2812 - Approval of transition bonds.
§ 2812. Approval of transition bonds. (a) Qualified rate orders.--Notwithstanding any other provision of law, the commission is authorized to issue qualified rate orders in accordance with the provisions of this subsection to facilitate the recovery or financing of qualified transition expenses of an electric utility or assignee. (1) A qualified rate order may be adopted by the commission only upon the application of an electric utility and shall become effective in accordance with its terms. After the issuance of a qualified rate order, the electric utility retains sole discretion regarding whether to assign, sell or otherwise transfer intangible transition property or to cause the transition bonds to be issued, including the right to defer or postpone such assignment, sale, transfer or issuance. (2) After the effective date of this chapter, an electric utility may file an application for a qualified rate order pursuant to the following procedures: (i) Each application for a qualified rate order shall contain a complete accounting of the utility's transition or stranded costs, detailed information regarding the utility's proposal for the sale of intangible transition property or the issuance of transition bonds and information regarding the electric utility's planned use of the proceeds of the sale or issuance. After the utility has filed its restructuring plan under section 2806 (relating to implementation, pilot programs and performance-based rates), the utility may incorporate by reference the information in the restructuring plan in providing the information. (ii) An electric utility may file an application for a qualified rate order concurrently with, prior to, during or following the filing of its restructuring plan under section 2806. If an electric utility requests expedited review under subsection (b)(1)(i) or (ii), it shall designate in its application the portion of its total claimed transition or stranded costs for which it requests such expedited review. (iii) After notice and an opportunity to be heard, the commission may issue a final qualified rate order for all or a portion of the amount of transition or stranded costs that it finds would be just and reasonable for the utility to recover from ratepayers under sections 2804 (relating to standards for restructuring of electric industry) and 2808 (relating to competitive transition charge). The commission shall issue a final qualified rate order only for the amounts for which it finds such issuance to be in the public interest. The commission shall complete its review of the application and issue its final determination by the later of nine months from the filing, unless the electric utility requests expedited treatment under subsection (b), or 15 days following the filing of the electric utility's restructuring plan under section 2806. (b) Expedited review procedures.-- (1) The commission shall provide for expedited review of applications for qualified rate orders upon request of the electric utility pursuant to the following procedures: (i) If the utility elects to file an application prior to the filing of its restructuring plan and requests expedited review, the commission, after notice and an opportunity to be heard, may issue a final qualified rate order approving the issuance of transition bonds for a portion of the utility's transition or stranded costs that the commission finds would be just and reasonable to recover from ratepayers under sections 2804 and 2808. The commission shall consider only the portion of the transition or stranded costs for which the utility requests approval to issue transition bonds. Consideration of all remaining amounts and amounts not resolved by the commission shall be deferred for consideration in the electric utility's restructuring plan proceeding under section 2806. The commission shall complete its review of the application and issue its final determination within 120 days after the request for expedited review but in no event earlier than 15 days after the utility has filed its restructuring plan under section 2806. (ii) If the electric utility files an application for a qualified rate order concurrently with its restructuring plan or during the course of the restructuring plan proceeding, the electric utility may request, and the commission may allow, an accelerated determination of the application. After notice and an opportunity to be heard, the commission may issue a final qualified rate order approving the issuance of transition bonds for a portion of the utility's stranded or transition costs that the commission finds would be just and reasonable to recover from ratepayers under sections 2804 and 2808. The commission shall consider only the portion of the utility's transition or stranded costs for which the utility seeks expedited review. Consideration of all remaining amounts and amounts not resolved by the commission shall be deferred for consideration in a final order regarding the utility's restructuring plan under section 2806. The commission shall complete its review of the application and issue its final determination within 120 days after the request for expedited review. (iii) If the electric utility files an application for a qualified rate order after the commission enters a final order regarding the utility's restructuring plan, and requests expedited treatment, the commission shall complete its review and issue its final determination within 120 days of the request for expedited review. (2) The qualified rate order shall require that the proceeds from the assignment, sale or transfer or other financing of intangible transition property shall be used principally to reduce the electric utility's transition or stranded costs and to reduce the related capitalization, pursuant to a plan submitted by the electric utility in its application for a qualified rate order and approved by the commission. (3) Notwithstanding any other provision of law, the commission has the power to specify that all or a portion of a qualified rate order shall be irrevocable. To the extent so specified, neither the order nor the intangible transition charges authorized to be imposed and collected under the order shall be subject to reduction, postponement, impairment or termination by any subsequent action of the commission. Nothing in this paragraph is intended to supersede the right of any party to judicial review of the qualified rate order. (4) The commission shall provide in any qualified rate order for a procedure for the expeditious approval by the commission of periodic adjustments to the intangible transition charges that are the subject of the pertinent qualified rate order. Such adjustments shall ensure the recovery of revenues sufficient to provide for the payment of principal, interest, acquisition or redemption premium and for other fees, costs and charges in respect of transition bonds approved by the commission as part of or in conjunction with a qualified rate order. The commission shall determine whether the adjustments are required on each anniversary of the issuance of the qualified rate order and at the additional intervals as may be provided for in the qualified rate order. The adjustments, if required, shall be approved within 90 days of each anniversary of the issuance of the qualified rate order or of each additional interval provided for in the qualified rate order. (5) Notwithstanding any other provision of law, on such conditions as the commission may approve, all or portions of the interest of an electric utility in intangible transition property may be assigned, sold or transferred to an assignee and may be pledged or assigned as security by an electric utility or assignee to or for the benefit of a financing party. To the extent that an interest is assigned, sold or transferred or is pledged or assigned as security, the commission shall authorize the electric utility to contract with the assignee or financing party that the electric utility will continue to operate its system to provide service to its customers, will impose and collect the applicable intangible transition charges for the benefit and account of the assignee or financing party and will account for and remit the applicable intangible transition charge to or for the account of the assignee or financing party. If the qualified rate order so provides, the obligations of the electric utility: (i) shall be binding upon the electric utility, its successors and assigns; and (ii) shall be required by the commission to be undertaken and performed by the electric utility and any other entity which provides electric service to a person that was a customer of an electric utility located within the certificated territory of the electric utility on the effective date of this chapter or that became a customer of electric services within such territory after the effective date of this chapter and is still located within such territory, as a condition to the provision of service to such customer by such electric utility or other entity, unless the customer has paid a termination charge in the manner and on the basis specified in the qualified rate order. (6) The irrevocable status of any portion of a qualified rate order under paragraph (3) shall lapse and terminate to the extent that an assignment, sale or transfer of the intangible transition property resulting from the rate order or the issuance of the related transition bonds is not effected within the period specified in the qualified rate order. (7) The effect of any subsequent refinancing of transition bonds upon the rates authorized in a qualified rate order shall be as provided in such order. (8) In its qualified rate order, the commission shall afford flexibility in establishing the terms and conditions of the transition bonds, including repayment schedules, interest rates and other financing costs. The electric utility shall file the final terms of issuance with the commission. (c) Intangible transition property.-- (1) Any right that an electric utility has in the intangible transition property prior to its sale or transfer or any other right created under this section or created in the qualified rate order and assignable under this section or assignable pursuant to a qualified rate order shall be only a contract right. (2) The Commonwealth pledges to and agrees with the holders of any transition bonds issued under this section and with any assignee or financing party who may enter into contracts with an electric utility under this section that the Commonwealth will not limit or alter or in any way impair or reduce the value of intangible transition property or intangible transition charges approved by a qualified rate order until the transition bonds and interest on the transition bonds are fully paid and discharged or the contracts are fully performed on the part of the electric utility. Subject to other requirements of law, nothing in this paragraph shall preclude limitation or alteration if adequate compensation is made by law for the full protection of the intangible transition charges collected pursuant to a qualified rate order and of the holder of this transition bond and any assignee or financing party entering into contract with the electric utility. (d) Security interests in intangible transition property.-- (1) Neither intangible transition property nor any right, title or interest of a utility or assignee described in paragraph (1) of the definition of "intangible transition property" in subsection (g), whether before or after the issuance of the qualified rate order, shall constitute "an account" or "general intangibles" under 13 Pa.C.S. § 9102 (relating to definitions and index of definitions) nor shall any such right, title or interest pertaining to a qualified rate order, including the associated intangible transition property and any revenues, collections, claims, payments, money or proceeds of or arising from intangible transition charges pursuant to such order, be deemed proceeds of any right or interest other than in the order and the intangible transition property arising from the order. (2) The granting, perfection and enforcement of security interests in intangible transition property to secure transition bonds is governed by this section rather than by Title 13 (relating to commercial code). (3) A valid and enforceable security interest in intangible transition property shall attach and be perfected only by means of a separate filing with the commission, under regulations the commission prescribes. For this purpose: (i) If the transition bonds are issued to finance any qualified transition expenses, as specified in the applicable qualified rate order, the lien of the bonds shall attach automatically to the intangible transition property relating to the expenses from the time of issuance of the bonds. (ii) The lien under subparagraph (i) shall be deemed a valid and enforceable security interest in the intangible transition property securing the qualified transition bonds and shall be continuously perfected if, before the date of issuance specified in subparagraph (i) or within no more than ten days after the date, a filing has been made by or on behalf of the financing party to protect that security interest in accordance with the procedures prescribed by the commission under this subsection. Any filing in respect to such transition bonds shall take precedence over any other filing. (iii) The lien under subparagraph (i) is enforceable against the assignee and all third parties, including judicial lien creditors, subject only to the rights of any third parties holding security interests in the intangible transition property previously perfected in the manner described in this subsection if value has been given by the purchasers of transition bonds. A perfected lien in intangible transition property is a continuously perfected security interest in all revenues and proceeds arising with respect to the associated intangible transition property, whether or not revenues have accrued. Intangible transition property constitutes property for the purposes of contracts securing transition bonds, whether or not the related revenues have accrued. The lien created under this paragraph is perfected and ranks prior to any other lien, including any judicial lien, which subsequently attaches to the intangible transition property, to the intangible transition charges and to the qualified rate order and any rights created by the order or any proceeds of the order. The relative priority of a lien created under this paragraph is not defeated or adversely affected by changes to the qualified rate order or to the intangible transition charges payable by any customer. (iv) The relative priority of a lien created under this paragraph is not defeated or adversely affected by the commingling of revenues arising with respect to intangible transition property with funds of the electric utility or other funds of the assignee. (v) If an event of default occurs under approved transition bonds, the holders of transition bonds or their authorized representatives, as secured parties, may foreclose or otherwise enforce the lien in the intangible transition property securing the transition bonds, subject to the rights of any third parties holding prior security interests in the intangible transition property perfected in the manner provided in this subsection. Upon application by the holders or their representatives, without limiting their other remedies, the commission shall order the sequestration and payment to the holders or their representatives of revenues arising with respect to the intangible transition property pledged to the holders. An order under this subparagraph shall remain in full force and effect notwithstanding any bankruptcy, reorganization or other insolvency proceedings with respect to the electric utility or assignee. (4) The commission shall establish and maintain a separate system of records to reflect the date and time of receipt of all filings made under this subsection and may provide that transfers of intangible transition property to an assignee be filed in accordance with the same system. (e) True sale.--A transfer of intangible transition property by an electric utility to an assignee which the parties have in the governing documentation expressly stated to be a sale or other absolute transfer, in a transaction approved in a qualified rate 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 intangible transition property, other than for Federal and State income and franchise tax purposes. Granting to holders of transition bonds a preferred right to the intangible transition property or the provision by the electric utility of any credit enhancement with respect to transition 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. A transfer of intangible transition property shall be deemed perfected as against third persons, including any judicial lien creditors, when all of the following have taken place: (1) The commission has issued the qualified rate order creating intangible transition property. (2) A sale or transfer of the intangible transition property in writing has been executed and delivered to the assignee. (f) Actions with respect to intangible transition charges.-- (1) Nothing in this chapter shall entitle any person to bring an action against a retail electric customer for nonpayment of intangible transition charges, other than the electric utility, its successor or any other entity which provides electric service to a person that was a customer of an electric utility located within the certificated territory of the electric utility on the effective date of this chapter or that became a customer of electric services within such territory after the effective date of this chapter and is still located within such territory. (2) The commission has exclusive jurisdiction over any dispute arising out of the obligations to impose and collect intangible transition charges of an electric utility, its successor or any other entity which provides electric service to a person that was a customer of an electric utility located within the certificated territory of the electric utility on the effective date of this chapter or that became a customer of electric services within such territory after the effective date of this chapter and is still located within such territory. (g) Definitions.--As used in this section, the following words and phrases shall have the meanings given to them in this subsection: "Assignee." An entity, including a corporation, public authority, trust or financing vehicle, to which an electric utility assigns, sells or transfers other than as security all or a portion of its interest in or right to intangible transition property. The term includes an entity, including a corporation, public authority, trust or financing vehicle to which a direct assignee of an electric utility may assign, sell or transfer other than as security its interest in or right to intangible transition property. "Financing party." A holder of transition bonds, including trustees, collateral agents and other entities acting for the benefit of such a holder. "Intangible transition charges." The amounts authorized to be imposed on all customer bills and collected, through a nonbypassable mechanism by the electric utility or its successor or by any other entity which provides electric service to a person that was a customer of an electric utility located within the certificated territory of the electric utility on the effective date of this chapter or that, after this effective date of this chapter, became a customer of electric services within such territory and is still located within such territory, to recover qualified transition expenses pursuant to a qualified rate order. The amounts shall be allocated to customer classes in a manner that does not shift interclass or intraclass costs and maintains consistency with the allocation methodology for utility production plant accepted by the commission in the electric utility's most recent base rate proceeding. "Intangible transition property." (1) The property right created under this section representing the irrevocable right of the electric utility or an assignee to receive through intangible transition charges amounts sufficient to recover all of its qualified transition expenses. The term includes all right, title and interest of the electric utility or assignee in the qualified rate order and in all revenues, collections, claims, payments, money or proceeds of or arising from intangible transition charges pursuant to the order to the extent that, in accordance with this chapter, the order and the rates and other charges authorized under the order are declared to be irrevocable. (2) Intangible transition property shall arise and exist only when, as and to the extent that an electric utility or assignee has qualified transition expenses for which intangible transition charges are authorized in a qualified rate order that has become effective in accordance with subsection (a) and shall thereafter continuously exist to the extent provided in the order. "Qualified rate order." An order of the commission adopted in accordance with this section, authorizing the imposition and collection of intangible transition charges. "Qualified transition expenses." The transition or stranded costs of an electric utility approved by the commission for recovery under sections 2804 (relating to standards for restructuring of electric industry) and 2808 (relating to competitive transition charge) through the issuance of transition bonds; the costs of retiring existing debt or equity capital of the electric utility or its holding company parent, including accrued interest and acquisition or redemption premium, costs of defeasance, and other related fees, costs and charges relating to, through the issuance of transition bonds or the assignment, sale or other transfer of intangible transition property; and the costs incurred to issue, service or refinance the transition bonds, including accrued interest and acquisition or redemption premium, and other related fees, costs and charges, or to assign, sell or otherwise transfer intangible transition property. "Transition bonds." Bonds, debentures, notes, certificates of participation or of beneficial interest or other evidences of indebtedness or ownership which: (1) are issued by or on behalf of the electric utility or assignee pursuant to a qualified rate order; (2) are secured by or payable from intangible transition property; and (3) reach final maturity in no longer than ten years. (June 8, 2001, P.L.123, No.18, eff. July 1, 2001) 2001 Amendment. Act 18 amended subsec. (d)(1). Cross References. Section 2812 is referred to in section 2808 of this title; section 9109 of Title 13 (Commercial Code).