|
|
A BILL TO BE ENTITLED
|
|
AN ACT
|
|
relating to securitizing costs of electric services or electric |
|
markets. |
|
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
|
SECTION 1. Chapter 31, Utilities Code, is amended by adding |
|
Subchapter C to read as follows: |
|
SUBCHAPTER C. SECURITIZATION CORPORATION |
|
Sec. 31.101. PURPOSE AND DEFINITIONS. |
|
(a) The purpose of this subchapter is to create a |
|
securitization corporation dedicated to financing costs that are |
|
eligible for securitization under Subtitle B of this code. |
|
Entities that are permitted to securitize costs may, subject to any |
|
other requirements applicable to such securitization authority, |
|
request that the Texas Electric Securitization Corporation conduct |
|
the financing on their behalf. |
|
(b) The Texas Electric Securitization Corporation shall be |
|
created pursuant to this subchapter as a special purpose public |
|
corporation and instrumentality of the state for the essential |
|
public purpose of providing a lower cost financing mechanism for |
|
securitization authorized under this subchapter. |
|
(c) Bonds issued consistent with this subchapter will be |
|
solely the obligation of the issuer and the corporation (as |
|
borrower, if applicable) and will not be a debt of or a pledge of the |
|
faith and credit of the state. |
|
(d) Bonds issued consistent with this subchapter shall be |
|
nonrecourse to the credit or any assets of the state or the |
|
commission. |
|
(e) As used in this subchapter: |
|
(1) "corporation" means the Texas Electric |
|
Securitization Corporation. |
|
(2) "issuer" means the corporation or any other Texas |
|
corporation, public trust, public instrumentality, or other entity |
|
that issues bonds approved by a financing order. |
|
Sec. 31.102. CREATION OF THE CORPORATION. (a) The |
|
corporation shall be incorporated as a nonprofit corporation and |
|
instrumentality of the state, and shall perform the essential |
|
governmental function of financing eligible costs in accordance |
|
with this subchapter. The corporation shall perform only those |
|
functions consistent with this subchapter, shall exercise its |
|
powers through a governing board, and shall be subject to the |
|
regulation of the commission. The corporation shall have a legal |
|
existence as a public corporate body and instrumentality of the |
|
state separate and distinct from the state. |
|
(b) Assets of the corporation shall not be considered part |
|
of any state fund. The state shall not budget for or provide any |
|
general fund appropriations to the corporation, and the debts, |
|
claims, obligations, and liabilities of the corporation shall not |
|
be considered to be a debt of the state or a pledge of its credit. |
|
The corporation shall be self-funded. Prior to the imposition of |
|
charges to recover the securitized amounts, the corporation may |
|
accept and expend for its operating expenses such funds as may be |
|
received from any source, including financing agreements with the |
|
state, a commercial bank, or another entity to finance the |
|
corporation's obligations until the corporation receives |
|
sufficient property to cover its operating expenses as financing |
|
costs, and to repay any short-term borrowing under any such |
|
financing agreement. |
|
(c) The corporation shall have the powers, rights, and |
|
privileges provided for a corporation organized under Chapter 22, |
|
Business Organizations Code, subject to the express exceptions and |
|
limitations set forth in this subchapter. |
|
(d) An incorporator selected by the executive director of |
|
the commission shall prepare the articles of incorporation of the |
|
corporation under Chapter 22, Business Organizations Code, which |
|
articles shall be consistent with the provisions of this |
|
subchapter. |
|
(e) State officers, departments, and agencies are |
|
authorized to render services to the corporation within their |
|
respective functions, as may be requested by the commission or the |
|
corporation. |
|
(f) The corporation and any issuer may retain such |
|
professionals, financial advisors, and accountants as it may deem |
|
necessary to fulfill its duties under this subchapter and may |
|
determine their duties and compensation, subject to approval of the |
|
commission. |
|
(g) The governing body of the corporation shall be a board |
|
of directors that shall consist of five members appointed by the |
|
commission. All official action of the governing body shall |
|
require the favorable vote of a majority of the board members |
|
present and voting at any meeting of the board of directors. |
|
Sec. 31.103. POWERS AND DUTIES OF THE CORPORATION. (a) The |
|
corporation shall, in each instance subject to the prior |
|
authorization of the commission, participate in the financial |
|
transactions contemplated by this subchapter. The corporation |
|
shall engage in no other business activities except those |
|
activities provided for in this subchapter and those ancillary and |
|
incidental thereto. Neither the corporation nor any issuer shall |
|
apply any proceeds of bonds or charges to any purpose not specified |
|
in a financing order, or to any purpose in excess of the amount |
|
allowed for such purpose in the order, or to any purpose in |
|
contravention of the order. |
|
(b) The governing board of the corporation shall, pursuant |
|
to the provisions of this subchapter, have the power to employ or |
|
retain such persons as are necessary to perform the duties of the |
|
corporation. |
|
(c) The corporation may: |
|
(1) Acquire, sell, pledge, and transfer property as |
|
necessary to effect the purposes of this subchapter. In connection |
|
therewith, the corporation may agree to such terms and conditions |
|
as it deems necessary and proper, consistent with the terms of a |
|
financing order, (i) to acquire property and to pledge such |
|
property, and any other collateral, (a) to secure payment of bonds |
|
issued by the corporation, together with payment of any other |
|
qualified costs, or (b) to secure repayment of any borrowing from |
|
any other issuer of bonds, or (ii) to sell the property to another |
|
issuer, which may in turn pledge such property, together with any |
|
other collateral, to the repayment of bonds issued by the issuer |
|
together with any other qualified costs; |
|
(2) Issue bonds on terms and conditions consistent |
|
with a financing order; |
|
(3) Borrow funds from an issuer of bonds to acquire |
|
property, and pledge such property to the repayment of any |
|
borrowing from an issuer, together with any related qualified |
|
costs, all on terms and conditions consistent with a financing |
|
order. The corporation may also borrow funds for initial operating |
|
expenses; |
|
(4) Sue or be sued in its corporate name. The |
|
corporation has the authority to intervene as a party before the |
|
commission or any court in this state in any matter involving the |
|
corporation's powers and duties; |
|
(5) Negotiate and become a party to such contracts as |
|
necessary, convenient, or desirable to carry out the purposes of |
|
this subchapter; and |
|
(6) Engage in corporate actions or undertakings that |
|
are permitted for nonprofit corporations in this state and that are |
|
not prohibited by, or contrary to, the provisions of this |
|
subchapter. |
|
(d) The corporation shall maintain separate accounts and |
|
records relating to an entity that is collecting charges for all |
|
charges, revenues, assets, liabilities, and expenses relating to an |
|
entity's related bond issuances. |
|
(e) The governing board of the corporation shall be |
|
prohibited from authorizing any rehabilitation, liquidation, or |
|
dissolution of the corporation, and no such rehabilitation, |
|
liquidation, or dissolution of the corporation shall take effect as |
|
long as any bonds are outstanding unless adequate protection and |
|
provision has been made for the payment of the bonds pursuant to the |
|
documents authorizing the issuance of the bonds. In the event of any |
|
rehabilitation, liquidation, or dissolution, the assets of the |
|
corporation shall be applied first to pay all debts, liabilities, |
|
and obligations of the corporation, including the establishment of |
|
reasonable reserves for any contingent liabilities or obligations, |
|
and all remaining funds of the corporation shall be applied and |
|
distributed as provided by an order of the commission. |
|
(f) Prior to the date that is two years and one day after |
|
which the corporation no longer has any payment obligation with |
|
respect to any bonds, including any obligation to any issuer of any |
|
bonds outstanding, the corporation is prohibited from filing and |
|
shall have no authority to file a voluntary petition under the |
|
Federal Bankruptcy Code, as it may, from time to time, be in effect, |
|
and neither any public official nor any organization, entity, or |
|
other person shall authorize the corporation to be or to become a |
|
debtor under the Federal Bankruptcy Code during such period. The |
|
state covenants that it will not limit or alter the denial of |
|
authority under this subsection or subsection (e), and the |
|
provisions of such subsections are hereby made a part of the |
|
contractual obligation that is subject to the state pledge set |
|
forth in Section 39.310. |
|
(g) The corporation shall prepare an operating budget |
|
annually that shall be submitted for approval to the commission. If |
|
requested by the commission, the corporation shall prepare and |
|
submit an annual report containing, among other appropriate |
|
matters, the annual operating and financial statements of the |
|
corporation. |
|
Sec. 31.104. COMMISSION REGULATION OF THE CORPORATION. The |
|
commission shall regulate the corporation as provided for in this |
|
subchapter. Notwithstanding such regulation, the corporation is |
|
not a public utility. |
|
Sec. 31.105. FINANCING ORDER. (a) This section applies to |
|
the commission's issuance of a financing order under this |
|
subchapter. |
|
(b) Except as otherwise specifically provided in this |
|
subchapter, provisions that apply to a financing order authorized |
|
under Subtitle B apply to the commission's issuance of a financing |
|
order under this subchapter for the same purpose. |
|
(c) The corporation and any issuer shall be a party to the |
|
commission's proceedings addressing the issuance of a financing |
|
order along with the entity requesting securitization. |
|
(d) A financing order issued under this subchapter shall, in |
|
addition to any other applicable requirements under Subtitle B: |
|
(1) Require the sale, assignment, or other transfer of |
|
certain specified property created by the financing order to the |
|
corporation, and following such sale, assignment, or transfer, |
|
charges paid under any financing order shall be created, assessed, |
|
and collected as the property of the corporation, subject to |
|
subsequent sale, assignment, or transfer by the corporation as |
|
authorized under this subchapter. |
|
(2) Authorize either: |
|
(A) the issuance of bonds by the corporation |
|
secured by a pledge of such specified property, and the application |
|
of the proceeds of such bonds (net of issuance costs) to the |
|
acquisition of the property from the entity requesting |
|
securitization; or |
|
(B) the acquisition of specified property from |
|
the entity requesting securitization by the corporation, financed |
|
(i) by a loan by an issuer to the corporation of the proceeds of |
|
bonds (net of issuance costs), or (ii) by the acquisition by an |
|
issuer from the corporation of such property, and in each case, the |
|
pledge of such property to the repayment of such loan or bonds, as |
|
applicable; |
|
(3) Authorize the entity requesting securitization to |
|
serve as collection agent to collect the charges and transfer those |
|
collected charges to the corporation, the issuer, or a financing |
|
party, as appropriate. |
|
(e) After issuance of the financing order, the corporation |
|
shall arrange for the issuance of bonds as specified in the |
|
financing order by it or another issuer selected by the corporation |
|
and approved by the commission. |
|
(f) Bonds issued pursuant to a financing order under this |
|
section are secured only by the related property and any other funds |
|
pledged under the bond documents, and no assets of the state or any |
|
entity requesting securitization under this chapter shall be |
|
subject to claims by such bondholders. Following assignment of the |
|
property, the entity requesting securitization shall not have any |
|
beneficial interest or claim of right in such charges or in any |
|
property. |
|
Sec. 31.106. SEVERABILITY. Effective on the date the first |
|
bonds 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 any other provision of this title that is relevant to |
|
the issuance, administration, payment, retirement, or refunding of |
|
authorized securitization bonds or to any actions of an entity |
|
requesting securitization under this subchapter, its successors, |
|
an assignee, a collection agent, the corporation, an issuer, or a |
|
financing party, and those provisions shall remain in full force |
|
and effect. |
|
SECTION 3. Chapter 39, Utilities Code, is amended by adding |
|
Subchapter M to read as follows: |
|
Sec. 39.601. PURPOSE. The purpose of this subchapter is to |
|
enable the independent organization certified under section 39.151 |
|
to use securitization financing to fund substantial balances that |
|
would otherwise be uplifted to the wholesale market as a result of |
|
market participants defaulting on amounts owed after an extreme |
|
pricing event. Securitization will allow wholesale market |
|
participants who are owed money to be paid in a more timely manner, |
|
while allowing the balance to be repaid over time at a low carrying |
|
cost. The proceeds of the bonds shall be used solely for the |
|
purposes of financing default balances that would otherwise be |
|
uplifted to the wholesale market. The commission shall ensure that |
|
securitization provides tangible and quantifiable benefits to |
|
wholesale market participants, greater than would have been |
|
achieved absent the issuance of bonds. The commission shall ensure |
|
that the structuring and pricing of the bonds result in the lowest |
|
bond charges consistent with market conditions and the terms of the |
|
financing order. The amount securitized may not exceed the present |
|
value of the revenue requirement over the life of the proposed bond |
|
associated with default balances that are sought to be securitized. |
|
The present value calculation shall use a discount rate equal to the |
|
proposed interest rate on the bonds. |
|
Sec. 39.602. DEFINITIONS. In this subchapter: |
|
(1) "Assignee" means any individual, corporation, or |
|
other legally recognized entity to which an interest in default |
|
property is transferred, other than as security, including any |
|
assignee of that party. |
|
(2) "Financing order" means an order of the commission |
|
approving the issuance of bonds and the creation of charges for the |
|
recovery of qualified costs. |
|
(3) "Financing party" means a holder of bonds, |
|
including trustees, collateral agents, and other persons acting for |
|
the benefit of the holder. |
|
(4) "Qualified costs" means a default balance that |
|
would otherwise be uplifted to other wholesale market participants, |
|
together with the costs of issuing, supporting, and servicing bonds |
|
and any costs of retiring and refunding existing debt in connection |
|
with the issuance of the bonds. |
|
(7) "Default charges" means nonbypassable amounts to |
|
be charged on all wholesale market transactions administered by the |
|
independent organization certified under section 39.151, approved |
|
by the commission under a financing order to recover qualified |
|
costs, that shall be collected by the independent organization, its |
|
successors, an assignee, or other collection agents as provided for |
|
in the financing order. |
|
Sec. 39.603. FINANCING ORDERS; TERMS. (a) The commission |
|
may adopt a financing order, on application of the independent |
|
organization, to recover the costs of a substantial default balance |
|
resulting from a significant pricing event on making a finding that |
|
such financing is needed to preserve the integrity of the wholesale |
|
market and the public interest, after considering the interests of |
|
wholesale market participants who are owed balances and the |
|
potential impacts of uplifting those balances to the wholesale |
|
market without a financing vehicle. |
|
(b) The financing order shall detail the amounts to be |
|
recovered and the period over which the nonbypassable default |
|
charges shall be recovered, which period may not exceed 15 years. If |
|
an amount determined under this section is subject to judicial |
|
review at the time of the securitization proceeding, the financing |
|
order shall include an adjustment mechanism requiring the |
|
independent organization to adjust its default charges in a manner |
|
that would refund, over the remaining life of the bonds, any |
|
overpayments resulting from securitization of amounts in excess of |
|
the amount resulting from a final determination after completion of |
|
all appellate reviews. The adjustment mechanism may not affect the |
|
stream of revenue available to service the bonds. An adjustment may |
|
not be made under this subsection until all appellate reviews, |
|
including, if applicable, appellate reviews following a commission |
|
decision on remand of its original orders, have been completed. |
|
(c) Nonbypassable default charges shall be collected and |
|
allocated among wholesale market participants on the same basis |
|
that they would otherwise be uplifted pursuant to the protocols of |
|
the independent organization. |
|
(d) A financing order shall become effective in accordance |
|
with its terms, and the financing order, together with the default |
|
charges authorized in the order, shall thereafter be irrevocable |
|
and not subject to reduction, impairment, or adjustment by further |
|
action of the commission. |
|
(e) The commission shall issue a financing order under |
|
Subsections (a) and (g) not later than 90 days after the independent |
|
organization files its request for the financing order. |
|
(f) A financing order is not subject to rehearing by the |
|
commission. A financing 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 financing 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 financing 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. |
|
(g) At the request of the independent organization, the |
|
commission may adopt a financing order providing for retiring and |
|
refunding the bonds on making a finding that the future default |
|
charges required to service the new bonds, including transaction |
|
costs, will be less than the future default charges required to |
|
service the bonds being refunded. On the retirement of the refunded |
|
bonds, the commission shall adjust the related default charges |
|
accordingly. |
|
Sec. 39.604. PROPERTY RIGHTS. (a) The rights and interests |
|
of the independent organization or its successor under a financing |
|
order, including the right to impose, collect, and receive default |
|
charges authorized in the order, shall be only contract rights |
|
until they are first transferred to an assignee or pledged in |
|
connection with the issuance of bonds, at which time they will |
|
become "default property." |
|
(b) Default property shall constitute a present property |
|
right for purposes of contracts concerning the sale or pledge of |
|
property, even though the imposition and collection of default |
|
charges depends on further acts of the independent organization or |
|
others that have not yet occurred. The financing order shall remain |
|
in effect and the property shall continue to exist for the same |
|
period as the pledge of the state described in Section 36.310. |
|
(c) All revenues and collections resulting from default |
|
charges shall constitute proceeds only of the default property |
|
arising from the financing order. |
|
Sec. 39.605. NO SETOFF. The interest of an assignee or |
|
pledgee in default property and in the revenues and collections |
|
arising from that property are not subject to setoff, counterclaim, |
|
surcharge, or defense by the independent organization or any other |
|
person or in connection with the bankruptcy of any wholesale market |
|
participant. A financing order shall remain in effect and unabated |
|
notwithstanding the bankruptcy of the independent organization, |
|
its successors, or assignees. |
|
Sec. 39.606. NO BYPASS. A financing order shall include |
|
terms ensuring that the imposition and collection of default |
|
charges authorized in the order shall be nonbypassable. |
|
Sec. 39.607. TRUE-UP. A financing order shall include a |
|
mechanism requiring that default charges be reviewed and adjusted |
|
at least annually, within 45 days of the anniversary date of the |
|
issuance of the bonds, to correct any overcollections or |
|
undercollections of the preceding 12 months and to ensure the |
|
expected recovery of amounts sufficient to timely provide all |
|
payments of debt service and other required amounts and charges in |
|
connection with the bonds. |
|
Sec. 39.609. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING; |
|
DEFAULT. (a) Default property does not constitute an account or |
|
general intangible under Section 9.106, Business & Commerce Code. |
|
The creation, granting, perfection, and enforcement of liens and |
|
security interests in default property are governed by this section |
|
and not by the Business & Commerce Code. |
|
(b) A valid and enforceable lien and security interest in |
|
default property may be created only by a financing order and the |
|
execution and delivery of a security agreement with a financing |
|
party in connection with the issuance of bonds. The lien and |
|
security interest shall attach automatically from the time that |
|
value is received for the bonds and, on perfection through the |
|
filing of notice with the secretary of state in accordance with the |
|
rules prescribed under Subsection (d), shall be a continuously |
|
perfected lien and security interest in the default property and |
|
all proceeds of the property, whether accrued or not, shall have |
|
priority in the order of filing and take precedence over any |
|
subsequent judicial or other lien creditor. If notice is filed |
|
within 10 days after value is received for the default bonds, the |
|
security interest shall be perfected retroactive to the date value |
|
was received, otherwise, the security interest shall be perfected |
|
as of the date of filing. |
|
(c) Transfer of an interest in default property to an |
|
assignee shall be perfected against all third parties, including |
|
subsequent judicial or other lien creditors, when the financing |
|
order becomes effective, transfer documents have been delivered to |
|
the assignee, and a notice of that transfer has been filed in |
|
accordance with the rules prescribed under Subsection (d); |
|
provided, however, that if notice of the transfer has not been filed |
|
in accordance with this subsection within 10 days after the |
|
delivery of transfer documentation, the transfer of the interest is |
|
not perfected against third parties until the notice is filed. |
|
(d) The secretary of state shall implement this section by |
|
establishing and maintaining a separate system of records for the |
|
filing of notices under this section and prescribing the rules for |
|
those filings based on Chapter 9, Business & Commerce Code, adapted |
|
to this subchapter and using the terms defined in this subchapter. |
|
(e) The priority of a lien and security interest perfected |
|
under this section is not impaired by any later modification of the |
|
financing order under Section 31.607 or by the commingling of funds |
|
arising from default charges with other funds, and any other |
|
security interest that may apply to those funds shall be terminated |
|
when they are transferred to a segregated account for the assignee |
|
or a financing party. If default property has been transferred to an |
|
assignee, any proceeds of that property shall be held in trust for |
|
the assignee. |
|
(f) If a default or termination occurs under the bonds, the |
|
financing parties or their representatives may foreclose on or |
|
otherwise enforce their lien and security interest in any default |
|
property as if they were secured parties under Chapter 9, Business & |
|
Commerce Code, and the commission may order that amounts arising |
|
from default charges be transferred to a separate account for the |
|
financing parties' benefit, to which their lien and security |
|
interest shall apply. On application by or on behalf of the |
|
financing parties, a district court of Travis County shall order |
|
the sequestration and payment to them of revenues arising from the |
|
default charges. |
|
Sec. 39.610. PLEDGE OF STATE. Default bonds are not a debt |
|
or obligation of the state and are not a charge on its full faith and |
|
credit or taxing power. The state pledges, however, for the benefit |
|
and protection of financing parties and the independent |
|
organization, that it will not take or permit any action that would |
|
impair the value of default property, or reduce, alter, or impair |
|
the default charges to be imposed, collected, and remitted to |
|
financing parties, until the principal, interest and premium, and |
|
any other charges incurred and contracts to be performed in |
|
connection with the related bonds have been paid and performed in |
|
full. Any party issuing under this chapter bonds is authorized to |
|
include this pledge in any documentation relating to those bonds. |
|
Sec. 39.611. TAX EXEMPTION. Transactions involving the |
|
transfer and ownership of default property and the receipt of |
|
default charges are exempt from state and local income, sales, |
|
franchise, gross receipts, and other taxes or similar charges. |
|
Sec. 39.612. NOT PUBLIC UTILITY. An assignee or financing |
|
party may not be considered to be a public utility or person |
|
providing electric service solely by virtue of the transactions |
|
described in this subchapter. |
|
Sec. 39.613. SEVERABILITY. Effective on the date the first |
|
bonds 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 subchapteror any other provision of this title |
|
that is relevant to the issuance, administration, payment, |
|
retirement, or refunding of bonds or to any actions of the electric |
|
utility, its successors, an assignee, a collection agent, or a |
|
financing party, which shall remain in full force and effect. |
|
SECTION 2. This Act takes effect September 1, 2021. |