Bill Text: TX SB1950 | 2021-2022 | 87th Legislature | Introduced


Bill Title: Relating to the use of securitization by electric cooperatives to address extraordinary costs and expenses resulting from Winter Storm Uri.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced) 2021-04-01 - Referred to Business & Commerce [SB1950 Detail]

Download: Texas-2021-SB1950-Introduced.html
  2021S0197-1 03/11/21
 
  By: Paxton S.B. No. 1950
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the use of securitization by electric cooperatives to
  address extraordinary costs and expenses resulting from Winter
  Storm Uri.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 41, Utilities Code, is amended by adding
  Subchapter D to read as follows:
  SUBCHAPTER D. WEATHER SECURITIZATION
         Sec. 41.151.  PURPOSE. The purpose of this subchapter is to
  enable electric cooperatives to use securitization financing to
  recover extraordinary costs and expenses incurred because of the
  abnormal weather events from 12:01 a.m. on February 12, 2021,
  through 11:59 p.m. on February 20, 2021. This type of debt will
  lower the cost of financing such extraordinary costs and expenses
  relative to the costs that would be incurred using conventional
  electric cooperative financing methods. The proceeds of the
  securitized bonds shall be used solely for the purposes of
  financing or refinancing such extraordinary costs and expenses,
  including costs relating to consummation and administration of the
  securitized financing itself. The board of directors of each
  electric cooperative involved in such financing shall ensure that
  securitization provides tangible and quantifiable benefits to its
  members, greater than would have been achieved absent the issuance
  of securitized bonds. Each board of directors that chooses to
  securitize pursuant to this subchapter shall ensure that the
  structuring and pricing of the securitized bonds result in
  reasonable securitized bond charges consistent with market
  conditions and the terms of the financing order. The amount
  securitized may not exceed the present value of the revenue
  requirement over the life of the proposed securitized bonds
  associated with the extraordinary costs and expenses being
  financed. The present value calculation shall use a discount rate
  equal to the proposed interest rate on the securitized bonds.
         Sec. 41.152.  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)  "Extraordinary costs and expenses" means:
                     (A)  costs and expenses incurred by the electric
  cooperative for power and energy purchased during the 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
  cooperative for power and energy purchased during the month of
  January 2021;
                     (B)  costs and expenses incurred by the electric
  cooperative 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
  cooperative or on a power supplier to the electric cooperative and
  passed on to the electric cooperative by the applicable regional
  transmission organization or independent system operator resulting
  from defaults by other market participants in the regional
  transmission organization or independent system operator for costs
  relating to the period of emergency.
               (3)  "Financing order" means an order of the board of
  directors approving the issuance of securitized bonds and the
  creation of transition charges for the recovery of qualified costs.
               (4)  "Financing party" means a holder of securitized
  bonds, including trustees, collateral agents, and other persons
  acting for the benefit of the holder.
               (5)  "Qualified costs" means 100 percent of an electric
  cooperative'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 cooperative's existing debt securities
  initially issued to finance the extraordinary costs and expenses.
               (6)  "Period of emergency" means the period from 12:01
  a.m. on February 12, 2021, through 11:59 p.m. on February 20, 2021.
               (7)  "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 cooperative, its successors, or an assignee under a
  financing order that have a term not longer than 30 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.
               (8)  "Transition charges" means nonbypassable amounts
  to be charged for the use or availability of electric services,
  approved by the board of directors of the electric cooperative
  under a financing order to recover qualified costs, that shall be
  collected by an electric cooperative, its successors, an assignee,
  or other collection agents as provided for in the financing order.
               (9)  "Transition property" means the property right
  created pursuant to this subchapter, including the right, title,
  and interest of the electric cooperative 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 41.157 and the financing
  order; and
                     (B)  to be paid the amount that is determined in a
  financing order to be the amount that the electric cooperative 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. 41.153.  FINANCING ORDERS; TERMS. (a) The board of
  directors shall adopt a financing order to recover the electric
  cooperative'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 41.151.
         (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
  30 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 becomes 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 of directors or
  by action of any regulatory or other governmental body of the State
  of Texas, except as permitted by Section 41.157. A financing order
  issued pursuant to this subchapter shall have the same force and
  effect as a financing order under Chapter 39.
         (e)  A financing order may be reviewed by appeal only to a
  district court of the county where the electric cooperative is
  domiciled by a member of the electric cooperative filed within 15
  days after the financing order is adopted by the board of directors.
  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 of directors, other information considered by the board of
  directors 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 of directors under this
  subchapter.
         (f)  The board of directors 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 of directors shall adjust the related
  transition charges accordingly.
         Sec. 41.154.  PROPERTY RIGHTS. (a) The rights and interests
  of an electric cooperative 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
  becomes 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 depend on further acts of the
  electric cooperative 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 cooperative or its successors or assigns. Upon the
  issuance of the securitized bonds and the financing order, and upon
  satisfaction of the requirements of Section 41.159, the transition
  charges, including their nonbypassability, shall be irrevocable,
  final, nondiscretionary, and effective without further action by
  the electric cooperative 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 41.160.
         (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. 41.155.  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 cooperative or
  any other person or in connection with the bankruptcy of the
  electric cooperative or any other entity. A financing order shall
  remain in effect and unabated notwithstanding the bankruptcy of the
  electric cooperative, its successors, or assignees.
         Sec. 41.156.  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 cooperative's
  system assets and taking service, whether or not the system assets
  continue to be owned by the electric cooperative.
         Sec. 41.157.  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 nor-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 of directors and adjusted at least annually, within 45 days
  after 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. 41.158.  TRUE SALE. An agreement by an electric
  cooperative 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 cooperative 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. 41.159.  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 41.157 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)(1)  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 cooperative or the board of
  directors. 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
  cooperative, 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.  Upon application by or on behalf of the financing parties, a
  district court of the county where the electric cooperative is
  domiciled may order that amounts arising from transition charges be
  transferred to a separate account for the financing parties'
  benefit.
               (2)  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 have 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.
               (3)  The statutory lien is not adversely 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.
               (4)  The electric cooperative, any successor or assign
  of the electric cooperative, or any other person with any
  operational control of any portion of the electric cooperative's
  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.
         (g)  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
  cooperative 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 the county where the
  electric cooperative is domiciled shall order the sequestration and
  payment to them of revenues arising from the transition charges.
         Sec. 41.160.  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 cooperative 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 41.157, 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. 41.161.  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. 41.162.  NOT PUBLIC UTILITY. An assignee or financing
  party may not be considered to be a public utility, electric
  cooperative, or person providing electric service solely by virtue
  of the transactions described in this subchapter.
         Sec. 41.163.  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, or 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 cooperative, 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 immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution. If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2021.
feedback