BILL NUMBER: AB 932 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 31, 2011
INTRODUCED BY Assembly Member Blumenfield
FEBRUARY 18, 2011
An act to amend Section 3384 add Article
12 (commencing with Section 920) to Chapter 4 of Part 1 of Division 1
of the Public Utilities Code, relating to energy.
LEGISLATIVE COUNSEL'S DIGEST
AB 932, as amended, Blumenfield. Consumer Power and
Conservation Financing Authority: renewable energy resources.
Renewable energy resources: Renewable Transition
Financing Act.
Under existing law, the Public Utilities Commission has regulatory
authority over public utilities, including electrical corporations,
and authorizes the commission to fix just and reasonable rates and
charges. The existing restructuring of the electrical services
industry provides for the issuance of rate reduction bonds by the
California Infrastructure and Economic Development Bank for the
recovery of transition costs, as defined, by electrical corporations.
This bill would enact the Renewable Transition Financing Act. The
act would authorize a financing entity, as defined, to issue green
rate reduction bonds, as defined, for the recovery of transition
costs, as defined, by an electrical corporation.
Existing law creates the California Consumer Power and
Conservation Financing Authority with the responsibility to implement
certain purposes, including to provide loans to consumers and
businesses for the purpose of an electric or natural gas energy
conservation program or any program for the use of renewable energy
resources, as approved by the State Energy Resources Conservation and
Development Commission (Energy Commission), the Public Utilities
Commission (PUC), or a participating local publicly owned electric
utility. Existing law prohibits the authority from financing or
approving any new program, enterprise, or project on or after January
1, 2007.
This bill would make an exception to the above-described
prohibition for a program for the use of renewable energy resources
as approved by the Energy Commission, PUC, or local publicly owned
electric utility.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 12 (commencing with Section
920) is added to Chapter 4 of Part 1 of Division 1 of the
Public Utilities Code , to read:
Article 12. Renewable Transition Financing Act
920. (a) This article shall be known, and may be cited, as the
Renewable Transition Financing Act.
(b) For purposes of this article, the following terms have the
following meanings:
(1) "Financing entity" means any special purpose trust, as defined
in Section 63010 of the Government Code, authorized to issue green
rate reduction bonds or acquire transition property, or any other
entity created and authorized by the Treasurer, as agent of sale, to
issue green rate reduction bonds or acquire transition property, or
both.
(2) "Financing order" shall mean an order of the commission
adopted in accordance with this article, which shall include, without
limitation, a procedure to require the expeditious approval by the
commission of periodic adjustments to fixed transition amounts
included therein to ensure recovery of all transition costs and the
costs of capital associated with the proposed provision, recovery,
financing, or refinancing thereof, including the costs of issuing,
servicing, and retiring the green rate reduction bonds contemplated
by the financing order. These adjustments shall not impose fixed
transition amounts upon classes of customers who were not subject to
the fixed transition amounts in the pertinent financing order.
(3) "Fixed transition amounts" means those nonbypassable rates and
other charges, including, but not limited to, distribution,
connection, disconnection, and termination rates and charges, that
are authorized by the commission in a financing order to recover (A)
transition costs, and (B) the costs of providing, recovering,
financing, or refinancing the transition costs through a plan
approved by the commission in the financing order, including the
costs of issuing, servicing, and retiring green rate reduction bonds.
If requested by the electrical corporation in its application for a
financing order, fixed transition amounts shall include nonbypassable
rates and other charges to recover federal and state taxes whose
recovery period is modified by the transactions approved in the
financing order.
(4) "Green rate reduction bonds" means bonds, notes, certificates
of participation or beneficial interest, or other evidences of
indebtedness or ownership, issued pursuant to an executed indenture
or other agreement of a financing entity, the proceeds of which are
used, directly or indirectly, to provide, recover, finance, or
refinance transition costs, and that are directly or indirectly
secured by, or payable from, transition property.
(5) "Transition costs" means the costs for investments in
transitioning to a lower carbon economy in the State of California
including, but not limited to: (1) clean energy technologies; (2)
advanced or enabling energy infrastructure technologies; (3) energy
efficiency projects and technologies in residential, commercial, and
industrial applications; (4) advanced manufacturing technologies for
any of the technologies or applications described in this section,
and (5) renewable energy generation and transmission projects all as
designated and administered by electrical corporations or the State
pursuant to a financing order of the commission. Transition costs may
be estimated at the time an electrical corporation applies for a
financing order; provided, however, net proceeds from any related
issuance of green rate reduction bonds shall be held in escrow
pending completion of such investments attributable to transition
costs. All costs shall be approved by the commission pursuant to a
financing order. Transition costs shall also include the costs of
refinancing or retiring of debt or equity capital of the electrical
corporation, and associated federal and state tax liabilities. Each
financing order shall specify transition costs that include an amount
of debt or equity capital of the electrical corporation to be
refinanced or retired, or an amount of debt or equity capital that
would have otherwise had been issued to finance renewable energy
generation and transmission projects such that the expected cost of
capital savings attributable to financing, refinancing or retiring
such transition costs with green rate reduction bonds shall exceed
the cost of issuing, servicing and retiring the green rate reduction
bonds used (1) to effect such financing, refinancing or retirement
and/or (2) to fund any investments by electric corporations or the
State in transitioning to a lower carbon economy in the State of
California as designated in such Financing Order.
(6) (A) "Transition property" means the property right created
pursuant to this article including, without limitation, the right,
title, and interest of an electrical corporation or its transferee:
(i) In and to the tariff established pursuant to a financing
order, as adjusted from time to time in accordance with subdivision
(c) of Section 921 and the financing order.
(ii) To be paid the amount that is determined in a financing order
to be the amount that the electrical corporation or its transferee
is lawfully entitled to receive pursuant to the provision of this
article and the proceeds thereof, and in and to all revenues,
collections, claims, payments, money, or proceeds of or arising from
the tariff or constituting fixed transition amounts that are the
subject of a financing order including those nonbypassable rates and
other charges referred to in paragraph (3).
(iii) In and to all rights to obtain adjustments to the tariff
pursuant to the terms of subdivision (c) of Section 921 and the
financing order.
(B) "Transition 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 a particular electrical corporation,
the electrical corporation performing certain services.
(C) For purposes of Sections 63010 and 63025.1 of the Government
Code, "transition property" also shall mean certificates representing
primarily interests in the property rights described in
subparagraphs (A) and (B).
921. (a) An electrical corporation shall, at the direction of the
commission, or may, upon its own election, apply to the commission
for a determination that certain transition costs may be recovered
through fixed transition amounts, which would therefore constitute
transition property under this article. An electrical corporation may
request this determination by the commission in separate proceedings
or in an order instituting investigation or order instituting
rulemaking, or both. The electrical corporation shall in its
application specify that customers should benefit from reduced rates
through the issuance of green rate reduction bonds. The commission
shall designate fixed transition amounts as recoverable in one or
more financing orders if the commission determines, as part of its
findings in connection with the financing order, that the designation
of the fixed transition amounts, and issuance of green rate
reduction bonds in connection with some or all of the fixed
transition amounts would reduce rates that customers would have paid
if the financing order were not adopted. These customers shall
continue to pay fixed transition amounts until the bonds are paid in
full by the financing entity.
(b) The commission may issue financing orders in accordance with
this article to facilitate the provision, recovery, financing, or
refinancing of transition costs. Each financing order shall include a
provision for the electrical corporation to equitably share in any
expected cost of capital savings attributable to refinancing or
retiring its debt or equity capital with green rate reduction bonds.
A financing order may be adopted only upon the application of an
electrical corporation and shall become effective in accordance with
its terms only after the electrical corporation files with the
commission the electrical corporation's written consent to all terms
and conditions of the financing order. A financing order may specify
how amounts collected from a customer shall be allocated between
fixed transition amounts and other charges.
(c) Notwithstanding Section 455.5, Section 1708, or any other
provision of law, except as otherwise provided in this subdivision
with respect to transition property that has been made the basis for
the issuance of green rate reduction bonds, the financing orders and
the fixed transition amounts shall be irrevocable and the commission
shall not have authority either by rescinding, altering, or amending
the financing order or otherwise, to revalue or revise for ratemaking
purposes the transition costs, or the costs of providing,
recovering, financing, or refinancing the transition costs, determine
that the fixed transition amounts or rates are unjust or
unreasonable, or in any way reduce or impair the value of transition
property either directly or indirectly by taking fixed transition
amounts into account when setting other rates for the electrical
corporation; nor shall the amount of revenues arising with respect
thereto be subject to reduction, impairment, postponement, or
termination. Except as otherwise provided in this subdivision, the
State of California does hereby pledge and agree with the owners of
transition property and holders of green rate reduction bonds that
the state shall neither limit nor alter the fixed transition amounts,
transition property, financing orders, and all rights thereunder
until the obligations, together with the interest thereon, are fully
met and discharged, provided nothing contained in this section shall
preclude the limitation or alteration if and when adequate provision
shall be made by law for the protection of the owners and holders.
The financing entity is authorized to include this pledge and
undertaking for the state in these obligations. Notwithstanding any
other provision of this section, the commission shall approve the
adjustments to the fixed transition amounts as may be necessary to
ensure timely recovery of all transition costs that are the subject
of the pertinent financing order, and the costs of capital associated
with the provision, recovery, financing, or refinancing thereof,
including the costs of issuing, servicing, and retiring the green
rate reduction bonds contemplated by the financing order. The
adjustments shall not impose fixed transition amounts upon classes of
customers who were not subject to the fixed transition amounts in
the pertinent financing order.
(d) (1) Financing orders issued under this article do not
constitute a debt or liability of the state or of any political
subdivision thereof, other than the financing entity, and do not
constitute a pledge of the full faith and credit of the state or any
of its political subdivisions, other than the financing entity, but
are payable solely from the funds provided therefor under this
article and shall be consistent with Sections 1 and 18 of Article XVI
of the California Constitution. This subdivision shall in no way
preclude bond guarantees or enhancements pursuant to this article.
All the 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 California is pledged to the payment of the principal of, or
interest on, this bond."
(2) The issuance of bonds under this article shall not directly,
indirectly, or contingently obligate the state or any political
subdivision thereof to levy or to pledge any form of taxation
therefor or to make any appropriation for their payment.
(e) The commission shall establish procedures for the expeditious
processing of applications for financing orders, including the
approval or disapproval thereof within 120 days of the electrical
corporation's making application therefor. The commission shall
provide in any financing order for a procedure for the expeditious
approval by the commission of periodic adjustments to the fixed
transition amounts that are the subject of the pertinent financing
order, as required by subdivision (c). The procedure shall require
the commission to determine whether the adjustments are required on
each anniversary of the issuance of the financing order, and at the
additional intervals as may be provided for in the financing order,
and for the adjustments, if required, to be approved within 90 days
of each anniversary of the issuance of the financing order, or of
each additional interval provided for in the financing order.
(f) Fixed transition amounts shall constitute transition property
when, and to the extent that, a financing order authorizing the fixed
transition amounts has become effective in accordance with this
article, and the transition property shall thereafter continuously
exist as property for all purposes with all of the rights and
privileges of this article for the period and to the extent provided
in the financing order, but in any event until the green rate
reduction bonds are paid in full, including all principal, interest,
premium, costs, and arrearages thereon.
(g) Any surplus fixed transition amounts in excess of the amounts
necessary to pay principal, premium, if any, interest and expenses of
the issuance of the green rate reduction bonds shall be remitted to
the financing entity and may be used to benefit customers if this
would not result in a recharacterization of the intended
characteristics of the financing, including, but not limited to, the
following:
(1) Avoiding the recognition of debt on the electrical corporation'
s balance sheet for regulatory purposes.
(2) Treating the green rate reduction bonds as debt of the
electrical corporation or its affiliates for federal income tax
purposes.
(3) Treating the transfer of the transition property by the
electrical corporation as a true sale for bankruptcy purposes.
(4) Avoiding any adverse impact of the financing on the electrical
corporation's credit rating.
922. (a) Financing entities may issue green rate reduction bonds
upon approval by the commission in the pertinent financing orders.
Green rate reduction bonds shall be nonrecourse to the credit or any
assets of the electrical corporation, other than the transition
property as specified in the pertinent financing order.
(b) An electrical corporation may sell and assign all or portions
of its interest in transition property to an affiliate. An electrical
corporation or its affiliates may sell or assign their interests to
one or more financing entities created hereunder that make that
property the basis for issuance of green rate reduction bonds to the
extent approved in the pertinent financing orders. An electrical
corporation, its affiliates, or financing entities may pledge
transition property as collateral, directly or indirectly, for green
rate reduction bonds to the extent approved in the pertinent
financing orders providing for a security interest in the transition
property, in the manner as set forth in Section 923. In addition
transition property may be sold or assigned by (1) the financing
entity or a trustee for the holders of green rate reduction bonds in
connection with the exercise of remedies upon a default, or (2) any
person acquiring the transition property after a sale or assignment
pursuant to this subdivision.
(c) To the extent that any interest in transition property is so
sold or assigned, or is so pledged as collateral, the commission
shall authorize the electrical corporation to contract with the
financing entity that it will continue to operate its system to
provide service to its customers, will collect amounts in respect of
the fixed transition amounts for the benefit and account of the
financing entity, and will account for and remit these amounts to or
for the account of the financing entity. Contracting with the
financing entity 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 security interest, as
applicable.
(d) Notwithstanding Section 1708 or any other provision of law,
any requirement under this article or a financing order that the
commission take 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. The approval by the commission in a financing order of the
issuance by an electrical corporation or a financing entity of green
rate reduction bonds shall include the approvals, if any, as may be
required by Article 5 (commencing with Section 816) and Section
701.5. Nothing in Section 701.5 shall be construed to prohibit the
issuance of green rate reduction bonds upon the terms and conditions
as may be approved by the commission in a financing order. Section
921 shall not be applicable to the transfer or pledge of transition
property, the issuance of green rate reduction bonds, or related
transactions approved in a financing order.
923. (a) A security interest in transition property is valid, is
enforceable against the pledgor and third parties, subject to the
rights of any third parties holding security interests in the
transition property perfected in the manner described in this
section, and attaches when all of the following have taken place:
(1) The commission has issued the financing order authorizing the
fixed transition amounts included in the transition property.
(2) Value has been given by the pledgees of the transition
property.
(3) The pledgor has signed a security agreement covering the
transition property.
(b) A valid and enforceable security interest in transition
property is perfected when it has attached and when a financing
statement has been filed in accordance with Chapter 4 (commencing
with Section 9401) of Division 9 of the Commercial Code naming the
pledgor of the transition property as "debtor" and identifying the
transition property. Any description of the transition property shall
be sufficient if it refers to the financing order creating the
transition property. A copy of the financing statement shall be filed
with the commission by the electrical corporation that is the
pledgor or transferor of the transition property, and the commission
may require the electrical corporation to make other filings with
respect to the security interest in accordance with procedures it may
establish, provided that the filings shall not affect the perfection
of the security interest.
(c) A perfected security interest in transition property is a
continuously perfected security interest in all 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. Transition property
shall constitute property for all purposes, including for contracts
securing green rate reduction bonds, whether or not the revenues and
proceeds arising with respect thereto have accrued.
(d) Subject to the terms of the security agreement covering the
transition property and the rights of any third parties holding
security interests in the transition property perfected in the manner
described in this section, the validity and relative priority of a
security interest created under this section is not defeated or
adversely affected by the commingling of revenues arising with
respect to the transition property with other funds of the electrical
corporation that is the pledgor or transferor of the transition
property, or by any security interest in a deposit account of that
electrical corporation perfected under Division 9 (commencing with
Section 9101) of the Commercial Code into which the revenues are
deposited. Subject to the terms of the security agreement, upon
compliance with the requirements of subdivision (g) of Section 9302
of the Commercial Code, the pledgees of the transition property shall
have a perfected security interest in all cash and deposit accounts
of the electrical corporation in which revenues arising with respect
to the transition property have been commingled with other funds, but
the perfected security interest shall be limited to an amount not
greater than the amount of the revenues with respect to the
transition property received by the electrical corporation within 12
months before (1) any default under the security agreement or (2) the
institution of insolvency proceedings by or against the electrical
corporation, less payments from the revenues to the pledgees during
that 12-month period.
(e) If an event of default occurs under the security agreement
covering the transition property, the pledgees of the transition
property, subject to the terms of the security agreement, shall have
all rights and remedies of a secured party upon default under
Division 9 (commencing with Section 9101) of the Commercial Code, and
shall be entitled to foreclose or otherwise enforce their security
interest in the transition property, subject to the rights of any
third parties holding prior security interests in the transition
property perfected in the manner provided in this section. In
addition, the commission may require, in the financing order creating
the transition property, that, in the event of default by the
electrical corporation in payment of revenues arising with respect to
the transition property, the commission and any successor thereto,
upon the application by the pledgees or transferees, including
transferees under Section 844, of the transition property, and
without limiting any other remedies available to the pledgees or
transferees by reason of the default, shall order the sequestration
and payment to the pledgees or transferees of revenues arising with
respect to the transition property. Any 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 transition property. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest, costs,
and arrearages on the green rate reduction bonds, and other costs
arising under the security agreement, shall be remitted to the debtor
or to the pledgor or transferor.
(f) Section 5451 of the Government Code shall not apply to any
pledge of transition property by a financing entity. Sections 9204
and 9205 of the Commercial Code shall apply to a pledge of transition
property by an electrical corporation, an affiliate of an electrical
corporation, or a financing entity.
(g) (1) This section sets forth the terms by which a consensual
security interest can be created and perfected in the transition
property. Unless otherwise ordered by the commission with respect to
any series of green rate reduction bonds on or prior to the issuance
of the series, there shall exist a statutory lien as provided in this
subdivision. Upon the effective date of
the financing order, there shall exist a first
priority lien on all transition property then existing or thereafter
arising pursuant to the terms of the financing order. This lien shall
arise by operation of this section automatically without any action
on the part of the electrical corporation, any affiliate thereof, the
financing entity, or any other person. This lien shall secure all
obligations, then existing or subsequently arising, to the holders of
the green rate reduction bonds issued pursuant to the financing
order, the trustee or representative for the holders, and any other
entity specified in the financing order. The persons for whose
benefit this lien is established shall, upon the occurrence of any
defaults specified in the financing order, have all rights and
remedies of a secured party upon default under Division 9 (commencing
with Section 9101) of the Commercial Code, and shall be entitled to
foreclose or otherwise enforce this statutory lien in the transition
property. This lien shall attach to the transition property
regardless of who shall own, or shall subsequently be determined to
own, the transition property including any electrical corporation,
any affiliate thereof, the financing entity, or any other person.
This lien shall be valid, perfected, and enforceable against the
owner of the transition property and all third parties upon the
effectiveness of the financing order without any further public
notice; provided, however, that any person may, but shall not be
required to, file a financing statement in accordance with
subdivision (b). Financing statements so filed may be "protective
filings" and shall not be evidence of the ownership of the transition
property.
(2) A perfected statutory lien in transition property is a
continuously perfected lien in all revenues and proceeds arising with
respect thereto, whether or not the revenues or proceeds have
accrued. Conflicting liens shall rank according to priority in time
of perfection. Transition property shall constitute property for all
purposes, including for contracts securing green rate reduction
bonds, whether or not the revenues and proceeds arising with respect
thereto have accrued.
(3) In addition, the commission may require, in the financing
order creating the transition property, that, in the event of default
by the electrical corporation in payment of revenues arising with
respect to transition property, the commission and any successor
thereto, upon the application by the beneficiaries of the statutory
lien, and without limiting any other remedies available to the
beneficiaries by reason of the default, shall order the sequestration
and payment to the beneficiaries of revenues arising with respect to
the transition property. Any 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 transition property. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest, costs,
and arrearages on the green rate reduction bonds, and other costs
arising in connection with the documents governing the green rate
reduction bonds, shall be remitted to the debtor or to the pledgor or
transferor.
924. (a) A transfer of transition property by an electrical
corporation to an affiliate or to a financing entity, or by an
affiliate of an electrical corporation or a financing entity to
another financing entity, which the parties have in the governing
documentation 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 transition property, other than for federal and
state income and franchise tax purposes. Granting to holders of green
rate reduction bonds a preferred right to revenues of the electrical
corporation, or the provision by the company of other credit
enhancement with respect to green rate reduction bonds, shall not
impair or negate the characterization of any transfer as a true sale,
other than for federal and state income and franchise tax purposes.
(b) A transfer of transition property shall be deemed perfected as
against third persons when both of the following have taken place:
(1) The commission has issued the financing order authorizing the
fixed transition amounts included in the transition property.
(2) An assignment of the transition property in writing has been
executed and delivered to the transferee.
(c) As between bona fide assignees of the same right for value
without notice, the assignee first filing a financing statement in
accordance with Chapter 4 (commencing with Section 9401) of Division
9 of the Commercial Code naming the assignor of the transition
property as debtor and identifying the transition property has
priority. Any description of the transition property shall be
sufficient if it refers to the financing order creating the
transition 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 it may establish, but
these filings shall not affect the perfection of the transfer.
925. Any successor to the electrical corporation, 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 perform and satisfy all
obligations of the electrical corporation pursuant to this article in
the same manner and to the same extent as the electrical
corporation, including, but not limited to, collecting and paying to
the holders of green rate reduction bonds or their representatives or
the applicable financing entity revenues arising with respect to the
transition property sold to the applicable financing entity or
pledged to secure green rate reduction bonds.
926. The authority of the commission to issue financing orders
pursuant to Section 921 shall expire on __________. The expiration of
the authority shall have no effect upon financing orders adopted by
the commission pursuant to this article or any transition property
arising therefrom, or upon the charges authorized to be levied
thereunder, or the rights, interests, and obligations of the
electrical corporation or a financing entity or holders of transition
bonds pursuant to the financing order, or the authority of the
commission to monitor, supervise, or take further action with respect
to the order in accordance with the terms of this article and of the
order.
SECTION 1. Section 3384 of the Public Utilities
Code is amended to read:
3384. The authority may not finance or approve any new program,
enterprise, or project on or after January 1, 2007, except a program
for the use of renewable energy resources undertaken pursuant to
subdivision (c) of Section 3365.