TX
Texas Senate Bill SB1757

Texas 2021 - 87th Regular

Texas Senate Bill SB1757 Compare Versions

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11 By: Hancock S.B. No. 1757
2- (In the Senate - Filed March 12, 2021; March 26, 2021, read
3- first time and referred to Committee on Business & Commerce;
4- April 15, 2021, reported adversely, with favorable Committee
5- Substitute by the following vote: Yeas 9, Nays 0; April 15, 2021,
6- sent to printer.)
7-Click here to see the committee vote
8- COMMITTEE SUBSTITUTE FOR S.B. No. 1757 By: Hancock
92
103
114 A BILL TO BE ENTITLED
125 AN ACT
13- relating to securitizing costs associated with electric markets;
14- granting authority to issue bonds.
6+ relating to securitizing costs of electric services or electric
7+ markets.
158 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
169 SECTION 1. Chapter 31, Utilities Code, is amended by adding
1710 Subchapter C to read as follows:
1811 SUBCHAPTER C. SECURITIZATION CORPORATION
19- Sec. 31.101. PURPOSE. (a) The purpose of this subchapter
20- is to create a corporation dedicated to financing costs that are
21- eligible for securitization as provided by Subchapter M, Chapter
22- 39. An entity authorized to securitize costs under Subchapter M,
23- Chapter 39, subject to any other requirements applicable to the
24- authorization, may request that the Texas Electric Securitization
25- Corporation conduct the financing on behalf of the entity.
26- (b) The Texas Electric Securitization Corporation is
27- created under this subchapter as a special purpose public
12+ Sec. 31.101. PURPOSE AND DEFINITIONS.
13+ (a) The purpose of this subchapter is to create a
14+ securitization corporation dedicated to financing costs that are
15+ eligible for securitization under Subtitle B of this code.
16+ Entities that are permitted to securitize costs may, subject to any
17+ other requirements applicable to such securitization authority,
18+ request that the Texas Electric Securitization Corporation conduct
19+ the financing on their behalf.
20+ (b) The Texas Electric Securitization Corporation shall be
21+ created pursuant to this subchapter as a special purpose public
2822 corporation and instrumentality of the state for the essential
29- public purpose of providing a lower-cost financing mechanism for
30- securitization in the manner provided by this subchapter.
31- (c) Bonds issued under this subchapter will be the
32- obligation solely of the issuer and the corporation as borrower, if
33- applicable, and will not be a debt of or a pledge of the faith and
34- credit of the state.
35- (d) Bonds issued under this subchapter shall be nonrecourse
36- to the credit or any assets of the state and the commission.
37- Sec. 31.102. DEFINITIONS. In this subchapter:
23+ public purpose of providing a lower cost financing mechanism for
24+ securitization authorized under this subchapter.
25+ (c) Bonds issued consistent with this subchapter will be
26+ solely the obligation of the issuer and the corporation (as
27+ borrower, if applicable) and will not be a debt of or a pledge of the
28+ faith and credit of the state.
29+ (d) Bonds issued consistent with this subchapter shall be
30+ nonrecourse to the credit or any assets of the state or the
31+ commission.
32+ (e) As used in this subchapter:
3833 (1) "corporation" means the Texas Electric
3934 Securitization Corporation.
40- (2) "Issuer" means the corporation or any other
41- corporation, public trust, public instrumentality, or entity that
42- issues bonds approved by a financing order.
43- Sec. 31.103. CREATION OF CORPORATION. (a) The corporation
44- is a nonprofit corporation and instrumentality of this state, and
45- shall perform the essential governmental function of financing
46- eligible costs in accordance with this subchapter. The
47- corporation:
48- (1) shall perform only functions consistent with this
49- subchapter;
50- (2) shall exercise its powers through a governing
51- board;
52- (3) is subject to the regulation of the commission;
53- and
54- (4) has a legal existence as a public corporate body
55- and instrumentality of the state separate and distinct from the
56- state.
57- (b) Assets of the corporation may not be considered part of
58- any state fund. The state may not budget for or provide any state
59- money to the corporation. The debts, claims, obligations, and
60- liabilities of the corporation may not be considered to be a debt of
61- the state or a pledge of its credit.
62- (c) The corporation must be self-funded. Before the
63- imposition of charges to recover securitized amounts, the
64- corporation may accept and expend for its operating expenses money
65- that may be received from any source, including financing
66- agreements with the state, a commercial bank, or another entity to:
67- (1) finance the corporation's obligations until the
68- corporation receives sufficient property to cover its operating
69- expenses as financing costs; and
70- (2) repay any short-term borrowing under any such
71- financing agreements.
72- (d) The corporation has the powers, rights, and privileges
73- provided for a corporation organized under Chapter 22, Business
74- Organizations Code, subject to the express exceptions and
75- limitations provided by this subchapter.
76- (e) An organizer selected by the executive director of the
77- commission shall prepare the certificate of formation of the
78- corporation under Chapters 3 and 22, Business Organizations Code.
79- The certificate of formation must be consistent with the provisions
80- of this subchapter.
81- (f) State officers and agencies are authorized to render
82- services to the corporation, within their respective functions, as
83- may be requested by the commission or the corporation.
84- (g) The corporation or an issuer may:
85- (1) retain professionals, financial advisors, and
86- accountants the corporation or issuer considers necessary to
87- fulfill the corporation's or issuer's duties under this subchapter;
88- and
89- (2) determine the duties and compensation of a person
90- retained under Subdivision (1), subject to the approval of the
35+ (2) "issuer" means the corporation or any other Texas
36+ corporation, public trust, public instrumentality, or other entity
37+ that issues bonds approved by a financing order.
38+ Sec. 31.102. CREATION OF THE CORPORATION. (a) The
39+ corporation shall be incorporated as a nonprofit corporation and
40+ instrumentality of the state, and shall perform the essential
41+ governmental function of financing eligible costs in accordance
42+ with this subchapter. The corporation shall perform only those
43+ functions consistent with this subchapter, shall exercise its
44+ powers through a governing board, and shall be subject to the
45+ regulation of the commission. The corporation shall have a legal
46+ existence as a public corporate body and instrumentality of the
47+ state separate and distinct from the state.
48+ (b) Assets of the corporation shall not be considered part
49+ of any state fund. The state shall not budget for or provide any
50+ general fund appropriations to the corporation, and the debts,
51+ claims, obligations, and liabilities of the corporation shall not
52+ be considered to be a debt of the state or a pledge of its credit.
53+ The corporation shall be self-funded. Prior to the imposition of
54+ charges to recover the securitized amounts, the corporation may
55+ accept and expend for its operating expenses such funds as may be
56+ received from any source, including financing agreements with the
57+ state, a commercial bank, or another entity to finance the
58+ corporation's obligations until the corporation receives
59+ sufficient property to cover its operating expenses as financing
60+ costs, and to repay any short-term borrowing under any such
61+ financing agreement.
62+ (c) The corporation shall have the powers, rights, and
63+ privileges provided for a corporation organized under Chapter 22,
64+ Business Organizations Code, subject to the express exceptions and
65+ limitations set forth in this subchapter.
66+ (d) An incorporator selected by the executive director of
67+ the commission shall prepare the articles of incorporation of the
68+ corporation under Chapter 22, Business Organizations Code, which
69+ articles shall be consistent with the provisions of this
70+ subchapter.
71+ (e) State officers, departments, and agencies are
72+ authorized to render services to the corporation within their
73+ respective functions, as may be requested by the commission or the
74+ corporation.
75+ (f) The corporation and any issuer may retain such
76+ professionals, financial advisors, and accountants as it may deem
77+ necessary to fulfill its duties under this subchapter and may
78+ determine their duties and compensation, subject to approval of the
9179 commission.
92- (h) The corporation is governed by a board of five directors
93- appointed by the commission for two-year terms.
94- (i) An official action of the board of the corporation
95- requires the favorable vote of a majority of the directors present
96- and voting at a meeting of the board.
97- Sec. 31.104. POWERS AND DUTIES OF CORPORATION. (a) The
98- corporation, in each instance subject to the prior authorization of
99- the commission, shall participate in the financial transactions
100- authorized by this subchapter. The corporation may not engage in
101- business activities except those activities provided for by this
102- subchapter and those ancillary and incidental to those activities.
103- The corporation or an issuer may not apply proceeds of bonds or
104- charges to a purpose not specified in a financing order, to a
105- purpose in an amount that exceeds the amount allowed for the purpose
106- in the order, or to a purpose in contravention of the order.
107- (b) The board of the corporation, under the provisions of
108- this subchapter, may employ or retain persons as are necessary to
109- perform the duties of the corporation.
80+ (g) The governing body of the corporation shall be a board
81+ of directors that shall consist of five members appointed by the
82+ commission. All official action of the governing body shall
83+ require the favorable vote of a majority of the board members
84+ present and voting at any meeting of the board of directors.
85+ Sec. 31.103. POWERS AND DUTIES OF THE CORPORATION. (a) The
86+ corporation shall, in each instance subject to the prior
87+ authorization of the commission, participate in the financial
88+ transactions contemplated by this subchapter. The corporation
89+ shall engage in no other business activities except those
90+ activities provided for in this subchapter and those ancillary and
91+ incidental thereto. Neither the corporation nor any issuer shall
92+ apply any proceeds of bonds or charges to any purpose not specified
93+ in a financing order, or to any purpose in excess of the amount
94+ allowed for such purpose in the order, or to any purpose in
95+ contravention of the order.
96+ (b) The governing board of the corporation shall, pursuant
97+ to the provisions of this subchapter, have the power to employ or
98+ retain such persons as are necessary to perform the duties of the
99+ corporation.
110100 (c) The corporation may:
111- (1) acquire, sell, pledge, or transfer property as
112- necessary to effect the purposes of this subchapter and, in
113- connection with the action, agree to such terms and conditions as
114- the corporation deems necessary and proper, consistent with the
115- terms of a financing order:
116- (A) to acquire property and to pledge such
117- property, and any other collateral:
118- (i) to secure payment of bonds issued by the
119- corporation, together with payment of any other qualified costs; or
120- (ii) to secure repayment of any borrowing
121- from any other issuer of bonds; or
122- (B) to sell the property to another issuer, which
123- may in turn pledge that property, together with any other
124- collateral, to the repayment of bonds issued by the issuer together
125- with any other qualified costs;
101+ (1) Acquire, sell, pledge, and transfer property as
102+ necessary to effect the purposes of this subchapter. In connection
103+ therewith, the corporation may agree to such terms and conditions
104+ as it deems necessary and proper, consistent with the terms of a
105+ financing order, (i) to acquire property and to pledge such
106+ property, and any other collateral, (a) to secure payment of bonds
107+ issued by the corporation, together with payment of any other
108+ qualified costs, or (b) to secure repayment of any borrowing from
109+ any other issuer of bonds, or (ii) to sell the property to another
110+ issuer, which may in turn pledge such property, together with any
111+ other collateral, to the repayment of bonds issued by the issuer
112+ together with any other qualified costs;
126113 (2) Issue bonds on terms and conditions consistent
127114 with a financing order;
128- (3) borrow funds:
129- (A) from an issuer of bonds to acquire property,
130- and pledge that property to the repayment of any borrowing from an
131- issuer, together with any related qualified costs, all on terms and
132- conditions consistent with a financing order; or
133- (B) for initial operating expenses;
134- (4) sue or be sued in its corporate name;
135- (5) intervene as a party before the commission or any
136- court in this state in any matter involving the corporation's
137- powers and duties;
138- (6) negotiate and become a party to contracts as
115+ (3) Borrow funds from an issuer of bonds to acquire
116+ property, and pledge such property to the repayment of any
117+ borrowing from an issuer, together with any related qualified
118+ costs, all on terms and conditions consistent with a financing
119+ order. The corporation may also borrow funds for initial operating
120+ expenses;
121+ (4) Sue or be sued in its corporate name. The
122+ corporation has the authority to intervene as a party before the
123+ commission or any court in this state in any matter involving the
124+ corporation's powers and duties;
125+ (5) Negotiate and become a party to such contracts as
139126 necessary, convenient, or desirable to carry out the purposes of
140127 this subchapter; and
141- (7) engage in corporate actions or undertakings that
128+ (6) Engage in corporate actions or undertakings that
142129 are permitted for nonprofit corporations in this state and that are
143- not prohibited by, or contrary to, this subchapter.
130+ not prohibited by, or contrary to, the provisions of this
131+ subchapter.
144132 (d) The corporation shall maintain separate accounts and
145- records relating to each entity that collects charges for all
146- charges, revenues, assets, liabilities, and expenses relating to
147- the entity's related bond issuances.
148- (e) The board of the corporation may not authorize any
149- rehabilitation, liquidation, or dissolution of the corporation and
150- a rehabilitation, liquidation, or dissolution of the corporation
151- may not take effect as long as any bonds are outstanding unless
152- adequate protection and provision have been made for the payment of
153- the bonds pursuant to the documents authorizing the issuance of the
154- bonds. In the event of any rehabilitation, liquidation, or
155- dissolution, the assets of the corporation must be applied first to
156- pay all debts, liabilities, and obligations of the corporation,
157- including the establishment of reasonable reserves for any
158- contingent liabilities or obligations, and all remaining funds of
159- the corporation must be applied and distributed as provided by an
160- order of the commission.
161- (f) Before the date that is two years and one day after the
162- date that the corporation no longer has any payment obligation with
163- respect to any bonds, including any obligation to an issuer of any
164- bonds outstanding, the corporation may not file a voluntary
165- petition under federal bankruptcy law and neither any public
166- official nor any organization, entity, or other person may
167- authorize the corporation to be or to become a debtor under federal
168- bankruptcy law during that period. The state covenants that it will
169- not limit or alter the denial of authority under this subsection or
170- Subsection (e), and the provisions of this subsection and
171- Subsection (e) are hereby made a part of the contractual obligation
172- that is subject to the state pledge set forth in Section 39.609.
173- (g) The corporation shall prepare and submit to the
174- commission for approval an annual operating budget. If requested
175- by the commission, the corporation shall prepare and submit an
176- annual report containing the annual operating and financial
177- statements of the corporation and any other appropriate
178- information.
179- Sec. 31.105. COMMISSION REGULATION OF CORPORATION. The
180- commission shall regulate the corporation as provided by this
181- subchapter. Notwithstanding the regulation authorized by this
182- section, the corporation is not a public utility.
183- Sec. 31.106. FINANCING ORDER. (a) This section applies to
133+ records relating to an entity that is collecting charges for all
134+ charges, revenues, assets, liabilities, and expenses relating to an
135+ entity's related bond issuances.
136+ (e) The governing board of the corporation shall be
137+ prohibited from authorizing any rehabilitation, liquidation, or
138+ dissolution of the corporation, and no such rehabilitation,
139+ liquidation, or dissolution of the corporation shall take effect as
140+ long as any bonds are outstanding unless adequate protection and
141+ provision has been made for the payment of the bonds pursuant to the
142+ documents authorizing the issuance of the bonds. In the event of any
143+ rehabilitation, liquidation, or dissolution, the assets of the
144+ corporation shall be applied first to pay all debts, liabilities,
145+ and obligations of the corporation, including the establishment of
146+ reasonable reserves for any contingent liabilities or obligations,
147+ and all remaining funds of the corporation shall be applied and
148+ distributed as provided by an order of the commission.
149+ (f) Prior to the date that is two years and one day after
150+ which the corporation no longer has any payment obligation with
151+ respect to any bonds, including any obligation to any issuer of any
152+ bonds outstanding, the corporation is prohibited from filing and
153+ shall have no authority to file a voluntary petition under the
154+ Federal Bankruptcy Code, as it may, from time to time, be in effect,
155+ and neither any public official nor any organization, entity, or
156+ other person shall authorize the corporation to be or to become a
157+ debtor under the Federal Bankruptcy Code during such period. The
158+ state covenants that it will not limit or alter the denial of
159+ authority under this subsection or subsection (e), and the
160+ provisions of such subsections are hereby made a part of the
161+ contractual obligation that is subject to the state pledge set
162+ forth in Section 39.310.
163+ (g) The corporation shall prepare an operating budget
164+ annually that shall be submitted for approval to the commission. If
165+ requested by the commission, the corporation shall prepare and
166+ submit an annual report containing, among other appropriate
167+ matters, the annual operating and financial statements of the
168+ corporation.
169+ Sec. 31.104. COMMISSION REGULATION OF THE CORPORATION. The
170+ commission shall regulate the corporation as provided for in this
171+ subchapter. Notwithstanding such regulation, the corporation is
172+ not a public utility.
173+ Sec. 31.105. FINANCING ORDER. (a) This section applies to
184174 the commission's issuance of a financing order under this
185175 subchapter.
186- (b) Except as otherwise specifically provided by this
187- subchapter, the provisions of this subtitle that address the
188- commission's issuance of a financing order under other provisions
189- of this subtitle also apply to the commission's issuance of a
190- financing order under this subchapter.
191- (c) The corporation and any issuer must be a party to the
192- commission's proceedings that address the issuance of a financing
176+ (b) Except as otherwise specifically provided in this
177+ subchapter, provisions that apply to a financing order authorized
178+ under Subtitle B apply to the commission's issuance of a financing
179+ order under this subchapter for the same purpose.
180+ (c) The corporation and any issuer shall be a party to the
181+ commission's proceedings addressing the issuance of a financing
193182 order along with the entity requesting securitization.
194- (d) In addition to the other applicable requirements of this
195- subtitle, a financing order issued under this subchapter must:
196- (1) require the sale, assignment, or other transfer to
197- the corporation of certain specified property created by the
198- financing order and, following that sale, assignment, or transfer,
199- require that charges paid under any financing order be created,
200- assessed, and collected as the property of the corporation, subject
201- to subsequent sale, assignment, or transfer by the corporation as
202- authorized under this subchapter;
203- (2) authorize:
183+ (d) A financing order issued under this subchapter shall, in
184+ addition to any other applicable requirements under Subtitle B:
185+ (1) Require the sale, assignment, or other transfer of
186+ certain specified property created by the financing order to the
187+ corporation, and following such sale, assignment, or transfer,
188+ charges paid under any financing order shall be created, assessed,
189+ and collected as the property of the corporation, subject to
190+ subsequent sale, assignment, or transfer by the corporation as
191+ authorized under this subchapter.
192+ (2) Authorize either:
204193 (A) the issuance of bonds by the corporation
205- secured by a pledge of specified property, and the application of
206- the proceeds of those bonds, net of issuance costs, to the
194+ secured by a pledge of such specified property, and the application
195+ of the proceeds of such bonds (net of issuance costs) to the
207196 acquisition of the property from the entity requesting
208197 securitization; or
209198 (B) the acquisition of specified property from
210- the entity requesting securitization by the corporation, financed:
211- (i) by a loan by an issuer to the
212- corporation of the proceeds of bonds, net of issuance costs; or
213- (ii) by the acquisition by an issuer from
214- the corporation of the property and in each case the pledge of the
215- property to the repayment of the loan or bonds, as applicable; and
199+ the entity requesting securitization by the corporation, financed
200+ (i) by a loan by an issuer to the corporation of the proceeds of
201+ bonds (net of issuance costs), or (ii) by the acquisition by an
202+ issuer from the corporation of such property, and in each case, the
203+ pledge of such property to the repayment of such loan or bonds, as
204+ applicable;
216205 (3) Authorize the entity requesting securitization to
217- serve as collection agent to collect the charges and transfer the
206+ serve as collection agent to collect the charges and transfer those
218207 collected charges to the corporation, the issuer, or a financing
219208 party, as appropriate.
220209 (e) After issuance of the financing order, the corporation
221210 shall arrange for the issuance of bonds as specified in the
222- financing order by the corporation or another issuer selected by
223- the corporation and approved by the commission.
211+ financing order by it or another issuer selected by the corporation
212+ and approved by the commission.
224213 (f) Bonds issued pursuant to a financing order under this
225214 section are secured only by the related property and any other funds
226- pledged under the bond documents. No assets of the state or the
227- entity requesting securitization are subject to claims by the
228- holders of the bonds. Following assignment of the property, the
229- entity requesting securitization does not have any beneficial
230- interest or claim of right in such charges or in any property.
231- Sec. 31.107. SEVERABILITY. Effective on the date the first
215+ pledged under the bond documents, and no assets of the state or any
216+ entity requesting securitization under this chapter shall be
217+ subject to claims by such bondholders. Following assignment of the
218+ property, the entity requesting securitization shall not have any
219+ beneficial interest or claim of right in such charges or in any
220+ property.
221+ Sec. 31.106. SEVERABILITY. Effective on the date the first
232222 bonds are issued under this subchapter, if any provision in this
233223 title or portion of this title is held to be invalid or is
234224 invalidated, superseded, replaced, repealed, or expires for any
235225 reason, that occurrence does not affect the validity or
236- continuation of this subchapter or any other provision of this
237- title that is relevant to the issuance, administration, payment,
238- retirement, or refunding of authorized securitization bonds or to
239- any actions of an entity requesting securitization under this
240- subchapter, its successors, an assignee, a collection agent, the
241- corporation, an issuer, or a financing party, and those provisions
242- shall remain in full force and effect.
243- SECTION 2. Section 39.002, Utilities Code, is amended to
244- read as follows:
245- Sec. 39.002. APPLICABILITY. This chapter, other than
246- Sections 39.151, 39.1516, 39.155, 39.157(e), 39.203, 39.904,
247- 39.9051, 39.9052, and 39.914(e), does not apply to a municipally
248- owned utility or an electric cooperative. Sections 39.157(e),
249- 39.203, and 39.904, however, apply only to a municipally owned
250- utility or an electric cooperative that is offering customer
251- choice. If there is a conflict between the specific provisions of
252- this chapter and any other provisions of this title, except for
253- Chapters 40 and 41, the provisions of this chapter control.
254- SECTION 3. Section 39.151, Utilities Code, is amended by
255- adding Subsection (j-1) to read as follows:
256- (j-1) Notwithstanding Subsection (j), the independent
257- system operator in ERCOT may not reduce payments to or charge uplift
258- short-paid amounts from a municipally owned utility that becomes
259- subject to the jurisdiction of the independent system operator in
260- ERCOT on or after June 1, 2021, and before December 30, 2021,
261- related to a default on a payment obligation by a market participant
262- that occurred before June 1, 2021.
263- SECTION 4. Chapter 39, Utilities Code, is amended by adding
226+ continuation any other provision of this title that is relevant to
227+ the issuance, administration, payment, retirement, or refunding of
228+ authorized securitization bonds or to any actions of an entity
229+ requesting securitization under this subchapter, its successors,
230+ an assignee, a collection agent, the corporation, an issuer, or a
231+ financing party, and those provisions shall remain in full force
232+ and effect.
233+ SECTION 3. Chapter 39, Utilities Code, is amended by adding
264234 Subchapter M to read as follows:
265- SUBCHAPTER M. SECURITIZATION FOR INDEPENDENT ORGANIZATION
266- Sec. 39.601. PURPOSE; USE OF PROCEEDS; BOND CHARGES. (a)
267- The purpose of this subchapter is to enable the independent
268- organization certified under Section 39.151 for the ERCOT power
269- region to use securitization financing to fund substantial balances
270- that would otherwise be uplifted to the wholesale market as a result
271- of market participants defaulting on amounts owed after an extreme
235+ Sec. 39.601. PURPOSE. The purpose of this subchapter is to
236+ enable the independent organization certified under section 39.151
237+ to use securitization financing to fund substantial balances that
238+ would otherwise be uplifted to the wholesale market as a result of
239+ market participants defaulting on amounts owed after an extreme
272240 pricing event. Securitization will allow wholesale market
273241 participants who are owed money to be paid in a more timely manner,
274242 while allowing the balance to be repaid over time at a low carrying
275- cost.
276- (b) The proceeds of bonds issued for the purpose described
277- by Subsection (a) must be used solely for the purpose of financing
278- default balances that otherwise would be or have been uplifted to
279- the wholesale market. The commission shall ensure that
243+ cost. The proceeds of the bonds shall be used solely for the
244+ purposes of financing default balances that would otherwise be
245+ uplifted to the wholesale market. The commission shall ensure that
280246 securitization provides tangible and quantifiable benefits to
281247 wholesale market participants, greater than would have been
282- achieved absent the issuance of bonds.
283- (c) The commission shall ensure that the structuring and
284- pricing of the bonds result in the lowest bond charges consistent
285- with market conditions and the terms of the financing order. The
286- present value calculation shall use a discount rate equal to the
248+ achieved absent the issuance of bonds. The commission shall ensure
249+ that the structuring and pricing of the bonds result in the lowest
250+ bond charges consistent with market conditions and the terms of the
251+ financing order. The amount securitized may not exceed the present
252+ value of the revenue requirement over the life of the proposed bond
253+ associated with default balances that are sought to be securitized.
254+ The present value calculation shall use a discount rate equal to the
287255 proposed interest rate on the bonds.
288256 Sec. 39.602. DEFINITIONS. In this subchapter:
289257 (1) "Assignee" means any individual, corporation, or
290- other legally recognized entity to which an interest in default or
291- uplift property is transferred, other than as security.
292- (2) "Default charges" means nonbypassable amounts to
293- be charged on all wholesale market transactions administered by the
294- independent organization certified under Section 39.151 for the
295- ERCOT power region, approved by the commission under a financing
296- order to recover qualified costs, that shall be collected by the
297- independent organization, its successors, an assignee, or other
298- collection agents as provided by the financing order.
299- (3) "Financing order" means an order of the commission
258+ other legally recognized entity to which an interest in default
259+ property is transferred, other than as security, including any
260+ assignee of that party.
261+ (2) "Financing order" means an order of the commission
300262 approving the issuance of bonds and the creation of charges for the
301263 recovery of qualified costs.
302- (4) "Financing party" means a holder of bonds,
264+ (3) "Financing party" means a holder of bonds,
303265 including trustees, collateral agents, and other persons acting for
304266 the benefit of the holder.
305- (5) "Independent organization" means the independent
306- organization certified under Section 39.151 for the ERCOT power
307- region.
308- (6) "Period of emergency" means the period beginning
309- 12:00 a.m., February 12, 2021, and ending 11:59 p.m., February 20,
310- 2021.
311- (7) "Qualified costs" means a default balance
312- resulting from the period of emergency that otherwise would be or
313- has been uplifted to other wholesale market participants, together
314- with the costs of issuing, supporting, and servicing bonds and any
315- costs of retiring and refunding existing debt in connection with
316- the issuance of the bonds.
317- Sec. 39.603. FINANCING ORDERS; TERMS. (a) On application
318- of the independent organization, the commission may adopt a
319- financing order to recover the costs of a substantial default
320- balance of qualified costs resulting from a significant pricing
321- event on making a finding that such financing is needed to preserve
322- the integrity of the wholesale market and the public interest after
323- considering:
324- (1) the interests of wholesale market participants who
325- are owed balances; and
326- (2) the potential effects of uplifting those balances
327- to the wholesale market without a financing vehicle.
328- (b) The financing order must detail the amounts to be
267+ (4) "Qualified costs" means a default balance that
268+ would otherwise be uplifted to other wholesale market participants,
269+ together with the costs of issuing, supporting, and servicing bonds
270+ and any costs of retiring and refunding existing debt in connection
271+ with the issuance of the bonds.
272+ (7) "Default charges" means nonbypassable amounts to
273+ be charged on all wholesale market transactions administered by the
274+ independent organization certified under section 39.151, approved
275+ by the commission under a financing order to recover qualified
276+ costs, that shall be collected by the independent organization, its
277+ successors, an assignee, or other collection agents as provided for
278+ in the financing order.
279+ Sec. 39.603. FINANCING ORDERS; TERMS. (a) The commission
280+ may adopt a financing order, on application of the independent
281+ organization, to recover the costs of a substantial default balance
282+ resulting from a significant pricing event on making a finding that
283+ such financing is needed to preserve the integrity of the wholesale
284+ market and the public interest, after considering the interests of
285+ wholesale market participants who are owed balances and the
286+ potential impacts of uplifting those balances to the wholesale
287+ market without a financing vehicle.
288+ (b) The financing order shall detail the amounts to be
329289 recovered and the period over which the nonbypassable default
330- charges shall be recovered. The period may not exceed 30 years. If
290+ charges shall be recovered, which period may not exceed 15 years. If
331291 an amount determined under this section is subject to judicial
332- review of a commission order, a bankruptcy proceeding, or another
333- type of litigation at the time of the securitization proceeding,
334- the financing order shall include an adjustment mechanism requiring
335- the independent organization to adjust its default charges in a
336- manner that would refund, over the remaining life of the bonds, any
292+ review at the time of the securitization proceeding, the financing
293+ order shall include an adjustment mechanism requiring the
294+ independent organization to adjust its default charges in a manner
295+ that would refund, over the remaining life of the bonds, any
337296 overpayments resulting from securitization of amounts in excess of
338297 the amount resulting from a final determination after completion of
339298 all appellate reviews. The adjustment mechanism may not affect the
340299 stream of revenue available to service the bonds. An adjustment may
341- not be made under this subsection until all appellate reviews have
342- been completed, including appellate reviews following a commission
343- decision on remand of its original orders, if applicable.
344- (c) Nonbypassable default charges must be collected from
345- and allocated among wholesale market participants using the same
346- methodology under which the charges would otherwise be uplifted
347- under the protocols of the independent organization in effect on
348- March 1, 2021. The rate associated with the nonbypassable default
349- charges must be assessed on all wholesale market participants and
350- may be based on updated transaction data to prevent market
351- participants from engaging in behavior designed to avoid the
352- nonbypassable default charges.
353- (d) A financing order becomes effective in accordance with
354- its terms and the financing order, together with the default
355- charges authorized in the order, shall be irrevocable and not
356- subject to reduction, impairment, or adjustment by further action
357- of the commission after it takes effect.
358- (e) The commission shall issue a financing order not later
359- than the 90th day after the date the independent organization files
360- a request for the financing order under Subsection (a) or (g).
300+ not be made under this subsection until all appellate reviews,
301+ including, if applicable, appellate reviews following a commission
302+ decision on remand of its original orders, have been completed.
303+ (c) Nonbypassable default charges shall be collected and
304+ allocated among wholesale market participants on the same basis
305+ that they would otherwise be uplifted pursuant to the protocols of
306+ the independent organization.
307+ (d) A financing order shall become effective in accordance
308+ with its terms, and the financing order, together with the default
309+ charges authorized in the order, shall thereafter be irrevocable
310+ and not subject to reduction, impairment, or adjustment by further
311+ action of the commission.
312+ (e) The commission shall issue a financing order under
313+ Subsections (a) and (g) not later than 90 days after the independent
314+ organization files its request for the financing order.
361315 (f) A financing order is not subject to rehearing by the
362- commission. A financing order may be reviewed by appeal by a party
363- to the proceeding to a Travis County district court filed not later
364- than the 15th day after the date the financing order is signed by
365- the commission. The judgment of the district court may be reviewed
366- only by direct appeal to the Supreme Court of Texas filed not later
367- than the 15th day after the date of the entry of judgment. All
368- appeals shall be heard and determined by the district court and the
369- Supreme Court of Texas as expeditiously as possible with lawful
370- precedence over other matters. Review on appeal shall be based
371- solely on the record before the commission and briefs to the court
372- and shall be limited to whether the financing order conforms to the
373- constitution and laws of this state and the United States and is
374- within the authority of the commission under this chapter.
316+ commission. A financing order may be reviewed by appeal only to a
317+ Travis County district court by a party to the proceeding filed
318+ within 15 days after the financing order is signed by the
319+ commission. The judgment of the district court may be reviewed only
320+ by direct appeal to the Supreme Court of Texas filed within 15 days
321+ after entry of judgment. All appeals shall be heard and determined
322+ by the district court and the Supreme Court of Texas as
323+ expeditiously as possible with lawful precedence over other
324+ matters. Review on appeal shall be based solely on the record before
325+ the commission and briefs to the court and shall be limited to
326+ whether the financing order conforms to the constitution and laws
327+ of this state and the United States and is within the authority of
328+ the commission under this chapter.
375329 (g) At the request of the independent organization, the
376330 commission may adopt a financing order providing for retiring and
377331 refunding the bonds on making a finding that the future default
378332 charges required to service the new bonds, including transaction
379333 costs, will be less than the future default charges required to
380334 service the bonds being refunded. On the retirement of the refunded
381335 bonds, the commission shall adjust the related default charges
382336 accordingly.
383337 Sec. 39.604. PROPERTY RIGHTS. (a) The rights and interests
384338 of the independent organization or its successor under a financing
385339 order, including the right to impose, collect, and receive default
386340 charges authorized in the order, shall be only contract rights
387341 until they are first transferred to an assignee or pledged in
388342 connection with the issuance of bonds, at which time they will
389- become default property, as described by Subsection (b).
343+ become "default property."
390344 (b) Default property shall constitute a present property
391345 right for purposes of contracts concerning the sale or pledge of
392346 property, even though the imposition and collection of default
393347 charges depends on further acts of the independent organization or
394348 others that have not yet occurred. The financing order shall remain
395349 in effect and the property shall continue to exist for the same
396- period as the pledge of the state described by Section 39.609.
350+ period as the pledge of the state described in Section 36.310.
397351 (c) All revenues and collections resulting from default
398352 charges shall constitute proceeds only of the default property
399353 arising from the financing order.
400- Sec. 39.605. INTEREST NOT SUBJECT TO SETOFF. The interest
401- of an assignee or pledgee in default property and in the revenues
402- and collections arising from that property are not subject to
403- setoff, counterclaim, surcharge, or defense by the independent
404- organization or any other person or in connection with the
405- bankruptcy of a wholesale market participant or the independent
406- organization. A financing order shall remain in effect and
407- unabated notwithstanding the bankruptcy of the independent
408- organization, its successors, or assignees.
409- Sec. 39.606. DEFAULT CHARGES NONBYPASSABLE. A financing
410- order shall include terms ensuring that the imposition and
411- collection of default charges authorized in the order shall be
412- nonbypassable.
354+ Sec. 39.605. NO SETOFF. The interest of an assignee or
355+ pledgee in default property and in the revenues and collections
356+ arising from that property are not subject to setoff, counterclaim,
357+ surcharge, or defense by the independent organization or any other
358+ person or in connection with the bankruptcy of any wholesale market
359+ participant. A financing order shall remain in effect and unabated
360+ notwithstanding the bankruptcy of the independent organization,
361+ its successors, or assignees.
362+ Sec. 39.606. NO BYPASS. A financing order shall include
363+ terms ensuring that the imposition and collection of default
364+ charges authorized in the order shall be nonbypassable.
413365 Sec. 39.607. TRUE-UP. A financing order shall include a
414366 mechanism requiring that default charges be reviewed and adjusted
415- at least annually, not later than the 45th day after the anniversary
416- date of the issuance of the bonds, to:
417- (1) correct over-collections or under-collections of
418- the preceding 12 months; and
419- (2) ensure the expected recovery of amounts sufficient
420- to timely provide all payments of debt service and other required
421- amounts and charges in connection with the bonds.
422- Sec. 39.608. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;
367+ at least annually, within 45 days of the anniversary date of the
368+ issuance of the bonds, to correct any overcollections or
369+ undercollections of the preceding 12 months and to ensure the
370+ expected recovery of amounts sufficient to timely provide all
371+ payments of debt service and other required amounts and charges in
372+ connection with the bonds.
373+ Sec. 39.609. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;
423374 DEFAULT. (a) Default property does not constitute an account or
424375 general intangible under Section 9.106, Business & Commerce Code.
425376 The creation, granting, perfection, and enforcement of liens and
426377 security interests in default property are governed by this section
427378 and not by the Business & Commerce Code.
428379 (b) A valid and enforceable lien and security interest in
429380 default property may be created only by a financing order and the
430381 execution and delivery of a security agreement with a financing
431382 party in connection with the issuance of bonds. The lien and
432383 security interest shall attach automatically from the time that
433384 value is received for the bonds and, on perfection through the
434385 filing of notice with the secretary of state in accordance with the
435386 rules prescribed under Subsection (d), shall be a continuously
436387 perfected lien and security interest in the default property and
437388 all proceeds of the property, whether accrued or not, shall have
438389 priority in the order of filing and take precedence over any
439390 subsequent judicial or other lien creditor. If notice is filed
440- before the 10th day after the date value is received for the default
441- bonds, the security interest shall be perfected retroactive to the
442- date value was received. Otherwise, the security interest shall be
443- perfected as of the date of filing.
391+ within 10 days after value is received for the default bonds, the
392+ security interest shall be perfected retroactive to the date value
393+ was received, otherwise, the security interest shall be perfected
394+ as of the date of filing.
444395 (c) Transfer of an interest in default property to an
445396 assignee shall be perfected against all third parties, including
446397 subsequent judicial or other lien creditors, when the financing
447398 order becomes effective, transfer documents have been delivered to
448399 the assignee, and a notice of that transfer has been filed in
449- accordance with the rules adopted under Subsection (d). However,
450- if notice of the transfer has not been filed in accordance with this
451- subsection before the 10th day after the delivery of transfer
452- documentation, the transfer of the interest is not perfected
453- against third parties until the notice is filed.
400+ accordance with the rules prescribed under Subsection (d);
401+ provided, however, that if notice of the transfer has not been filed
402+ in accordance with this subsection within 10 days after the
403+ delivery of transfer documentation, the transfer of the interest is
404+ not perfected against third parties until the notice is filed.
454405 (d) The secretary of state shall implement this section by
455406 establishing and maintaining a separate system of records for the
456- filing of notices under this section and adopting the rules for
407+ filing of notices under this section and prescribing the rules for
457408 those filings based on Chapter 9, Business & Commerce Code, adapted
458- to this subchapter and using the terms defined by this subchapter.
409+ to this subchapter and using the terms defined in this subchapter.
459410 (e) The priority of a lien and security interest perfected
460411 under this section is not impaired by any later modification of the
461- financing order under Section 39.607 or by the commingling of funds
412+ financing order under Section 31.607 or by the commingling of funds
462413 arising from default charges with other funds, and any other
463414 security interest that may apply to those funds shall be terminated
464415 when they are transferred to a segregated account for the assignee
465- or a financing party. If default property has been transferred to
466- an assignee, any proceeds of that property shall be held in trust
467- for the assignee.
416+ or a financing party. If default property has been transferred to an
417+ assignee, any proceeds of that property shall be held in trust for
418+ the assignee.
468419 (f) If a default or termination occurs under the bonds, the
469420 financing parties or their representatives may foreclose on or
470- otherwise enforce their lien and security interest in any property
471- as if they were secured parties under Chapter 9, Business & Commerce
472- Code, and the commission may order that amounts arising from
473- default charges be transferred to a separate account for the
421+ otherwise enforce their lien and security interest in any default
422+ property as if they were secured parties under Chapter 9, Business &
423+ Commerce Code, and the commission may order that amounts arising
424+ from default charges be transferred to a separate account for the
474425 financing parties' benefit, to which their lien and security
475426 interest shall apply. On application by or on behalf of the
476427 financing parties, a district court of Travis County shall order
477428 the sequestration and payment to them of revenues arising from the
478429 default charges.
479- Sec. 39.609. PLEDGE OF STATE. Default bonds are not a debt
430+ Sec. 39.610. PLEDGE OF STATE. Default bonds are not a debt
480431 or obligation of the state and are not a charge on its full faith and
481432 credit or taxing power. The state pledges, however, for the benefit
482433 and protection of financing parties and the independent
483- organization that it will not take or permit any action that would
434+ organization, that it will not take or permit any action that would
484435 impair the value of default property, or reduce, alter, or impair
485436 the default charges to be imposed, collected, and remitted to
486437 financing parties, until the principal, interest and premium, and
487438 any other charges incurred and contracts to be performed in
488439 connection with the related bonds have been paid and performed in
489- full. Any party issuing bonds under this subchapter is authorized
490- to include this pledge in any documentation relating to those
491- bonds.
492- Sec. 39.610. TAX EXEMPTION. Transactions involving the
440+ full. Any party issuing under this chapter bonds is authorized to
441+ include this pledge in any documentation relating to those bonds.
442+ Sec. 39.611. TAX EXEMPTION. Transactions involving the
493443 transfer and ownership of default property and the receipt of
494444 default charges are exempt from state and local income, sales,
495445 franchise, gross receipts, and other taxes or similar charges.
496- Sec. 39.611. NOT PUBLIC UTILITY. An assignee or financing
446+ Sec. 39.612. NOT PUBLIC UTILITY. An assignee or financing
497447 party may not be considered to be a public utility or person
498448 providing electric service solely by virtue of the transactions
499449 described in this subchapter.
500- Sec. 39.612. SEVERABILITY. Effective on the date the first
450+ Sec. 39.613. SEVERABILITY. Effective on the date the first
501451 bonds are issued under this subchapter, if any provision in this
502452 title or portion of this title is held to be invalid or is
503453 invalidated, superseded, replaced, repealed, or expires for any
504454 reason, that occurrence does not affect the validity or
505- continuation of this subchapter or any other provision of this
506- title that is relevant to the issuance, administration, payment,
507- retirement, or refunding of bonds or to any actions of the
508- independent organization, its successors, an assignee, a
509- collection agent, or a financing party, which shall remain in full
510- force and effect.
511- SECTION 5. This Act takes effect immediately if it receives
512- a vote of two-thirds of all the members elected to each house, as
513- provided by Section 39, Article III, Texas Constitution. If this
514- Act does not receive the vote necessary for immediate effect, this
515- Act takes effect September 1, 2021.
516- * * * * *
455+ continuation of this subchapteror any other provision of this title
456+ that is relevant to the issuance, administration, payment,
457+ retirement, or refunding of bonds or to any actions of the electric
458+ utility, its successors, an assignee, a collection agent, or a
459+ financing party, which shall remain in full force and effect.
460+ SECTION 2. This Act takes effect September 1, 2021.