By: Williams, et al. S.B. No. 769
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to methods for the recovery of system restoration costs
  incurred by electric utilities following hurricanes, tropical
  storms, ice or snow storms, floods, and other weather-related
  events and 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 FOR RECOVERY OF SYSTEM
  RESTORATION COSTS
         Sec. 36.401.  SECURITIZATION FOR RECOVERY OF SYSTEM
  RESTORATION COSTS; PURPOSE.  (a)  The purpose of this subchapter is
  to enable an electric utility to obtain timely recovery of system
  restoration costs and to use securitization financing to recover
  these costs, because that type of debt will lower the carrying costs
  associated with the recovery of these costs, relative to the costs
  that would be incurred using conventional financing methods. The
  proceeds of the transition bonds may be used only for the purposes
  of 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.
         (b)  It is the intent of the legislature that:
               (1)  securitization of system restoration costs will be
  accomplished using the same procedures, standards, and protections
  for securitization authorized under Subchapter G, Chapter 39, as in
  effect on the effective date of this section, except as provided by
  this subchapter; and
               (2)  the commission will ensure that securitization of
  system restoration costs provides greater tangible and
  quantifiable benefits to ratepayers than would have been achieved
  without the issuance of transition bonds.
         Sec. 36.402.  SYSTEM RESTORATION COSTS; STANDARDS AND
  DEFINITIONS.  (a)  In this subchapter, "system restoration costs"
  means reasonable and necessary costs, including costs expensed,
  charged to self-insurance reserves, deferred, capitalized, or
  otherwise financed, that are incurred by an electric utility due to
  any activity or 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 in calendar
  year 2008 or thereafter. System restoration costs include
  mobilization, staging, and construction, reconstruction,
  replacement, or repair of electric generation, transmission,
  distribution, or general plant facilities. System restoration
  costs shall include 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, but such estimates shall be subject to true-up and
  reconciliation after the actual costs are known.
         (b)  System restoration costs shall include carrying costs
  at the electric utility's weighted average cost of capital as last
  approved by the commission in a general rate proceeding from the
  date on which the system restoration costs were incurred until the
  date that transition bonds are issued or until system restoration
  costs are otherwise recovered pursuant to the provisions of this
  subchapter.
         (c)  To the extent a utility subject to this subchapter
  receives insurance proceeds, governmental grants, or any other
  source of funding that compensate it for system restoration costs,
  those amounts shall be used to reduce the utility's system
  restoration costs recoverable from customers. If the timing of a
  utility's receipt of those amounts prevents their inclusion as a
  reduction to the system restoration costs that are securitized, or
  the commission later determines as a result of the true-up and
  reconciliation provided for in Subsection (a) that the actual costs
  incurred are less than estimated costs included in the
  determination of system restoration costs, the commission shall
  take those amounts 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.
         (d)  If the commission determines that the insurance
  proceeds, governmental grants, or other sources of funding that
  compensate the electric utility for system restoration costs, or
  the amount resulting from a true-up of estimated system restoration
  costs are of a magnitude to justify a separate tariff rider, the
  commission may establish a tariff rider to credit such amounts
  against charges, other than transition charges or system
  restoration charges as defined in Section 36.403, being collected
  from customers.
         (e)  To the extent that the electric utility receives
  insurance proceeds, governmental grants, or any other source of
  funding that is used to reduce system restoration costs, the
  commission shall impute interest on those amounts at the same cost
  of capital included in the utility's system restoration costs until
  the date that those amounts are used to reduce the amount of system
  restoration costs that are securitized or otherwise reflected in
  the rates of the utility.
         Sec. 36.403.  STANDARDS AND PROCEDURES GOVERNING
  SECURITIZATION AND RECOVERY OF SYSTEM RESTORATION COSTS.  (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, or to otherwise
  provide for the recovery of system restoration costs.
         (b)  Subject to the standards, procedures, and tests
  contained in this subchapter and Subchapter G, Chapter 39, the
  commission shall adopt a financing order on the application of the
  electric utility to recover its system restoration costs. If on its
  own motion or complaint by an affected person, the commission
  determines that it is likely that securitization of system
  restoration costs would meet the tests contained in Section
  36.401(b), the commission shall require the utility to file an
  application for a financing order. On the commission's issuance of
  a financing order allowing for recovery and securitization of
  system restoration costs, the provisions of this subchapter and
  Subchapter G, Chapter 39, continue to govern the financing order
  and the rights and interests established in the order, and this
  subchapter and Subchapter G, Chapter 39, continue to govern any
  transition bonds issued pursuant to the financing order. To the
  extent any conflict exists between the provisions of this
  subchapter and Subchapter G, Chapter 39, in cases involving the
  securitization of system restoration costs, the provisions of this
  subchapter control.
         (c)  For purposes of this subchapter, "financing order," as
  defined by Section 39.302 and as used in Subchapter G, Chapter 39,
  includes a financing order authorizing the securitization of system
  restoration costs.
         (d)  For purposes of this subchapter, "qualified costs," as
  defined by Section 39.302 and as used in Subchapter G, Chapter 39,
  includes 100 percent of the electric utility's system restoration
  costs, net of any insurance proceeds, governmental grants, or other
  source of funding that compensate the utility for system
  restoration costs, received by the utility at the time it files an
  application for a financing order. Qualified costs also include
  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 subject to this subchapter in
  connection with the issuance of transition bonds. For purposes of
  this subchapter, the term qualified costs also includes:
               (1)  the costs to the commission of acquiring
  professional services for the purpose of evaluating proposed
  transactions under this subchapter; and
               (2)  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.
         (e)  For purposes of this subchapter, "transition bonds," as
  defined by Section 39.302 and as used in Subchapter G, Chapter 39,
  includes transition bonds issued in association with the recovery
  of system restoration costs. Transition bonds issued to securitize
  system restoration costs may be called "system restoration bonds"
  or may be called by any other name acceptable to the issuer and the
  underwriters of the transition bonds.
         (f)  For purposes of this subchapter, "transition charges,"
  as defined by Section 39.302 and as used in Subchapter G, Chapter
  39, includes nonbypassable amounts to be charged for the use of
  electric services, approved by the commission under a financing
  order to recover system restoration costs, 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 may be called "system
  restoration charges" or may be called by any other name acceptable
  to the issuer and the underwriters of the transition bonds.
         (g)  Notwithstanding Section 39.303(c), system restoration
  costs shall be functionalized and allocated to customers in the
  same manner as the corresponding facilities and related expenses
  are functionalized and allocated in the electric utility's current
  base rates. For an electric utility operating within the Electric
  Reliability Council of Texas, system restoration costs that are
  properly includable in the transmission cost of service mechanism
  adopted under Section 35.004 and associated deferred costs not
  included under Section 35.004 shall be recovered under the method
  of pricing provided for in that section and commission rules
  promulgated under that section; provided, however, that an electric
  utility operating under a rate freeze or other limitation on its
  ability to pass through wholesale costs to its customers may defer
  such costs and accrue carrying costs at its weighted average cost of
  capital as last approved by the commission in a general rate
  proceeding until such time as the freeze or limitation expires.
         (h)  The amount of any accumulated deferred federal income
  taxes offset, used to determine the securitization total, may not
  be considered in future rate proceedings. Any tax obligation of the
  electric utility arising from its receipt of securitization bond
  proceeds, or from the collection and remittance of transition
  charges, shall be recovered by the electric utility through the
  commission's implementation of this subchapter.
         (i)  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 recover system restoration costs
  consistent with the provisions of this subchapter.
         (j)  If in the course of a proceeding to adopt a financing
  order the commission determines that the recovery of all or any
  portion of an electric utility's system restoration costs, using
  securitization, is not beneficial to ratepayers of the electric
  utility, under one or more of the tests applied to determine those
  benefits, the commission shall nonetheless use the proceeding to
  issue an order permitting the electric utility to recover the
  remainder of its system restoration costs through an appropriate
  customer surcharge mechanism, including carrying costs at the
  electric utility's weighted average cost of capital as last
  approved by the commission in a general rate proceeding, to the
  extent that the electric utility has not securitized those costs. A
  rate proceeding under Subchapter C or D shall not be required to
  determine and implement this surcharge mechanism. On the final
  implementation of rates resulting from the filing of a rate
  proceeding under Subchapter C or D that provides for the recovery of
  all remaining system restoration costs, a rider or surcharge
  mechanism adopted under this subsection shall expire. This
  subsection is limited to instances in which an electric utility has
  incurred system restoration costs of $100 million or more in any
  calendar year after January 1, 2008.
         Sec. 36.404.  NONBYPASSABLE CHARGES. The commission shall
  include terms in the financing order to ensure that the imposition
  and collection of transition charges associated with the recovery
  of system restoration costs are nonbypassable by imposing
  restrictions on bypassability of the type provided for in Chapter
  39 or by alternative means of ensuring nonbypassability, as the
  commission considers appropriate, consistent with the purposes of
  securitization.
         Sec. 36.405.  DETERMINATION OF SYSTEM RESTORATION COSTS.  
  (a)  An electric utility is entitled to recover system restoration
  costs consistent with the provisions of this subchapter and is
  entitled to seek recovery of amounts not recovered under this
  subchapter, including system restoration costs not yet incurred at
  the time an application is filed under Subsection (b), in its next
  base rate proceeding or through any other proceeding authorized by
  Subchapter C or D.
         (b)  An electric utility may file an application with the
  commission seeking a determination of the amount of system
  restoration costs eligible for recovery and securitization. The
  commission may by rule prescribe the form of the application and the
  information reasonably needed to support the application;
  provided, however, that if such a rule is not in effect, the
  electric utility shall not be precluded from filing its application
  and such application cannot be rejected as being incomplete.
         (c)  The commission shall issue an order determining the
  amount of system restoration costs eligible for recovery and
  securitization not later than the 150th day after the date an
  electric utility files its application. The 150-day period begins
  on the date the electric utility files the application, even if the
  filing occurs before the effective date of this section.
         (d)  An electric utility may file an application for a
  financing order prior to the expiration of the 150-day period
  provided for in Subsection (c). The commission shall issue a
  financing order not later than 90 days after the utility files its
  request for a financing order; provided, however, that the
  commission need not issue the financing order until it has
  determined the amount of system restoration costs eligible for
  recovery and securitization.
         (e)  To the extent the commission has made a determination of
  the eligible system restoration costs of an electric utility before
  the effective date of this section, that determination may provide
  the basis for the utility's application for a financing order
  pursuant to this subchapter and Subchapter G, Chapter 39. A
  previous commission determination does not preclude the utility
  from requesting recovery of additional system restoration costs
  eligible for recovery under this subchapter, but not previously
  authorized by the commission.
         (f)  A rate proceeding under Subchapter C or D shall not be
  required to determine the amount of recoverable system restoration
  costs, as provided by this section, or for the issuance of a
  financing order.
         (g)  A commission order under this subchapter is not subject
  to rehearing. A commission order may be reviewed by appeal only to
  a Travis County district court by a party to the proceeding filed
  within 15 days after the order is signed by the commission. 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. 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. 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. 36.406.  SEVERABILITY.  Effective on the date the first
  utility transition bonds associated with system restoration costs
  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.