RELATING TO PUBLIC UTILITIES.

HB881

HOUSE OF REPRESENTATIVES

H.B. NO.

881

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to public utilities
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION
1.
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The legislature finds that following
the 2023 Lahaina fire, public utilities must raise the capital to fund costs
and expenses to develop and implement effective plans for wildfire risk
mitigation, contribute to disaster relief funds, and fund litigation and
settlements.
�
Moreover, uncertainty as to
the total financial costs Hawaii's largest electric utility may bear as a
result of the 2023 Lahaina wildfire has led credit ratings agencies to
downgrade the credit rating of that utility to non-investment-grade
status.
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The legislature finds that the
credit rating downgrade will have severe negative impacts on ratepayers.
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As the utility borrows money in the future to
finance critical investments to improve safety and reliability, it will have to
pay much higher interest rates as non-investment grade issuers, and those
higher interest costs will be passed on to customers in the form of higher
rates.
�
In addition, a financially weak
utility is less able to make the investments and commitments the State needs to
meet its renewable energy and other goals.

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Accordingly,
the purpose of this Act is to establish and implement the Catastrophic Wildfire
Securitization Act, to allow public utilities to securitize rates in order to
raise capital that can be used to pay for costs and expenses arising out of
catastrophic wildfires, providing a vital source of liquidity and preserving
the public utilities' financial viability.

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SECTION
2.
�
The Hawaii Revised Statutes is
amended by adding a new chapter to be appropriately designated and to read as
follows:

"
Chapter

catastrophic wildfire securitization act

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� -1
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Short title.
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This chapter shall be known and may be cited
as the "Catastrophic Wildfire Securitization Act".

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� -2
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Definitions.
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As used in this chapter:

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"Ancillary
agreement" means a bond insurance policy, letter of credit, reserve
account, surety bond, swap arrangement, hedging arrangement, liquidity or
credit support arrangement, or other similar agreement or arrangement entered
into in connection with the issuance of recovery bonds that is designed to
promote the credit quality and marketability of the bonds or to mitigate the
risk of an increase in interest rates.

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"Catastrophic
wildfire" means any wildfire in the State that damaged or destroyed more
than five hundred dwellings or commercial buildings.

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"Commission"
means the public utilities commission.

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"Financing
costs" means the costs to issue, service, repay, or refinance recovery
bonds, whether incurred or paid upon issuance of the recovery bonds or over the
life of the recovery bonds, if they are approved for recovery by the commission
in a financing order.
�
"Financing
costs" may include any of the following:

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(1)
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Principal, interest, and redemption premiums
that are payable on recovery bonds;

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(2)
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A payment required under an ancillary
agreement;

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(3)
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An amount required to fund or replenish
reserve accounts or other accounts established under an indenture, ancillary
agreement, or other financing document relating to the recovery bonds;

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(4)
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Taxes, franchise fees, or license fees imposed
on fixed recovery charges;

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(5)
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Costs related to issuing and servicing
recovery bonds or the application for a financing order, including without
limitation servicing fees and expenses, trustee fees and expenses, legal fees
and expenses, accounting fees, administrative fees, underwriting and placement
fees, financial advisory fees, original issue discounts, capitalized interest,
rating agency fees, and any other related costs that are approved for recovery
in the financing order; or

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(6)
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Other costs as specifically authorized by a
financing order.

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"Financing
entity" means the public utility that is authorized by the commission to
issue recovery bonds or acquire recovery property, or both.

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"Financing
order" means an order of the commission adopted in accordance with this
chapter, which shall include without limitation a procedure to require the
expeditious approval by the commission of periodic adjustments to fixed
recovery charges and to any associated fixed recovery tax amounts included in
that financing order to ensure recovery of all recovery costs and the costs
associated with the proposed recovery, financing, or refinancing thereof,
including the costs of servicing and retiring the recovery bonds contemplated
by the financing order.

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"Fixed
recovery charges" 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 both of the following:

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(1)
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Recovery costs specified in the financing
order; and

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(2)
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The costs of recovering, financing, or
refinancing those recovery costs through a plan approved by the commission in
the financing order, including the costs of servicing and retiring recovery
bonds.

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"Fixed
recovery tax amounts" means those nonbypassable rates and other charges,
including but not limited to distribution, connection, disconnection, and
termination rates and charges, that are needed to recover federal and state
taxes associated with fixed recovery charges authorized by the commission in a
financing order, but are not approved as financing costs financed from proceeds
of recovery bonds.

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"Public
utility" has the same meaning as defined in section 269-1.

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"Recovery
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 recover, finance, or refinance
recovery costs, and that are directly or indirectly secured by, or payable
from, recovery property.

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"Recovery
costs" means any of the following:

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(1)
�
Catastrophic wildfire costs or expenses
authorized by the commission in a financing order for recovery;

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(2)
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Federal and state taxes associated with
recovery of the amounts pursuant to paragraph (1);

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(3)
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Financing costs; or

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(4)
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Professional fees, consultant fees, redemption
premiums, tender premiums, and other costs incurred by the
public utility
in using proceeds of recovery bonds to
acquire outstanding securities of the public utility, as authorized by the
commission in a financing order.

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"Recovery
property" means the property right created pursuant to this chapter,
including without limitation the right, title, and interest of the public
utility or its transferee:

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(1)
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In and to the fixed recovery charges
established pursuant to a financing order, including all rights to obtain
adjustments to the fixed recovery charges in accordance with section
-3(k) and the financing order; and

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(2)
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To be paid the amount that is determined in a
financing order to be the amount that the public utility or its transferee is
lawfully entitled to receive pursuant to the provisions of this chapter and the
proceeds thereof, and in and to all revenues, collections, claims, payments,
moneys, or proceeds of or arising from the fixed recovery charges that are the
subject of a financing order.

"Recovery property" shall not include a
right to be paid fixed recovery tax amounts.
�

"Recovery property" shall constitute a current property right,
notwithstanding the fact that the value of the property right will depend on
consumers using electricity or, in those instances where consumers are
customers of the public utility, the public utility performing certain
services.

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"True-up
adjustment" means a formulaic adjustment to the fixed recovery charges as
they appear on customer bills that is necessary to correct for any
overcollection or undercollection of the fixed recovery charges authorized by a
financing order and to otherwise ensure the timely and complete payment and
recovery of recovery costs over the authorized repayment term.

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� -3
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Financing orders; authorization.
�
(a)
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A
public utility that applies to the commission for recovery of costs and
expenses related to a catastrophic wildfire or the mitigation of the risk of
wildfires, may request the commission to issue a financing order to authorize
the costs and expenses that the commission finds to be just and reasonable to
be recovered through fixed recovery charges pursuant to this chapter, and order
that any portion of the public utility's federal and state taxes associated with
those fixed recovery charges and not financed from proceeds of recovery bonds
may be recovered through fixed recovery tax amounts.

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(b)
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Any application pursuant to subsection (a)
shall be governed by this chapter, and shall be deemed to comply with any
requirements imposed by section 269-17 or any other provision of chapter 269.

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(c)
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Upon receiving an application from a public
utility pursuant to this section, the commission shall issue a financing order
if the commission determines that the following conditions are satisfied:

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(1)
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The costs and expenses are authorized for
recovery; and

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(2)
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The issuance of the recovery bonds, including
all material terms and conditions of the recovery bonds, including without
limitation interest rates, rating, amortization redemption, and maturity, and
the imposition and collection of fixed recovery charges as set forth in an
application satisfy all of the following conditions, as applicable:

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(A)
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They are just and reasonable;

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(B)
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They are consistent with the public interest;
and

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(C)
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The recovery of recovery costs through the
designation of the fixed recovery charges and any associated fixed recovery tax
amounts, and the issuance of recovery bonds in connection with the fixed
recovery charges, would reduce, to the maximum extent possible, the rates on a
present value basis that ratepayers would pay as compared to the use of
traditional utility financing mechanisms, which shall be calculated using the
public utility's corporate debt and equity in the ratio approved by the
commission at the time of the financing order.

The public utility may request the determination
specified in this section by the commission in a separate proceeding, in an
existing proceeding, or both.
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If the
commission makes the determination specified in this section, the commission
shall establish, as part of the financing order, a procedure for the public
utility to submit applications from time to time to request the issuance of
additional financing orders designating fixed recovery charges and any
associated fixed recovery tax amounts as recoverable.
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The public utility may submit an application
with respect to recovery costs that a public utility has paid, has an existing
legal obligation to pay, or would be obligated to pay pursuant to an executed
settlement agreement.
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The commission
shall, within one hundred eighty days of the filing of that application, issue
a financing order, which may take the form of a resolution, if the commission
determines that the amounts identified in the application are recovery costs.

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(d)
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Fixed recovery charges and any associated
fixed recovery tax amounts shall be imposed only on existing and future
ratepayers in the utility service territory.
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Ratepayers within the utility service
territory shall continue to pay fixed recovery charges and any associated fixed
recovery tax amounts until the recovery bonds and associated financing costs
are paid in full by the financing entity.

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(e)
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A public utility may exercise the same rights
and remedies under its tariff and applicable law and regulation based upon a
consumer's nonpayment of fixed recovery charges and any associated fixed
recovery tax as it may for a consumer's failure to pay any other charge payable
to that public utility.

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(f)
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The commission may establish in a financing
order an effective mechanism that ensures recovery of recovery costs through
nonbypassable fixed recovery charges and any associated fixed recovery tax
amounts from existing and future consumers in the utility service territory,
and those consumers shall be required to pay those charges until the recovery
bonds and all associated financing costs are paid in full by the financing
entity, at which time those charges shall be terminated.
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Fixed recovery charges shall be irrevocable,
notwithstanding the true-up adjustment pursuant to subsection (k).

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(g)
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Recovery bonds authorized by the commission's
financing orders may be issued in one or more series.

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(h)
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The commission shall issue financing orders
in accordance with this chapter to facilitate the recovery, financing, or
refinancing of recovery costs.
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A
financing order may be adopted only upon the application of the public utility
and shall become effective in accordance with its terms only after the public
utility files with the commission the public utility's written consent to all
terms and conditions of the financing order.
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A financing order may specify how amounts
collected from a consumer shall be allocated between fixed recovery charges,
any associated fixed recovery tax amounts, and other charges.

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(i)
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Notwithstanding any other law, and except as
otherwise provided in subsection (k), with respect to recovery property that
has been made the basis for the issuance of recovery bonds and with respect to
any associated fixed recovery tax amounts, the financing order, the fixed
recovery charges, and any associated fixed recovery tax amounts shall be irrevocable.

�
The commission shall not, either by
rescinding, altering, or amending the financing order or otherwise, revalue or
revise for ratemaking purposes the recovery costs or the costs of recovering,
financing, or refinancing the recovery costs, in any way reduce or impair the
value of recovery property or of the right to receive any associated fixed
recovery tax amounts either directly or indirectly by taking fixed recovery
charges or any associated fixed recovery tax amounts into account when setting
other rates for the public utility.
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The
amount of revenues shall not be subject to reduction, impairment, postponement,
or termination.
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The State does hereby pledge
and agree with the public utility, owners of recovery property, financing
entities, and holders of recovery bonds that the State shall neither limit nor
alter, except as otherwise provided with respect to the true-up adjustment of
the fixed recovery charges pursuant to subsection (k), the fixed recovery
charges, any associated fixed recovery tax amounts, recovery property,
financing orders, or any rights under a financing order until the recovery
bonds, together with the interest on the recovery bonds and associated
financing costs, are fully paid and discharged, and any associated fixed
recovery tax amounts have been satisfied or, in the alternative, have been
refinanced through an additional issue of recovery bonds; provided that 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 public
utility and of owners and holders of the recovery bonds.
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The financing entity may include this pledge
and undertaking for the State in these recovery bonds.
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When setting other rates for the public
utility, nothing in this subsection shall prevent the commission from taking
into account either of the following:
�

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(1)
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Any collection of fixed recovery charges in
excess of amounts actually required to pay recovery costs financed or
refinanced by recovery bonds; or

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(2)
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Any collection of fixed recovery tax amounts
in excess of amounts actually required to pay federal and state taxes
associated with fixed recovery charges; provided that this shall not result in
a recharacterization of the tax, accounting, and other intended characteristics
of the financing, including but not limited to either of the following:

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(A)
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Treating the recovery bonds as debt of the
public utility or its affiliates for federal income tax purposes; or

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(B)
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Treating the transfer of the recovery property
by the public utility as a true sale for bankruptcy purposes.

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(j)
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Neither financing orders nor recovery bonds
issued under this chapter shall constitute a debt or liability of the State or
of any political subdivision thereof, nor shall they constitute a pledge of the
full faith and credit of the State or any of its political subdivisions, but
shall be payable solely from the funds provided under this chapter.
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All recovery bonds shall contain on the face
thereof a statement to the following effect:
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"Neither the full faith and credit nor the
taxing power of the State of Hawaii is pledged to the payment of the principal
of, or interest on, this bond."

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The
issuance of recovery bonds under this chapter shall not directly, indirectly,
or contingently obligate the State or any political subdivision thereof to levy
or to pledge any form of taxation or to make any appropriation for their
payment.

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(k)
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The commission shall establish procedures for
the expeditious processing of an application for a financing order, which shall
provide for the approval or disapproval of the application within one hundred
twenty days of the application.
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Any
fixed recovery charge authorized by a financing order shall appear on ratepayer
bills.
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The commission shall, in any
financing order, provide for a procedure for periodic true-up adjustments to
fixed recovery charges, which shall be made at least annually and may be made
more frequently.
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The public utility
shall file an application with the commission to implement any true-up
adjustment.

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(l)
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Fixed recovery charges are recovery property
when, and to the extent that, a financing order authorizing the fixed recovery
charges has become effective in accordance with this chapter, and the recovery
property shall thereafter continuously exist as property for all purposes, and
all of the rights and privileges relating to that property shall continuously
exist for the period and to the extent provided in the financing order, but in
any event until the recovery bonds are paid in full, including all principal,
premiums, if any, and interest with respect to the recovery bonds, and all
associated financing costs are paid in full.
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A financing order may provide that the
creation of recovery property shall be simultaneous with the sale of the
recovery property to a transferee or assignee as provided in the application of
the pledge of the recovery property to secure the recovery bonds.

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(m)
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Any successor to a financing entity shall be
bound by the requirements of this chapter and shall perform and satisfy all
obligations of, and have the same rights under a financing order as, and to the
same extent as, the financing entity.

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� -4
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Recovery bonds; issuance; recovery property
interests.
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(a)
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The financing entity may issue recovery bonds
upon approval by the commission in a financing order.
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Recovery bonds shall be nonrecourse to the
credit or any assets of the public utility, other than the recovery property as
specified in that financing order.

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(b)
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The public utility may sell and assign all or
portions of its interest in recovery property to one or more financing entities
that make that recovery property the basis for issuance of recovery bonds, to
the extent approved in a financing order.
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The public utility or financing entity may
pledge recovery property as collateral, directly or indirectly, for recovery
bonds to the extent approved in the pertinent financing orders providing for a
security interest in the recovery property, in the manner set forth in section
-5.
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In addition,
recovery property may be sold or assigned by either of the following:

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(1)
�
The financing entity or a trustee for the
holders of recovery bonds or the holders of an ancillary agreement in
connection with the exercise of remedies upon a default; or

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(2)
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Any person acquiring the recovery property
after a sale or assignment pursuant to this chapter.

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(c)
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To the extent that any interest in recovery
property is sold, assigned, or is pledged as collateral pursuant to subsection
(b), the commission shall authorize the public utility to contract with the
financing entity that it will continue to operate its system to provide service
to consumers within its service territory, will collect amounts in respect of
the fixed recovery charges 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.
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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 a security interest, as applicable.
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To the extent that billing, collection, and
other related services with respect to the provision of the public utility's
services are provided to a consumer by any person or entity other than the
public utility in whose service territory the consumer is located, that person
or entity shall collect the fixed recovery charges and any associated fixed
recovery tax amounts from the consumer for the benefit and account of the
public utility or financing entity with the associated revenues remitted solely
for the benefit and repayment of the recovery bonds and associated financing
costs as a condition to the provision of electric service to that consumer.
�
Each financing order shall impose terms and
conditions, consistent with the purposes and objectives of this chapter, on any
person or entity responsible for billing, collection, and other related
services, including without limitation collection of the fixed recovery charges
and any associated fixed recovery tax amounts, that are the subject of the
financing order.

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(d)
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Recovery property that is specified in a
financing order shall constitute an existing, present property right,
notwithstanding the fact that the imposition and collection of fixed recovery
charges depend on the public utility continuing to provide services or
continuing to perform its servicing functions relating to the collection of
fixed recovery charges or on the level of future service consumption, e.g.,
electricity consumption.
�
Recovery
property shall exist whether or not the fixed recovery charges have been
billed, have accrued, or have been collected and notwithstanding the fact that
the value for a security interest in the recovery property, or amount of the
recovery property, is dependent on the future provision of service to
consumers.
�
All recovery property
specified in a financing order shall continue to exist until the recovery bonds
issued pursuant to a financing order and all associated financing costs are
paid in full.

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(e)
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Recovery property, fixed recovery charges,
and the interests of an assignee, bondholder or financing entity, or any
pledgee in recovery property and fixed recovery charges shall not be subject to
setoff, counterclaim, surcharge, recoupment, or defense by the public utility or
any other person or in connection with the bankruptcy, reorganization, or other
insolvency proceeding of the public utility, any affiliate of the public
utility, or any other entity.

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(f)
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Notwithstanding any other law to the contrary, any
requirement under this chapter or a financing order that the commission takes
action with respect to the subject matter of a financing order shall be binding
upon the commission, as it may be constituted from time to time, and any
successor agency exercising functions similar to the commission, and the
commission shall have no authority to rescind, alter, or amend that requirement
in a financing order.

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� -5
�
Security interests in recovery property;
financing statements.
�
(a)
�
A security interest in recovery property is
valid, enforceable against the pledgor and third parties, subject to the rights
of any third parties holding security interests in the recovery property
perfected in the manner described in this section, and attaches when all of the
following have taken place:

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(1)
�
The commission has issued a financing order
authorizing the fixed recovery charges included in the recovery property;

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(2)
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Value has been given by the pledgees of the
recovery property; and

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(3)
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The pledgor has signed a security agreement
covering the recovery property.

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(b)
�
A valid and enforceable security interest in
recovery property is perfected when it has attached and when a financing
statement has been filed naming the pledgor of the recovery property as "debtor"
and identifying the recovery property.
�
Any
description of the recovery property shall be sufficient if it refers to the
financing order creating the recovery property.
�
A copy of the financing statement shall be
filed with the commission by the public utility that is the pledgor or
transferor of the recovery property, and the commission may require the public
utility 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.

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(c)
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A perfected security interest in recovery
property shall be a continuously perfected security interest in all recovery
property revenues and proceeds arising with respect thereto, whether or not the
revenues or proceeds have accrued.
�
Conflicting
security interests shall rank according to priority in time of perfection.
�
Recovery property shall constitute property
for all purposes, including for contracts securing recovery bonds, whether or
not the recovery property revenues and proceeds have accrued.
�

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(d)
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Subject to the terms of the security
agreement covering the recovery property and the rights of any third parties
holding security interests in the recovery property perfected in the manner
described in this section, the validity and relative priority of a security
interest created under this section shall not be defeated or adversely affected
by the commingling of revenues arising with respect to the recovery property
with other funds of the public utility that is the pledgor or transferor of the
recovery property, or by any security interest in a deposit account of that
public utility perfected under article 9 of chapter 490, into which the
revenues are deposited.
�
Subject to the
terms of the security agreement, upon compliance with the requirements of section
490:9-312(b)(1), the pledgees of the recovery property shall have a perfected
security interest in all cash and deposit accounts of the electrical
corporation in which recovery property revenues have been commingled with other
funds; provided that the perfected security interest shall be limited to an
amount not greater than the amount of the recovery property revenues received
by the public utility within twelve months before (1) any default under the
security agreement, or (2) the institution of insolvency proceedings by or
against the public utility, less payments from the revenues to the pledgees
during that twelve-month period.

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(e)
�
If default occurs under the security
agreement covering the recovery property, the pledgees of the recovery
property, subject to the terms of the security agreement, shall have all rights
and remedies of a secured party upon default under article 9 of chapter 490,
and shall be entitled to foreclose or otherwise enforce their security interest
in the recovery property, subject to the rights of any third parties holding
prior security interests in the recovery property perfected in the manner
provided in this section.
�
In addition,
the commission may require in the financing order creating the recovery
property that, in the event of default by the electrical corporation in payment
of recovery property revenues, the commission and any successor thereto, upon
the application by the pledgees or transferees, including transferees under section
-6 of the recovery 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
recovery property revenues.
�
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 recovery property.
�
Any surplus in excess of amounts necessary to
pay principal, premiums, if any, interest, costs, and arrearages on the
recovery bonds, and associated financing costs arising under the security
agreement, shall be remitted to the debtor or to the pledgor or transferor.

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(f)
�
Sections 490:9-204 and 490:9-205 shall apply
to a pledge of recovery property by the public utility, an affiliate of the
public utility, or a financing entity.

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(g)
�
This section sets forth the terms by which a
consensual security interest shall be created and perfected in the recovery
property.
�
Unless otherwise ordered by
the commission with respect to any series of recovery bonds on or prior to the
issuance of the series, there shall exist a statutory lien as provided in this
subsection.
�
Upon the effective date of
the financing order, there shall exist a first priority lien on all recovery
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 public utility, 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
recovery 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 article 9 of chapter 490, and are entitled to foreclose or
otherwise enforce this statutory lien in the recovery property.
�
This lien shall attach to the recovery
property regardless of who owns, or is subsequently determined to own, the
recovery property, including the public utility, any affiliate thereof, the financing
entity, or any other person.
�
This lien
shall be valid, perfected, and enforceable against the owner of the recovery
property and all third parties upon the effectiveness of the financing order
without any further public notice; provided that any person may file a
financing statement in accordance with this section.
�
Financing statements so filed may be
"protective filings" and shall not be evidence of the ownership of
the recovery property.

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A
perfected statutory lien in recovery property is a continuously perfected lien
in all recovery property revenues and proceeds, whether or not the revenues or
proceeds have accrued.

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Conflicting
liens shall rank according to priority in time of perfection.
�
Recovery property shall constitute property
for all purposes, including for contracts securing recovery bonds, whether or
not the recovery property revenues and proceeds have accrued.

����
In
addition, the commission may require, in the financing order creating the
recovery property, that, in the event of default by the public utility in the
payment of recovery property revenues, 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
recovery property revenues.
�
Any order
shall remain in full force and effect notwithstanding any bankruptcy,
reorganization, or other insolvency proceedings with respect to the
debtor.
�
Any surplus in excess of amounts
necessary to pay principal, premiums, if any, interest, costs, and arrearages
on the recovery bonds, and other costs arising in connection with the documents
governing the recovery bonds, shall be remitted to the debtor.

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� -6
�
Transfers of recovery property.
�
(a)
�
A
transfer of recovery property by the public utility to an affiliate or to a
financing entity, or by an affiliate of the public utility or a financing
entity to another financing entity, which the parties in the governing
documentation have expressly stated to be a sale or other absolute transfer, in
a transaction approved in a financing order, shall be treated as an absolute
transfer of all of the transferor's right, title, and interest, as in a true
sale, and not as a pledge or other financing, of the recovery property, other
than for federal and state income and franchise tax purposes.

����
(b)
�
The characterization of the sale, assignment,
or transfer as an absolute transfer and true sale and the corresponding
characterization of the property interest of the purchaser shall not be
affected or impaired by, among other things, the occurrence of any of the
following:

����
(1)
�
Commingling of fixed recovery charge revenues
with other amounts;

����
(2)
�
The retention by the seller of either of the
following:

���������
(A)
�
A partial or residual interest, including an
equity interest, in the financing entity or the recovery property, whether
direct or indirect, subordinate or otherwise; or

���������
(B)
�
The right to recover costs associated with
taxes, franchise fees, or license fees imposed on the collection of fixed
recovery charges;

����
(3)
�
Any recourse that the purchaser may have
against the seller;

����
(4)
�
Any indemnification rights, obligations, or
repurchase rights made or provided by the seller;

����
(5)
�
The obligation of the seller to collect fixed
recovery charges on behalf of an assignee;

����
(6)
�
The treatment of the sale, assignment, or
transfer for tax, financial reporting, or other purpose; or

����
(7)
�
Any true-up adjustment of the fixed recovery
charges as provided in the financing order.

����
(c)
�
A transfer of recovery property shall be
deemed perfected against third persons when both of the following occur:

����
(1)
�
The commission issues the financing order
authorizing the fixed recovery charges included in the recovery property; and

����
(2)
�
An assignment of the recovery property in
writing has been executed and delivered to the transferee.

����
(d)
�
As between bona fide assignees of the same
right for value without notice, the assignee first filing a financing statement
in accordance with part 5 of article 9 of chapter 490, naming the assignor of
the recovery property as debtor and identifying the recovery property shall
have priority.
�
Any description of the
recovery property shall be sufficient if it refers to the financing order
creating the recovery 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.

����
� -7
�
Successors to public utilities; obligations.
�
Any successor to the public utility, 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 public utility pursuant to
this chapter in the same manner and to the same extent as the public utility,
including but not limited to collecting and paying to the holders of recovery
bonds, their representatives, or the applicable financing entity, revenues
arising with respect to the recovery property sold to the applicable financing
entity or pledged to secure recovery bonds.
�
Any successor to the public utility shall be
entitled to receive any fixed recovery tax amounts otherwise payable to the
public utility.

����
� -8
�
Credits to customers.
�
(a)
�
Notwithstanding
section -3(i), if, subsequent to the issuance of a financing
order, a public utility receives additional insurance proceeds, tax benefits,
or other amounts that reimburse the public utility for costs associated with
catastrophic wildfire amounts included in the recovery costs addressed in that
financing order, the public utility shall credit customers, in a manner to be
determined by the commission, with the net after tax amounts of those
reimbursements, but the commission shall not adjust, amend, or modify the
catastrophic wildfire amounts, fixed recovery charges, the fixed recovery tax
amounts, the financing order, recovery costs, the recovery property, or the
recovery bonds.

����
(b)
�
Nothing in this section shall be construed to
permit setoff, counterclaim, surcharge, recoupment, or defense by the public
utility or any other person, or in connection with the bankruptcy,
reorganization, or other insolvency proceeding of the electrical corporation,
any affiliate of the public utility, or any other entity, against the recovery
property, the fixed recovery charges, or the interests of an assignee,
bondholder, or financing entity, or any pledgee in recovery property or fixed
recovery charges.

����
� -9
�
Limitations.
�
This chapter shall not affect any civil
action or proceeding."

����
SECTION
3.
�
This Act does not affect rights and
duties that matured, penalties that were incurred, and proceedings that were
begun before its effective date.

����
SECTION
4.
�
If any provision of this Act, or the
application thereof to any person or circumstance, is held invalid, the
invalidity does not affect other provisions or applications of the Act that can
be given effect without the invalid provision or application, and to this end
the provisions of this Act are severable.

����
SECTION 5.
�
This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________

Report Title:

Public
Utilities Commission; Public Utilities; Electrical Corporations; Rate Securitization;
Catastrophic Wildfire Expenses; Financing Orders; Recovery Bonds; Recovery
Property

Description:

Establishes
and implements the Catastrophic Wildfire Securitization Act, to allow public
utilities to securitize rates in order to raise capital that can be used to pay
for costs and expenses arising out of catastrophic wildfires.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.