§ 23-18-901 - Short title -- Purpose.
23-18-901. Short title -- Purpose.
(a) This subchapter shall be known and may be cited as the "Arkansas Electric Utility Storm Recovery Securitization Act".
(b) The purpose of this subchapter is to enable Arkansas electric utilities, if authorized by a financing order issued by the Arkansas Public Service Commission, to use securitization financing for storm recovery costs, which may lower the financing costs or mitigate the impact on rates in comparison with traditional utility financing or other traditional utility recovery methods thereby benefitting customers. The storm recovery bonds will not be public debt. The proceeds of the storm recovery bonds shall be used for the purposes of recovering storm recovery costs solely as set forth in a financing order issued by the commission to encourage and facilitate the rebuilding of utility infrastructure damaged by storms. Securitization financings for storm recovery costs are hereby recognized to be a valid public purpose. Federal tax laws and revenue procedures expressly require that certain state legislation be enacted in order for such transactions to receive certain federal tax benefits. The General Assembly finds a public need to promote such securitization financings by providing clear and exclusive methods to create, transfer, and encumber interests in storm recovery property as defined in this subchapter. This need can be met by providing in this subchapter such methods and by establishing that any conflict between the rules governing sales, assignments, or transfers of, or security interests or other encumbrances of any nature upon intangible personal property under other Arkansas laws and the methods provided in this subchapter, including without limitation with regard to creation, perfection, priority, or enforcement, shall be resolved in favor of the rules and methods established in this subchapter with regard to storm recovery property.
(c) The intent of this subchapter is to provide benefits to Arkansas customers by allowing an Arkansas electric utility, if authorized by a financing order, to achieve certain tax and credit benefits of financing storm recovery costs on a similar basis with utilities in other states. This subchapter addresses certain property, security interests, and other matters to ensure that the financial, state income tax, state franchise tax, and federal income tax benefits of financing storm recovery costs through securitization are available in Arkansas. Financing orders issued under this subchapter shall not be considered as or deemed to be single issue ratemaking. The beneficial income tax and credit characteristics that may be achieved include the following:
(1) Treating the storm recovery bonds as debt of the electric utility for state and federal income tax purposes;
(2) Treating the storm recovery charges as gross income to the electric utility recognized under the utility's usual method of accounting for income taxes, rather than recognizing gross income upon the receipt of the financing order or the receipt of cash in exchange for the sale of the storm recovery property or the issuance of the storm recovery bonds;
(3) Avoiding the recognition of debt on the electric utility's balance sheet for certain credit and regulatory purposes by reason of the storm recovery bonds;
(4) Treating the sale, assignment, or transfer of the storm recovery property by the electric utility as a true sale for state law and bankruptcy purposes; and
(5) Avoiding any adverse impact of the financing on the electric utility's credit rating.