81R4196 JJT-F
By: Thompson H.B. No. 1378
A BILL TO BE ENTITLED
AN ACT
relating to the recovery by an electric utility of certain expenses
relating to weather-related events or natural disasters.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 36, Utilities Code, is amended by adding
Subchapter I to read as follows:
SUBCHAPTER I. SECURITIZATION OR RECOVERY OF
SYSTEM RESTORATION COSTS AND SELF-INSURANCE RESERVES
Sec. 36.401. PURPOSE AND INTENT. (a) The purpose of this
subchapter is to enable an electric utility to:
(1) obtain timely recovery of system restoration
costs;
(2) create, fund, eliminate shortages in, or replenish
self-insurance reserves at such levels as the commission may
authorize; and
(3) use appropriate mechanisms to recover system
restoration costs or self-insurance reserves, including through a
securitization financing mechanism because that type of financing
will lower the carrying costs associated with the recovery of the
costs, relative to the costs that would be incurred using
conventional financing methods.
(b) The legislature intends that:
(1) the securitization of system restoration costs and
self-insurance reserves under this subchapter will be accomplished
using the same procedures, standards, and protections for
securitization authorized under Subchapter G, Chapter 39, except as
provided by this subchapter; and
(2) the commission will ensure that the securitization
of system restoration costs and self-insurance reserves under this
subchapter provides greater tangible and quantifiable benefits to
ratepayers than would be achievable without the issuance of
transition bonds.
Sec. 36.402. DEFINITIONS AND APPLICABILITY OF TERMS. (a)
In this subchapter:
(1) "Self-insurance reserves" means the
self-insurance reserves authorized by Section 36.064 and, for
purposes of this subchapter, the term includes the cost of
creating, funding, eliminating a shortage in, or replenishing the
self-insurance reserves. For purposes of this subchapter, the term
applies to:
(A) shortages in self-insurance reserves in
existence on the effective date of this subchapter; and
(B) shortages in self-insurance reserves that
arise after the effective date of this subchapter.
(2) "System restoration costs" means reasonable and
necessary costs, including costs expensed, charged to
self-insurance reserves, capitalized, or otherwise financed, that
are incurred by an electric utility due to any activities conducted
by or on behalf of the electric utility in connection with the
restoration of service and infrastructure associated with electric
power outages affecting customers of the electric utility as the
result of any tropical storm or hurricane, ice or snow storm, flood,
or other weather-related event or natural disaster that occurred
during or after the calendar year 2008. The term includes:
(A) all costs related to mobilization, staging,
construction, reconstruction, replacement, or repair of electric
generation, transmission, distribution, or general plant
facilities, including all internal or external labor costs;
(B) reasonable estimates of the costs of an
activity or activities conducted or expected to be conducted by or
on behalf of the electric utility in connection with the
restoration of service or infrastructure associated with electric
power outages, except that such estimates are subject to true-up
and reconciliation after the actual costs are known; and
(C) carrying costs, at the electric utility's
last commission-authorized weighted average cost of capital, from
the date on which the system restoration costs were incurred until
the date that transition bonds are issued under this subchapter.
(b) For purposes of this subchapter, "financing order," as
defined by Section 39.302 and as used in this subchapter and
Subchapter G, Chapter 39, includes a financing order issued under
this subchapter authorizing the securitization of system
restoration costs or self-insurance reserves, or both.
(c) For purposes of this subchapter, "qualified costs," as
defined by Section 39.302 and as used in this subchapter and
Subchapter G, Chapter 39, includes:
(1) all of the electric utility's system restoration
costs and self-insurance reserves, net of any insurance proceeds or
governmental grants received by the utility at the time it files an
application for a financing order together with the costs of
issuing, supporting, and servicing transition bonds and any costs
of retiring and refunding existing debt and equity securities of an
electric utility in connection with the issuance of transition
bonds under this subchapter;
(2) the costs to the commission of acquiring
professional services for the purpose of evaluating proposed
transactions under this subchapter; and
(3) costs associated with ancillary agreements such as
any bond insurance policy, letter of credit, reserve account,
surety bond, swap arrangement, hedging arrangement, liquidity or
credit support arrangement, or other financial arrangement entered
into in connection with the issuance or payment of transition
bonds.
(d) For purposes of this subchapter, "transition bonds," as
defined by Section 39.302 and as used in this subchapter and
Subchapter G, Chapter 39, includes transition bonds issued in
association with the recovery of system restoration costs or
self-insurance reserves, or both. Transition bonds issued to
securitize system restoration costs or self-insurance reserves may
be referred to as "system restoration bonds" or by any other term
acceptable to the issuer and underwriters of the transition bonds.
(e) For purposes of this subchapter, "transition charges,"
as defined by Section 39.302 and as used in this subchapter and
Subchapter G, Chapter 39, includes nonbypassable amounts to be
charged for the use or availability of electric services, approved
by the commission under a financing order to recover system
restoration costs, self-insurance reserves, or both, that shall be
collected by an electric utility, its successors, an assignee, or
other collection agents as provided for in the financing order.
Transition charges approved by the commission under a financing
order to recover system restoration costs, self-insurance
reserves, or both, may be referred to as "system restoration
charges" or by any other term acceptable to the issuer and
underwriters of the transition bonds.
Sec. 36.403. SUBCHAPTER CONTROLS. To the extent of any
conflict between this subchapter and Subchapter G, Chapter 39, in
relation to the securitization of system restoration costs or
self-insurance reserves, the provisions of this subchapter
control.
Sec. 36.404. LIMITATION ON USE OF TRANSITION BOND PROCEEDS.
The proceeds of the transition bonds issued under this subchapter
may be used only for:
(1) reducing the amount of recoverable system
restoration costs, as determined by the commission in accordance
with this subchapter, including the refinancing or retirement of
utility debt or equity; or
(2) creating, funding, eliminating shortages in, or
replenishing self-insurance reserves.
Sec. 36.405. DETERMINATION OF SYSTEM RESTORATION COSTS AND
SELF-INSURANCE RESERVES. (a) An electric utility is entitled to:
(1) recover system restoration costs and
self-insurance reserves under a financing order issued under this
subchapter; or
(2) seek, in its next base rate proceeding or through
any other proceeding authorized by Subchapter C or D, the recovery
of amounts not otherwise recovered under this subchapter, including
system restoration costs not yet incurred at the time an
application is filed under Subsection (b).
(b) An electric utility may file an application with the
commission seeking a determination of:
(1) the amount necessary to create, fund, eliminate a
shortage in, or replenish self-insurance reserves;
(2) the amount of system restoration costs eligible
for recovery and securitization; or
(3) both amounts described by Subdivisions (1) and
(2).
(c) The commission by rule may prescribe the form of an
application under Subsection (b) and the information reasonably
necessary to support the determinations that are the subject of an
application. If an electric utility files an application under
Subsection (b) before the commission has adopted rules for purposes
of this subsection or before the rules have taken effect, the
commission shall accept the application and the commission may not
reject the application as incomplete.
(d) The commission shall issue an order that states the
amount, determined by the commission, necessary to create, fund,
eliminate a shortage in, or replenish self-insurance reserves, or
the amount of system restoration costs eligible for recovery and
securitization, or both, not later than the 150th day after the date
an electric utility files an application under Subsection (b).
(d-1) The 150-day period provided by Subsection (d) begins
on the date the electric utility files an application described by
Subsection (b), even if the electric utility files the application
before the effective date of this subchapter. This subsection
expires April 1, 2010.
(e) An electric utility may file an application for a
financing order before the end of the 150-day period provided by
Subsection (d). The commission shall issue a financing order under
this subchapter not later than the 90th day after the date the
utility files the request for a financing order. Notwithstanding
the 90-day period provided by this subsection, the commission is
not required to issue the financing order until the commission has
issued an order under Subsection (d) determining the amount
necessary to create, replenish, or eliminate a shortage in
self-insurance reserves, or the amount of system restoration costs
eligible for recovery and securitization, or both, if applicable.
(f) A determination made by the commission before the
effective date of this subchapter of an electric utility's eligible
system restoration costs or self-insurance reserves may provide the
basis for the utility's application for a financing order under
this subchapter and Subchapter G, Chapter 39. A previous
commission determination does not preclude the utility from
requesting recovery of additional system restoration costs or
self-insurance reserves eligible to be recovered under this
subchapter, but not previously authorized by the commission.
(g) A rate proceeding under Subchapter C or D is not
required to determine the amount of recoverable system restoration
costs or self-insurance reserves as provided by this section or for
the issuance of a financing order.
Sec. 36.406. STANDARDS AND PROCEDURES FOR FINANCING ORDER.
(a) The procedures and standards of this subchapter and the
provisions of Subchapter G, Chapter 39, govern an electric
utility's application for, and the commission's issuance of, a
financing order to provide for the securitization of system
restoration costs, self-insurance reserves, or both, or to
otherwise provide for the recovery of system restoration costs,
self-insurance reserves, or both.
(b) Notwithstanding any other provisions of this subchapter
or of Section 39.301 for determining tangible and quantifiable
benefits to ratepayers, if the commission determines that it is in
the public interest to use securitization financing for the
recovery of system restoration costs or to create, fund, eliminate
shortages in, or replenish self-insurance reserves, the commission
may issue a financing order for that securitization financing.
(c) Subject to the standards, procedures, and tests
provided by this subchapter and Subchapter G, Chapter 39, the
commission shall adopt a financing order on the application of the
utility to recover its system restoration costs or self-insurance
reserves.
(d) If the commission determines, on its own motion or on a
complaint by an affected person, that it is in the public interest
to securitize under this subchapter the amounts needed for an
electric utility to recover its system restoration costs or to
create, fund, eliminate shortages in, or replenish a utility's
self-insurance reserve, the commission shall require the utility to
file an application for a financing order.
(e) On the commission's issuance of a financing order
allowing for recovery and securitization of system restoration
costs or self-insurance reserves, or both, this subchapter and
Subchapter G, Chapter 39, continue to govern:
(1) the financing order and the rights and interests
established by the order; and
(2) transition bonds issued pursuant to the financing
order.
Sec. 36.407. NONBYPASSABLE CHARGES. The commission shall
include in a financing order issued under this subchapter terms
necessary to ensure that the imposition and collection of
transition charges for the recovery of system restoration costs and
self-insurance reserves are nonbypassable by:
(1) imposing restrictions on bypassability of the type
provided for in Chapter 39; or
(2) alternative means as the commission considers to
be appropriate and consistent with the purposes of securitization.
Sec. 36.408. TREATMENT OF ESTIMATED COSTS AFTER TRUE-UP AND
RECONCILIATION. (a) The commission may provide a process for
true-up and reconciliation of system restoration costs subject to
an order under this subchapter.
(b) If the commission determines as a result of a true-up
and reconciliation proceeding that the actual costs incurred are
less than estimated costs included in a determination under this
subchapter of system restoration costs, the commission shall take
the difference between actual and estimated costs into account in:
(1) the utility's next base rate proceeding; or
(2) any subsequent proceeding, other than a true-up
proceeding under Section 39.307, in which the commission considers
system restoration costs.
Sec. 36.409. INSURANCE PROCEEDS OR GOVERNMENTAL GRANTS
AFFECTING SYSTEM RESTORATION COSTS. (a) To the extent an electric
utility receives insurance proceeds or governmental grants that
compensate it for system restoration costs considered under this
subchapter, the utility shall use the amounts of those proceeds to
reduce the utility's system restoration costs recoverable from
customers.
(b) If the timing of a utility's receipt of insurance
proceeds or governmental grants prevents their inclusion as a
reduction to the system restoration costs that are securitized
under this subchapter, the commission shall take those insurance
proceeds and governmental grants into account in:
(1) the utility's next base rate proceeding; or
(2) any subsequent proceeding, other than a true-up
proceeding under Section 39.307, in which the commission considers
system restoration costs.
(c) To the extent that the utility receives insurance
proceeds or governmental grants that are used to reduce system
restoration costs, the commission shall impute interest on those
proceeds or grants at the same cost of capital included in the
utility's system restoration costs and until the date that the
proceeds or grants are used to reduce the amount of system
restoration costs that are securitized or otherwise reflected in
the rates of the utility.
Sec. 36.410. TAX OFFSETS AND TAX OBLIGATIONS. (a) The
amount of any accumulated deferred federal income taxes offset used
to determine the securitization total under this subchapter may not
be considered in future rate proceedings.
(b) The commission shall provide for an electric utility to
recover under this subchapter any tax obligation of the electric
utility arising from the utility's receipt of securitization bond
proceeds or from the collection and remittance of transition
charges.
Sec. 36.411. FUNCTIONALIZATION AND ALLOCATION OF SYSTEM
RESTORATION COSTS AND SELF-INSURANCE RESERVES. Notwithstanding
Section 39.303(c), system restoration costs and self-insurance
reserves shall be functionalized and allocated to customers in the
same manner as the corresponding facilities and related expenses
are functionalized and allocated in the utility's current base
rates.
Sec. 36.412. SURCHARGE AS ALTERNATIVE TO SECURITIZATION.
(a) If the commission determines that using securitization for
creating, funding, eliminating a shortage in, or replenishing all
or any portion of an electric utility's self-insurance reserves or
for the recovery of all or any portion of an electric utility's
system restoration costs is not beneficial to ratepayers of the
electric utility, under one or more of the tests applied to
determine those benefits, the commission shall allow the electric
utility to create, fund, eliminate a shortage in, or replenish the
remainder of its self-insurance reserves or recover the remainder
of its system restoration costs through an appropriate customer
surcharge mechanism, including carrying costs at the electric
utility's last commission-authorized weighted average cost of
capital, to the extent that the electric utility has not
securitized those costs.
(b) A rate proceeding under this chapter is not required to
determine and implement the surcharge mechanism allowed under
Subsection (a).
(c) The commission shall provide for a rider adopted under
Subsection (a) to be reduced on the final implementation of rates
resulting from the filing of a rate proceeding under Subchapter C or
D to the extent that the costs to the utility to create, fund,
eliminate a shortage in, or replenish self-insurance reserves or
recover system restoration costs are included in the electric
utility's base rates.
Sec. 36.413. LIMITATIONS ON RATES DO NOT AFFECT
APPLICABILITY OF SUBCHAPTER. Notwithstanding a rate freeze or
limitations on an electric utility's ability to change rates
authorized or imposed by any other provision of this title or by a
regulatory authority, an electric utility is entitled to create,
fund, eliminate a shortage in, or replenish self-insurance
reserves, or recover system restoration costs, or both, consistent
with the provisions of this subchapter.
Sec. 36.414. REVIEW OF COMMISSION ORDER. (a) A commission
order under this subchapter is not subject to rehearing and may be
reviewed only by appeal to a Travis County district court by a party
to the proceeding filed within 15 days after the order is signed by
the commission.
(b) The judgment of the district court may be reviewed only
by direct appeal to the Supreme Court of Texas filed within 15 days
after entry of judgment.
(c) All appeals shall be heard and determined by the
district court and the Supreme Court of Texas as expeditiously as
possible with lawful precedence over other matters.
(d) Review on appeal shall be based solely on the record
before the commission and briefs to the court and shall be limited
to whether the order conforms to the constitution and laws of this
state and the United States and is within the authority of the
commission under this chapter.
Sec. 36.415. SEVERABILITY. Effective on the date the first
utility transition bonds associated with system restoration costs
or self-insurance reserves are issued under this subchapter, if any
provision in this title or portion of this title is held to be
invalid or is invalidated, superseded, replaced, repealed, or
expires for any reason, that occurrence does not affect the
validity or continuation of this subchapter, Subchapter G, Chapter
39, as it applies to this subchapter, or any part of those
provisions, or any other provision of this title that is relevant to
the issuance, administration, payment, retirement, or refunding of
transition bonds or to any actions of the electric utility, its
successors, an assignee, a collection agent, or a financing party,
and those provisions shall remain in full force and effect.
SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2009.