2001 Legislation
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SENATE BILL NO. 1255 – Energy cost recovery bonds

SENATE BILL NO. 1255

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S1255......................................................by STATE AFFAIRS
ENERGY COST RECOVERY BONDS - Adds to existing law to authorize the Public
Utilities Commission to allow for the issuance of bonds for public
utilities so that recovery of large energy increases through fuel or power
cost adjustments, purchased gas adjustment tracker rates, commodity tracker
rate adjustments or purchased power tracker rates will be facilitated by
the issuance of bonds.
                                                                        
03/15    Senate intro - 1st rdg - to printing
03/16    Rpt prt - to St Aff
03/19    Rpt out - rec d/p - to 2nd rdg
03/20    2nd rdg - to 3rd rdg
03/21    3rd rdg - PASSED - 30-5-0
      AYES -- Andreason, Boatright, Branch, Brandt, Bunderson, Danielson,
      Darrington, Davis, Deide, Dunklin, Frasure, Geddes, Goedde, Ingram,
      Ipsen, King-Barrutia, Lee, Lodge, Noh, Richardson, Risch, Sandy,
      Schroeder, Sims, Sorensen, Stegner, Stennett, Thorne, Wheeler,
      Williams,
      NAYS -- Burtenshaw, Cameron, Hawkins, Keough, Whitworth
      Absent and excused -- None
    Floor Sponsors -- Lee & Noh
    Title apvd - to House
03/21    House intro - 1st rdg - to St Aff
03/26    Rpt out - rec d/p - to 2nd rdg
03/28    2nd rdg - to 3rd rdg
03/29    3rd rdg - PASSED - 45-22-3
      AYES -- Barraclough, Bedke, Bell, Bieter, Black, Boe, Bolz, Bradford,
      Bruneel, Chase, Cuddy, Deal, Denney, Ellsworth, Eskridge, Field(13),
      Gould, Hammond, Higgins, Hornbeck, Jaquet, Jones, Kellogg, Kunz,
      Langford, Mader, Marley, McKague, Meyer, Mortensen, Moss, Moyle,
      Pearce, Pischner, Pomeroy, Raybould, Robison, Sellman, Shepherd,
      Smylie, Stevenson, Stone, Tilman, Trail, Mr. Speaker
      NAYS -- Barrett, Callister, Clark, Collins, Ellis, Field(20), Gagner,
      Hadley, Hansen, Harwood, Henbest(Farley), Kendell, Lake, Loertscher,
      Ridinger, Roberts, Sali, Schaefer, Smith Wheeler, Wood, Young(Young)
      Absent and excused -- Campbell, Crow, Montgomery
    Floor Sponsor -- Stevenson
    Title apvd - to Senate
03/29    To enrol
03/30    Rpt enrol - Pres signed
    Sp signed - to Governor
04/10    Governor signed
         Session Law Chapter 380
         Effective: 04/10/01

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-sixth Legislature                  First Regular Session - 2001
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1255
                                                                        
                                 BY STATE AFFAIRS COMMITTEE
                                                                        
                                                                        
  1                                        AN ACT
  2    RELATING TO ENERGY COST RECOVERY BONDS; AMENDING TITLE 61, IDAHO CODE, BY  THE
  3        ADDITION OF A NEW CHAPTER 15, TITLE 61, IDAHO CODE, TO PROVIDE LEGISLATIVE
  4        INTENT,  TO  DEFINE  TERMS,  TO PROVIDE FOR ENERGY COST RECOVERY BONDS, TO
  5        PROVIDE PROCEDURES FOR ISSUANCE OF ENERGY COST RECOVERY BONDS, TO  PROVIDE
  6        FOR  SECURITY  INTEREST,  TO PROVIDE FOR TRANSFERS IN INTEREST, TO PROVIDE
  7        FOR SUCCESSORS AND TO PROVIDE SEVERABILITY; AND DECLARING AN EMERGENCY.
                                                                        
  8    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
  9        SECTION 1.  That Title 61, Idaho Code, be, and the same is hereby  amended
 10    by  the addition thereto of a NEW CHAPTER, to be known and designated as Chap-
 11    ter 15, Title 61, Idaho Code, and to read as follows:
                                                                        
 12                                      CHAPTER 15
 13                              ENERGY COST RECOVERY BONDS
                                                                        
 14        61-1501.  LEGISLATIVE INTENT. It is  the  intent  of  the  legislature  in
 15    enacting  this  chapter  to  provide  a process by which the recovery of large
 16    energy rate increases caused by fuel or power cost adjustments, purchased  gas
 17    adjustment  tracker  rates,  commodity  tracker  rate adjustments or purchased
 18    power tracker rates will be facilitated by the issuance of bonds. This  legis-
 19    lation  will  provide electric and gas utilities with a mechanism for recovery
 20    of their increased costs while leveling the rate impact of  such  increase  on
 21    the  utilities'  customers. The legislature believes that this type of securi-
 22    ties legislation is in the public interest but should not be considered as  an
 23    endorsement  of,  or intended to provide, a mechanism for restructuring of the
 24    utility industry in the state of Idaho.
                                                                        
 25        61-1502.  DEFINITIONS. For purposes of this chapter, the  following  terms
 26    shall have the following meanings:
 27        (1)  "Assignee"  means  any corporation, limited liability company, trust,
 28    partnership or other entity to which a public utility assigns, sells or trans-
 29    fers, other than as security, all or a portion of the public utility's  inter-
 30    est  in  or  right  to  energy cost property.  The term also includes any such
 31    entity to which an assignee assigns, sells or transfers, other than  as  secu-
 32    rity, the assignee's interest in or right to energy cost property.
 33        (2)  "Chapter  9"  means  chapter 9, title 28, Idaho Code, as from time to
 34    time amended, including any successor provisions.
 35        (3)  "Commission" means the Idaho public utilities commission, as  it  may
 36    be  constituted  from  time to time, and any successor agency exercising func-
 37    tions similar in purpose thereto.
 38        (4)  "ECA" means any of the following, as authorized by the commission and
 39    reflected in a usage-based charge of a public utility: a fuel  or  power  cost
 40    adjustment;  a  purchased gas adjustment tracker rate; a commodity electric or
                                                                        
                                           2
                                                                        
  1    gas tracker rate adjustment; or a purchased power tracker rate.
  2        (5)  "Energy cost amounts"  means  the  amounts  that  a  public  utility,
  3    assignee or other issuer has been authorized to recover by the commission pur-
  4    suant to an energy cost financing order, including without limitation:
  5        (a)  Amounts recoverable by a public utility pursuant to an ECA;
  6        (b)  Expenditures  incurred to refinance or retire existing debt or exist-
  7        ing equity capital of the public utility through the  issuance  of  energy
  8        cost recovery bonds and any costs related thereto;
  9        (c)  Amounts  necessary to recover federal or state taxes actually paid by
 10        a public utility, which tax liability  is  modified  by  the  transactions
 11        approved in an energy cost financing order issued by the commission pursu-
 12        ant to this chapter; and
 13        (d)  Reasonable  costs,  as  approved  by  the commission, relating to the
 14        issuance, servicing or refinancing of energy cost recovery bonds under the
 15        provisions of this chapter including, without  limitation,  principal  and
 16        interest  payments  and  accruals, sinking fund payments, debt service and
 17        other reserves, costs of credit enhancement, indemnities, if any, owed  to
 18        an  assignee  or  other issuer or the trustee for the energy cost recovery
 19        bonds, issuance costs and redemption premiums, if any, and all other  rea-
 20        sonable  fees,  costs and charges with respect to the energy cost recovery
 21        bonds.
 22        (6)  "Energy cost bond charge" means a  nonbypassable  usage-based  charge
 23    that the commission authorizes in an energy cost financing order as a separate
 24    line  item  for  recovery  on a public utility's bill to all of its customers,
 25    whether such amounts are billed and/or collected by the  public  utility,  any
 26    subsidiary  or  affiliate  thereof,  or  any  third  party that may assume the
 27    responsibility for billing or collecting such charges.
 28        (7)  "Energy cost financing order" means an order of the commission issued
 29    in accordance with this chapter that authorizes the imposition and  collection
 30    of  energy  cost  amounts  and  the issuance of energy cost recovery bonds. If
 31    requested by an electric or gas public  utility  in  its  application  for  an
 32    energy  cost  financing  order, energy cost bond charges shall be in an amount
 33    sufficient to recover federal and state taxes associated with the recovery  of
 34    energy cost amounts described therein.
 35        (8)  "Energy  cost  property" means the irrevocable, vested property right
 36    created pursuant to this chapter and one (1) or  more  energy  cost  financing
 37    orders  including, without limitation, the right, title and interest of a pub-
 38    lic utility, assignee or other issuer of energy cost  recovery  bonds  to  all
 39    revenues,  collections, claims, payments, money or proceeds of or arising from
 40    an energy cost recovery charge or constituting the costs of recovering,  reim-
 41    bursing,  financing  or  refinancing  energy cost amounts and acquiring energy
 42    cost property (including the costs of issuing, servicing and  retiring  energy
 43    cost  recovery bonds) and all rights to obtain adjustments to such energy cost
 44    recovery charge pursuant to the terms of this  chapter  and  any  energy  cost
 45    financing  order;  provided  that  any  right that a public utility has in the
 46    energy cost property before the sale or other transfer of such property or any
 47    other rights created under this chapter or created in any energy cost  financ-
 48    ing order and assignable under section 61-1504, Idaho Code, or assignable pur-
 49    suant to an energy cost financing order shall be only a contract right. Energy
 50    cost property shall, upon its sale or other transfer, constitute a current and
 51    irrevocably  vested  property right notwithstanding the fact that the value of
 52    such property right will depend upon consumers using  electricity  and/or  the
 53    public utility performing certain services.
 54        (9)  "Energy  cost  recovery bond" means any instrument, pass-through cer-
 55    tificate, note, bond,  debenture,  certificate  of  participation,  collateral
                                                                        
                                           3
                                                                        
  1    trust  certificate,  beneficial  interest or other evidence of indebtedness or
  2    ownership issued by a public utility, assignee or other issuer pursuant to  an
  3    energy  cost  financing order and an executed indenture, security agreement or
  4    other similar agreement of a public utility, assignee or other issuer that  is
  5    secured by or payable from energy cost bond charges or energy cost property.
  6        (10) "Energy  cost recovery bondholder" means any holder of an energy cost
  7    recovery bond or any trustee, collateral agent or other entity acting for  the
  8    benefit of or on behalf of any such holder.
                                                                        
  9        61-1503.  ENERGY  COST  RECOVERY  BONDS. An electric or gas public utility
 10    may apply to the commission for an energy cost financing order requesting that
 11    certain energy cost amounts be recovered  through  the  sale  of  energy  cost
 12    recovery bonds.
 13        (1)  A  public  utility  may  apply to the commission at any time and from
 14    time to time for an authorization that it may recover ECA  amounts  and  other
 15    energy  cost  amounts  through the issuance of energy cost recovery bonds. The
 16    public utility may apply to the commission for such an authorization either in
 17    a separate proceeding or in a proceeding considering the authorization  of  an
 18    ECA.  Upon such an application, if the commission finds that the public inter-
 19    est would be better served if the energy cost amounts were  recovered  through
 20    the issuance of energy cost recovery bonds over the term of such bonds than if
 21    the  ECA amounts were recovered over a period of one (1) year, assuming a con-
 22    ventional financing of such amounts, the commission shall issue an energy cost
 23    financing order to allow the public utility to recover energy cost amounts.
 24        (2)  The energy cost financing order shall detail the energy  cost  amount
 25    to be recovered and the period of time in which the energy cost recovery is to
 26    occur.   The  commission shall not issue an energy cost financing order unless
 27    the total of the then  (a)  existing  ECAs,  (b)  existing  energy  cost  bond
 28    charges,  and  (c) the amount identified by the electric or gas public utility
 29    in its application for such financing order as the additional ECA  that  would
 30    be  required absent an issuance of energy cost recovery bonds pursuant to such
 31    financing order, exceeds a minimum amount (expressed in  cents  per  kilowatt-
 32    hour  or cents per therm) approved by the commission and in effect at the time
 33    of the issuance of such energy  cost  financing  order.  Each  public  utility
 34    shall,  at least thirty (30) days prior to its first application for an energy
 35    cost financing order and at five (5) year intervals thereafter, file with  the
 36    commission a proposal as to what such minimum amount should be and the commis-
 37    sion  shall,  within  twenty-eight  (28)  days  of such filing, issue an order
 38    regarding its determination of  such  proposed  minimum  amount.  Energy  cost
 39    recovery  bonds  shall  have  an expected maturity date no later than five (5)
 40    years after the date of issuance, and scheduled  principal  payments  on  such
 41    bonds  shall,  to  the extent practicable, be scheduled to be made in approxi-
 42    mately equal amounts during each year of the term of such bonds.  Energy  cost
 43    recovery  bonds shall have a legal maturity date no later than seven (7) years
 44    after the date of issuance. Energy cost bond charges shall  remain  in  effect
 45    until  all  energy  cost  recovery bonds and all energy cost amounts have been
 46    paid in full. The commission may issue successive energy cost financing orders
 47    permitting subsequent issuances of energy cost recovery bonds.
 48        (3)  An energy cost financing order may be issued only upon  the  applica-
 49    tion  of  a  public utility and shall become effective only in accordance with
 50    its terms and conditions. The public utility may withdraw its  application  if
 51    it disagrees with any of the terms and conditions of the energy cost financing
 52    order or any modification thereof within fourteen (14) days of issuance of the
 53    energy cost financing order or of such modification. The energy cost financing
 54    order  shall  specify  the estimated amount of the energy cost bond charge and
                                                                        
                                           4
                                                                        
  1    the formula for determining the amount of the charge that from  time  to  time
  2    will be sufficient to recover all energy cost amounts.
  3        (4)  After  issuance of an energy cost financing order, the public utility
  4    may sell, assign or otherwise transfer or pledge energy cost property or cause
  5    the energy cost recovery bonds to be issued, provided it may  defer,  postpone
  6    or  refrain from effecting the sale, assignment, transfer, pledge or issuance,
  7    in which case no energy cost bond charge shall be  imposed  unless  and  until
  8    such  energy cost recovery bonds are issued. If energy cost recovery bonds are
  9    not issued within one (1) year after the energy cost financing  order  becomes
 10    final  and  nonappealable,  the  authorization  contained  in  the energy cost
 11    financing order shall expire, provided that a public utility may apply for  an
 12    extension or renewal of an energy cost financing order.
 13        (5)  The  energy  cost  financing  orders, the energy cost amounts and the
 14    energy cost bond charges that have been determined by the commission shall  be
 15    irrevocable  and  binding  upon  the commission. The commission shall not have
 16    authority either by rescinding, altering or amending the energy cost financing
 17    order or otherwise to, either directly or indirectly, revalue  or  revise  for
 18    ratemaking  purposes  the  energy cost amounts. Once the commission determines
 19    the energy cost bond charge, it cannot determine in a  later  proceeding  that
 20    the  energy cost bond charge is unjust or unreasonable or in any way reduce or
 21    impair the value of energy cost property either directly or indirectly by tak-
 22    ing the energy cost bond charge into account when setting other rates for  the
 23    public  utility; nor shall the amount of revenues arising with respect thereto
 24    be subject to reduction, impairment, postponement or termination. The state of
 25    Idaho does hereby pledge to and agree with the owners of energy cost  property
 26    and  with  any energy cost recovery bondholders that neither the state nor any
 27    of its agencies, including the commission, shall (by legislative action,  bal-
 28    lot  initiative or other similar process) limit, alter, restrict or impair the
 29    energy cost amounts, the energy cost bond charge, the  energy  cost  property,
 30    the energy cost financing orders or any rights thereunder or ownership thereof
 31    or  security  interest  therein or in any way impair the rights or remedies of
 32    any energy cost recovery bondholders until the  energy  cost  recovery  bonds,
 33    including  all  principal,  interest,  premium, costs, expenses and arrearages
 34    thereon, are fully met and discharged,  provided  nothing  contained  in  this
 35    chapter  shall  preclude such a limitation, alteration, restriction or impair-
 36    ment if and when adequate provision (including  without  limitation  provision
 37    for  the  payment of principal and interest when due) shall be made by law for
 38    the protection of the energy cost recovery bondholders.  The  state  of  Idaho
 39    does hereby acknowledge that any energy cost recovery bondholders may and will
 40    rely on this pledge and agreement and that they would be irreparably harmed by
 41    any  such  limitation, alteration, restriction or impairment without such ade-
 42    quate provision.  The public utility and any  assignee  or  other  issuer  are
 43    authorized  to  include  this pledge and agreement in the energy cost recovery
 44    bonds and the documents relating thereto. Notwithstanding any other  provision
 45    of  this  subsection,  the  commission  shall  approve such adjustments to the
 46    energy cost bond charges as may be necessary to ensure timely recovery of  all
 47    energy  cost amounts that are the subject of the pertinent energy cost financ-
 48    ing order.
 49        (6)  Energy cost recovery bonds issued under this chapter  and any  energy
 50    cost financing orders do not constitute a debt or liability of the state or of
 51    any  political  subdivision thereof and do not constitute a pledge of the full
 52    faith and credit of the state or any of its political  subdivisions,  but  are
 53    payable  solely  from the funds provided therefor. All the bonds shall contain
 54    on the face thereof a statement to the following  effect:  "Neither  the  full
 55    faith  and credit nor the taxing power of the state of Idaho is pledged to the
                                                                        
                                           5
                                                                        
  1    payment of the principal of, or interest on, this bond." This paragraph  shall
  2    in  no  way preclude bond guarantees or enhancements pursuant to this chapter,
  3    nor shall it preclude the payment  of  compensation  for  any  breach  of  the
  4    state's  pledge  contained in subsection (5) of this section or for any action
  5    or failure to act by the commission in contravention of this chapter.
  6        (7)  The commission shall establish procedures for the  expeditious  proc-
  7    essing  of  any  application  for  energy cost financing orders, including the
  8    approval or disapproval of any such orders within forty-five (45) days of  the
  9    application.  In  addition,  each  energy cost financing order shall specify a
 10    procedure for making adjustments to the energy cost bond charge  that  is  the
 11    subject  of  the  order,  such adjustments to be expeditiously approved by the
 12    commission, so as to ensure the timely payment of principal  and  interest  on
 13    the  related  energy  cost recovery bonds and the recovery of all other energy
 14    cost amounts. Such procedure shall provide for adjustments to  be  made,  upon
 15    application by the affected public utility, assignee or other issuer, at least
 16    annually  and  at  such  additional intervals, if any, as are specified in the
 17    order. The public utility, assignee or other issuer shall file its application
 18    for any such adjustment with the commission at least thirty (30)  days  before
 19    the  date  on  which  the adjustment is requested to become effective, and the
 20    commission shall approve or disapprove such application no later  than  thirty
 21    (30)  days  after  the date of such filing. In addition, upon application by a
 22    public utility, assignee or other issuer after an energy cost financing  order
 23    has been issued and has become effective, the commission may:
 24        (a)  Authorize the making of adjustments to the energy cost bond charge at
 25        more frequent intervals than those specified in such order; and/or
 26        (b)  Authorize a change in the method for calculating the energy cost bond
 27        charge from that specified in such order so as to better ensure the timely
 28        recovery of all energy cost amounts.
 29        (8)  The  energy cost bond charge shall be treated as a charge for utility
 30    services for purposes of determining both the credit and collection  standards
 31    to  which  customers  (including, for purposes of this subsection, any parties
 32    that provide billing or collection services for  energy  supplied  to  another
 33    customer)  may be held subject under applicable state law and the remedies for
 34    nonpayment that are available to a public utility under applicable state  law,
 35    and such treatment shall not alter the tax, accounting or other intended char-
 36    acteristics of any energy cost bond financing.
 37        (9)  An  energy  cost  bond  charge  shall constitute energy cost property
 38    when, and to the extent that, an energy cost financing order authorizing  such
 39    energy  cost bond charge has become effective in accordance with this chapter,
 40    and the energy cost property shall thereafter continuously exist  as  property
 41    for all purposes with all of the rights and privileges of this chapter for the
 42    period  and  to the extent provided in the energy cost financing order, but in
 43    any event until the energy cost recovery bonds are paid in full, including all
 44    principal, interest, premium, costs and arrearages thereon.
 45        (10) Any surplus energy cost bond charge  collections  in  excess  of  the
 46    amounts necessary to pay principal, premium, if any, interest, credit enhance-
 47    ment  and all other fees, costs and charges with respect to energy cost recov-
 48    ery bonds shall be used to benefit customers in such manner as the  commission
 49    may  reasonably determine except to the extent that such use would result in a
 50    recharacterization of the tax, accounting or other intended characteristics of
 51    the financing.
                                                                        
 52        61-1504.  PROCEDURE FOR ISSUANCE OF BONDS. (1) Public utilities, assignees
 53    or other issuers may issue energy cost recovery bonds  upon  approval  by  the
 54    commission in an energy cost financing order.
                                                                        
                                           6
                                                                        
  1        (2)  Public utilities and assignees may sell and assign all or portions of
  2    their  interest  in  energy  cost property. Public utilities and assignees may
  3    sell or assign their interests to one (1) or more assignees or  other  issuers
  4    that  make  that property the basis for issuance of energy cost recovery bonds
  5    to the extent approved in the pertinent energy cost financing  order.  To  the
  6    extent  approved  in the pertinent energy cost financing orders, public utili-
  7    ties and assignees  may  also  pledge  energy  cost  property  as  collateral,
  8    directly  or  indirectly, for energy cost recovery bonds providing for a secu-
  9    rity interest in the energy cost property, in the manner as set forth in  sec-
 10    tion 61-1505, Idaho Code.  Energy cost property may be sold or assigned by:
 11        (a)  The  public  utility,  assignee  or other issuer or a trustee for the
 12        holders of energy cost recovery bonds in connection with the  exercise  of
 13        remedies upon a default; or
 14        (b)  Any person acquiring the energy cost property after a sale or assign-
 15        ment pursuant to this subsection.
 16        (3)  To the extent that any interest in energy cost property is so sold or
 17    assigned,  or  is so pledged as collateral, the commission shall authorize the
 18    public utility to contract with an assignee or other issuer that it will  con-
 19    tinue  to operate its system to provide service to its customers, will collect
 20    amounts with respect to the energy cost  bond  charges  for  the  benefit  and
 21    account  of the assignee or other issuer, and will account for and remit these
 22    amounts to or for the account of the assignee or  other  issuer.   Contracting
 23    with  the assignee or other issuer in accordance with that authorization shall
 24    not impair or negate the characterization of the sale, assignment or pledge as
 25    an absolute transfer, a true sale or security interest, as applicable.
 26        (4)  Notwithstanding any other provision of  law   to  the  contrary,  any
 27    requirement under this chapter or an energy cost financing order that the com-
 28    mission  take  action  with  respect  to  the subject matter of an energy cost
 29    financing order shall be binding upon the commission, as it may be constituted
 30    from time to time, and any successor agency exercising  functions  similar  to
 31    the  commission.  The  commission shall have no authority to rescind, alter or
 32    amend any such requirement under this chapter  or  an  energy  cost  financing
 33    order;  provided  however,  that  nothing  in  this  subsection shall preclude
 34    adjustments of the energy cost bond charges in accordance with the  provisions
 35    of  section  61-1503,  Idaho Code. The issuance of energy cost recovery bonds,
 36    any related transfer or pledge of energy cost recovery property and any  other
 37    transactions  incidental  to such issuance shall be exempt from the provisions
 38    of sections 61-901 through 61-908, Idaho Code, upon approval by the commission
 39    in an energy cost financing order. The commission shall include in any  energy
 40    cost  financing order any additional approvals that may be required in connec-
 41    tion with such issuance under applicable law.
 42        (5)  An assignee or other issuer shall not be considered to  be  a  public
 43    utility solely by virtue of the transactions described in this chapter.
                                                                        
 44        61-1505.  SECURITY  INTEREST.  (1)  To  the  extent the provisions of this
 45    section conflict with chapter 9 as from time to time in effect, including  any
 46    successor provisions, this section shall apply.
 47        (2)  A  security interest in energy cost property is valid, is enforceable
 48    against the pledgor and third parties, subject to the rights of any third par-
 49    ties holding security interests in the energy cost property perfected  in  the
 50    manner  described in this section, and attaches when all of the following have
 51    occurred:
 52        (a)  The commission has issued an energy cost financing order  authorizing
 53        the  energy  cost bond charges, the right to the imposition and collection
 54        of which is included in the energy cost property;
                                                                        
                                           7
                                                                        
  1        (b)  Value has been given by the pledgees of the energy cost property; and
  2        (c)  The pledgor has signed a security agreement covering the energy  cost
  3        property.
  4        (3)  A  valid and enforceable security interest in energy cost property is
  5    perfected when it has attached and when a financing statement has  been  filed
  6    in  accordance  with chapter 9, naming the pledgor of the energy cost property
  7    as "debtor" and identifying the energy cost property. Any description  of  the
  8    energy  cost  property  shall  be  sufficient  if it refers to the energy cost
  9    financing order creating the energy cost property. A  copy  of  the  financing
 10    statement  shall  be filed with the commission by the pledgor or transferor of
 11    the energy cost property, and the commission may require the pledgor or trans-
 12    feror to make other filings with respect to the security  interest  in  accor-
 13    dance  with  procedures  it may establish, provided that the filings shall not
 14    affect the perfection of the security interest. A  financing  statement  filed
 15    pursuant  to this section shall remain effective until a termination statement
 16    is filed.
 17        (4)  A perfected security interest in energy cost property is  a  continu-
 18    ously  perfected  security  interest in all revenues and proceeds arising with
 19    respect thereto, whether or not the revenues or proceeds  have  accrued.  Con-
 20    flicting  security  interests shall rank according to priority in time of per-
 21    fection. Energy cost property shall  constitute  property  for  all  purposes,
 22    including  for  contracts  securing energy cost recovery bonds, whether or not
 23    the revenues and proceeds arising with respect thereto have accrued.
 24        (5)  Subject to the terms of the security agreement  covering  the  energy
 25    cost  property  and the rights of any third parties holding security interests
 26    in the energy cost property perfected in the manner described in this section,
 27    the validity and relative priority of a security interest created  under  this
 28    section   is not defeated or adversely affected by the commingling of revenues
 29    arising with respect to the energy cost property with other funds of the  pub-
 30    lic  utility that is the pledgor or transferor of the energy cost property, or
 31    by any security interest in a deposit account of that public utility perfected
 32    under chapter 9, into which the revenues are deposited. Subject to  the  terms
 33    of the security agreement, the pledgees of the energy cost property shall have
 34    a  perfected  security interest in all cash and deposit accounts of the public
 35    utility in which revenues arising with respect to  the  energy  cost  property
 36    have  been  commingled  with  other funds, but the perfected security interest
 37    shall be limited to an amount not greater than the amount of the revenues with
 38    respect to the energy cost property received  by  the  public  utility  within
 39    twelve  (12)  months  before: (a) any default under the security agreement, or
 40    (b) the institution of insolvency proceedings by or against the  public  util-
 41    ity,  less  payments from the revenues to the pledgees during that twelve (12)
 42    month period.
 43        (6)  If an event of default occurs under the security  agreement  covering
 44    the energy cost property, the pledgees of the energy cost property, subject to
 45    the  terms  of the security agreement, shall have all rights and remedies of a
 46    secured party upon default under chapter 9, and shall be entitled to foreclose
 47    or otherwise enforce their security interest in the energy cost property, sub-
 48    ject to the rights of any third parties holding prior  security  interests  in
 49    the  energy cost property perfected in the manner provided in this section. In
 50    addition, the commission may require, in the energy cost financing order  cre-
 51    ating  the  energy  cost property, that, in the event of default by the public
 52    utility in payment of revenues arising with respect to the energy  cost  prop-
 53    erty,  the  commission  and any successor thereto, upon the application by the
 54    pledgees or transferees, including transferees under  section  61-1506,  Idaho
 55    Code,  of  the  energy  cost property, and without limiting any other remedies
                                                                        
                                           8
                                                                        
  1    available to the pledgees or transferees by reason of the default, shall order
  2    the sequestration and payment to the pledgees or transferees of revenues aris-
  3    ing with respect to the energy cost property. Any order shall remain  in  full
  4    force  and  effect  notwithstanding  any  bankruptcy, reorganization, or other
  5    insolvency proceedings with respect to the debtor, pledgor  or  transferor  of
  6    the energy cost property.
  7        (7)  Energy  cost  recovery  property  shall constitute an account as that
  8    term is defined under chapter 9.
  9        (8)  Sections 28-9-204 and 28-9-205, Idaho Code,  as  from  time  to  time
 10    amended, including any successor provisions, shall apply to a pledge of energy
 11    cost property by a public utility, assignee or other issuer.
 12        (9)  This  subsection  sets forth the terms by which a consensual security
 13    interest can be created and perfected in  the  energy  cost  property.  Unless
 14    otherwise  ordered by the commission with respect to any series of energy cost
 15    recovery bonds on or prior to the issuance of the series, there shall exist  a
 16    statutory  lien as provided in this subsection. Upon the effective date of the
 17    energy cost financing order, there shall exist a first priority  lien  on  all
 18    energy cost property then existing or thereafter arising pursuant to the terms
 19    of the energy cost financing order. This lien shall arise by operation of this
 20    subsection automatically without any action on the part of the public utility,
 21    any  assignee or other issuer, or any other person. This lien shall secure all
 22    obligations, then existing or subsequently arising,  to  the  holders  of  the
 23    energy cost recovery bonds issued pursuant to the energy cost financing order,
 24    the  trustee or representative for the holders, and any other entity specified
 25    in the energy cost financing order. The persons for whose benefit this lien is
 26    established shall, upon the occurrence of any defaults specified in the perti-
 27    nent energy cost financing order, have all rights and remedies  of  a  secured
 28    party  upon  default  under  chapter  9, and shall be entitled to foreclose or
 29    otherwise enforce this statutory lien in the energy cost property.  This  lien
 30    shall attach to the energy cost property regardless of who shall own, or shall
 31    subsequently be determined to own, the energy cost property including any pub-
 32    lic  utility,  any  assignee  or other issuer, or any other person.  This lien
 33    shall be valid, perfected, and enforceable against the  owner  of  the  energy
 34    cost  property and all third parties upon the effectiveness of the energy cost
 35    financing order without any further public notice; provided however, that  any
 36    person may, but shall not be required to, file a financing statement in accor-
 37    dance  with  subsection (3) of this section. Financing statements so filed may
 38    be "protective filings" and shall not be evidence  of  the  ownership  of  the
 39    energy  cost property. A perfected statutory lien in energy cost property is a
 40    continuously perfected lien in all revenues and proceeds arising with  respect
 41    thereto,  whether  or  not  the revenues or proceeds have accrued. Conflicting
 42    liens shall rank according to priority in time of perfection. In addition, the
 43    commission may require, in the energy cost financing order creating the energy
 44    cost property, that, in the event of default by the public utility in  payment
 45    of  revenues  arising with respect to energy cost property, the commission and
 46    any successor thereto, upon the application by the beneficiaries of the statu-
 47    tory lien, and without limiting any other remedies available to the beneficia-
 48    ries by reason of the default, shall order the sequestration  and  payment  to
 49    the  beneficiaries  of  revenues arising with respect to the energy cost prop-
 50    erty.
                                                                        
 51        61-1506.  TRANSFERS IN INTEREST. (1) A transfer of energy cost property by
 52    a public utility to an assignee, or by an assignee to another  assignee,  that
 53    the  parties have in the governing documentation expressly stated to be a sale
 54    or other absolute transfer, in  a  transaction  approved  in  an  energy  cost
                                                                        
                                           9
                                                                        
  1    financing  order,  shall  be  treated  as  an  absolute transfer of all of the
  2    transferor's right, title and interest, as in a true sale, and not as a pledge
  3    or other financing, of the energy cost property in each  case  notwithstanding
  4    any  contrary  treatment  for  federal  and  state income and franchise taxes,
  5    accounting or other purposes.
  6        (2)  A transfer of energy cost  property  shall  be  deemed  perfected  as
  7    against  third persons and shall vest title in the transferee when both of the
  8    following have taken place:
  9        (a)  The commission has issued the energy cost financing order authorizing
 10        the energy cost bond charges included in the energy cost property.
 11        (b)  An assignment of the energy cost property in writing  has  been  exe-
 12        cuted and delivered to the transferee.
 13        (3)  As  between  bona  fide assignees of the same right for value without
 14    notice, the assignee first filing a financing  statement  in  accordance  with
 15    chapter 9, naming the assignor of the energy cost property as debtor and iden-
 16    tifying  the  energy cost property has priority. Any description of the energy
 17    cost property shall be sufficient if it refers to the  energy  cost  financing
 18    order  creating  the  energy  cost property. A copy of the financing statement
 19    shall be filed by the assignee with the commission,  and  the  commission  may
 20    require the assignor or the assignee to make other filings with respect to the
 21    transfer  in  accordance  with  procedures it may establish, but these filings
 22    shall not affect the perfection of the transfer.
 23        (4)  The interest of an assignee or pledgee in energy cost property and in
 24    the revenues and collections arising from such property  are  not  subject  to
 25    set-off, counterclaim, surcharge or defense by the public utility or any other
 26    person or in connection with the bankruptcy of the public utility or any other
 27    person.
                                                                        
 28        61-1507.  SUCCESSORS.  Any successor to the public utility, whether pursu-
 29    ant to any bankruptcy, reorganization or other insolvency proceeding, or  pur-
 30    suant to any merger, sale or transfer, by operation of law or otherwise, shall
 31    perform  and  satisfy  all  obligations of the public utility pursuant to this
 32    chapter in the same manner and to the same extent as was required of the  pub-
 33    lic  utility before such proceeding or merger, sale or transfer including, but
 34    not limited to, billing, collecting and paying to  the  energy  cost  recovery
 35    bondholders or their representatives or the applicable financing entity energy
 36    cost  recovery  charges  and  any  other  revenues arising with respect to the
 37    energy cost property sold to the applicable financing  entity  or  pledged  to
 38    secure  energy cost recovery bonds and seeking energy cost bond charge adjust-
 39    ments, as necessary and permitted  by  the  pertinent  energy  cost  financing
 40    order,  to  recover  all  energy  cost  amounts designated in such energy cost
 41    financing order.
                                                                        
 42        61-1508.  SEVERABILITY. If any provision of this chapter  is  held  to  be
 43    invalid  or  is  invalidated, superseded, replaced or repealed, or expires for
 44    any reason, that occurrence does not affect the validity  or  continuation  of
 45    this  chapter  or  any  other  provision of this title that is relevant to the
 46    issuance, administration, payment, retirement  or  refunding  of  energy  cost
 47    recovery  bonds  or  to  any actions of the public utility, its successors, an
 48    assignee or other issuer or a collection agent, which  shall  remain  in  full
 49    force and effect.
                                                                        
 50        SECTION  2.  An  emergency  existing  therefor,  which emergency is hereby
 51    declared to exist, this act shall be in full force and effect on and after its
 52    passage and approval.

Statement of Purpose / Fiscal Impact


                     STATEMENT OF PURPOSE

                          RS11252C2

The purpose of this legislation is to provide a process by which the 
recovery of large energy cost increases through fuel or power cost 
adjustments, purchased gas adjustment tracker rates, commodity tracker 
rate adjustments or purchased power tracker rates will be facilitated 
by the issuance of bonds. This legislation will provide public 
utilities with a mechanism for recovery of their increased costs 
while leveling the rate impact of the increase on the public utility's 
customers. This legislation should not be construed as an endorsement 
of, or intended to provide a mechanism for restructuring of the 
utility industry in Idaho.


                         FISCAL IMPACT



There should be no fiscal impact to a fund of state or a local unit 
of government.





Contact:
Name:	Senator Robert Lee 
        Representative Bert Stevenson
Phone:	332-1111


STATEMENT OF PURPOSE/FISCAL NOTE		S 1255