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2021 Regular Session
SENATE BILL NO. 223
BY SENATOR JOHNS AND REPRESENTATI VE DAVIS
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
UTILITIES. Provides relative to financing utility storm repairs and strengthening and
stabilizing utilities. (gov sig)
1 AN ACT
2 To amend and reenact the introductory paragraph of R.S. 10:9-109(c)(6) and to enact R.S.
3 45:1237 through 1240 and Subparts B and C of Part VIII of Chapter 9 of Title 45 of
4 the Louisiana Revised Statutes of 1950, to be comprised of R.S. 45:1331 through
5 1343, relative to financing utility storm repairs and strengthening and stabilizing
6 utilities; to provide additional powers to the Louisiana Utilities Restoration
7 Corporation; to provide with respect to financing orders and issuers of storm
8 recovery bonds; to provide for legislative intent and definitions; to authorize the
9 creation of special public trusts by the Louisiana Utilities Restoration Corporation;
10 to provide for an alternate use of proceeds of system restoration bonds and contents
11 of financing orders; to provide for the beneficiaries and powers of special public
12 trusts; to provide the mode of creation of special public trusts; to place special public
13 trusts under the regulatory jurisdiction of the Public Service Commission or the
14 council of the city of New Orleans; to establish a mechanism by which the special
15 public trusts may make investments and distribute dividends and redemption
16 payments; to provide for trustees and their duties and powers; to provide a
17 corporation pledge of nonimpairment of special public trusts; to prohibit the special
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1 public trusts from filing bankruptcy; to provide with respect to transfers of beneficial
2 interests; to authorize the Louisiana Utilities Restoration Corporation to participate
3 under the Louisiana Electric Utility Storm Recovery Securitization Act; and to
4 provide for related matters.
5 Be it enacted by the Legislature of Louisiana:
6 Section 1. The introductory paragraph of R.S. 10:9-109(c)(6) is hereby amended and
7 reenacted to read as follows:
8 §9-109. Scope
9 * * *
10 (c) Extent to which Chapter does not apply. This Chapter does not apply to
11 the extent that:
12 * * *
13 (6) R.S. 45:1226 through 1236 1240, the Louisiana Electric Utility Storm
14 Recovery Securitization Act, expressly governs the creation, perfection, priority, or
15 enforcement of a security interest in storm recovery property as defined therein or
16 any interest or right in any storm recovery property, but except to the extent contrary
17 to express provisions in said the Act:
18 * * *
19 Section 2. R.S. 45:1237 through 1240 are hereby enacted to read as follows:
20 §1237. Additional assignee; powers and duties of the corporation; expenditures;
21 perfection of security interest on storm recovery property;
22 limitations on bankruptcy
23 A. In addition to the purpose and powers granted pursuant to the
24 Louisiana Utilities Restoration Corporation Act, R.S. 45:1311 through 1328, the
25 Louisiana Utilities Restoration Corporation, hereinafter referred to as
26 "corporation" in this Section and in R.S. 45:1238 through 1240, shall have the
27 power and authority to participate as an assignee in the financial transactions
28 provided by this Part. Prior to the corporation participating as an assignee, the
29 corporation, in each instance, shall receive prior authorization from the
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1 commission. Supplemental to the powers and duties provided in R.S. 45:1313
2 and R.S. 45:1316, the corporation may perform the functions and activities that
3 assignees are authorized to do by this Part in financing storm recovery costs
4 through storm recovery bonds, except the corporation shall not be an issuer of
5 storm recovery bonds. The corporation's exercise of powers provided in this
6 Part is the performance of an essential governmental function of the
7 corporation.
8 B. Financing of storm recovery costs pursuant to this Part is hereby
9 recognized to be a valid public purpose for the corporation. The corporation
10 may negotiate and become a party to such contracts as are necessary,
11 convenient, or desirable to carry out the purposes of this Part. The corporation
12 may perform such other acts as are necessary, convenient, or desirable to
13 effectuate the purposes of this Part.
14 C. The expenditure of money by the corporation pursuant to this Part
15 shall be under the direction of its governing board and the regulation of the
16 commission. Such money shall only be paid by the corporation in accordance
17 with this Part and approved by the commission, pursuant to the procedures
18 established by commission regulations or orders, as applicable. If authorized in
19 a commission order, the corporation may purchase storm recovery property
20 from an electric utility by using the net proceeds of storm recovery bonds that
21 were loaned to the corporation by the issuer of storm recovery bonds that were
22 approved by a financing order. The corporation shall not apply any proceeds
23 of storm recovery bonds or storm recovery charges to any purpose not specified
24 in a commission order, to any purpose in excess of the amount allowed for such
25 purpose in the order, or to any purpose in contravention of the order.
26 D. In addition to the restrictions required by R.S. 45:1324, the governing
27 board of the corporation shall be prohibited from authorizing any
28 rehabilitation, liquidation, or dissolution of the corporation, and no such
29 rehabilitation, liquidation, or dissolution of the corporation shall take effect, as
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1 long as any storm recovery bonds issued in a transaction involving the
2 corporation are outstanding, unless adequate protection and provision has been
3 made for the payment of the bonds pursuant to the documents authorizing the
4 issuance of the bonds. Prior to the date that is two years and one day after
5 which the corporation no longer has any payment obligation outstanding to any
6 issuer of storm recovery bonds, the corporation shall be prohibited from filing
7 and shall have no authority to file a voluntary petition under the Federal
8 Bankruptcy Code, as it may, from time to time, be in effect, and neither any
9 public official nor any organization, entity, or other person shall authorize the
10 corporation to be or to become a debtor under the Federal Bankruptcy Code
11 during such period. The provisions of this Subsection shall be part of any
12 contractual obligation owed to the holders of storm recovery bonds issued under
13 this Part involving the corporation. Any such contractual obligation shall not
14 subsequently be modified by state law during the period of the contractual
15 obligation, and the state of Louisiana and the Louisiana Legislature hereby
16 covenant with the holders that the state and any public instrumentality thereof
17 and the Louisiana Legislature shall not limit or alter the denial of authority
18 pursuant to this Subsection during the period referred to in this Subsection.
19 E.(1) When the corporation is involved in the issuance of storm recovery
20 bonds, the corporation shall pledge to, and agree with, the financing parties that
21 until the storm recovery bonds and any ancillary agreements have been paid
22 and performed in full, the corporation shall not do any of the following:
23 (a) Take or permit any action that impairs or would impair the value of
24 storm recovery property.
25 (b) Except as allowed pursuant to this Paragraph and except for
26 adjustments under any true-up mechanism established by the commission,
27 reduce, alter, or impair storm recovery charges that are to be imposed,
28 collected, and remitted for the benefit of the financing parties, until all
29 principal, interest, premium, financing costs and other fees, expenses, or
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1 charges incurred, and any contracts to be performed, in connection with the
2 related storm recovery bonds have been paid and performed in full. Nothing in
3 this Paragraph shall preclude limitation or alteration if and when full
4 compensation is made by law for the full protection of the storm recovery
5 charges collected pursuant to a financing order and full protection of the
6 holders of storm recovery bonds and any assignee or financing party.
7 (2) Any person or entity that issues storm recovery bonds may include
8 the pledge specified in this Subsection in the bonds and related documentation.
9 F. For purposes of this Part, including without limitation all financing
10 statements referenced in this Part, the corporation is considered to be a public
11 entity under R.S. 39:1421(2) and a governmental unit under R.S.
12 10:9-102(a)(45). Notwithstanding any provision of law to the contrary, including
13 without limitation R.S. 33:4548.7 and R.S. 39:1430.1, the filing of a financing
14 statement pursuant to this Part is the exclusive method of perfecting a sale,
15 assignment, transfer, or pledge of or security interest or lien on storm recovery
16 property or any right, title, or interest of an assignee or secured party including
17 an issuer of storm recovery bonds therein, including without limitation to
18 perfect a security interest granted by the corporation or by a governmental unit
19 issuer. The provisions of this Section and R.S. 45:1239 shall not be interpreted
20 to conflict with or modify the provisions of R.S. 10:9-109(c)(6) and R.S. 45:1230
21 through 1232. Financing statements referenced in this Part where the debtor,
22 buyer, or secured party is a public entity and a governmental unit nevertheless
23 shall be filed as provided in this Part.
24 §1238. Financing orders including the Louisiana Utilities Restoration
25 Corporation
26 A. Notwithstanding the provisions of R.S. 45:1228(C)(3), in a financing
27 order issued to an electric utility by the commission to create storm recovery
28 property, the financing order may provide that such storm recovery property
29 shall be sold, assigned, or transferred by the electric utility to the corporation.
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1 B. When an electric utility petitions the commission for a financing order
2 pursuant to this Section, the corporation shall be a party to the commission's
3 proceedings along with the pertinent utility.
4 §1239. Alternative issuers; additional powers and duties for the corporation;
5 limitations; approval of storm recovery bonds by the State Bond Commission;
6 financing order requirements
7 A. Notwithstanding any provisions to the contrary in R.S. 45:1228 and
8 R.S. 45:1233, when the corporation is participating in a securitization financing
9 transaction pursuant to this Part, the financing order may authorize any
10 Louisiana public entity that has a separate corporate existence and that is
11 eligible to issue debt on which interest is exempt from income taxation under
12 the laws of the United States to be the issuer of the storm recovery bonds. After
13 the issuance of such financing order, the corporation shall arrange for the
14 issuance of the storm recovery bonds as specified in the financing order by an
15 issuer selected by the corporation and approved by the commission. The
16 corporation shall enter into a loan transaction with the issuer and then transfer
17 the net proceeds of such storm recovery bonds received by the corporation to
18 the pertinent utility as the purchase price of the storm recovery property.
19 B. The corporation shall not itself have the authority to issue storm
20 recovery bonds. The corporation may issue promissory notes to issuers
21 pursuant to this Part.
22 C. When storm recovery bonds are issued pursuant to this Section, the
23 bonds shall be approved by the State Bond Commission.
24 §1240. Additional authority
25 A. The provisions of R.S. 45:1237 through 1239 shall be additional and
26 alternative authority and shall provide the full method together with the other
27 provisions of this Part for the exercise of the powers herein granted and
28 accomplishment of the things authorized hereby and shall be regarded as
29 supplemental and additional to powers conferred by other laws. All rights and
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1 powers herein granted by this Part to the corporation and the issuers of storm
2 recovery bonds shall be cumulative with those derived from other sources and
3 shall not, except as expressly stated herein, be construed in limitation thereof.
4 B. A utility may finance storm recovery costs pursuant to R.S. 45:1237
5 through 1239 that were incurred prior to the effective date of those Sections. To
6 the extent that a utility has made application for a determination of eligible
7 storm recovery costs prior to the effective date of R.S. 45:1237 through 1239,
8 that application may provide the basis in part for the commission's financing
9 order relying in part upon those Sections.
10 Section 3. Subparts B and C of Part VIII of Chapter 9 of Title 45 of the Louisiana
11 Revised Statutes of 1950, comprised of R.S. 45:1331 through 1343, are hereby enacted to
12 read as follows:
13 SUBPART B. SPECIAL PUBLIC TRUSTS
14 §1331. Legislative findings and purpose
15 A. The Louisiana Legislature declared in Subpart A of this Part that the
16 restoration and rebuilding of utility systems after natural disasters using
17 low-cost capital, thereby minimizing the cost to ratepayers, is a valid public
18 purpose. Supporting the financial strength and stability of utility companies
19 that already have restored and rebuilt, partially or completely, their utility
20 systems after natural disasters is a valid public purpose in the best interests of
21 the citizens of the state.
22 B. The Louisiana Legislature finds and declares it to be prudent and in
23 the best interests of the state of Louisiana to consider and make available an
24 additional alternate financing technique to support the financial strength and
25 stability of utility companies that have undertaken past, and will undertake
26 future, utility system restoration. Therefore, the Louisiana Utilities Restoration
27 Corporation may create special public trusts for the purpose of providing an
28 alternate financing mechanism available to the Public Service Commission and
29 the council of the city of New Orleans, as applicable, to attract low-cost capital
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1 to finance utility system restoration and capital investments and contributions
2 to financially strengthen and stabilize utilities. Special public trusts are
3 nonbusiness entities authorized by this Subpart as a special type of public
4 corporation.
5 C. The purpose of this Subpart is to minimize costs charged to
6 ratepayers for system restoration costs by providing the corporation with a
7 beneficial interest in a trust that the corporation shall pledge as further security
8 for its obligations to the issuer of the system restoration bonds. The alternate
9 financing technique contemplated by this Subpart used in conjunction with
10 Subpart A of this Part enables the corporation to finance, directly or indirectly,
11 system restoration costs with low-cost capital. Financing of system restoration
12 costs using this alternate financing technique pursuant to this Subpart will
13 additionally safeguard the system restoration bonds so issued and reduce costs
14 to ratepayers. The Louisiana Legislature further finds that this alternate
15 financing technique is a valid public purpose.
16 D. Securitization financings pursuant to this Subpart, if authorized by
17 the commission in its sole discretion, shall include a commitment by the related
18 utility that the proceeds from the issuance of the system restoration bonds shall
19 be in lieu of recovery of system restoration costs through the regular rate
20 making process to the extent of those securitization financing proceeds.
21 §1332. Definitions
22 For purposes of this Subpart, the terms defined in R.S. 45:1312 have the
23 same meaning in this Subpart, except where a term is expressly modified in this
24 Subpart, and as used in this Subpart:
25 (1) "Affiliate" means, when used with reference to a specified person, an
26 entity that directly or indirectly through one or more intermediaries controls
27 or is controlled by or is under common control with the entity specified. For the
28 purpose of this term,"control", "controlled by", and "under common control
29 with", means the possession, direct or indirect, of the power to direct or cause
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1 the direction of the management and policies of an entity whether through the
2 ownership of voting securities, by contract, or otherwise.
3 (2) "Contributed proceeds" means the monies contributed by the
4 corporation to a trust. In each instance, the contributed proceeds shall be the
5 amount of the net proceeds received by the corporation from an issuance of
6 system restoration bonds in accordance with the terms of a financing order.
7 (3) "Pledgee" means an issuer as pledgee of the corporation or an
8 applicable financing party as pledgee of an issuer.
9 (4) "Preferred interests" means preferred equity interests in a utility
10 affiliate that pay preferred dividends to the trust that purchased those
11 preferred equity interests.
12 (5) "Purchase proceeds" means the proceeds received by a utility
13 affiliate from the sale of its preferred interests to a trust.
14 (6) "Related bonds" means, with respect to a trust, the system
15 restoration bonds that funded the net proceeds transferred by an issuer to the
16 corporation and then contributed by the corporation to that trust.
17 (7) "Related utility" means, with respect to a trust, the utility that is a
18 beneficiary of such trust and that obtains a financing order pursuant to this
19 Subpart. The related utility shall be an affiliate of the utility affiliate that sells
20 its preferred interests to such trust for purchase proceeds.
21 (8) "Trust" means an express special public trust created only pursuant
22 to and in compliance with the provisions of this Subpart. A trust for purposes
23 of this Subpart shall not be an issuer of system restoration bonds and shall not
24 be created pursuant to the public trust law, R.S. 9:2341 et seq.
25 (9) "Trust agreement" means, with respect to a trust, the written
26 instrument that created the trust together with all proper amendments.
27 (10) "Utility affiliate" means an affiliate of the utility that obtains a
28 financing order pursuant to this Subpart.
29 §1333. Additional powers of the corporation and the commission
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1 A. The corporation may create express special public trusts for the
2 furtherance and accomplishment of the corporation's function and purpose
3 pursuant to this Part.
4 B. (1) Notwithstanding any provisions to the contrary in Subpart A of
5 this Part, including without limitation R.S. 45:1316(A), R.S. 45:1318(C)(5)(a)
6 and (E), and 45:1322(B), (D), and (E), a financing order may require that the
7 corporation shall contribute to a trust all of the net proceeds from the issuance
8 of system restoration bonds and the trust shall use all such contributed proceeds
9 to purchase preferred interests from a utility affiliate of the related utility.
10 (2) Notwithstanding any provisions to the contrary in Subpart A of this
11 Part, R.S. 45:1318(C)(5)(a) and 45:1321(K) shall not apply to securitization
12 financing pursuant to this Subpart and a utility affiliate that sells its preferred
13 interests to a trust shall use those purchase proceeds for corporate purposes
14 supporting the related utility's financial strength and stability and thereby
15 promote the economic welfare of the citizens of the state.
16 (3) In order for this Subpart to be used, a utility shall request in its
17 application to the commission pursuant to R.S. 45:1318, or in a supplement
18 thereto, that a trust shall be used by the corporation in its distribution of system
19 restoration bonds' proceeds.
20 C. A financing order may create system restoration property pursuant
21 to this Part without including all the requirements of R.S. 45:1318(C)(5)(a), if
22 the financing order includes all the requirements of R.S. 45:1337(A), and if the
23 commission, in such financing order, requires the corporation to transfer the
24 net proceeds of the system restoration bonds to a trust that has the related
25 utility as a beneficiary, subject to the express conditions and requirements set
26 forth in the financing order that, upon receipt of the purchase proceeds by the
27 utility affiliate from that trust, such related utility shall do all of the following:
28 (1) Set aside in a restricted escrow account, in an amount and manner
29 required by the commission, any monies or investments used to fund the related
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1 utility's storm damage reserve.
2 (2) Not seek to recover the system restoration costs approved by that
3 applicable financing order, to the extent of the system restoration bonds
4 proceeds, from any of its commission-jurisdictional customers.
5 (3) Flow through to the benefit of its customers in a manner determined
6 by the commission the amount of any insurance proceeds, federal government
7 grants, or similar source of permanent reimbursement received by the related
8 utility after the issuance of the financing order relating to that same system
9 restoration activity and those same system restoration costs.
10 D. A financing order that is issued pursuant to this Subpart shall require
11 that, upon receipt of the purchase proceeds by a utility affiliate, the related
12 utility fully release any claims or rights that the related utility has to recover,
13 in any manner, from its commission-jurisdictional customers any of the system
14 restoration costs covered by the financing order, to the extent of the amount of
15 the related bonds' proceeds.
16 §1334. Special public trusts authorized; powers and duties for the special public
17 trust; expenditures; limitations of the special public trust; public records law;
18 domicile; subject to legislative audit; liability protection for beneficiaries
19 A. The corporation may create trusts in movable property, with the
20 corporation and a utility as the two beneficiaries thereof, by and with the
21 express approval of the commission, including authorization in a financing
22 order. A trust shall own, administer, and distribute the trust property
23 contributed and earned for the benefit of its beneficiaries and, when applicable,
24 a pledgee. The operations and activities of a trust shall be managed by an
25 independent trustee pursuant to R.S. 45:1338. A trust is a separate juridical
26 person and only the trust owns the trust property.
27 B. A trust shall not itself have the power to be an issuer of system
28 restoration bonds. Furthermore, a trust shall not have the power to issue other
29 bonds, notes, obligations, or other evidences of indebtedness. System restoration
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1 bonds shall not be the debt of a trust.
2 C. No funds of the corporation or the commission shall be charged with
3 or expended for the operation of a trust. The costs of creating a trust incurred
4 before its trust agreement becomes effective may be included in issuance costs
5 if the commission so provides in a financing order. The costs associated with the
6 operation of a trust after it is organized pursuant to R.S. 45:1335, shall be paid
7 solely from the related utility's share of the dividend income or redemption
8 proceeds from preferred interests, as provided in R.S. 45:1338.
9 D. A public trust created pursuant to this Subpart shall have a legal
10 existence separate and distinct from the state and the trust's settlor and
11 beneficiaries, and from other public trusts. A trust is not and shall not be a
12 political subdivision, nor a department, unit, agency, board, or commission of
13 the state. Assets of a trust shall not be considered part of the general fund of the
14 state or any other fund in the state treasury. The state, the commission, and the
15 corporation shall not budget for or provide appropriations to a trust. The
16 monies of each trust created under this Subpart shall be maintained by that
17 trust as a separate and special fund, separate and apart from the funds of the
18 corporation or other trusts. A trust shall perform only those functions
19 consistent with this Subpart and shall exercise its powers through its trustee
20 established under its trust agreement in accordance with R.S. 45:1338. A trust
21 shall have the power only to engage in activities necessary to accomplish its
22 purposes as expressed in this Subpart, and in its trust agreement, or which may
23 be incidental thereto, including the authority to sue and be sued, and to make
24 contracts. A trust shall not apply any contributed proceeds of system
25 restoration bonds or proceeds from distributions in respect of preferred
26 interests to any purpose not specified in its approved trust agreement, or to any
27 purpose in excess of the amount allowed for such purpose in its approved trust
28 agreement, or to any purpose in contravention of a commission order. A trust
29 created pursuant to this Subpart shall be a special purpose public corporation
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1 of the Louisiana Utilities Restoration Corporation. This special purpose status
2 does not affect or diminish the rights, powers, duties, and remedies of the
3 trustee and the beneficiaries, as determined by the provisions of the trust
4 agreement and as expressly provided in this Subpart. The special purpose status
5 does not apply for purposes of applicable federal and state taxation laws. A
6 trust created pursuant to this Subpart functions as a trust with respect to its
7 beneficiaries and is not a corporation or business entity formed under the
8 Business Corporation Act. A trust's primary purpose is to preserve the trust
9 property as provided for in this Subpart. A trust is intended to be a trust for
10 federal income tax purposes and shall not be a partnership or corporation for
11 federal or state tax purposes. A trust shall not be subject to the state franchise
12 tax.
13 E. A trust created under this Subpart shall be subject to the Public
14 Records Law, R.S. 44:1 et seq.
15 F. The domicile of a trust shall be the parish of East Baton Rouge.
16 G. The books and accounts of a trust shall be subject to examination by
17 the legislative auditor. Every trust agreement shall provide for an annual,
18 independent audit of the trust by a certified public accountant.
19 H. No beneficiary shall be charged personally with any liability
20 whatsoever by reason of any act or omission committed or suffered in the
21 performance of the trust's operations.
22 §1335. Mode of creation; acceptance of beneficial interests; amendments
23 A. A trust shall be created, organized, structured, and empowered by a
24 written instrument, which shall be in accordance with this Subpart. A trust
25 agreement shall be subscribed by the corporation as settlor by authentic act or
26 by act under private signature executed in the presence of two witnesses and
27 duly acknowledged by the settlor or by the affidavit of one of the attesting
28 witnesses. A trust agreement shall become effective upon acceptance by the
29 trustee and the beneficiaries as provided in this Section. A trust's existence as
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1 a juridical person begins, and the trust is duly organized, when its trust
2 agreement becomes effective, even if no property is contributed to that trust
3 until a later time. Upon effectiveness, a trust agreement shall be and constitute
4 a binding contract among the corporation as settlor, the beneficiaries and the
5 trustee, for the acceptance of the beneficial interests in the trust by the
6 designated beneficiaries, and the application of the proceeds of the trust
7 property and its operation for the purposes and in accordance with the
8 stipulations of the approved trust agreement. A trust agreement shall not be an
9 ancillary agreement as defined in R.S. 45:1312(1).
10 B. Before the execution of a trust agreement, that instrument shall be
11 approved by the commission in a financing order, or by the use of an approval
12 method provided in a financing order.
13 C. Before a trust agreement and a trust become effective, the trust
14 agreement shall be accepted by the trustees and the beneficiaries. The trustee
15 may accept the trust in the trust agreement, or in a separate written instrument
16 within a reasonable amount of time after the trust agreement's execution. Each
17 beneficiary may accept the trust in the trust agreement or by written acceptance
18 of the beneficial interest endorsed thereon. The corporation settlor and the
19 related utility shall be the trust's only beneficiaries.
20 D. Promptly after a trust agreement takes effect, the trust agreement,
21 together with any separate written acceptances, shall be recorded in the
22 conveyance records of the clerk of court of the parish of East Baton Rouge.
23 E. A trust agreement may be modified, amended, terminated, or
24 rescinded only with the express approval of the commission, the corporation,
25 the beneficiary-related utility, and its trustee. Each amendment to a trust
26 agreement shall be recorded in the conveyance records of the clerk of court of
27 the parish of East Baton Rouge.
28 F. A trust shall have duration for the term specified in the trust
29 agreement. Notwithstanding any provisions of the trust agreement or the
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1 provisions of Subsection E of this Section, no termination, rescission,
2 rehabilitation, liquidation, or dissolution of a trust shall take effect as long as
3 any of the related bonds are outstanding. Upon termination, the trustee shall file
4 a certificate of termination of the trust agreement in the conveyance records of
5 the clerk of court of the parish of East Baton Rouge.
6 G. Each trust agreement shall establish a name for its trust that is
7 distinguishable from the name of every other trust previously created by the
8 corporation and from the name of any entity registered with the secretary of
9 state. The name shall not imply that the trust is a political subdivision or an
10 administrative agency of this state.
11 §1336. Regulation by the commission
12 A. The commission shall regulate each trust concomitant with the
13 commission's regulation of the related utility. Notwithstanding such regulation,
14 a trust shall not be considered a public utility and shall not be considered an
15 agent of any utility.
16 B. Any expenses of examination by the commission shall be charged only
17 to the trust being examined and recovered only from the related utility's share
18 of the distributions or redemptions in respect of the preferred interests held by
19 that trust as provided in R.S. 45:1338.
20 §1337. Permitted use of funds
21 A. A trust shall perform only those functions consistent with and
22 effectuate only the purposes set forth in this Subpart. A trust shall acquire and
23 subscribe for preferred interests of a utility affiliate using all of the contributed
24 proceeds of system restoration bonds received from the corporation as settlor.
25 Notwithstanding the provisions of R.S. 45:1318(C)(5)(a), a financing order
26 issued under this Subpart shall require the corporation to transfer the net
27 proceeds of the system restoration bonds it receives, pursuant to R.S.
28 45:1318(C)(3), to a trust whose beneficiary is the related utility that is collecting
29 the applicable system restoration charges. A financing order shall require that
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1 trust to use those contributed proceeds as provided in this Subsection, shall
2 require that trust to use the distributions in respect of the purchased preferred
3 interests as provided in Subsection C of this Section, and shall require that the
4 trust be subject to the express conditions and requirements set forth in the
5 financing order described in Subsection B of this Section.
6 B. A financing order issued under this Subpart shall include the related
7 utility's commitment that, upon receipt of the purchase proceeds by the utility
8 affiliate, the related utility shall fully release any claims or rights to recover the
9 system restoration costs approved by that financing order, to the extent of such
10 related bonds' proceeds, from any of its commission-jurisdictional customers,
11 and shall set aside in a restricted reserve account, in an amount and manner
12 required by the commission, any monies or investments used to fund the
13 utility's storm damage reserve. The primary purpose of this Subpart is to serve
14 the public good and to benefit the public as a whole as part of a regulatory
15 program that is intended to minimize the rates charged by utilities and to
16 strengthen the financial position of utilities that have restored and rebuilt their
17 systems after storms. The purchase proceeds are not payments for any electric
18 or gas service provided by the related utility to any person and are not
19 payments in the nature of insurance, or otherwise as direct compensation for
20 losses by the related utility from storms. Instead, the purchase proceeds are
21 made in exchange for the preferred interests, the dividend income, and
22 redemption payments attributable thereto and for the related utility's
23 obligations set forth in the financing order.
24 C. A trust shall pay distributions, whether dividend income, redemption
25 payments, or otherwise, in respect of the preferred interests only to the
26 beneficiaries of the trust, shared between the beneficiaries, as specified in the
27 approved trust agreement, or when applicable, to a permitted pledgee, and for
28 expenses permitted by R.S. 45:1338(D). A trust may cause the periodic
29 redemption of the preferred interests only as provided in the approved trust
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1 agreement. The terms and attributes of the preferred interests purchased by a
2 trust shall be approved by the commission in a financing order or by the use of
3 an approval method provided in a financing order.
4 D. System restoration bonds issued pursuant to a financing order under
5 this Subpart shall not be debt of a trust. System restoration bonds shall be
6 nonrecourse to the credit or any assets of a trust, other than the trust's
7 obligation to distribute proceeds to the corporation or a pledgee as specified in
8 the trust agreement and pursuant to the pledge by the corporation to the issuer
9 of the related bonds as security for repayment of a loan to the corporation by
10 the issuer. The terms of the indenture, and other financing documents
11 pertaining to system restoration bonds issued pursuant to this Subpart shall be
12 consistent with this Section.
13 §1338. Trustee requirements; duties and powers; compensation; liability
14 protection
15 A. The trustee of a trust shall not serve as a trustee under an indenture
16 pertaining to the related bonds authorized by the financing order relating to
17 that trust. Additionally, only the following entities shall serve as a trustee of a
18 trust established pursuant to this Subpart:
19 (1) A federally insured depository institution organized under the laws
20 of this state, another state, or the United States.
21 (2) A financial institution or trust company organized under the laws of
22 this state or the United States, authorized to exercise trust or fiduciary powers
23 under the laws of this state or the United States, or a trust company, organized
24 under the laws of another state, and operating in this state pursuant to R.S.
25 6:626(A)(1) and (2).
26 B. An original trustee, an alternate trustee, or a successor trustee may
27 be designated in the trust agreement or chosen by the use of a method provided
28 in the trust agreement.
29 C. A trustee who accepts a trust established pursuant to this Subpart
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1 submits to the jurisdiction of the courts of this state.
2 D. A trust acting through its trustee may employ or retain such
3 attorneys, accountants, and other professionals as it may deem necessary to
4 carry out its duties under this Subpart and the trust agreement, and may
5 determine their duties and compensation subject to regulation by the
6 commission in its discretion. The compensation of a trustee and such
7 professionals, and other costs to operate a trust, shall not be included within
8 financing costs as defined in R.S. 45:1312. All such compensation and other
9 costs shall first be paid from the related utility's share as beneficiary of the
10 dividend income that the trust receives from the preferred interests. If the
11 related utility's share of dividend income is insufficient to pay these expenses,
12 then the expenses shall be paid from the related utility's share as beneficiary of
13 redemption payments, in respect of the preferred interests.
14 E. A trust agreement may provide indemnity to a trustee for expenses
15 properly incurred by the trustee in the administration of the trust property, but
16 such amounts shall only be paid from the related utility's portion of the trust
17 property, or directly from the related utility, if the related utility agrees to such
18 direct payment.
19 F. A trustee shall administer a trust solely in the interest of the
20 beneficiaries, and if applicable, a pledgee, in accordance with the trust
21 agreement. A trust shall keep and render clear and accurate accounts of the
22 administration of the trusts at least annually to the beneficiaries as specified in
23 the trust agreement. Upon the request of the beneficiary, a trustee, within a
24 reasonable time, shall provide a beneficiary complete and accurate information
25 as to the nature and the amount of the trust property. The trustee shall permit
26 the beneficiary or its agents to inspect the subject matter of the trust, the
27 accounts, and any other documents relating to the trust.
28 G. A trustee shall administer the trust as a prudent person would
29 administer it. A trustee shall invest trust property only in preferred interests as
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1 provided in this Subpart and the applicable trust agreement. A trustee shall
2 have no liability whatsoever by reason of investing within the limitations of the
3 foregoing requirement. The nature and extent of the duties and powers of a
4 trustee shall be determined by the provisions of the trust agreement, except as
5 otherwise expressly provided in this Subpart. A trust agreement may relieve the
6 trustee from liability, except a liability relief provision in a trust agreement shall
7 not be effective to relieve the trustee from liability for breach of the duty of
8 loyalty to a beneficiary, or for breach of trust committed in bad faith.
9 H. Except for redemptions of preferred interests as authorized by the
10 trust agreement, a trustee may not sell or encumber trust property.
11 §1339. Corporation additional pledge to financing parties
12 A. The corporation shall pledge to and agree with the issuer for the
13 benefit of the issuer, the bondholders, and other financing parties, that until the
14 related bonds and any ancillary agreements have been paid and performed in
15 full, the corporation shall not do any of the following:
16 (1) Take or permit any action that impairs or would impair the value of
17 the corporation's beneficial interest in the applicable trust, other than the
18 distributions of dividend income and redemption proceeds contemplated in this
19 Subpart and in the trust agreement.
20 (2) Approve or allow a modification or amendment pertaining to the
21 corporation's beneficial interest in the applicable trust, or a termination or
22 rescission of the applicable trust agreement or the applicable trust, or in any
23 other way impair the rights and remedies of the corporation as beneficiary
24 under the applicable trust, provided that nothing shall preclude the
25 distributions of dividend income and the redemption proceeds that are
26 contemplated in this Subpart and in the trust agreement.
27 B. For purposes of this Section and R.S. 45:1340, the term "bondholder"
28 means a person who holds a system restoration bond, including in book entry
29 form.
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1 §1340. Limitation on bankruptcy
2 A. Prior to the date that is two years and one day after which the
3 corporation no longer has any payment obligation outstanding to the issuer of
4 the related bonds, a trust shall be prohibited from filing and shall have no
5 authority to file a voluntary petition under the Federal Bankruptcy Code, as it
6 may, from time to time, be in effect. The provisions of this Section shall be part
7 of any contractual obligation owed to the bondholders of the related bonds
8 issued pursuant to this Subpart. This contractual obligation shall not
9 subsequently be modified by state law during the period of this contractual
10 obligation, and the state of Louisiana and the Louisiana Legislature hereby
11 covenant with the bondholders of the related bonds that the state and the
12 Louisiana Legislature shall not limit or alter the denial of authority pursuant
13 to this Section during the period referred to in this Subsection.
14 B. A trust shall be subject to the provisions of R.S. 13:4741 and R.S.
15 39:619 through 622.
16 §1341. Transfers by beneficiaries
17 A. The trust's beneficiaries shall have no power over the trust or the
18 trust property. A beneficiary shall not alienate or encumber its beneficial
19 interest in a trust, except as solely permitted by Subsection B of this Section.
20 B. If authorized in the pertinent financing order, a trust agreement shall
21 permit the corporation to encumber the whole or any part of its interest as
22 beneficiary in favor of the issuer of the related bonds as additional security for
23 the corporation's repayment of the loan of the net proceeds of the related bonds
24 made to the corporation by that issuer. The issuer also may pledge that
25 collateral. In such instance, the trust agreement shall require the trustee to pay
26 a pledgee all or a portion of a distribution owing to the corporation after the
27 trustee receives a notification, authenticated by the corporation or the pledgee,
28 that the amount due or to become due has been assigned and that payment is to
29 be made to the pledgee, notwithstanding any provisions in R.S. 10:9-406. A
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1 trustee may request the pledgee to seasonably furnish reasonable proof that the
2 assignment to the pledgee has been made, and unless the pledgee complies, the
3 trustee may pay the corporation, even if the trustee has received a notification
4 pursuant to this Subsection. As to trust property, the pledgee may seize only
5 distributions of dividend income and redemption payments that have been
6 authorized by the trustee and not yet paid to the corporation beneficiary as
7 pledgor.
8 C. A trust agreement shall provide that the interest of the related utility
9 beneficiary shall not be subject to voluntary or involuntary alienation or
10 encumbrance. Such a restraint upon voluntary alienation or encumbrance is
11 valid. However, a restraint upon involuntary alienation, or encumbrance by a
12 beneficiary, is subject to the limitations in Subsection D of this Section.
13 D. A creditor of a related utility beneficiary may seize only distributions
14 of dividend income and redemption proceeds that have been authorized by the
15 trustee and have not yet been paid to such beneficiary.
16 E. For purposes of R.S. 39:1430.1, the corporation's beneficial interest
17 in a trust, including without limitation, the corporation's rights under a trust
18 agreement, interests in income and principal, and income, receipts and proceeds
19 from distributions from a trust, whether dividend income, redemption
20 payments or otherwise, shall be considered to be income, revenues, monies,
21 receipts, and contract rights pursuant to R.S. 39:1430.1, and shall be subject to
22 the provisions of R.S. 39:1430.1. A pledge and security interest granted by the
23 corporation in such rights, interests, income, receipts and proceeds pursuant to
24 this Subpart shall be effective as to the applicable trustee from the time a copy
25 of the pledge or security agreement is received by the trustee, and shall be valid,
26 perfected, and enforceable against the corporation and other third parties from
27 the time when the pledge and grant is made without any notice or filing of any
28 kind. Without limiting the foregoing, notwithstanding that the corporation's
29 interest in a trust is a general intangible pursuant to the Louisiana Uniform
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1 Commercial Code - Secured Transaction R.S. 10:9-101 et seq., the filing of a
2 financing statement is not required to perfect a pledgee's security interest in the
3 corporation's movable property described in this Subsection. This pledge and
4 security interest pursuant to this Subsection shall secure all obligations, then
5 existing or thereafter arising, provided in the pledge or security agreement. A
6 perfected pledge and security interest pursuant to this Subsection shall be a
7 continuously perfected privilege and security interest in all movable property
8 described in this Subsection whether or not the interests, income, receipts,
9 proceeds, or distributions have accrued. Conflicting pledges, if allowed, shall
10 rank according to priority in time of perfection.
11 F. Insofar as the provisions of this Section are inconsistent with the
12 provisions of R.S. 10:9-406 or 10:9-408, the provisions of this Section shall be
13 controlling.
14 §1342. Construction and effect
15 A. This Subpart and all powers granted hereby, shall be liberally
16 construed to effectuate its and their purposes, without implied limitations
17 thereon. All rights and powers granted in this Subpart to the commission, the
18 corporation, and a trust, shall be cumulative with those derived from other
19 sources and shall not, except as expressly stated herein, be construed in
20 limitation thereof.
21 B. System restoration bonds may be issued pursuant to Subpart A of this
22 Part alone, or pursuant to this Subpart, together with Subpart A of this Part as
23 modified by this Subpart. References in this Subpart to a financing order issued
24 pursuant to this Subpart, mean that the financing order is issued pursuant to
25 this Subpart, and in conjunction with Subpart A of this Part, as modified by this
26 Subpart.
27 C. A utility may finance system restoration costs pursuant to this
28 Subpart that were incurred by a utility prior to the effective date of this
29 Subpart. Further, to the extent that a utility has made application for a
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1 determination of eligible system restoration costs prior to the effective date of
2 this Subpart, that application may provide the basis in part for the
3 commission's financing order pursuant to this Subpart and subject to R.S.
4 45:1333(B)(3).
5 D. The failure of a utility, its utility affiliate, a trust, or the trustee or any
6 beneficiary thereof to perform their respective obligations pursuant to this
7 Subpart, or under the trust agreement, or applicable financing order, shall not
8 affect or impair the system restoration property, or any rights of the
9 corporation, the issuer or any financing party under the financing order,
10 including without limitation the right to receive billed and collected system
11 restoration charges. Nothing in this Subsection shall be construed to deny, limit,
12 or diminish the commission's jurisdiction and authority to enforce the
13 provisions of any financing order upon the utility.
14 SUBPART C. ADDITIONAL POWERS
15 §1343. Corporation participation
16 The corporation may, in each instance, subject to the prior authorization
17 of the commission, participate in financing transactions contemplated by the
18 Louisiana Electric Utility Storm Recovery Securitization Act, Part V-B of
19 Chapter 9 of Title 45 of the Louisiana Revised Statutes of 1950, comprised of
20 R.S. 45:1226 through 1240.
21 Section 4. The Louisiana State Law Institute is hereby directed to redesignate the
22 existing R.S. 45:1311 through 1328 as Subpart A of Part VIII of Chapter 9 of Title 45 of the
23 Louisiana Revised Statutes of 1950, with the heading "System Restoration Bonds".
24 Section 5. This Act shall become effective upon signature by the governor, or, if not
25 signed by the governor, upon expiration of the time for bills to become law without signature
26 by the governor, as provided in Article III, Section 18 of the Constitution of Louisiana. If
27 vetoed by the governor and subsequently approved by the legislature, this Act shall become
28 effective on the day following such approval.
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The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Elizabeth O'Quin.
DIGEST
SB 223 Engrossed 2021 Regular Session Johns
Present law provides that the provisions of the Uniform Commercial Code - Secured
Transactions shall not apply to the La. Electric Utility Storm Recovery Securitization Act,
except for the provisions related 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 provides the provisions of the Uniform Commercial Code - Secured
Transactions shall not apply to certain powers granted to the La. Utilities Restoration
Corporation (corporation).
Proposed law provides additional powers to a corporation under the La. Electric Utility
Storm Recovery Securitization Act and authorizes a corporation to be an assignee for
financing storm costs. Provides before the corporation may be an assignee, it must seek prior
authorization from the Public Service Commission (commission). Provides the corporation
may perform the functions and activities that assignees are authorized to do in financing
storm recovery costs through storm recovery bonds, except the corporation shall not be an
issuer of storm recovery bonds. Provides the corporation's exercise of its powers is the
performance of an essential governmental function of the corporation under this proposed
law.
Proposed law provides the financing of storm recovery costs is a valid public purpose for the
corporation. Provides the corporation may negotiate and be a party to certain contracts and
other acts in order to carry out the purposes of the La. Electric Utility Storm Recovery
Securitization Act.
Proposed law provides the corporation's expenditure of money is under the direction of its
governing board and the commission in accordance with the La. Electric Utility Storm
Recovery Securitization Act. Provides such money shall only be paid by the corporation if
approved by the commission in accordance with the La. Electric Utility Storm Recovery
Securitization Act, and pursuant to procedures established by the commission regulations
or orders, as applicable. Provides if the commissions order authorizes the corporation, the
corporation may purchase storm recovery property from an electric utility using the net
proceeds of storm recovery bonds the issuer of the storm recovery bonds loaned it. Provides
the corporation is required to only use the proceeds of the storm recovery bonds or storm
recovery charges as specified in the order, or use the proceeds for any purpose that is not in
excess of the amount allowed in the order, or to any purpose allowed in the order.
Proposed law provides that in addition to the restrictions for filing bankruptcy in law, the
corporation is prohibited from any rehabilitation, liquidation, or dissolution of the
corporation and unless adequate protection and provisions have been made for payment for
the payment of bonds, no such action shall take effect as long as any storm recovery bonds
are outstanding. Provides the corporation is prohibited from filing a voluntary petition for
bankruptcy until two years and one day after the corporation has satisfied the payment
obligations to any issuer of any storm recovery bonds outstanding. Provides provisions must
be included with any contractual obligation for storm recovery bonds under proposed law.
Provides the contractual obligation shall not subsequently be modified by state law during
the period of the contractual obligation, and this state and the legislature contract with the
holders that the state shall not limit or alter the denial of authority during the period referred
to in proposed law.
Proposed law provides when a corporation is involved in the issuance of storm recovery
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bonds, the corporation shall pledge to and agree with the issuer that until the storm recovery
bonds and any ancillary agreements have been paid and performed in full, the corporation
shall not do any of the following:
(1)Take or permit an action that impairs or would impair the value of storm recovery
property.
(2)Except as provided under proposed law and except for adjustments under any true-up
mechanism established by the commission, reduce, alter, or impair storm recovery
charges that are to be imposed, collected, and remitted for the benefit of the
financing parties until any and all obligations of related storm recovery bonds have
been paid or performed in full. Provides this does not preclude the limitation or
alteration of the contract if it has been paid or performed in full under this proposed
law.
Proposed law provides any person or entity issuing storm recovery bonds may include the
pledge in the bonds and related documentation under proposed law.
Proposed law provides a corporation is considered a public entity and a governmental unit
under law and for the purpose of the La. Electric Utility Storm Recovery Securitization Act.
Provides notwithstanding any provision of law to the contrary, including without limitation
the law on revenue bonds and any pledge made by the Louisiana Local Government
Environmental Facilities and Community Development, the filing of a financing statement
for storm recovery bonds is the method for perfecting a sale, assignment, transfer, or pledge
of or security interest or lien on a storm recovery property or any right, title or interest of an
assignee or secured party, including an issuer of storm recovery bonds which includes
perfecting a security interest that was granted by a corporation or by a governmental unit
issuer under the La. Electric Utility Storm Recovery Securitization Act. Provides proposed
law is not to be interpreted to conflict with or modify certain provisions of present law.
Provides for the filing of financing statements.
Proposed law provides notwithstanding the financing orders in law, a financing order issued
to an electric utility by the commission for storm recovery property may provide the storm
recovery property may be sold, assigned, or transferred by the electric utility to the
corporation.
Proposed law provides when an electric utility petitions the commission for a financing
order, the corporation and the utility shall be a party to the commission's proceedings under
proposed law.
Proposed law provides that notwithstanding any provisions to the contrary. Relative to
financing orders and storm recovery bonds, when a corporation participates in a
securitization financing transaction pursuant to the La. Electric Utility Storm Recovery
Securitization Act, the financing order may authorize a state public entity that has a separate
corporate existence and that is eligible to issue debt on interest that is exempt from federal
income tax to be the issuer of the storm recovery bonds. Provides the corporation must
arrange to have storm recovery bonds specified in the financing order be issued to an issuer
selected by the corporation and approved by the commission. Provides the corporation is
required to enter a loan transaction with the issuer of the storm recovery bonds and the
corporation must transfer the net proceeds of bonds to the pertinent utility as the purchase
price of the storm recovery property.
Proposed law provides the corporation cannot issue storm recovery bonds. Provides a
corporation may issue promissory notes under the La. Electric Utility Storm Recovery
Securitization Act.
Proposed law provides storm recovery bonds issued requires approval by the State Bond
Commission.
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Proposed law provides a utility may finance storm recovery costs using additional
alternatives for costs incurred before the effective date to the extent that the utility has made
an application for a determination of eligibility for their storm recovery costs under these
additional alternatives may be the basis for the commission's financing order that relied on
the proposed law.
Proposed law provides for legislative intent and the creation of special public trusts.
Proposed law provides that the securitization financing as provided in proposed law, if
authorized by the commission, shall include a commitment by the utility that the proceeds
from these bonds are in lieu of recovery of system restoration costs through the regular rate
making process to the extent of those securitization financing proceeds.
Proposed law defines the following terms:
(1)"Affiliate" means, when referring to a specified person, an entity that directly or
indirectly through one or more intermediaries controls or is controlled by or is under
common control with the entity specified. The term,"control", "controlled by", and
"under common control with", means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of an entity whether
through the ownership of voting securities, by contract, or otherwise.
(2)"Contributed proceeds" means the money a corporation contributes to a trust, the
contributed proceeds are the corporation's net proceeds from an issuance of system
restoration bonds in accordance with the terms of a financing order.
(3)"Pledgee" means an issuer as pledgee of the corporation or an applicable financing
party as pledgee of an issuer.
(4)"Preferred interests" means preferred equity interests in a utility affiliate that pay the
preferred dividends to the trust that purchased the preferred equity interests.
(5)"Purchase proceeds" means proceeds received by a utility affiliate from the sale of
its preferred interests to a trust.
(6)"Related bonds" means with respect to a trust, the system restoration bonds that
funded the net proceeds transferred by an issuer to the corporation and then
contributed by the corporation to that trust.
(7)"Related utility" means the utility that is a beneficiary of a trust and obtains a
financing order under the provisions of proposed law. Provides the related utility is
an affiliate of the utility affiliate that sells its preferred interests to the trust for
purchase proceeds.
(8)"Trust" means an express special public trust created only pursuant to and in
compliance with the provisions of proposed law. Provides this trust shall not be an
issuer of system restoration bonds and is not created under the public trust laws.
(9)"Trust agreement" means a written instrument that creates the trust together with all
amendments.
(10)"Utility affiliate" means an affiliate of the utility that obtained a financing order
under the provisions of the proposed law.
Proposed law provides a corporation may create express special public trusts to accomplish
a corporation's function and purpose under the provisions of proposed law.
Proposed law provides that a financing order may authorize a corporation to contribute to
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a trust all of its net proceeds from the issuance of system restoration bonds and the trust is
required to use all the proceeds to purchase preferred interest from the related utility.
Proposed law provides certain provisions of the La. Energy Emergency Relief Act do not
apply to securitization financing under the provisions of proposed law. Requires the utility
affiliate sell its preferred interests to the trust. Requires the related utility to purchase
proceeds for corporate purposes that supports the related utility's financial strength and
stability and promotes the economic welfare of the citizens of the state.
Proposed law provides the utility must request in its application to the commission that a
trust shall be used in its distribution of system restoration bonds proceeds.
Proposed law provides the financing order may create the system restoration property
pursuant to proposed law, and provides the financing order does not have to meet all the
requirements for financing orders if the commission in its order requires the corporation to
transfer the net proceeds of the bonds to a trust that has the related utility as a beneficiary,
who is subject to the financing order and upon receipt of the purchased proceeds by the
related utility with the trust, requires the related utility to do the following:
(1)Sets aside in a restricted escrow account, the money or investment used to fund the
related utility's storm damage reserve.
(2)Not seek to recover the system restoration costs, to the extent of the bond's proceeds
from its commission-jurisdictional customers.
(3)Flow through that benefits its customers the amount of any insurance proceeds,
federal government grants, or similar source of permanent reimbursement receive by
the related utility after the issuance of the financing order, relating to that system
restoration activity and those same system restoration costs.
Proposed law provides the financing order requires, upon receipt of purchase proceeds by
the related utility affiliate, the related utility fully release any claim the utility has to recover
from its commission-jurisdictional customers any of the system restoration costs covered by
the financing order.
Proposed law provides the corporation may create a trust in movable property, with the
corporation and the related utility as the beneficiaries, when the commission approves the
financing order. Provides the trust owns, administers, and distributes the trust property that
contributes and earns for the benefit of its beneficiaries and, if applicable, a pledgee.
Provides an independent trustee manages the operations and activities of the trust. Provides
only the trust owns trust property.
Proposed law provides the trust does not have the power to be an issuer of system restoration
bonds or issue these bonds, notes, or obligations, and these bonds are not a debt of the trust.
Proposed law provides no funds of the corporation or the commission shall be charged with
or expended for the operation expenses for the trust. Provides if the financing order
authorizes it, the costs of creating a trust before its trust agreement becomes effective may
include the issuance costs. Provides the costs associated with the operation of the trust shall
be paid solely from the related utility's share of the dividend income or redemption proceeds
from preferred interests.
Proposed law provides a public trust shall have a legal existence that is separate and distinct
from the state and the trust's settlors and beneficiaries, and other public trusts. Provides the
trust is not a political subdivision, department, unit, agency, board, or commission of the
state. Provides the trust assets are not part of the state's general fund or any funds in the state
treasury. Further provides the state, the commission, and the corporation shall not budget for
or provide appropriations to the trust and the monies in each fund created shall be held in
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separate funds.
Proposed law provides for powers and functions of the trust.
Proposed law subjects the special public trust to the Public Records Law.
Proposed law provides the trust's domicile is the parish of East Baton Rouge.
Proposed law provides the legislative auditor may examine the trust's books and accounts,
and requires the trust agreement includes provisions the trust has an annual, independent
audit by a certified public accountant.
Proposed law provides the beneficiary is not charged personally with any liability by reason
of any act or omission committed or suffered in the performance of the trust's operations.
Proposed law provides the trust shall be created, organized, structured, and empowered by
a written instrument in accordance with the provisions of proposed law. Provides the
corporation is the settlor of the trust agreement either by authentic act or by act under private
signature executed in the presence of two witnesses, and is duly acknowledged by the settlor
or by the affidavit of one of the attesting witnesses. Provides the trust agreement is effective
upon the trustee's acceptance and the beneficiaries as provided in the proposed law. Further,
provides when the trust agreement is in effect, the trust is a juridical person, even if the trust
has no property until a later time, and the trust agreement constitutes a binding contract
between the corporation as settlor, the beneficiaries and the trustee, for the acceptance of the
beneficial interests in the trust by the designated beneficiaries, and the application of the
proceeds of the trust property and its operation for the purposes, and in accordance with the
stipulations of the approved trust agreement. Provides the trust agreement shall not be an
ancillary agreement as defined pursuant to the Louisiana Utilities Restoration Corporation
Act.
Proposed law provides before the execution of a trust agreement, it needs approval from the
commission.
Proposed law provides the trustees and beneficiaries have to accept the trust agreement
before it becomes effective. Provides the corporation settlor and the related utility are the
only beneficiaries of the trust.
Proposed law requires after the trust agreement takes effect, the trust agreement be recorded
in the conveyance records of the clerk of court of the parish of East Baton Rouge.
Proposed law provides when the trust agreement is modified, amended, terminated, or
rescinded, these changes require approval from the commission, the corporation, the
beneficiary related utility, and the trustee. Further provides these changes be recorded in the
conveyance records of the clerk of court of the parish of East Baton Rouge.
Proposed law provides the trust has a duration that is specified in the trust agreement.
Provides notwithstanding any provisions of the trust agreement or the proposed law above,
the termination, rescission, rehabilitation, liquidation, or dissolution of the trust may take
effect if any of the related bonds are outstanding. Provides once the trust is terminated, the
trustee is required to file a certificate of termination in the conveyance records of the clerk
of court of the parish of East Baton Rouge.
Proposed law provides for requirement in naming a trust.
Proposed law provides the commission shall regulate each trust concomitant with the
commission's regulation of the related utility and notwithstanding such regulation, a trust
shall not be considered a public utility or an agent of any utility.
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Proposed law provides any expenses of examination by the commission shall be charged to
the trust being examined and recovered and from the related utility's share of the
distributions or redemptions in respect of the preferred interests held by that trust.
Proposed law provides the trust shall perform only those functions consistent with and
effectuate only the purposes of proposed law. Provides the trust shall acquire and subscribe
for preferred interests of a utility affiliate using all of the contributed proceeds of system
restoration bonds received from the corporation as settlor. Provides notwithstanding the law
on requiring the corporation to transfer the proceeds of the system restoration bonds, the
financing order must require the corporation to transfer the net proceeds of the system
restoration bonds it receives as required by law, to a trust that has as a beneficiary and a
related utility that is collecting the applicable system restoration charges. Provides the
financing order requires the trust to use those contributed proceeds as provided in proposed
law, requires the trust use the distributions that are purchased preferred interests as provided
in proposed law, and requires that they be subject to the requirements set forth in the
proposed law.
Proposed law provides the financing order shall include the related utility's commitment that,
upon receipt of the purchase proceeds by the utility affiliate, the related utility shall fully
release any claims or rights to recover the system restoration costs, to the extent the related
bonds' proceeds, are from any of its commission-jurisdictional customers, and requires the
related utility to set aside in a restricted reserve account, an amount and manner the
commission requires, and the use of this money or investment is to fund the utility's storm
damage reserve.
Proposed law provides the trust pay distributions, in respect of the preferred interests to the
beneficiaries of the trust shared between the beneficiaries, as specified in the approved trust
agreement, or when applicable, to a permitted pledgee, and for expenses permitted under
proposed law. Provides the trust may cause the periodic redemption of the preferred interests
only as provided in the approved trust agreement. Further provides that the terms shall be
approved by the commission in the financing order or by the use of an alternate approval
method.
Proposed law provides system restoration bonds in a financing order are not a debt of the
trust when it is issued pursuant to the provisions of proposed law. Provides these bonds are
nonrecourse to the credit or any assets of a trust, other than the trust's obligation to distribute
proceeds to the corporation or a pledgee as specified in the trust agreement and pursuant to
the pledge by the corporation, to the issuer of the related bonds, as security for repayment
of a loan to the corporation by the issuer. Provides the terms of the indenture, and other
financing documents pertaining to system restoration bonds issued under the provisions of
proposed law must be consistent with proposed law.
Proposed law provides the trustee of a trust shall not serve as a trustee under an indenture
pertaining to the related bonds authorized by the financing order relating to that trust and
only the following entities shall serve as a trustee of a trust established under proposed law:
(1)A federally insured depository institution organized under the laws of this state,
another state, or the United States.
(2)A financial institution or trust company organized under the laws of this state or the
United States, authorized to exercise trust or fiduciary powers under the laws of this
state or the United States, or a trust company, organized under the laws of another
state, and operating in this state pursuant to the laws for out-of-state trust companies.
Proposed law provides an original trustee, an alternate trustee, or a successor trustee may
designate in the trust agreement or chosen by the use of a method used in the trust
agreement.
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Proposed law provides the trustee who accepts the trust under the provisions of proposed law
submits to the jurisdiction of the courts of this state.
Proposed law provides the trust acting through its trustee may employ or retain attorneys,
accountants, and other professionals it deems necessary to carry out its duties under the
provisions of proposed law. Proposed law provides that the compensation of a trustee,
professionals, and other costs to operate a trust is not included within the financing costs.
Provides all compensation and other costs is first to be paid from the related utility's
beneficiary share of the dividend income the trust receives from its preferred interests.
Provides if the related utility's dividend income is insufficient to pay these expenses, the
expenses are paid from the related utility's beneficiary share of redemption payments in
respect of the preferred interests.
Proposed law provides the trust agreement may provide indemnity to a trustee for expenses
the trustee incurred for the administration of trust property, but the amounts are only paid
from the related utility's portion of the trust property or directly from the related utility, if
the related utility agrees to such direct payment.
Proposed law provides the trustee administers the trust in the interest of the beneficiaries,
and if applicable, a pledgee, in accordance with the trust agreement. Provides the trust keep
for the beneficiaries at least annually, accurate accounts of its administration as specified in
the trust agreement. Provides the beneficiary may request the trustee within a reasonable
time provide the beneficiary complete and accurate information as to the nature and the
amount of the trust property, and the trustee permits the beneficiary or its agents to inspect
the accounts and any other documents relating to the trust.
Proposed law provides the trustee administers the trust as a prudent person would administer
it. Provides the trustee invest the trust property only in preferred interests as provided in
proposed law and the applicable trust agreement. Proposed law provides the trustee shall
have no liability for investing within the limitations as required. Provides the trustee's duties
and powers of a trustee be included in the trust agreement, except as provided under the
provisions of proposed law. Provides the trust agreement may relieve the trustee from
liability, unless the liability is for breach of the duty of loyalty to a beneficiary, or for breach
of trust committed in bad faith.
Proposed law provides the trustee may not sell or encumber trust property except for
redemptions of preferred interests as authorized by the trust agreement.
Proposed law provides the corporation pledge to and agree with the issuer, for the benefit
of the issuer, the bondholders, and other financing parties, that until the related bonds and
any ancillary agreements have been paid and performed in full, the corporation shall not do
either of the following:
(1)Take or permit any action that impairs or would impair the value of the corporation's
beneficial interest in the applicable trust, other than the distributions of dividend
income and redemption proceeds and in the trust agreement.
(2)Approve or allow a modification or amendment pertaining to the corporation's
beneficial interest in the applicable trust, or a termination or rescission of the
applicable trust agreement or the applicable trust, or in any other way impair the
rights and remedies of the corporation as beneficiary under the applicable trust,
provided that nothing shall preclude the distributions of dividend income, and the
redemption proceeds and in the trust agreement.
Proposed law defines "bondholder" as a person who holds a system restoration bond
including in book entry form.
Proposed law provides that prior to the date that is two years and one day after which the
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corporation no longer has any payment obligation outstanding to the issuer of the related
bonds, a trust is prohibited from filing and has no authority to file a voluntary petition under
federal law. Provides the limitation of bankruptcy provisions under the proposed law
provisions for bankruptcy are included in the contractual obligation owed to the bondholders
under the provisions of proposed law. Provides during the time of the contractual obligation,
the state is not permitted to modify proposed law, and the state and the legislature will make
a covenant with the bondholders that the state and the legislature will not limit or alter the
denial of authority pursuant to proposed law bankruptcy limitations during the period
referred to in proposed law.
Proposed law provides trust's beneficiaries have no power over the trust or the trust property
and the beneficiary shall not alienate or encumber its beneficial interest in a trust, except
what is authorized under proposed law.
Proposed law provides if authorized in the financial order, a trust agreement must permit the
corporation to encumber its interest as beneficiary in favor of the issuer of the related bonds
as additional security for the repayment of the loan of the net proceeds of the related bonds
made to a corporation by that issuer. Provides the trust agreement requires the trustee to pay
the pledgee all or a portion of a distribution owing to the corporation after the trustee
receives notification, which is authenticated by the corporation or the pledgee, that the
amount due or to become due has been assigned and payment is to be made to the pledgee.
Provides the trustee may request the pledgee furnish proof of assignment, and unless the
pledgee complies, the trustee may pay the corporation, even if the trustee has received a
notification pursuant to proposed law. Provides the pledgee may seize only distributions of
dividend income and redemption payments that the trustee authorized, but has not been paid
to the corporation beneficiary as pledgor.
Proposed law provides the trust agreement requires the interest of the related utility
beneficiary is not subject to voluntary or involuntary alienation or encumbrance. Provides
the restraint is valid, but a restraint is subject to the limitations of a creditor.
Proposed law provides the creditor of a related utility beneficiary may seize only
distributions of dividend income and redemption proceeds that have been authorized by the
trustee and have not yet been paid to such beneficiary.
Proposed law provides the corporation's beneficial interest in a trust, interests in income and
principal, receipts, and proceeds from trust distributions shall be considered to be income,
revenues, monies, receipts and the contract rights. Provides the pledge and security interest
the corporation granted is effective when the trustee receives a copy of the pledge or the
trustee receives the security agreement and is valid, perfected, and enforceable against the
corporation, and other third parties from the time when the pledge and grant is made without
any notice or filing of any kind under the provisions of proposed law. Provides the filing of
a financing statement is not required to perfect the pledgee's security interest under proposed
law. Provides the pledge and security interest secures all obligations that exist or arise under
proposed law. Provides the perfected pledge and security interest is a continuously perfected
privilege and security interest in all movable property as described in proposed law , whether
or not the interests, income, receipts, proceeds, or distributions have accrued. Provides
conflicting pledges, if allowed, shall rank according to priority in time of perfection.
Proposed law provides as long as these requirements are not inconsistent with the provisions
for discharging the debtor or restrictions on assignment, the provisions under proposed law
are controlling.
Proposed law provides all powers granted are liberally construed to effectuate its purposes
without implied limitations under proposed law. Provides all powers granted to the
commission, the corporation, and a trust are cumulative with those derived from other
sources and are not limited except as limited under the provisions of proposed law.
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Proposed law provides a utility may finance system restoration costs under the provisions
of proposed law if the utility incurred costs before the effective date. Provides if the utility
has made an application to determine its eligibility on system restoration costs incurred
before the effective date, the application may provide the basis for the commission's
financing order under the provisions of proposed law, and is subject to the provisions of the
additional powers for corporations.
Proposed law provides the failure of the utility, its utility affiliate, the trust, or the trustee or
any beneficiary to perform their obligations under the provisions of proposed law, or under
the trust agreement, or applicable financing order, does not affect or impair the system
restoration property, or any rights of the corporation, the issuer or any financing party under
the financing order, including the right to receive billed and collected system restoration
charges. Provides that nothing is construed to deny, limit, or diminish the commission's
jurisdiction and authority to enforce the provisions of any financing order.
Proposed law provides the corporation may participate in financing transactions by the La.
Electric Utility Storm Recovery Securitization Act, after prior authorization from the
commission and as provided by the provisions granting the corporation additional powers,
financial orders, and issuers of storm recovery bonds under those provisions of proposed
law.
(Amends R.S. 10:9-109(c)(6) (intro para); adds R.S. 45:1237-1240 and 1331-1343)
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Commerce, Consumer
Protection and International Affairs to the original bill
1. Makes technical changes.
2. Provides that the corporation may perform the functions and activities that
assignees are authorized to do in financing storm recovery costs through
storm recovery bonds, except the corporation shall not be an issuer of storm
recovery bonds.
3. Provides a financing order may require, rather than authorize, that the
corporation shall contribute to a trust, all the net proceeds from the issuance
of certain bonds.
4. Prohibits a beneficiary from alienating or encumbering its beneficial interest
in a trust, except as solely permitted in the financing order.
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