maintain separate accounts and | ||
records relating to each entity that collects charges for all | ||
charges, revenues, assets, liabilities, and expenses relating to | ||
the entity's related bond issuances. | ||
(e) The board of the corporation may not authorize any | ||
rehabilitation, liquidation, or dissolution of the corporation and | ||
a rehabilitation, liquidation, or dissolution of the corporation | ||
may not take effect as long as any bonds are outstanding unless | ||
adequate protection and provision have been made for the payment of | ||
the bonds pursuant to the documents authorizing the issuance of the | ||
bonds. In the event of any rehabilitation, liquidation, or | ||
dissolution, the assets of the corporation must be applied first to | ||
pay all debts, liabilities, and obligations of the corporation, | ||
including the establishment of reasonable reserves for any | ||
contingent liabilities or obligations, and all remaining funds of | ||
the corporation must be applied and distributed as provided by an | ||
order of the commission. | ||
(f) Before the date that is two years and one day after the | ||
date that the corporation no longer has any payment obligation with | ||
respect to any bonds, including any obligation to an issuer of any | ||
bonds outstanding, the corporation may not file a voluntary | ||
petition under federal bankruptcy law and neither any public | ||
official nor any organization, entity, or other person may | ||
authorize the corporation to be or to become a debtor under federal | ||
bankruptcy law during that period. The state covenants that it will | ||
not limit or alter the denial of authority under this subsection or | ||
Subsection (e), and the provisions of this subsection and | ||
Subsection (e) are hereby made a part of the contractual obligation | ||
that is subject to the state pledge set forth in Section 39.609. | ||
(g) The corporation shall prepare and submit to the | ||
commission for approval an annual operating budget. If requested by | ||
the commission, the corporation shall prepare and submit an annual | ||
report containing the annual operating and financial statements of | ||
the corporation and any other appropriate information. | ||
Sec. 31.105. COMMISSION REGULATION OF CORPORATION. The | ||
commission shall regulate the corporation as provided by this | ||
subchapter. Notwithstanding the regulation authorized by this | ||
section, the corporation is not a public utility. | ||
Sec. 31.106. FINANCING ORDER. (a) This section applies to | ||
the commission's issuance of a financing order under this | ||
subchapter. | ||
(b) Except as otherwise specifically provided by this | ||
subchapter, the provisions of this subtitle that address the | ||
commission's issuance of a financing order under other provisions | ||
of this subtitle also apply to the commission's issuance of a | ||
financing order under this subchapter. | ||
(c) The corporation and any issuer must be a party to the | ||
commission's proceedings that address the issuance of a financing | ||
order along with the entity requesting securitization. | ||
(d) In addition to the other applicable requirements of this | ||
subtitle, a financing order issued under this subchapter must: | ||
(1) require the sale, assignment, or other transfer to | ||
the corporation of certain specified property created by the | ||
financing order and, following that sale, assignment, or transfer, | ||
require that charges paid under any financing order be created, | ||
assessed, and collected as the property of the corporation, subject | ||
to subsequent sale, assignment, or transfer by the corporation as | ||
authorized under this subchapter; | ||
(2) authorize: | ||
(A) the issuance of bonds by the corporation | ||
secured by a pledge of specified property, and the application of | ||
the proceeds of those bonds, net of issuance costs, to the | ||
acquisition of the property from the entity requesting | ||
securitization; or | ||
(B) the acquisition of specified property from | ||
the entity requesting securitization by the corporation, financed: | ||
(i) by a loan by an issuer to the | ||
corporation of the proceeds of bonds, net of issuance costs; or | ||
(ii) by the acquisition by an issuer from | ||
the corporation of the property and in each case the pledge of the | ||
property to the repayment of the loan or bonds, as applicable; and | ||
(3) authorize the entity requesting securitization to | ||
serve as collection agent to collect the charges and transfer the | ||
collected charges to the corporation, the issuer, or a financing | ||
party, as appropriate. | ||
(e) After issuance of the financing order, the corporation | ||
shall arrange for the issuance of bonds as specified in the | ||
financing order by the corporation or another issuer selected by | ||
the corporation and approved by the commission. | ||
(f) Bonds issued pursuant to a financing order under this | ||
section are secured only by the related property and any other funds | ||
pledged under the bond documents. No assets of the state or the | ||
entity requesting securitization are subject to claims by the | ||
holders of the bonds. Following assignment of the property, the | ||
entity requesting securitization does not have any beneficial | ||
interest or claim of right in such charges or in any property. | ||
Sec. 31.107. SEVERABILITY. Effective on the date the first | ||
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 authorized securitization bonds or to | ||
any actions of an entity requesting securitization under this | ||
subchapter, its successors, an assignee, a collection agent, the | ||
corporation, an issuer, or a financing party, and those provisions | ||
shall remain in full force and effect. | ||
SECTION 2. Section 39.002, Utilities Code, is amended to | ||
read as follows: | ||
Sec. 39.002. APPLICABILITY. This chapter, other than | ||
Subchapter M and Sections 39.151, 39.1516, 39.155, 39.157(e), | ||
39.203, 39.904, 39.9051, 39.9052, and 39.914(e), does not apply to | ||
a municipally owned utility or an electric cooperative. Sections | ||
39.157(e), 39.203, and 39.904, however, apply only to a municipally | ||
owned utility or an electric cooperative that is offering customer | ||
choice. If there is a conflict between the specific provisions of | ||
this chapter and any other provisions of this title, except for | ||
Chapters 40 and 41, the provisions of this chapter control. | ||
SECTION 3. Section 39.151, Utilities Code, is amended by | ||
adding Subsection (j-1) to read as follows: | ||
(j-1) Notwithstanding Subsection (j), the independent | ||
system operator in ERCOT may not reduce payments to or charge uplift | ||
short-paid amounts from a municipally owned utility that becomes | ||
subject to the jurisdiction of the independent system operator in | ||
ERCOT on or after June 1, 2021, and before December 30, 2021, | ||
related to a default on a payment obligation by a market participant | ||
that occurred before June 1, 2021. | ||
SECTION 4. Chapter 39, Utilities Code, is amended by adding | ||
Subchapter M to read as follows: | ||
SUBCHAPTER M. SECURITIZATION FOR INDEPENDENT ORGANIZATION | ||
Sec. 39.601. PURPOSE; USE OF PROCEEDS; BOND CHARGES. (a) | ||
The purpose of this subchapter is to enable the independent | ||
organization certified under Section 39.151 for the ERCOT power | ||
region to use securitization financing to fund substantial default | ||
balances that would otherwise be uplifted to the wholesale market | ||
as a result of market participants defaulting on amounts owed after | ||
an extreme pricing event and extraordinary ancillary service and | ||
reliability deployment price adder charges that were uplifted on a | ||
load ratio share basis. Securitization will allow wholesale market | ||
participants who are owed money to be paid in a more timely manner, | ||
while allowing the balance to be repaid over time at a low carrying | ||
cost. This subchapter and Subchapter D, Chapter 41, do not change, | ||
alter, or reduce the obligation of a market participant to timely | ||
and fully pay the debts or obligations of the market participant to | ||
the independent organization. | ||
(b) The proceeds of bonds issued for the purpose described | ||
by Subsection (a) must be used solely for the purpose of financing | ||
default balances that otherwise would be or have been uplifted to | ||
the wholesale market and uplift balances that were allocated to all | ||
load-serving entities on a load ratio share basis as a result of | ||
usage during the period of emergency. The commission shall ensure | ||
that securitization provides tangible and quantifiable benefits to | ||
wholesale market participants, greater than would have been | ||
achieved absent the issuance of bonds. | ||
(c) The commission shall ensure that the structuring and | ||
pricing of the bonds result in the lowest bond charges consistent | ||
with market conditions and the terms of the financing order. The | ||
present value calculation shall use a discount rate equal to the | ||
proposed interest rate on the bonds. | ||
(d) The commission shall require that all market | ||
participants, including market participants not otherwise subject | ||
to this subchapter, pay or make provision for the full and prompt | ||
payment to the independent organization certified under Section | ||
39.151 for the ERCOT power region of all amounts owed to the | ||
independent organization to qualify, or to continue to qualify, as | ||
a market participant in the ERCOT power region. The commission and | ||
the independent organization shall pursue collection in full of | ||
amounts owed to the independent organization by any market | ||
participant to reduce the qualifying costs that would otherwise be | ||
borne by other market participants or their customers. | ||
Sec. 39.602. DEFINITIONS. In this subchapter: | ||
(1) "Assignee" means any individual, corporation, or | ||
other legally recognized entity to which an interest in default or | ||
uplift property is transferred, other than as security. | ||
(2) "Default charges" means nonbypassable amounts to | ||
be charged on all wholesale market transactions administered by the | ||
independent organization certified under Section 39.151 for the | ||
ERCOT power region, approved by the commission under a financing | ||
order to recover qualified costs, that shall be collected by the | ||
independent organization, its successors, an assignee, or other | ||
collection agents as provided by the financing order. | ||
(3) "Financing order" means an order of the commission | ||
approving the issuance of bonds and the creation of charges for the | ||
recovery of qualified costs. | ||
(4) "Financing party" means a holder of bonds, | ||
including trustees, collateral agents, and other persons acting for | ||
the benefit of the holder. | ||
(5) "Independent organization" means the independent | ||
organization certified under Section 39.151 for the ERCOT power | ||
region. | ||
(6) "Load-serving entity" means a municipally owned | ||
utility, an electric cooperative, or a retail electric provider. | ||
(7) "Period of emergency" means the period beginning | ||
12:00 a.m., February 12, 2021, and ending 11:59 p.m., February 20, | ||
2021. | ||
(8) "Qualified costs" means a default balance | ||
resulting from the period of emergency that otherwise would be or | ||
has been uplifted to other wholesale market participants, together | ||
with the costs of issuing, supporting, and servicing bonds and any | ||
costs of retiring and refunding existing debt in connection with | ||
the issuance of the bonds. | ||
(9) "Uplift charges" means charges for reliability | ||
deployment price adders and ancillary services costs in excess of | ||
the commission's system-wide offer cap that were uplifted to | ||
load-serving entities on a load ratio share basis due to energy | ||
consumption during the period of emergency. The term includes only | ||
uplifted amounts and does not include amounts that were part of the | ||
prevailing settlement point price. | ||
Sec. 39.603. FINANCING ORDERS; TERMS. (a) On application | ||
of the independent organization, the commission may adopt a | ||
financing order to recover the costs of a substantial default or | ||
uplift balance of qualified costs resulting from a significant | ||
pricing event on making a finding that such financing is needed to | ||
preserve the integrity of the wholesale market and the public | ||
interest after considering: | ||
(1) the interests of wholesale market participants who | ||
are owed balances; and | ||
(2) the potential effects of uplifting those balances | ||
without a financing vehicle. | ||
(b) The financing order must detail the amounts to be | ||
recovered and the period over which the nonbypassable default or | ||
uplift charges shall be recovered. The period may not exceed 30 | ||
years. If an amount determined under this section is subject to | ||
judicial review of a commission order, a bankruptcy proceeding, or | ||
another type of litigation at the time of the securitization | ||
proceeding, the financing order shall include an adjustment | ||
mechanism requiring the independent organization to adjust its | ||
default or uplift charges in a manner that would refund, over the | ||
remaining life of the bonds, any overpayments resulting from | ||
securitization of amounts in excess of the amount resulting from a | ||
final determination after completion of all appellate reviews. The | ||
adjustment mechanism may not affect the stream of revenue available | ||
to service the bonds. An adjustment may not be made under this | ||
subsection until all appellate reviews have been completed, | ||
including appellate reviews following a commission decision on | ||
remand of its original orders, if applicable. | ||
(c) Nonbypassable default charges must be collected and | ||
allocated among wholesale market participants using the same | ||
allocation methodology described in the protocols of the | ||
independent organization, as they existed on March 1, 2021. The | ||
rate associated with the nonbypassable default charges must be | ||
assessed on all wholesale market participants, including market | ||
participants who are in default but still participating in the | ||
wholesale market, and must be based on updated transaction data to | ||
prevent market participants from engaging in behavior designed to | ||
avoid the nonbypassable default charges. | ||
(d) Notwithstanding another provision of this subchapter, | ||
nonbypassable default charges may not be collected from or | ||
allocated to a market participant that: | ||
(1) would otherwise be subject to an uplift charge | ||
solely as a result of acting as a central counterparty | ||
clearinghouse in wholesale market transactions in the ERCOT power | ||
region; and | ||
(2) is regulated as a derivatives clearing | ||
organization, as defined by the Commodity Exchange Act (7 U.S.C. | ||
Section 1a). | ||
(e) Nonbypassable uplift charges must be allocated to all | ||
load-serving entities on a load ratio share basis, excluding the | ||
load of entities that have opted out under Subsection (f). | ||
(f) The commission shall develop a process that allows a | ||
load-serving entity and any customer whose demand is greater than | ||
one megawatt and is served by a retail electric provider to opt out | ||
of the uplift charges by paying in full all invoices owed for usage | ||
during the period of emergency. Load-serving entities and | ||
individual customers that opt out may not receive any proceeds from | ||
the uplift bonds. | ||
(g) A financing order becomes effective in accordance with | ||
its terms and the financing order, together with the default or | ||
uplift charges authorized in the order, shall be irrevocable and | ||
not subject to reduction, impairment, or adjustment by further | ||
action of the commission after it takes effect. | ||
(h) The commission shall issue a financing order not later | ||
than the 90th day after the date the independent organization files | ||
a request for the financing order under Subsection (a) or (j). | ||
(i) A financing order is not subject to rehearing by the | ||
commission. A financing order may be reviewed by appeal by a party | ||
to the proceeding to a Travis County district court filed not later | ||
than the 15th day after the date the financing order is signed by | ||
the commission. The judgment of the district court may be reviewed | ||
only by direct appeal to the Supreme Court of Texas filed not later | ||
than the 15th day after the date of the 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 record before the commission 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 commission under this chapter. | ||
(j) At the request of the independent organization, the | ||
commission may adopt a financing order providing for retiring and | ||
refunding the bonds on making a finding that the future default or | ||
uplift charges required to service the new bonds, including | ||
transaction costs, will be less than the future default or uplift | ||
charges required to service the bonds being refunded. On the | ||
retirement of the refunded bonds, the commission shall adjust the | ||
related default or uplift charges accordingly. | ||
Sec. 39.604. PROPERTY RIGHTS. (a) The rights and interests | ||
of the independent organization or its successor under a financing | ||
order, including the right to impose, collect, and receive default | ||
or uplift charges authorized in the order, shall be only contract | ||
rights until they are first transferred to an assignee or pledged in | ||
connection with the issuance of bonds, at which time they will | ||
become default or uplift property, as described by Subsection (b). | ||
(b) Default or uplift property shall constitute a present | ||
property right for purposes of contracts concerning the sale or | ||
pledge of property, even though the imposition and collection of | ||
default or uplift charges depends on further acts of the | ||
independent organization or others that have not yet occurred. 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 by Section 39.609. | ||
(c) All revenues and collections resulting from default or | ||
uplift charges shall constitute proceeds only of the default or | ||
uplift property arising from the financing order. | ||
Sec. 39.605. INTEREST NOT SUBJECT TO SETOFF. The interest | ||
of an assignee or pledgee in default or uplift property and in the | ||
revenues and collections arising from that property are not subject | ||
to setoff, counterclaim, surcharge, or defense by the independent | ||
organization or any other person or in connection with the | ||
bankruptcy of a wholesale market participant or the independent | ||
organization. A financing order shall remain in effect and | ||
unabated notwithstanding the bankruptcy of the independent | ||
organization, its successors, or assignees. | ||
Sec. 39.606. DEFAULT AND UPLIFT CHARGES NONBYPASSABLE. A | ||
financing order shall include terms ensuring that the imposition | ||
and collection of default or uplift charges authorized in the order | ||
shall be nonbypassable, other than uplift charges paid under | ||
Section 39.603(f). | ||
Sec. 39.607. TRUE-UP. A financing order shall include a | ||
mechanism requiring that default or uplift charges be reviewed and | ||
adjusted at least annually, not later than the 45th day after the | ||
anniversary date of the issuance of the bonds, to: | ||
(1) correct over-collections or under-collections of | ||
the preceding 12 months; and | ||
(2) 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 bonds. | ||
Sec. 39.608. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING; | ||
DEFAULT. (a) Default or uplift property does not constitute an | ||
account or general intangible under Section 9.106, Business & | ||
Commerce Code. The creation, granting, perfection, and enforcement | ||
of liens and security interests in default or uplift property are | ||
governed by this section and not by the Business & Commerce Code. | ||
(b) A valid and enforceable lien and security interest in | ||
default or uplift property may be created only by a financing order | ||
and the execution and delivery of a security agreement with a | ||
financing party in connection with the issuance of bonds. The lien | ||
and security interest shall attach automatically from the time that | ||
value is received for the 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 lien and security interest in the default or uplift | ||
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 | ||
before the 10th day after the date value is received for the default | ||
bonds, the security interest shall be perfected retroactive to the | ||
date value was received. Otherwise, the security interest shall be | ||
perfected as of the date of filing. | ||
(c) Transfer of an interest in default or uplift 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 adopted under Subsection (d). However, if | ||
notice of the transfer has not been filed in accordance with this | ||
subsection before the 10th day 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 adopting the rules for | ||
those filings based on Chapter 9, Business & Commerce Code, adapted | ||
to this subchapter and using the terms defined by 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 default or uplift 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 default or uplift property | ||
has been transferred to an assignee, any proceeds of that property | ||
shall be held in trust for the assignee. | ||
(f) If a default or termination occurs under the bonds, the | ||
financing parties or their representatives may foreclose on or | ||
otherwise enforce their lien and security interest in any property | ||
as if they were secured parties under Chapter 9, Business & Commerce | ||
Code, and the commission may order that amounts arising from | ||
default or uplift 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 | ||
default or uplift charges. | ||
Sec. 39.609. PLEDGE OF STATE. Default 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 pledges, however, for the benefit | ||
and protection of financing parties and the independent | ||
organization that it will not take or permit any action that would | ||
impair the value of default or uplift property, or reduce, alter, or | ||
impair the default or uplift 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 bonds have been paid and | ||
performed in full. Any party issuing bonds under this subchapter is | ||
authorized to include this pledge in any documentation relating to | ||
those bonds. | ||
Sec. 39.610. TAX EXEMPTION. Transactions involving the | ||
transfer and ownership of default or uplift property and the | ||
receipt of default or uplift charges are exempt from state and local | ||
income, sales, franchise, gross receipts, and other taxes or | ||
similar charges. | ||
Sec. 39.611. NOT PUBLIC UTILITY. An assignee or financing | ||
party may not be considered to be a public utility or person | ||
providing electric service solely by virtue of the transactions | ||
described in this subchapter. | ||
Sec. 39.612. SEVERABILITY. Effective on the date the first | ||
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 bonds or to any actions of the | ||
independent organization, its successors, an assignee, a | ||
collection agent, or a financing party, which shall remain in full | ||
force and effect. | ||
Sec. 39.613. CUSTOMER CHARGES. All load-serving entities | ||
that receive offsets to specific uplift charges from the | ||
independent organization under this subchapter must adjust | ||
customer invoices to reflect the offsets for any charges that were | ||
or would otherwise be passed through to customers under the terms of | ||
service with the load-serving entity, including by providing a | ||
refund for any offset charges that were previously paid. An | ||
electric cooperative, including an electric cooperative that | ||
elects to receive offsets, shall not otherwise become subject to | ||
rate regulation by the commission and receipt of offsets does not | ||
affect the applicability of Chapter 41 to an electric cooperative. | ||
SECTION 5. This Act takes effect on the date on which Senate | ||
Bill No. 1580, House Bill No. 3544, or other similar legislation of | ||
the 87th Legislature, Regular Session, 2021, relating to the use of | ||
securitization by electric cooperatives to address weather-related | ||
extraordinary costs and expenses becomes law. |