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Approval of transition bonds - 66 Pa. Cons. Stat. § 2812Legal Research Home > Pennsylvania Statutes Sponsored Links
§ 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).
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Last modified: November 27, 2007 |