Louisiana Senate Bill SB619 Latest Draft

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Regular Session, 2010
SENATE BILL NO. 619
BY SENATOR ALARIO 
UTILITIES. Creates the Louisiana Electric Utility Investment Recovery Securitization Act.
(gov sig)
AN ACT1
To amend and reenact R.S. 10:9-109(c)(4), (5), and (6)(C) and to enact R.S. 10:9-109(c)(7)2
and Part VII-C of Chapter 9 of Title 45 of the Louisiana Revised Statutes of 1950,3
to be comprised of R.S. 45:1251 through 1261, relative to utilities; to provide for4
security interests in investment recovery property; to provide for legislative intent5
and definitions; to provide with respect to issuance of financing orders; to provide6
for appeals of financing orders; to provide for a utility's interest in a financing order;7
to provide for investment recovery property; to provide for the sale of investment8
recovery property; to provide for the perfection and true sale status of a sale of9
investment recovery property; to provide for subsidiaries of electric utilities; to10
provide for conflicts of laws; to provide for the creation, perfection, and priority of11
security interests in investment recovery property; to provide a state pledge of non-12
impairment of investment recovery bonds; to exempt investment recovery bonds13
from being public debt; to provide an exclusion from secured transaction provisions14
of the uniform commercial laws; to provide for non-impairment of the jurisdiction15
of the commission; and to provide for related matters.16
Be it enacted by the Legislature of Louisiana:17 SB NO. 619
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Section 1. R.S. 10:9-109(c)(4), (5), and 6(C) are hereby amended and reenacted and1
R.S. 10:9-109(c)(7) is hereby enacted to read as follows:2
§9-109.  Scope3
*          *          *4
(c) Extent to which Chapter does not apply.  This Chapter does not apply to5
the extent that:6
*          *          *7
(4)  the rights of a transferee beneficiary or nominated person under a letter8
of credit are independent and superior under R.S. 10:5-114; or9
(5)  the rights of a successor in an estate are interests in real property.;10
(6) R.S. 45:1226 through 1236, the Louisiana Electric Utility Storm Recovery11
Securitization Act, expressly governs the creation, perfection, priority, or12
enforcement of a security interest in storm recovery property as defined therein or13
any interest or right in any storm recovery property, but except to the extent contrary14
to express provisions in said Act:15
*          *          *16
(C) This Chapter applies to the enforcement of security interests in storm17
recovery property .; or18
(7) R.S. 45:1251 through 1261, the Louisiana Electric Utility Investment19
Recovery Securitization Act, expressly governs the creation, perfection, priority,20
or enforcement of a security interest in investment recovery property as defined21
therein or any interest or right in any investment recovery property, but, except22
to the extent contrary to express provisions in said Act, the following provisions23
of this Chapter nonetheless do apply:24
(A) Part VII of this Chapter applies with respect to financing statements25
pertaining to investment recovery property.26
(B)  This Chapter applies to perfection, the effect of perfection or27
nonperfection, and the priority of a security interest held by a secured party28
having control of a deposit account or securities account as original collateral.29 SB NO. 619
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(C) This Chapter applies to the enforcement of security interests in1
investment recovery property.2
*          *          *3
Section 2.  Part VII of Chapter 9 of Title 45 of the Louisiana Revised Statutes of4
1950, comprised of R.S. 45:1251 through 1261, is hereby enacted to read as follows:5
PART VII-C.  LOUISIANA ELECTRIC INVESTMENT6
RECOVERY SECURITIZATION ACT7
§1251.  Short title; purpose8
A. This Part shall be known and may be cited as the "Louisiana Electric9
Utility Investment Recovery Securitization Act."10
B. The purpose of this Part is to enable Louisiana electric utilities, if11
authorized by a financing order issued by the commission, to use securitization12
financing for certain investment recovery costs, because this type of debt may13
lower the financing costs or mitigate the impact on rates in comparison with14
conventional utility financing methods or alternative methods of recovery,15
thereby benefiting ratepayers. The investment recovery bonds shall not be16
public debt. The proceeds of the investment recovery bonds shall be used for17
the purpose of recovering certain investment recovery costs, solely as allowed18
by the commission. Securitization financing for investment recovery costs are19
hereby recognized to be a valid public purpose.  Federal tax laws and revenue20
procedures expressly require that special state legislation be enacted in order21
for such transactions to receive certain tax benefits. The legislature finds a need22
to promote such securitization financing, if authorized by the commission, by23
providing clear and exclusive methods to create, transfer, and encumber24
interests in investment recovery property as defined in this Part. This need can25
be met by providing in this Part for such methods and by establishing that any26
conflict between the rules governing sales, assignments or transfers of, or27
security interests, privileges, or other encumbrances of any nature upon,28
incorporeal movable property under other Louisiana laws and the methods29 SB NO. 619
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provided in this Part, including without limitation with regard to creation,1
perfection, priority, or enforcement, shall be resolved in favor of the rules and2
methods established in this Part with regard to investment recovery property.3
C. The intent of this Part is to provide benefits to Louisiana ratepayers4
by allowing a Louisiana electric utility, if authorized by a financing order, to5
achieve certain tax and credit benefits of financing investment recovery costs.6
This Part does not in any way limit, impair, or impact the commission's plenary7
jurisdiction over the rates charged and services rendered by public utilities in8
this state.  Instead, this Part addresses certain property, security interest, and9
other matters to ensure that the financial and federal income tax benefits of10
financing investment recovery costs through securitization are available in11
Louisiana. The beneficial income tax and credit characteristics that may be12
achieved include the following:13
(1) Treating the investment recovery bonds as debt of the electric utility14
for income tax purposes.15
(2) Treating the investment recovery charges as gross income to the16
electric utility recognized under the utility's usual method of accounting for17
federal and state income tax purposes, rather than recognizing gross income18
upon the receipt of the financing order or of cash in exchange for the sale of the19
investment recovery property or the issuance of the investment recovery bonds.20
(3) Avoiding the recognition of debt on the electric utility's balance sheet21
for certain credit and regulatory purposes by reason of the investment recovery22
bonds.23
(4) Treating the sale, assignment, or transfer of the investment recovery24
property by the electric utility as a true sale for state law and bankruptcy25
purposes.26
(5) Avoiding any adverse impact of the financing on the electric utility's27
credit rating.28
§1252.  Definitions29 SB NO. 619
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As used in this Part:1
(1)  "Ancillary agreement" means any bond, insurance policy, letter of2
credit, reserve account, surety bond, swap arrangement, hedging arrangement,3
liquidity or credit support arrangement, or other financial arrangement entered4
into in connection with the issuance or payment of investment recovery bonds.5
(2) "Assignee" means any legal or commercial entity, including, but not6
limited to, a corporation, limited liability company, partnership, limited7
partnership, or other legally recognized entity to which an electric utility sells,8
assigns, or transfers, other than as security, all or a portion of its interest in or9
right to investment recovery property.  The term also includes any legal or10
commercial entity to which an assignee sells, assigns, or transfers, other than as11
security, all or a portion of its interest in or right to investment recovery12
property.13
(3) "Commission" means the Public Service Commission or, solely with14
respect to an electric utility furnishing electric service within the city of New15
Orleans, the council of the city of New Orleans. Each such commission will16
issue orders under this Part pertaining to those electric utilities subject to that17
commission's powers of regulation and supervision.18
(4) "Electric utility" or "utility" means an "electric public utility" as19
defined in R.S. 45:121 and in addition includes any person furnishing electric20
service within the city of New Orleans.21
(5)  "Financing costs" means any of the following:22
(a)  Interest and acquisition, defeasance, or redemption premiums that23
are payable on investment recovery bonds.24
(b) Any payment required under an ancillary agreement and any25
amount required to fund or replenish reserve or other accounts established26
under the terms of any indenture, ancillary agreement, or other financing27
documents pertaining to investment recovery bonds.28
(c) Any other cost related to issuing, supporting, repaying, servicing, and29 SB NO. 619
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refunding investment recovery bonds, including but not limited to servicing1
fees, accounting and auditing fees, trustee fees, legal fees, consulting fees,2
administrative fees, printing and edgarizing fees, financial advisor fees,3
placement and underwriting fees, capitalized interest, rating agency fees,4
government registration fees, stock exchange listing and compliance fees, and5
filing fees, including costs related to obtaining the financing order.6
(d) Any income taxes and license fees imposed on the revenues generated7
from the collection of investment recovery charges or otherwise resulting from8
the collection of investment recovery charges, in any such case whether paid,9
payable, or accrued.10
(e)  Any state and local taxes, franchise, gross receipts, and other taxes11
or similar charges, including but not limited to regulatory assessment fees, in12
any such case whether paid, payable, or accrued.13
(f) Any other costs and charges approved by the commission for14
inclusion in investment recovery charges.15
(6) "Financing order" means an order of the commission, if granted by16
the commission in its sole discretion, which allows for all of the following:17
(a)  The issuance of investment recovery bonds.18
(b)  The imposition, collection, and periodic adjustments of investment19
recovery charges.20
(c)  The creation of investment recovery property.21
(d) The sale, assignment, or transfer of investment recovery property to22
an assignee.23
(7) "Financing party" means any holder of investment recovery bonds,24
any party to or beneficiary of an ancillary agreement, and any trustee, collateral25
agent, or other person acting for the benefit of any of the foregoing.26
(8) "Financing statement" has the same meaning as that provided in the27
Uniform Commercial Code—Secured Transactions. All financing statements28
referenced in this Part shall be filed in accordance with Part V of Chapter 9 of29 SB NO. 619
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Title 10 of the Louisiana Revised Statutes and shall be filed in this state.1
(9) "Investment recovery bonds" means bonds, debentures, notes,2
certificates of participation, certificates of ownership, or other evidences of3
indebtedness or ownership that are issued pursuant to an indenture, contract,4
or other agreement of an electric utility or an assignee pursuant to a financing5
order, the proceeds of which are used directly or indirectly to provide, recover,6
finance, or refinance commission-approved investment recovery costs and7
financing costs, and which are secured by or payable from investment recovery8
property. If certificates of participation or ownership are issued, references in9
this Part to principal, interest, or premium shall be construed to refer to10
comparable amounts under those certificates. Investment recovery bonds shall11
be nonrecourse to the credit or any assets of the electric utility other than the12
investment recovery property as specified in the financing order and any rights13
under any ancillary agreement.  Investment recovery bonds shall be legal14
investments for all governmental units, financial institutions, insurance15
companies, fiduciaries, and other persons that require statutory authority16
regarding legal investment.17
(10) "Investment recovery charge" means the amounts authorized by18
the commission to recover, finance, or refinance investment recovery costs and19
financing costs. If determined appropriate by the commission and provided for20
in a financing order, such amounts are to be imposed on customer bills and21
collected by an electric utility or its successors or assignees, or a collection22
agent, in full through a charge which may be collected as part of the electric23
utility's base rates, fuel adjustment clauses, or in any other manner deemed24
appropriate by the commission, for the time period specified in the financing25
order, paid by existing and future customers receiving transmission or26
distribution service, or both, from the electric utility or its successors or27
assignees under rate schedules or special contracts approved by the commission.28
The commission may provide for payment of such charges even if the customer29 SB NO. 619
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elects to purchase electricity from an alternative electricity supplier including1
as the result of a fundamental change in the manner of regulation of public2
utilities in this state.3
(11) "Investment recovery costs" means, if requested by the electric4
utility, and as may be approved by the commission, costs incurred or to be5
incurred by an electric utility consisting of any of the following:6
(a)  Costs associated with the following:7
(i) The cancelled construction of electric generating or transmission8
facilities.9
(ii) Any other type of capital investment in excess of three hundred fifty10
million dollars determined by the commission to be suitable for securitization11
financing under this Part.12
(b) Costs associated with purchasing or otherwise acquiring long term13
supplies of fuel of any type or facilities of any type for the production, delivery,14
or storage of such supplies before or after use or of waste or other by-products15
of such use, including without limitation acquisitions of rights in immovables or16
movables, whether corporeal and incorporeal, wherever situated, acquisitions17
of ownership interests in juridical persons that own mineral rights or other18
rights to fuel supplies, prepaid forward purchases of fuel, and storage of spent19
nuclear fuel or any waste from the generation of electricity.20
(c) Costs of repurchasing equity or retiring any existing indebtedness21
relating to any of the foregoing.22
(12)  "Investment recovery property" means the contract right23
constituting incorporeal movable property newly created pursuant to this Part24
which consists of any of the following:25
(a) The rights and interests of an electric utility or successor or assignee26
of the electric utility specified under a financing order, including the right to27
impose, bill, charge, collect, and receive investment recovery charges authorized28
in the financing order and to obtain periodic adjustments to such charges as29 SB NO. 619
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may be provided in the financing order.1
(b) All revenues, collections, claims, rights to payment, payments,2
money, or proceeds arising from the rights and interests specified in3
Subparagraph (a) of this Paragraph, regardless of whether such revenues,4
collections, claims, rights to payment, payments, money, or proceeds are5
imposed, billed, received, collected, or maintained together with or commingled6
with other revenues, collections, rights to payment, payments, money, or7
proceeds.8
(13)  "Lien creditor" means any of the following:9
(a) A creditor that has acquired a lien on the property involved by10
attachment, sequestration, seizure, levy, or by similar means.11
(b)  An assignee for benefit of creditors from the time of assignment.12
(c)  A trustee in bankruptcy from the date of the filing of the petition.13
(d)  A receiver in equity from the time of appointment.14
(14) "Secured party" means a financing party in favor of which an15
electric utility or its successors or assignees creates a security interest in any or16
all portions of its interest in or right to investment recovery property.  A17
secured party may be granted a security interest in investment recovery18
property under this Part and a security interest in other collateral subject to the19
Uniform Commercial Code—Secured Transactions in one security agreement.20
(15)  "Security interest" means a pledge, hypothecation, or other21
encumbrance of or other right over any portion of investment recovery22
property created by contract to secure the payment or performance of an23
obligation.24
(16) "Uniform Commercial Code—Secured Transactions" means25
Chapter 9 of Title 10 of the Louisiana Revised Statutes of 1950.26
§1253.  Financing orders27
A. An electric utility may petition the commission for a financing order.28
Application by an electric utility for authority for the electric utility or its29 SB NO. 619
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affiliate or other assignee to issue investment recovery bonds shall be made in1
such form as the commission prescribes. Every application shall be made under2
oath and shall be signed and filed on behalf of the electric utility by its president3
or by a vice-president, treasurer, or other executive officer having knowledge4
of the matters set forth.  No electric utility or affiliate or other assignee shall5
issue any investment recovery bonds until it has been specifically authorized to6
do so by order of the commission. No electric utility shall, without the consent7
of the commission granted in a commission order, apply any proceeds of8
investment recovery bonds to any purpose not specified in the commission's9
order or supplemental order, or to any purpose in excess of the amount allowed10
for such purpose in the order or supplemental order, or to any purpose in11
contravention of the order or supplemental order.12
B. The commission may grant an application under Subsection A of this13
Section in whole or in part by a financing order, and with such modifications14
thereto and upon such terms and conditions as the commission prescribes, and15
may from time to time, after opportunity for hearing and for good cause shown,16
make such supplemental orders in the premises as it finds necessary or17
appropriate, subject, if the commission so provides, to Paragraph (C)(5) of this18
Section. If the commission issues a financing order approving any issue of19
investment recovery bonds under this Part, the commission may consider20
whether the proposed structuring, expected pricing, and financing costs of the21
investment recovery bonds are reasonably expected to result in lower overall22
costs or would avoid or mitigate rate impacts to customers as compared with23
traditional methods of financing or recovering investment recovery costs. The24
commission may determine what degree of flexibility to afford to the electric25
utility in establishing the terms and conditions of the investment recovery26
bonds, including but not limited to repayment schedules, interest rates, and27
other financing costs. A copy of any financing order made and entered by the28
commission under this Part duly certified by the secretary or clerk, as29 SB NO. 619
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applicable, of the commission shall be sufficient evidence for all purposes of1
whole and complete compliance by the electric utility with all procedural and2
other matters required precedent to the entry of the order.3
C. For a financing order issued to an electric utility by the commission4
to create investment recovery property, the financing order shall:5
(1)  Specify the amount of investment recovery costs, taking into6
consideration, to the extent the commission deems appropriate, any other7
methods used to recover these costs and any offsets or credits to those costs, and8
provide with respect to the amount of financing costs which may be recovered9
through investment recovery charges; and specify the time period over which10
all such costs may be recovered. This time period may be until the investment11
recovery bonds and financing costs are paid in full.12
(2) Specify and create the investment recovery property of an electric13
utility or its successors or assignees that shall be used to pay or secure14
investment recovery bonds and financing costs.15
(3) Provide that such investment recovery property shall be sold,16
assigned, or transferred by the electric utility to a subsidiary which is wholly17
owned, directly or indirectly, by the electric utility and which will be the issuer18
of the investment recovery bonds.19
(4) Provide that the investment recovery charges shall be sufficient at20
all times to pay the scheduled principal of, and interest on the investment21
recovery bonds as the same shall become due and payable and all other22
financing costs, and, if determined appropriate by the commission, establish a23
formulaic true-up mechanism requiring that the investment recovery charges24
be reviewed and adjusted at least annually, in order to correct any over-25
collection or under-collection during the period after the issuance or preceding26
adjustment and to ensure the projected recovery of amounts sufficient to27
provide timely payment of the scheduled principal of and interest on the28
pertinent investment recovery bonds and all other financing costs.29 SB NO. 619
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(5) Provide and pledge that after the earlier of the transfer of investment1
recovery property to an assignee or the issuance of authorized investment2
recovery bonds, a financing order shall be irrevocable until the indefeasible3
payment in full of the investment recovery bonds and the financing costs and,4
provide that, except as provided in Subsection F of this Section or to implement5
any true-up mechanism adopted by the commission as described in Paragraph6
(C)(4) of this Section, the commission shall not amend, modify, or terminate the7
financing order by any subsequent action or reduce, impair, postpone,8
terminate, or otherwise adjust investment recovery charges approved in the9
financing order, provided nothing shall preclude limitation or alteration if and10
when full compensation is made for the full protection of the investment11
recovery charges imposed, charged, and collected pursuant to a financing order12
and the full protection of the holders of investment recovery bonds and any13
assignee or financing party.14
(6) Specify how amounts collected from a customer shall be allocated15
between investment recovery charges and other charges.16
(7) Provide that a financing order remains in effect until the investment17
recovery bonds issued pursuant to the order have been indefeasibly paid in full18
and the financing costs of such bonds have been recovered in full.19
(8) Provide that a financing order shall remain in effect and unabated,20
notwithstanding the reorganization, bankruptcy, or other insolvency21
proceedings, or merger or sale, of the applicable electric utility or its successors22
or assignees.23
(9) Authorize and require the electric utility, to the extent that any24
interest in investment recovery property is sold or assigned, to contract with the25
assignee or any financing party that it will continue to operate its system to26
provide service to its customers, will collect amounts in respect of the27
investment recovery charges for the benefit and account of such assignee or28
financing party, and will account for and remit such amounts to or for the29 SB NO. 619
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account of such assignee or financing party, including pursuant to a1
sequestration order authorized by this Part.2
D. In a financing order issued to an electric utility, the commission may:3
(1) Prescribe any limitations on potential assignees of investment4
recovery property.5
(2) Authorize an assignee organized pursuant to the laws of this state6
which is a subsidiary of an electric utility and which issues investment recovery7
bonds to provide and establish in its articles of incorporation, partnership8
agreement, or operating agreement, as applicable, that in order for a person to9
file a voluntary bankruptcy petition on behalf of that assignee, the prior10
unanimous consent of the directors, partners, or managers, as applicable, shall11
be required.  If authorized in a financing order, the following shall apply:12
(a) Any such provision set forth in the articles of incorporation,13
partnership agreement, or operating agreement of such an assignee shall14
constitute a legal, valid and binding agreement of the shareholders, partners,15
or members, as applicable, of such assignee and is enforceable against such16
shareholders, partners, or members.17
(b) A person shall have authority under the laws of this state to file a18
voluntary bankruptcy petition on behalf of such assignee only after compliance19
with any such provision and prerequisite.20
(3) Provide that the creation of the electric utility's investment recovery21
property pursuant to Paragraph (C)(2) of this Section is conditioned upon, and22
shall be simultaneous with, the sale, assignment, or other transfer of the23
investment recovery property to an assignee and the security interest created24
in the investment recovery property to secure investment recovery bonds.25
(4) Otherwise provide with respect to any matters pertaining to and26
within the Public Service Commission's constitutional jurisdiction over electric27
utilities and plenary power to regulate electric utilities or such other jurisdiction28
as may be conferred on the commission by law, or in the case of the council of29 SB NO. 619
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the city of New Orleans, otherwise provide with respect to any matters1
pertaining to and within its home rule charter jurisdiction and authority over2
electric utilities providing service within the city of New Orleans.3
E. After the issuance of a financing order, and within such time and4
subject to any other limitations set forth in the financing order, the electric5
utility retains discretion regarding whether to sell, assign, or otherwise transfer6
investment recovery property or to cause the investment recovery bonds to be7
issued, including the right to defer or postpone such sale, assignment, transfer,8
or issuance, provided that nothing shall limit in any manner the commission's9
authority to review any such decision for rate-making purposes.10
F. At the request of an electric utility or on its own motion or the motion11
of any party affected by the financing order, the commission may commence a12
proceeding and issue a subsequent financing order that provides for the13
refinancing, retiring, or refunding of investment recovery bonds issued14
pursuant to the original financing order if the commission finds that the15
subsequent financing order satisfies all of the criteria specified in Subsection B16
of this Section or provides for an accounting, refunding, or crediting to17
ratepayers of the proceeds of any true-up mechanism adopted by the18
commission consistent with Paragraph (C)(4) of this Section.  Effective on19
retirement of the refunded investment recovery bonds and the issuance of new20
investment recovery bonds, the commission may adjust the related investment21
recovery charges accordingly or establish substitute investment recovery22
charges.23
G. All financing orders by the commission shall be operative and in full24
force and effect from the time fixed for them to become effective by the25
commission.26
H. An aggrieved party or intervenor may as its sole remedy, within27
fifteen days after the financing order or a supplemental order made by the28
commission becomes effective, file in the district court of the domicile of the29 SB NO. 619
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commission, a petition setting forth the particular cause of objection to the1
order. When a timely application for a rehearing has been made at the2
commission, the fifteen day time for such appeal shall not commence until the3
effective date of the commission order disposing of the rehearing application.4
Inasmuch as delay in the determination of the appeal of a financing order may5
delay the issuance of investment recovery bonds, thereby diminishing savings6
to customers which might be achieved if such bonds were issued as7
contemplated by a financing order, all such cases shall be given precedence over8
all other civil cases in the court, and shall be heard and determined as speedily9
as possible. No appeal to the Louisiana Supreme Court shall be allowed unless10
the petition is filed within fifteen days from the date on which the judgment of11
the district court is entered and only if the party taking the appeal has the12
record certified to the Louisiana Supreme Court and his brief filed therein13
within twenty days from the date on which the judgment of the district court is14
entered. Review on appeal from the Public Service Commission shall be in15
accordance with R.S. 45:1193 through 1195.  However, the immediately16
preceding two sentences of this Subsection shall have no application to appeals17
of any order of the council of the city of New Orleans, which shall proceed in the18
manner provided by applicable law.19
§1254.  Investment recovery property20
A.  All investment recovery property that is specified in a financing order21
shall constitute an existing, present contract right constituting an22
individualized, separate incorporeal movable susceptible of ownership, sale,23
assignment, transfer, and security interest, including, without limitation, for24
purposes of contracts concerning the sale of property and security interests in25
property, notwithstanding that the value of the property and the imposition and26
collection of investment recovery charges depends on future acts such as the27
electric utility to which the order is issued performing its servicing functions28
relating to the collection of investment recovery charges and on future29 SB NO. 619
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electricity consumption. Such property shall exist whether or not the revenues1
or proceeds arising from the property have been billed, have accrued, or have2
been collected, notwithstanding the fact that the value or amount of the3
property is or may be dependent on the future provision of service to customers4
by the electric utility or its successors or assignees and the future consumption5
by customers of electricity. Investment recovery property created by a6
financing order shall be a vested contract right, and such financing order shall7
create a contractual obligation of irrevocability by the commission in favor of8
the electric utility and its assignees and financing parties.9
B. Investment recovery property specified in a financing order shall10
continue to exist until the investment recovery bonds issued pursuant to the11
financing order are paid in full and all financing costs of the bonds have been12
recovered in full.13
C. All or any portion of investment recovery property specified in a14
financing order issued to an electric utility may be sold, assigned, or transferred15
to a successor or an assignee, including an affiliate or affiliates of the electric16
utility created for the limited purpose of acquiring, owning, or administering17
investment recovery property or issuing investment recovery bonds under the18
financing order. All or any portion of investment recovery property may be19
encumbered by a security interest to secure investment recovery bonds issued20
pursuant to the order and other financing costs. Each such sale, assignment,21
transfer, or security interest granted by an electric utility or affiliate of an22
electric utility or assignee shall be considered to be a transaction in the ordinary23
course of business.24
D. The description of investment recovery property being sold, assigned,25
or transferred to an assignee in any sale agreement, purchase agreement, or26
other transfer agreement, being encumbered to a secured party in any security27
agreement, pledge agreement, or other security document, or indicated in any28
financing statement shall be sufficient only if such description or indication29 SB NO. 619
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refers to the specific financing order that created the investment recovery1
property and states that such agreement or financing statement covers all or2
part of such investment recovery property described in such financing order.3
A description of investment recovery property in a financing statement shall be4
sufficient if it refers to the financing order creating the investment recovery5
property. This Subsection applies to all purported sales, assignments, or6
transfers of, and all purported liens or security interests in, investment recovery7
property, regardless of whether the related sale agreement, purchase8
agreement, other transfer agreement, security agreement, pledge agreement, or9
other security document was entered into, or any financing statement was filed,10
before or after the effective date of this Part.11
E.(1) Investment recovery property shall be an individualized, separate12
incorporeal movable susceptible of ownership, sale, assignment, transfer, and13
security interest encumbrance, notwithstanding any of the following:14
(a) That the investment recovery charges may be authorized by the15
commission and included as part of the electric utility's base rate and are not16
shown as a separate line item on individual electric bills.17
(b) That notice is not given to customers that the investment recovery18
property has been transferred to an assignee and that such assignee is the owner19
of the rights to the investment recovery charges.20
(c) That notice is not given to customers that the electric utility or21
another entity, if applicable, is acting as a collection agent or servicer or in a22
similar capacity for an assignee.23
(d)  That funds arising from the collection of investment recovery24
property by the electric utility as collection agent are commingled with other25
monies of the electric utility prior to the electric utility's transfer as collection26
agent of such funds to the assignee or financing party.27
(2) A description of investment recovery property, and a sale,28
assignment, or transfer or grant of security interest, shall not be denied legal29 SB NO. 619
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effect or enforceability due to the factors provided for in Paragraph (1) of this1
Subsection apply in whole or in part to such investment recovery property.2
F. If an electric utility defaults on any required payment of charges3
arising from investment recovery property specified in a financing order, the4
district court of the domicile of the commission, upon application by an5
interested party, and without limiting any other remedies available to the6
applying party, shall order the sequestration and payment of the revenues7
arising from the investment recovery property to the financing parties or their8
representatives.  Any such order shall remain in full force and effect,9
notwithstanding any reorganization, bankruptcy, or other insolvency10
proceedings with respect to the electric utility or its successors or assignees.11
G. To the extent provided in a financing order, the interest of an12
assignee or secured party in investment recovery property specified in a13
financing order shall not be subject to setoff, counterclaim, surcharge, or14
defense by the electric utility or by any customer of the electric utility or other15
person, or in connection with the reorganization, bankruptcy, or other16
insolvency of the electric utility or any other person.17
H. To the extent provided in a financing order, any successor to an18
electric utility, whether pursuant to any reorganization, bankruptcy, or other19
insolvency proceeding or whether pursuant to any merger or acquisition, sale,20
or other business combination, or transfer by operation of law, as a result of21
electric utility restructuring or otherwise, shall perform and satisfy all22
obligations of, and have the same rights under a financing order as, the electric23
utility under the financing order in the same manner and to the same extent as24
the electric utility, including collecting and paying to the persons entitled to25
receive them, the revenues, collections, payments, or proceeds of the investment26
recovery property. Nothing in this Section shall be intended to limit or impair27
any authority of the commission concerning the transfer or succession of28
interests of electric utilities.29 SB NO. 619
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§1255.  Sale1
The sale, assignment, or transfer of investment recovery property shall2
be governed by this Section. All of the following apply to a sale, assignment, or3
transfer under this Section:4
(1) The sale, assignment, or other transfer of investment recovery5
property by an electric utility to an assignee that the parties have in the6
governing contract expressly stated to be a sale shall be an absolute transfer and7
true sale of, and not a security interest in, the transferor's right, title, and8
interest in, to, and under the investment recovery property, other than for9
federal and state income tax purposes. For all purposes other than federal and10
state income tax and state franchise tax purposes, the parties' characterization11
of a transaction as a sale of an interest in investment recovery property shall be12
conclusive that the transaction is a true sale and that ownership has passed to13
the party characterized as the purchaser, regardless of whether the purchaser14
has possession of any documents evidencing or pertaining to the interest. After15
such a transaction, the investment recovery property shall not be subject to any16
claims of the transferor or the transferor's creditors, other than creditors17
holding a prior security interest in the investment recovery property perfected18
under R.S. 45:1256.19
(2) The characterization of the sale, assignment, or other transfer as a20
true sale or other absolute transfer pursuant to Paragraph (1) of this Section21
and the corresponding characterization of the assignee's property interest shall22
be determinative and conclusive irrespective of, and is not affected or impaired23
by, the existence of any of the following circumstances:24
(a)  Commingling of funds arising with respect to the investment25
recovery property with other monies of the electric utility prior to the electric26
utility's transfer as collection agent of such funds to the assignee or financing27
party.28
(b) The retention by the transferor of a partial or residual interest,29 SB NO. 619
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including an equity interest or entitlement to any surplus, in the investment1
recovery property, whether direct or indirect, or whether subordinate or2
otherwise.3
(c) Any recourse that the assignee may have against the transferor,4
except that any such recourse shall not be created, contingent upon, or5
otherwise occurring or resulting from the inability or failure of one or more of6
the transferor's customers to timely pay all or a portion of the investment7
recovery charge.8
(d) Any indemnifications, obligations, or repurchase rights made or9
provided by the transferor, except that such indemnity or repurchase rights10
shall not be based solely upon the inability or failure of a transferor's customers11
to timely pay all or a portion of the investment recovery charge.12
(e) The transferor acting as the collector of the investment recovery13
charges, or the existence of any contract described in R.S. 45:1253(C)(9).14
(f) The contrary or other treatment of the sale, assignment, or other15
transfer for tax, financial reporting, or other purposes.16
(g) The granting or providing to holders of the investment recovery17
bonds of a preferred right to the investment recovery property, or credit18
enhancement by the electric utility or its affiliates with respect to the investment19
recovery bonds.20
(h) The status of the assignee as a direct or indirect wholly owned21
subsidiary or other affiliate of the electric utility.  The separate juridical22
personality of any assignee of investment recovery property which is a23
subsidiary or affiliate of the electric utility shall not be disregarded due to the24
fact that the assignee and the electric utility share any one or more incidents of25
control, including common managers, officers, directors, members, accounting26
or administrative systems, consolidated tax returns, or office space, that the27
assignee may be a disregarded entity for tax purposes, that the utility caused the28
formation of the assignee, that a contract by the utility and the assignee29 SB NO. 619
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described in R.S. 45:1253(C)(9) exists, that the assignee has no other business1
other than pertaining to the investment recovery property, that the2
capitalization of the assignee is limited to amounts required for compliance with3
certain applicable federal income tax laws and revenue procedures, or that4
other factors used in applying a single business enterprise test to juridical5
persons are present.6
(i)  The matters described in R.S. 45:1254(E).7
(j)  Any other term of the contract under Paragraph (1) of this Section.8
(3) Any right that an electric utility has in the investment recovery9
property prior to its sale, assignment, or transfer shall be incorporeal movable10
property in the form of a vested contract right, notwithstanding any contrary11
treatment for accounting or tax purposes.  The ownership of an interest in12
investment recovery property shall be voluntarily transferred by a contract13
between the owner and the assignee that purports to transfer the ownership of14
that interest.  Unless otherwise provided, the transfer of ownership shall take15
place as between the parties as soon as there is written agreement on the16
interest, the purchase price is fixed, and the financing order has been issued.17
Such transfer shall be perfected and take effect against all third parties18
including without limitation subsequent lien creditors when the transfer has19
become effective between the parties and when a financing statement giving20
notice of the sale, assignment, or transfer is filed in accordance with Paragraph21
(4) of this Section. Delivery of such an interest in investment recovery property22
shall take place by operation of law upon the transfer becoming effective against23
third parties.24
(4) Financing statements required to be filed pursuant to this Section25
shall be filed, indexed, maintained, and continued in the same manner and in26
the same system of records maintained for the filing of financing statements27
under the Uniform Commercial Code—Secured Transactions.  The filing of28
such a financing statement shall be the only method of perfecting a sale,29 SB NO. 619
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assignment, or transfer of investment recovery property. The sale, assignment,1
or transfer of an interest in investment recovery property perfected by filing a2
financing statement shall be effective against the customers owing payment of3
the investment recovery charges, creditors of the transferor, subsequent4
transferees, and all other third persons, notwithstanding the absence of actual5
knowledge of or notice to the customers of the sale, assignment, or transfer.6
(5) The priority of the conflicting ownership interests of assignees in the7
same interest or rights in any investment recovery property is determined as8
follows:9
(a) Conflicting perfected interests or rights of assignees rank according10
to priority in time of perfection.11
(b) A perfected interest or right of an assignee has priority over a12
conflicting unperfected interest or right of an assignee.13
(c)  A perfected interest or right of an assignee shall have priority over14
a person who becomes a lien creditor after the perfection of such assignee's15
interest or right.16
(6) The priority of a sale, assignment, or transfer perfected pursuant to17
this Section shall not be impaired by any later modification of the financing18
order or investment recovery property or by the commingling of funds arising19
from investment recovery property with other funds. Any other security20
interest that may apply to those funds, other than a security interest perfected21
under R.S. 45:1256, shall be terminated when those funds are transferred to a22
segregated account for the assignee or a financing party. If investment recovery23
property has been transferred to an assignee or financing party, any proceeds24
of that property shall be held for and delivered to the assignee or financing25
party by any collector under any contract described in R.S. 45:1253(C)(9) as a26
mandatary and fiduciary.27
(7) No customer of an electric utility owing payment of an investment28
recovery charge may, by agreement with the electric utility or otherwise,29 SB NO. 619
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prohibit, restrict, or require the consent of such customer to the assignment,1
pledge, or transfer of the investment recovery charge.2
§1256.  Security interests3
A. The Uniform Commercial Code--Secured Transactions shall not4
apply to investment recovery property or any right, title, or interest of a utility5
or assignee, whether before or after the issuance of the financing order, except6
to the extent specified in R.S. 45:1257(A). In addition, such right, title, or7
interest pertaining to a financing order, including, but not limited to, the8
associated investment recovery property including any revenues, collections,9
claims, rights to payment, payments, money, or proceeds of or arising from10
investment recovery charges pursuant to such order, shall not be deemed11
proceeds of any right or interest other than of the financing order and the12
investment recovery property arising from the financing order. All revenues13
and collections resulting from investment recovery property shall constitute14
proceeds only of the investment recovery property arising from the financing15
order.16
B. Except to the extent provided in this Part with respect to filings of17
financing statements or control of deposit accounts or investment property as18
original collateral, the creation, attachment, granting, perfection, and priority19
of security interests in investment recovery property to secure investment20
recovery bonds shall be governed solely by this Part and not by the Uniform21
Commercial Code—Secured Transactions.22
C.(1) A security interest in investment recovery property shall be valid23
and enforceable against the electric utility and its successor or an assignee and24
third parties and attaches to investment recovery property only after all of the25
following conditions are met:26
(a)  The issuance of a financing order.27
(b) The execution and delivery of a security agreement with a financing28
party in connection with the issuance of investment recovery bonds.29 SB NO. 619
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(c)  The receipt of value for the investment recovery bonds.1
(2) A security interest attaches to investment recovery property when2
all of the conditions of Paragraph (1) of this Subsection have been met, unless3
the security agreement expressly postpones the time of attachment.4
D. A security interest in investment recovery property shall be perfected5
only if it has attached and a financing statement indicating the investment6
recovery property collateral covered has been filed. A financing statement shall7
be filed to perfect all security interests and liens in investment recovery8
property. A security interest in investment recovery property shall be perfected9
when it has attached and when the applicable financing statement has been10
filed.  The interest of a secured party shall not be perfected unless a financing11
statement sufficient pursuant to this Part and otherwise in accordance with the12
Uniform Commercial Code—Secured Transactions is filed, and after perfection,13
the secured party's interest continues in the investment recovery property and14
all proceeds of such investment recovery property, whether or not billed,15
accrued, or collected, and whether or not deposited into a deposit account and16
however evidenced. A security interest in proceeds of investment recovery17
property shall be a perfected security interest if the security interest in the18
investment recovery property was perfected pursuant to this Part. Financing19
statements required to be filed pursuant to this Section shall be filed, indexed,20
maintained, and continued in the same manner and in the same system of21
records maintained for the filing of financing statements pursuant to the22
Uniform Commercial Code—Secured Transactions.  The filing of such a23
financing statement shall be the only method of perfecting a lien or security24
interest on investment recovery property. The financing statement shall be filed25
as if the debtor named therein were located in this state.26
E. The priority of the conflicting security interests of secured parties in27
the same interest or rights in any investment recovery property shall be28
determined as follows:29 SB NO. 619
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(1) Conflicting perfected security interests of secured parties rank1
according to priority in time of perfection.2
(2) A perfected security interest of a secured party shall have priority3
over a conflicting unperfected security interest of a secured party.4
(3) A perfected security interest of a secured party shall have priority5
over a person who becomes a lien creditor after the perfection of such secured6
party's security interest.7
F. A perfected security interest in investment recovery property and all8
proceeds of such investment recovery property, whether or not billed, accrued,9
or collected, and whether or not deposited into a deposit account and however10
evidenced, shall have priority over a conflicting lien or privilege of any nature11
in the same collateral property, except a security interest shall be subordinate12
to the rights of a person that becomes a lien creditor before the perfection of13
such security interest. A security interest in investment recovery property14
which qualifies for priority over a conflicting security interest, lien, or privilege15
also has priority over the conflicting security interest, lien, or privilege in16
proceeds of the investment recovery property. The relative priority of a17
perfected security interest of a secured party shall not be adversely affected by18
any security interest, lien, or privilege in a deposit account of the electric utility19
that is a collector as described in R.S. 45:1253(C)(9) and into which the revenues20
are deposited. The priority of a security interest perfected pursuant to this21
Section shall not be defeated or impaired by any later modification of the22
financing order or investment recovery property or by the commingling of23
funds arising from investment recovery property with other funds. Any other24
security interest that may apply to those funds shall be terminated as to all25
funds transferred to a segregated account for the benefit of an assignee or a26
financing party or to an assignee or financing party directly. The perfection by27
control, the effect of perfection by control, and the priority of a security interest28
granted by the issuer of and securing investment recovery bonds held by a29 SB NO. 619
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secured party having control of a segregated deposit account or securities1
account as original collateral into which revenues, collections, or proceeds of2
investment recovery property are deposited or credited shall be governed by the3
Uniform Commercial Code—Secured Transactions, including the choice of law4
rules in Part III.5
G. If a default occurs under the terms of the investment recovery bonds,6
the secured party may foreclose on or otherwise enforce the security interest in7
any investment recovery property as if it was a secured party under the8
Uniform Commercial Code—Secured Transactions. A secured party holding9
a security interest in investment recovery property shall be entitled to exercise10
all of the same rights and remedies as are available to a secured party pursuant11
to the Uniform Commercial Code—Secured Transactions, to the same extent12
as if those rights and remedies were set forth in this Part. A court of competent13
jurisdiction may order that amounts arising from investment recovery property14
be transferred to a separate account of the secured party for the financing15
parties' benefit, to which their security interest shall apply. On application by16
or on behalf of a secured party to the district court of the domicile of the17
commission, the court shall order the sequestration and payment to the18
financing parties of revenues arising from the investment recovery property.19
H. A security interest created under this Part may provide for a security20
interest in after-acquired collateral.  A security interest granted pursuant to this21
Part shall not be invalid or fraudulent against creditors solely because the22
grantor or the electric utility as collector or servicer has the right or ability to23
commingle the collateral or proceeds, or collect, compromise, enforce, and24
otherwise deal with collateral.25
I. Any action arising under the provisions of this Part to enforce a26
security interest in any investment recovery property, or which otherwise27
asserts an interest in, or a right in, to, or against any investment recovery28
property, wherever located or deemed located, or any security interest governed29 SB NO. 619
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by this Part, shall be brought in the district court of the domicile of the1
commission. The suits shall be governed by the provisions of the Code of Civil2
Procedure and other law applicable to executory proceedings, including3
provisional remedies, but only to the extent such laws are consistent with the4
language and purposes of this Part. Nothing in this Subsection shall be5
construed to deny to the Public Service Commission any jurisdiction conferred6
upon it by law or the Constitution of Louisiana or to the council of the city of7
New Orleans any jurisdiction conferred upon it by its home rule charter or the8
Constitution of Louisiana.9
§1257.  Choice of law; conflicts10
A. The law governing the validity, enforceability, attachment,11
perfection, priority, exercise of remedies, and venue with respect to the sale,12
assignment, or transfer of an interest or right or the creation of a security13
interest in any investment recovery property shall be exclusively the laws of this14
state, without applying this state's laws of conflicts of laws and notwithstanding15
any contrary contractual provision, except as provided in the last sentence of16
R.S. 45:1256(F). The validity, enforceability, attachment, perfection, priority,17
and exercise of remedies with respect to the sale, assignment, or transfer of an18
interest or right or the creation of a security interest in any investment recovery19
property shall be governed by this Part, and solely to the extent not addressed20
by this Part, by the Uniform Commercial Code—Secured Transactions and21
other laws of this state. Notwithstanding any other law to the contrary, this22
Part provides that the Uniform Commercial Code—Secured Transactions23
applies to the filings of financing statements referenced in this Part, to24
perfection, the effect of perfection or nonperfection, and the priority of security25
interests held by a secured party having control of deposit accounts or securities26
accounts as original collateral securing investment recovery bonds,27
notwithstanding that proceeds of investment recovery charges are deposited28
therein, and to the enforcement of security interests in investment recovery29 SB NO. 619
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property, in each case subject to Section B of this Section.1
B. In the event of conflict between this Part and any other law regarding2
the attachment, creation, perfection, the effect of perfection, or priority of, a3
sale, assignment, or transfer of, or security interest in, investment recovery4
property, or the exercise of remedies with respect thereto, this Part shall govern5
to the extent of the conflict.6
C.  This Section shall not be interpreted to conflict with or modify R.S.7
45:1256(B).8
§1258.  Investment recovery bonds9
Investment recovery bonds shall not be a debt or a general obligation of10
the state or any of its political subdivisions, agencies, or instrumentalities and11
shall not be a charge on their full faith and credit. An issue of investment12
recovery bonds shall not, directly, indirectly, or contingently, obligate the state13
or any agency, political subdivision, or instrumentality of the state to levy any14
tax or make any appropriation for payment of the bonds, other than for paying15
investment recovery charges in their capacity as consumers of electricity.  All16
investment recovery bonds authorized by a financing order by the Public17
Service Commission shall contain on the face of the order, the following18
statement:  "Neither the full faith and credit nor the taxing power of the state19
of Louisiana is pledged to the payment of the principal of, or interest on, this20
bond." All investment recovery bonds authorized by a financing order by the21
council of the city of New Orleans shall contain on the face of the order, the22
following statement: "Neither the full faith and credit nor the taxing power of23
the state of Louisiana or the city of New Orleans is pledged to the payment of24
the principal of, or interest on, this bond."25
§1259.  State pledge26
A. For purposes of this Section, the term "bondholder" means a person27
who holds an investment recovery bond, including in book entry form.28
B.(1) The state and the Louisiana Legislature each pledge to and agree29 SB NO. 619
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with bondholders, the owners of the investment recovery property, and other1
financing parties that the state and the Louisiana Legislature shall not do any2
of the following:3
(a) Alter the provisions of this Part which authorize the commission to4
create an irrevocable contract right by the issuance of a financing order, to5
create investment recovery property, and to make the investment recovery6
charges imposed by a financing order irrevocable, binding, and non-bypassable7
charges.8
(b) Take or permit any action that impairs or would impair the value of9
investment recovery property.10
(c) Except as provided for in this Section and except for adjustments11
under any true-up mechanism established by the commission, reduce, alter, or12
impair investment recovery charges that are to be imposed, collected, and13
remitted for the benefit of the bondholders and other financing parties until any14
and all principal, interest, premium, financing costs, and other fees, expenses,15
or charges incurred, and any contracts to be performed, in connection with the16
related investment recovery bonds have been paid and performed in full.17
(2)  Nothing in this Subsection shall preclude limitation or alteration if18
and when full compensation is made by law for the full protection of the19
investment recovery charges imposed, charged, and collected pursuant to a20
financing order and full protection of the holders of investment recovery bonds21
and any assignee or financing party.22
C. Any person or entity that issues investment recovery bonds may23
include the pledge specified in Subsection B and in R.S. 45:1253(C)(5) in the24
bonds and related documentation.25
§1260.  Electric utility applicability26
An assignee or financing party shall not be considered an electric utility27
or person providing electric service by virtue of engaging in the transactions28
described in this Part.29 SB NO. 619
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§1261.  No impairment of commission jurisdiction1
Nothing in this Part is intended to be nor shall be construed to constitute2
any limitation, derogation, or diminution of the jurisdiction or authority of the3
commission provided by law, including that provided in or exercised by the4
Public Service Commission pursuant to the Constitution of Louisiana or the5
council of the city of New Orleans pursuant to its home rule charter.6
Section 3. This Act shall become effective upon signature by the governor or, if not7
signed by the governor, upon expiration of the time for bills to become law without signature8
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana.  If9
vetoed by the governor and subsequently approved by the legislature, this Act shall become10
effective on the day following such approval.11
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Alan Miller.
DIGEST
Present law provides that the Louisiana Electric Utility Storm Recovery Securitization Act
shall be exempt from the provisions of the Uniform Commercial Code - Secured
Transactions (Chapter 9 of Title 10 of the Louisiana Revised Statutes of 1950), except for
the provisions relating to financing statements, perfection, and the effect of perfection or
nonperfection, the priority of certain security interests, and the enforcement of security
interests.
Proposed law retains present law but includes the La. Electric Investment Recovery
Securitization Act in the exemption.
Proposed law defines "commission" as either the La. Public Service Commission or, solely
with respect to an electric utility furnishing electric service within the city of New Orleans,
the New Orleans city council. Each such commission will issue orders under proposed law
pertaining to those electric utilities subject to that commission's powers of regulation and
supervision.
Proposed law allows an electric utility to petition the commission for a financing order.
Application by an electric utility shall be made under oath and shall be signed and filed on
behalf of the electric utility by its president or by a vice-president, treasurer or other
executive officer.
Proposed law prohibits an electric utility or affiliate or other assignee from issuing any
investment recovery bonds until it has been specifically authorized to do so by order of the
commission.
Proposed law allows the commission to grant an application in whole or in part by a
financing order, and with such modifications thereto and upon such terms and conditions as
the commission prescribes, and may from time to time, after opportunity for hearing and for
good cause shown, make such supplemental orders in the premises as it finds necessary or
appropriate.  If the commission issues a financing order approving any issue of investment SB NO. 619
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recovery bonds, the commission may consider whether the proposed structuring, expected
pricing, and financing costs of the investment recovery bonds are reasonably expected to
result in lower overall costs or would avoid or mitigate rate impacts to customers as
compared with traditional methods of financing or recovering investment recovery costs.
The commission may determine what degree of flexibility to afford to the electric utility in
establishing the terms and conditions of the investment recovery bonds, including but not
limited to repayment schedules, interest rates, and other financing costs.
Proposed law provides that a copy of any financing order made and entered by the
commission duly certified by the secretary or clerk of the commission shall be sufficient
evidence for all purposes of whole and complete compliance by the electric utility with all
procedural and other matters required precedent to the entry of the order.
Proposed law provides that for a financing order issued to an electric utility by the
commission to create investment recovery property, the financing order shall:
(1)Specify the amount of investment recovery costs, taking into consideration, to the
extent the commission deems appropriate, any other methods used to recover these
costs and any offsets or credits to those costs, and provide with respect to the amount
of financing costs which may be recovered through investment recovery charges;
and specify the time period over which all such costs may be recovered.
(2)Specify and create the investment recovery property of an electric utility that shall
be used to pay or secure investment recovery bonds and financing costs.
(3)Provide that such investment recovery property shall be sold, assigned, or transferred
by the electric utility to a subsidiary which is wholly owned, directly or indirectly,
by the electric utility and which will be the issuer of the investment recovery bonds.
(4)Provide that the investment recovery charges shall be sufficient at all times to pay
the scheduled principal of and interest on the investment recovery bonds as the same
shall become due and payable and all other financing costs, and, if determined
appropriate by the commission, establish a formulaic true-up mechanism requiring
that the investment recovery charges be reviewed and adjusted at least annually, in
order to correct any overcollection or undercollection during the period after the
issuance or preceding adjustment and to ensure the projected recovery of amounts
sufficient to provide timely payment of the scheduled principal of and interest on the
pertinent investment recovery bonds and all other financing costs.
(5)Provide that after the earlier of the transfer of investment recovery property to an
assignee or the issuance of investment recovery bonds authorized thereby, a
financing order is irrevocable until the indefeasible payment in full of the investment
recovery bonds and the financing costs and, provide that the commission may not
amend, modify, or terminate the financing order by any subsequent action provided
nothing shall preclude limitation or alteration if and when full compensation is made
for the full protection of the investment recovery charges imposed, charged, and
collected pursuant to a financing order.
(6)Specify how amounts collected from a customer shall be allocated between
investment recovery charges and other charges.
(7)Provide that a financing order remains in effect until the investment recovery bonds
issued pursuant to the order have been indefeasibly paid in full and the financing
costs of such bonds have been recovered in full.
(8)Provide that a financing order shall remain in effect and unabated notwithstanding
the reorganization, bankruptcy, or other insolvency proceedings, or merger or sale,
of the applicable electric utility or its successors or assignees. SB NO. 619
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words in boldface type and underscored are additions.
(9)Authorize and require the electric utility, to the extent that any interest in investment
recovery property is sold or assigned, to contract with the assignee or any financing
party that it will continue to operate its system to provide service to its customers,
will collect amounts in respect of the investment recovery charges for the benefit and
account of such assignee or financing party, and will account for and remit such
amounts to or for the account of such assignee or financing party.
Proposed law provides that in a financing order issued to an electric utility, the commission
may:
(1)Prescribe any limitations on potential assignees of investment recovery property.
(2)Authorize an assignee which is a subsidiary of an electric utility and which issues
investment recovery bonds to provide and establish in its articles of incorporation,
partnership agreement, or operating agreement that in order for a person to file a
voluntary bankruptcy petition on behalf of that assignee, the prior unanimous consent
of the directors, partners, or managers shall be required.
(3)Provide that the creation of the electric utility's investment recovery property is
conditioned upon, and shall be simultaneous with, the sale, assignment or other
transfer of the investment recovery property to an assignee and the security interest
created in the investment recovery property to secure investment recovery bonds.
(4)Provide with respect to any matters pertaining to and within the P.S.C.'s
constitutional jurisdiction over electric utilities and plenary power to regulate electric
utilities or such other jurisdiction as may be conferred on the commission by law, or
in the case of the council of the city of N.O. otherwise provide with respect to any
matters pertaining to and within its home rule charter jurisdiction and authority over
electric utilities providing service within the city of N.O.
Proposed law provides that after the issuance of a financing order, the electric utility retains
discretion regarding whether to sell, assign, or otherwise transfer investment recovery
property or to cause the investment recovery bonds to be issued, including the right to defer
or postpone such sale, assignment, transfer, or issuance.
Proposed law allows the commission to commence a proceeding and issue a subsequent
financing order that provides for the refinancing, retiring, or refunding of investment
recovery bonds if the commission finds that the subsequent financing order satisfies certain
criteria or that provides for an accounting, refunding, or crediting to ratepayers of the
proceeds of any true-up mechanism. The commission may adjust the related investment
recovery charges accordingly or establish substitute investment recovery charges.
Proposed law provides that all financing orders by the commission shall be operative and
in full force and effect from the time fixed for them to become effective by the commission.
Proposed law provides that an aggrieved party, within 15 days after the financing order or
a supplemental order made by the commission becomes effective, file in the district court
of the domicile of the commission, a petition setting forth the particular cause of objection
to the order.
Proposed law provides that all investment recovery property that is specified in a financing
order shall constitute an existing contract right constituting an individualized, separate
incorporeal movable susceptible of ownership, sale, assignment, transfer, and security
interest, including without limitation for purposes of contracts concerning the sale of
property and security interests in property.  Investment recovery property created by a
financing order shall be a vested contract right, and such financing order shall create a
contractual obligation of irrevocability by the commission in favor of the electric utility and
its assignees and financing parties. SB NO. 619
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
Proposed law provides that investment recovery property specified in a financing order shall
continue to exist until the investment recovery bonds issued pursuant to the financing order
are paid in full and all financing costs of the bonds have been recovered in full.
Proposed law provides that all or any portion of investment recovery property specified in
a financing order issued to an electric utility may be sold, assigned, or transferred to a
successor or an assignee. All or any portion of investment recovery property may be
encumbered by a security interest to secure investment recovery bonds issued pursuant to
the order and other financing costs. Each such sale, assignment, transfer, or security interest
granted by an electric utility or affiliate of an electric utility or assignee is considered to be
a transaction in the ordinary course of business.
Proposed law provides that the description of investment recovery property being sold,
assigned, or transferred to an assignee is sufficient only if such description or indication
refers to the specific financing order that created the investment recovery property and states
that such agreement or financing statement covers all or part of such investment recovery
property described in such financing order.
Proposed law provides that investment recovery property shall be an individualized, separate
incorporeal movable susceptible of ownership, sale, assignment, transfer, and security
interest encumbrance notwithstanding certain provisions. A description of investment
recovery property, and a sale, assignment, or transfer thereof or grant of security interest
therein, shall not be denied legal effect or enforceability because of these provisions.
Proposed law provides that if an electric utility defaults on any required payment of charges
arising from investment recovery property specified in a financing order, a court shall order
the sequestration and payment of the revenues arising from the investment recovery property
to the financing parties or their representatives.
Proposed law provides that the interest of an assignee or secured party in investment
recovery property specified in a financing order is not subject to setoff, counterclaim,
surcharge, or defense by the electric utility or by any customer of the electric utility or other
person, or in connection with the reorganization, bankruptcy, or other insolvency of the
electric utility or any other person.
Proposed law provides that any successor to an electric utility shall perform and satisfy all
obligations of, and have the same rights under a financing order as, the electric utility under
the financing order in the same manner and to the same extent as the electric utility,
including collecting and paying to the person entitled to receive them, the revenues,
collections, payments, or proceeds of the investment recovery property.
Proposed law provides that the following applies to a sale, assignment, or transfer:
(1)The sale, assignment, or other transfer of investment recovery property by an electric
utility to an assignee that the parties have in the governing contract expressly stated
to be a sale is an absolute transfer and true sale of, and not a security interest in, the
transferor's right, title, and interest in, to, and under the investment recovery
property, other than for federal and state income tax purposes.
(2)The characterization of the sale, assignment, or other transfer as a true sale or other
absolute transfer and the corresponding characterization of the assignee's property
interest shall be determinative and conclusive irrespective of, and is not affected or
impaired by, the existence of various monetary factors.
(3)Any right that an electric utility has in the investment recovery property prior to its
sale, assignment, or transfer is incorporeal movable property in the form of a vested
contract right notwithstanding any contrary treatment thereof for accounting or tax
purposes. SB NO. 619
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
(4)Financing statements shall be filed, indexed, maintained, and continued in the same
manner and in the same system of records maintained for the filing of financing
statements under the UCC—Secured Transactions.  The filing of such a financing
statement shall be the only method of perfecting a sale, assignment, or transfer of
investment recovery property.
(5)The priority of the conflicting ownership interests of assignees in the same interest
or rights in any investment recovery property is determined by conflicting perfected
interests or rights of assignees being ranked according to priority in time of
perfection, a perfected interest or right of an assignee having priority over a
conflicting unperfected interest or right of an assignee, and a perfected interest or
right of an assignee having priority over a person who becomes a lien creditor after
the perfection of such assignee's interest or right.
(6)The priority of a sale, assignment, or transfer is not impaired by any later
modification of the financing order or investment recovery property or by the
commingling of funds arising from investment recovery property with other funds.
(7)No customer of an electric utility owing payment of an investment recovery charge
may, by agreement with the electric utility, prohibit, restrict, or require the consent
of such customer to the assignment, pledge or transfer of the investment recovery
charge.
Proposed law provides that the UCC–Secured Transactions does not apply to investment
recovery property or any right, title, or interest of a utility or assignee therein, whether
before or after the issuance of the financing order. Such right, title, or interest pertaining to
a financing order, including the associated investment recovery property including any
revenues, collections, claims, rights to payment, payments, money, or proceeds of or arising
from investment recovery charges pursuant to such order, shall not be deemed proceeds of
any right or interest other than of the financing order and the investment recovery property
arising from the financing order. All revenues and collections resulting from investment
recovery property shall constitute proceeds only of the investment recovery property arising
from the financing order.
Proposed law provides that the creation, attachment, granting, perfection, and priority of
security interests in investment recovery property to secure investment recovery bonds is
governed solely by 	proposed law and not by the UCC–Secured Transactions.
Proposed law provides that a security interest in investment recovery property is valid and
enforceable against the electric utility and its successor or an assignee and third parties and
attaches to investment recovery property only after certain conditions are met.
Proposed law provides that a security interest in investment recovery property is perfected
only if it has attached and a financing statement indicating the investment recovery property
collateral covered thereby has been filed. A financing statement must be filed to perfect all
security interests and liens in investment recovery property.  A security interest in
investment recovery property is perfected when it has attached and when the applicable
financing statement has been filed. The filing of such a financing statement shall be the only
method of perfecting a lien or security interest on investment recovery property.  The
financing statement shall be filed as if the debtor named therein were located in this state.
Proposed law provides that the priority of the conflicting security interests of secured parties
in the same interest or rights in any investment recovery property is determined as follows:
(1)Conflicting perfected security interests of secured parties rank according to priority
in time of perfection.
(2)A perfected security interest of a secured party has priority over a conflicting SB NO. 619
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unperfected security interest of a secured party.
(3)A perfected security interest of a secured party has priority over a person who
becomes a lien creditor after the perfection of such secured party's security interest.
Proposed law provides that a perfected security interest in investment recovery property and
all proceeds of such investment recovery property shall have priority over a conflicting lien
or privilege of any nature in the same collateral property, except a security interest is
subordinate to the rights of a person that becomes a lien creditor before the perfection of
such security interest. A security interest in investment recovery property which qualifies
for priority over a conflicting security interest, lien, or privilege also has priority over the
conflicting security interest, lien, or privilege in proceeds of the investment recovery
property.
Proposed law provides that if a default occurs under the terms of the investment recovery
bonds, the secured party may foreclose on or enforce the security interest in any investment
recovery property as if it was a secured party under the UCC–Secured Transactions.  A
secured party holding a security interest in investment recovery property shall be entitled to
exercise all of the same rights and remedies as are available to a secured party under the
UCC–Secured Transactions.
Proposed law provides that a security interest is not invalid or fraudulent against creditors
solely because the grantor or the electric utility as collector or servicer has the right or ability
to commingle the collateral or proceeds, or collect, compromise, enforce, and otherwise deal
with collateral.
Proposed law provides that any action arising under proposed law shall be brought in the
district court of the domicile of the commission.
Proposed law requires the law governing the validity, enforceability, attachment, perfection,
priority, exercise of remedies, and venue with respect to the sale, assignment, or transfer of
an interest or right or the creation of a security interest in any investment recovery property
to be exclusively the laws of this state, without applying this state's laws of conflicts of laws
and notwithstanding any contrary contractual provision.
Proposed law provides that if a conflict between proposed law and any other law regarding
the attachment, creation, perfection, the effect of perfection, or priority of, a sale,
assignment, or transfer of, or security interest in, investment recovery property, or the
exercise of remedies with respect thereto, proposed law shall govern to the extent of the
conflict.
Proposed law provides that investment recovery bonds are not a debt or a general obligation
of the state or any of its political subdivisions, agencies, or instrumentalities and are not a
charge on their full faith and credit.
Proposed law provides for a definition of "bondholder."
Proposed law provides that the state and the La. Legislature each pledge to and agree with
bondholders, the owners of the investment recovery property, and other financing parties that
the state and the Louisiana Legislature shall not do any of the following:
(1)Alter the provisions of proposed law which authorize the commission to create an
irrevocable contract right by the issuance of a financing order, to create investment
recovery property, and to make the investment recovery charges imposed by a
financing order irrevocable, binding, and nonbypassable charges.
(2)Take or permit any action that impairs or would impair the value of investment
recovery property. SB NO. 619
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Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
(3)Reduce, alter, or impair investment recovery charges that are to be imposed,
collected, and remitted for the benefit of the bondholders and other financing parties
until any and all principal, interest, premium, financing costs and other fees,
expenses, or charges incurred, and any contracts to be performed, in connection with
the related investment recovery bonds have been paid and performed in full.
Proposed law provides that nothing in proposed law shall preclude limitation or alteration
if and when full compensation is made by law for the full protection of the investment
recovery charges imposed, charged, and collected pursuant to a financing order and full
protection of the holders of investment recovery bonds and any assignee or financing party.
Proposed law allows any person or entity that issues investment recovery bonds to include
the pledge in the bonds and related documentation.
Proposed law provides that an assignee or financing party shall not be considered an electric
utility or person providing electric service by virtue of engaging in the transactions described
in proposed law.
Proposed law provides that nothing in proposed law is intended to be nor shall be construed
to constitute any limitation, derogation, or diminution of the jurisdiction or authority of the
commission provided by law, including that provided in or exercised by the PSC pursuant
to the La. Const. or the city council of N.O. pursuant to its home rule charter.
Effective upon signature of the governor or lapse of time for gubernatorial action.
(Amends R.S. 10:9-109(c)(4), (5), and 6(C); adds R.S. 45:1251-1261 and R.S. 10:9-
109(c)(7))