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 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.
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 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 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. 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.
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 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.
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.