Texas 2021 - 87th Regular

Texas Senate Bill SB1950 Compare Versions

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1	1	2021S0197-1 03/11/21
2	2	By: Paxton S.B. No. 1950
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the use of securitization by electric cooperatives to
8	8	address extraordinary costs and expenses resulting from Winter
9	9	Storm Uri.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Chapter 41, Utilities Code, is amended by adding
12	12	Subchapter D to read as follows:
13	13	SUBCHAPTER D. WEATHER SECURITIZATION
14	14	Sec. 41.151. PURPOSE. The purpose of this subchapter is to
15	15	enable electric cooperatives to use securitization financing to
16	16	recover extraordinary costs and expenses incurred because of the
17	17	abnormal weather events from 12:01 a.m. on February 12, 2021,
18	18	through 11:59 p.m. on February 20, 2021. This type of debt will
19	19	lower the cost of financing such extraordinary costs and expenses
20	20	relative to the costs that would be incurred using conventional
21	21	electric cooperative financing methods. The proceeds of the
22	22	securitized bonds shall be used solely for the purposes of
23	23	financing or refinancing such extraordinary costs and expenses,
24	24	including costs relating to consummation and administration of the
25	25	securitized financing itself. The board of directors of each
26	26	electric cooperative involved in such financing shall ensure that
27	27	securitization provides tangible and quantifiable benefits to its
28	28	members, greater than would have been achieved absent the issuance
29	29	of securitized bonds. Each board of directors that chooses to
30	30	securitize pursuant to this subchapter shall ensure that the
31	31	structuring and pricing of the securitized bonds result in
32	32	reasonable securitized bond charges consistent with market
33	33	conditions and the terms of the financing order. The amount
34	34	securitized may not exceed the present value of the revenue
35	35	requirement over the life of the proposed securitized bonds
36	36	associated with the extraordinary costs and expenses being
37	37	financed. The present value calculation shall use a discount rate
38	38	equal to the proposed interest rate on the securitized bonds.
39	39	Sec. 41.152. DEFINITIONS. In this subchapter:
40	40	(1) "Assignee" means any individual, corporation, or
41	41	other legally recognized entity, including a special-purpose
42	42	entity, to which an interest in transition property is transferred,
43	43	other than as security, including any assignee of that party.
44	44	(2) "Extraordinary costs and expenses" means:
45	45	(A) costs and expenses incurred by the electric
46	46	cooperative for power and energy purchased during the period of
47	47	emergency in excess of what would have been paid for the same amount
48	48	of power and energy at the average rate paid by the electric
49	49	cooperative for power and energy purchased during the month of
50	50	January 2021;
51	51	(B) costs and expenses incurred by the electric
52	52	cooperative to generate and transmit power and energy during the
53	53	period of emergency, including fuel costs, operation and
54	54	maintenance expenses, overtime costs, and all other costs and
55	55	expenses that would not have been incurred but for the extreme
56	56	weather conditions; and
57	57	(C) any charges imposed on the electric
58	58	cooperative or on a power supplier to the electric cooperative and
59	59	passed on to the electric cooperative by the applicable regional
60	60	transmission organization or independent system operator resulting
61	61	from defaults by other market participants in the regional
62	62	transmission organization or independent system operator for costs
63	63	relating to the period of emergency.
64	64	(3) "Financing order" means an order of the board of
65	65	directors approving the issuance of securitized bonds and the
66	66	creation of transition charges for the recovery of qualified costs.
67	67	(4) "Financing party" means a holder of securitized
68	68	bonds, including trustees, collateral agents, and other persons
69	69	acting for the benefit of the holder.
70	70	(5) "Qualified costs" means 100 percent of an electric
71	71	cooperative's extraordinary costs and expenses together with the
72	72	costs of issuing, supporting, repaying, servicing, and refinancing
73	73	the securitized bonds, whether incurred or paid upon issuance of
74	74	the securitized bonds or over the life of the securitized bonds or
75	75	the refunded securitized bonds, and any costs of retiring and
76	76	refunding the electric cooperative's existing debt securities
77	77	initially issued to finance the extraordinary costs and expenses.
78	78	(6) "Period of emergency" means the period from 12:01
79	79	a.m. on February 12, 2021, through 11:59 p.m. on February 20, 2021.
80	80	(7) "Securitized bonds" means bonds, debentures,
81	81	notes, certificates of participation or of beneficial interest, or
82	82	other evidences of indebtedness or ownership that are issued by an
83	83	electric cooperative, its successors, or an assignee under a
84	84	financing order that have a term not longer than 30 years and that
85	85	are secured by or payable, primarily, from transition property and
86	86	the proceeds thereof. If certificates of participation, beneficial
87	87	interest, or ownership are issued, references in this subchapter to
88	88	principal, interest, or premium shall refer to comparable amounts
89	89	under those certificates.
90	90	(8) "Transition charges" means nonbypassable amounts
91	91	to be charged for the use or availability of electric services,
92	92	approved by the board of directors of the electric cooperative
93	93	under a financing order to recover qualified costs, that shall be
94	94	collected by an electric cooperative, its successors, an assignee,
95	95	or other collection agents as provided for in the financing order.
96	96	(9) "Transition property" means the property right
97	97	created pursuant to this subchapter, including the right, title,
98	98	and interest of the electric cooperative or its assignee:
99	99	(A) in and to the transition charges established
100	100	pursuant to a financing order, including all rights to obtain
101	101	adjustments in accordance with Section 41.157 and the financing
102	102	order; and
103	103	(B) to be paid the amount that is determined in a
104	104	financing order to be the amount that the electric cooperative or
105	105	its transferee is lawfully entitled to receive pursuant to the
106	106	provisions of this subchapter and the proceeds thereof and in and to
107	107	all revenues, collections, claims, payments, moneys, or process of
108	108	or arising from the transition charges that are the subject of a
109	109	financing order.
110	110	Sec. 41.153. FINANCING ORDERS; TERMS. (a) The board of
111	111	directors shall adopt a financing order to recover the electric
112	112	cooperative's qualified costs on making a finding that the total
113	113	amount of revenues to be collected under the financing order is less
114	114	than the revenue requirement that would be recovered over the
115	115	remaining life of the transition property using conventional
116	116	financing methods and that the financing order is consistent with
117	117	the standards in Section 41.151.
118	118	(b) The financing order shall detail the amount of qualified
119	119	costs to be recovered and the period over which the nonbypassable
120	120	transition charges shall be recovered, which period may not exceed
121	121	30 years.
122	122	(c) Transition charges shall be collected and allocated
123	123	among customers in such manner as set forth in the financing order.
124	124	(d) A financing order becomes effective in accordance with
125	125	its terms, and the financing order, together with the transition
126	126	charges authorized in the order, shall thereafter be irrevocable
127	127	and not subject to rescission, reduction, impairment, or adjustment
128	128	or other alteration by further action of the board of directors or
129	129	by action of any regulatory or other governmental body of the State
130	130	of Texas, except as permitted by Section 41.157. A financing order
131	131	issued pursuant to this subchapter shall have the same force and
132	132	effect as a financing order under Chapter 39.
133	133	(e) A financing order may be reviewed by appeal only to a
134	134	district court of the county where the electric cooperative is
135	135	domiciled by a member of the electric cooperative filed within 15
136	136	days after the financing order is adopted by the board of directors.
137	137	The judgment of the district court may be reviewed only by direct
138	138	appeal to the Supreme Court of Texas filed within 15 days after
139	139	entry of judgment. All appeals shall be heard and determined by the
140	140	district court and the Supreme Court of Texas as expeditiously as
141	141	possible with lawful precedence over other matters. Review on
142	142	appeal shall be based solely on the financing order adopted by the
143	143	board of directors, other information considered by the board of
144	144	directors in adopting the resolutions, and briefs to the court and
145	145	shall be limited to whether the financing order conforms to the
146	146	constitution and laws of this state and the United States and is
147	147	within the authority of the board of directors under this
148	148	subchapter.
149	149	(f) The board of directors may adopt a financing order
150	150	providing for retiring and refunding securitized bonds on making a
151	151	finding that the future transition charges required to service the
152	152	new securitized bonds, including transaction costs, will be less
153	153	than the future transition charges required to service the
154	154	securitized bonds being refunded. After the indefeasible repayment
155	155	in full of all outstanding securitized bonds and associated
156	156	financing costs, the board of directors shall adjust the related
157	157	transition charges accordingly.
158	158	Sec. 41.154. PROPERTY RIGHTS. (a) The rights and interests
159	159	of an electric cooperative or its subsidiary, affiliate, successor,
160	160	financing party, or assignee under a financing order, including the
161	161	right to impose, collect, receive, and enforce the payment of
162	162	transition charges authorized in the financing order, shall be only
163	163	contract rights until such property is first transferred or pledged
164	164	to an assignee or financing party, as applicable, in connection
165	165	with the issuance of securitized bonds, at which time such property
166	166	becomes transition property.
167	167	(b) Transition property that is specified in the financing
168	168	order shall constitute a present vested property right for all
169	169	purposes, including, for the avoidance of doubt, for purposes of
170	170	the contracts and takings clauses of the constitutions and laws of
171	171	this state and the United States, even if the imposition and
172	172	collection of transition charges depend on further acts of the
173	173	electric cooperative or others that may not have yet occurred.
174	174	Transition property shall exist whether or not transition charges
175	175	have been billed, have accrued, or have been collected and
176	176	notwithstanding the fact that the value or amount of the property is
177	177	dependent on the future provision of service to customers by the
178	178	electric cooperative or its successors or assigns. Upon the
179	179	issuance of the securitized bonds and the financing order, and upon
180	180	satisfaction of the requirements of Section 41.159, the transition
181	181	charges, including their nonbypassability, shall be irrevocable,
182	182	final, nondiscretionary, and effective without further action by
183	183	the electric cooperative or any other person or governmental
184	184	authority. The financing order shall remain in effect and the
185	185	property shall continue to exist for the same period as the pledge
186	186	of the state described in Section 41.160.
187	187	(c) All revenues, collections, claims, payments, moneys, or
188	188	proceeds of or arising from or relating to transition charges shall
189	189	constitute proceeds of the transition property arising from the
190	190	financing order.
191	191	Sec. 41.155. NO SETOFF. The interest of an assignee or
192	192	pledgee in transition property and in the revenues and collections
193	193	arising from that property are not subject to setoff, counterclaim,
194	194	surcharge, recoupment, or defense by the electric cooperative or
195	195	any other person or in connection with the bankruptcy of the
196	196	electric cooperative or any other entity. A financing order shall
197	197	remain in effect and unabated notwithstanding the bankruptcy of the
198	198	electric cooperative, its successors, or assignees.
199	199	Sec. 41.156. NO BYPASS. A financing order shall include
200	200	terms ensuring that the imposition and collection of transition
201	201	charges authorized in the order shall be nonbypassable and shall
202	202	apply to all customers connected to the electric cooperative's
203	203	system assets and taking service, whether or not the system assets
204	204	continue to be owned by the electric cooperative.
205	205	Sec. 41.157. TRUE-UP. A financing order shall be promptly
206	206	reviewed and adjusted if, after its adoption, there are additional
207	207	charges or refunds of extraordinary costs and expenses so as to
208	208	ensure that there is neither an over-collection nor-under
209	209	collection of extraordinary costs and expenses and that collections
210	210	on the transition property will be sufficient to timely make all
211	211	periodic and final payments of principal, interest, fees, and other
212	212	amounts and to timely fund all reserve accounts, if any, related to
213	213	the securitized bonds. A financing order shall also include a
214	214	mechanism requiring that transition charges be reviewed by the
215	215	board of directors and adjusted at least annually, within 45 days
216	216	after the anniversary date of the issuance of the securitized
217	217	bonds, to correct any over-collections or under-collections of the
218	218	preceding 12 months and to ensure the expected recovery of amounts
219	219	sufficient to timely provide all payments of debt service and other
220	220	required amounts and charges in connection with the securitized
221	221	bonds. No governmental authority shall have the discretion or
222	222	authority to disapprove of, or alter, any adjustments made or
223	223	proposed to be made hereunder other than to correct computation or
224	224	other manifest errors.
225	225	Sec. 41.158. TRUE SALE. An agreement by an electric
226	226	cooperative or assignee to transfer transition property that
227	227	expressly states that the transfer is a sale or other absolute
228	228	transfer signifies that the transaction is a true sale and is not a
229	229	secured transaction and that title, legal and equitable, has passed
230	230	to the entity to which the transition property is transferred. The
231	231	transaction shall be treated as an absolute sale regardless of
232	232	whether the purchaser has any recourse against the seller or any
233	233	other term of the parties' agreement, including the seller's
234	234	retention of an equity interest in the transition property, the
235	235	fact that the electric cooperative acts as the collector of
236	236	transition charges relating to the transition property, or the
237	237	treatment of the transfer as a financing for tax, accounting,
238	238	financial reporting, or other purposes.
239	239	Sec. 41.159. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;
240	240	DEFAULT. (a) Transition property does not constitute an account or
241	241	general intangible under Section 9.106, Business & Commerce Code.
242	242	The transfer, sale, or assignment, or the creation, granting,
243	243	perfection, and enforcement, of liens and security interests in
244	244	transition property are governed by this section and not by the
245	245	Business & Commerce Code. Transition property shall constitute
246	246	property for all purposes, including for contracts securing
247	247	securitized bonds, whether or not the transition property revenues
248	248	and proceeds have accrued.
249	249	(b) A valid and enforceable transfer, sale, or assignment,
250	250	or lien and security interest, as applicable, in transition
251	251	property may be created only by a financing order and the execution
252	252	and delivery of a transfer, sale, or assignment, or security
253	253	agreement, as applicable, with a financing party in connection with
254	254	the issuance of securitized bonds. The transfer, sale, assignment,
255	255	or lien and security interest, as applicable, shall attach
256	256	automatically from the time that value is received for the
257	257	securitized bonds and, on perfection through the filing of notice
258	258	with the secretary of state in accordance with the rules prescribed
259	259	under Subsection (d), shall be a continuously perfected transfer,
260	260	sale, and assignment or lien and security interest, as applicable,
261	261	in the transition property and all proceeds of the property,
262	262	whether accrued or not, shall have priority in the order of filing
263	263	and take precedence over any subsequent judicial or other lien
264	264	creditor. If notice is filed within 10 days after value is received
265	265	for the securitized bonds, the transfer, sale, or assignment, or
266	266	security interest, as applicable, shall be perfected retroactive to
267	267	the date value was received; otherwise, the transfer, sale, or
268	268	assignment, or security interest, as applicable, shall be perfected
269	269	as of the date of filing.
270	270	(c) Transfer, sale, or assignment of an interest in
271	271	transition property to an assignee shall be perfected against all
272	272	third parties, including subsequent judicial or other lien
273	273	creditors, when the financing order becomes effective, transfer
274	274	documents have been delivered to the assignee, and a notice of that
275	275	transfer has been filed in accordance with the rules prescribed
276	276	under Subsection (d); provided, however, that if notice of the
277	277	transfer has not been filed in accordance with this subsection
278	278	within 10 days after the delivery of transfer documentation, the
279	279	transfer of the interest is not perfected against third parties
280	280	until the notice is filed.
281	281	(d) The secretary of state shall implement this section by
282	282	establishing and maintaining a separate system of records for the
283	283	filing of notices under this section and prescribing the rules for
284	284	those filings based on Chapter 9, Business & Commerce Code, adapted
285	285	to this subchapter and using the terms defined in this subchapter.
286	286	(e) The priority of a lien and security interest perfected
287	287	under this section is not impaired by any later modification of the
288	288	financing order under Section 41.157 or by the commingling of funds
289	289	arising from transition charges with other funds, and any other
290	290	security interest that may apply to those funds shall be terminated
291	291	when they are transferred to a segregated account for the assignee
292	292	or a financing party. If transition property has been transferred
293	293	to an assignee, any proceeds of that property shall be held in trust
294	294	for the assignee.
295	295	(f)(1) Securitized bonds shall be secured by a statutory
296	296	lien on the transition property in favor of the owners or beneficial
297	297	owners of securitized bonds. The lien shall automatically arise
298	298	upon issuance of the securitized bonds without the need for any
299	299	action or authorization by the electric cooperative or the board of
300	300	directors. The lien shall be valid and binding from the time the
301	301	securitized bonds are executed and delivered. The transition
302	302	property shall be immediately subject to the lien, and the lien
303	303	shall immediately attach to the transition property and be
304	304	effective, binding, and enforceable against the electric
305	305	cooperative, its creditors, their successors, assignees, and all
306	306	others asserting rights therein, irrespective of whether those
307	307	persons have notice of the lien and without the need for any
308	308	physical delivery, recordation, filing, or further act. The lien
309	309	is created by this subchapter and not by any security agreement, but
310	310	may be enforced by any financing party or their representatives as
311	311	if they were secured parties under Chapter 9, Business & Commerce
312	312	Code. Upon application by or on behalf of the financing parties, a
313	313	district court of the county where the electric cooperative is
314	314	domiciled may order that amounts arising from transition charges be
315	315	transferred to a separate account for the financing parties'
316	316	benefit.
317	317	(2) This statutory lien is a continuously perfected
318	318	security interest and has priority over any other lien, created by
319	319	operation of law or otherwise, that may subsequently attach to that
320	320	transition property or proceeds thereof unless the owners or
321	321	beneficial owners of securitized bonds as specified in the trust
322	322	agreement or indenture have agreed in writing otherwise. This
323	323	statutory lien is a lien on the transition charges and all
324	324	transition charge revenues or other proceeds that are deposited in
325	325	any deposit account or other account of the servicer or other person
326	326	in which transition charge revenues or other proceeds have been
327	327	commingled with other funds.
328	328	(3) The statutory lien is not adversely affected or
329	329	impaired by, among other things, the commingling of transition
330	330	charge revenues or other proceeds from transition charges with
331	331	other amounts regardless of the person holding such amounts.
332	332	(4) The electric cooperative, any successor or assign
333	333	of the electric cooperative, or any other person with any
334	334	operational control of any portion of the electric cooperative's
335	335	system assets, whether as owner, lessee, franchisee, or otherwise,
336	336	and any successor servicer of collections of the transition charges
337	337	shall be bound by the requirements of this subchapter and shall
338	338	perform and satisfy all obligations imposed pursuant hereto in the
339	339	same manner and to the same extent as did its predecessor, including
340	340	the obligation to bill, adjust, and enforce the payment of
341	341	transition charges.
342	342	(g) If a default or termination occurs under the securitized
343	343	bonds, the financing parties or their representatives may foreclose
344	344	on or otherwise enforce their lien and security interest in any
345	345	transition property as if they were secured parties under Chapter
346	346	9, Business & Commerce Code, and upon application by the electric
347	347	cooperative or by or on behalf of the financing parties, a district
348	348	court of Travis County may order that amounts arising from
349	349	transition charges be transferred to a separate account for the
350	350	financing parties' benefit, to which their lien and security
351	351	interest shall apply. On application by or on behalf of the
352	352	financing parties, a district court of the county where the
353	353	electric cooperative is domiciled shall order the sequestration and
354	354	payment to them of revenues arising from the transition charges.
355	355	Sec. 41.160. PLEDGE OF STATE. Securitized bonds are not a
356	356	debt or obligation of the state and are not a charge on its full
357	357	faith and credit or taxing power. The state irrevocably pledges,
358	358	however, for the benefit and protection of assignees, financing
359	359	parties, and the electric cooperative that it will not take or
360	360	permit, or permit any agency or other governmental authority or
361	361	political subdivision of the state to take or permit, any action
362	362	that would impair the value of transition property or, except as
363	363	permitted by Section 41.157, reduce, alter, or impair the
364	364	transition charges to be imposed, collected, and remitted to
365	365	financing parties, until the principal, interest, and premium, and
366	366	any other charges incurred and contracts to be performed in
367	367	connection with the related securitized bonds, have been paid and
368	368	performed in full. Any party issuing securitized bonds is
369	369	authorized to include this pledge in any documentation relating to
370	370	those bonds.
371	371	Sec. 41.161. TAX EXEMPTION. Transactions involving the
372	372	transfer and ownership of transition property and the receipt of
373	373	transition charges are exempt from state and local income, sales,
374	374	franchise, gross receipts, and other taxes or similar charges.
375	375	Sec. 41.162. NOT PUBLIC UTILITY. An assignee or financing
376	376	party may not be considered to be a public utility, electric
377	377	cooperative, or person providing electric service solely by virtue
378	378	of the transactions described in this subchapter.
379	379	Sec. 41.163. SEVERABILITY. Effective on the date the first
380	380	securitized bonds are issued under this subchapter, if any
381	381	provision in this title or portion of this title is held to be
382	382	invalid or is invalidated, superseded, replaced, or repealed or
383	383	expires for any reason, that occurrence does not affect the
384	384	validity or continuation of this subchapter, or any other provision
385	385	of this title that is relevant to the issuance, administration,
386	386	payment, retirement, or refunding of securitized bonds or to any
387	387	actions of the electric cooperative, its successors, an assignee, a
388	388	collection agent, or a financing party, which shall remain in full
389	389	force and effect.
390	390	SECTION 2. This Act takes effect immediately if it receives
391	391	a vote of two-thirds of all the members elected to each house, as
392	392	provided by Section 39, Article III, Texas Constitution. If this
393	393	Act does not receive the vote necessary for immediate effect, this
394	394	Act takes effect September 1, 2021.