2005 Legislation
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HOUSE BILL NO. 333 – Utility cost reduction bonds

HOUSE BILL NO. 333

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H0333......................................................by STATE AFFAIRS
UTILITIES - COST REDUCTION FINANCING - Adds to existing law to provide for
cost reduction orders by the Public Utilities Commission for electric and
natural gas utilities; to limit aggregate amount of cost reduction
financing; to provide cost reduction rates; and to provide procedures for
issuance of cost reduction bonds.
                                                                        
03/14    House intro - 1st rdg - to printing
03/15    Rpt prt - to 2nd rdg
03/16    2nd rdg - to 3rd rdg
03/17    3rd rdg - PASSED - 69-0-1
      AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer,
      Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Bradford, Cannon,
      Chadderdon, Clark, Collins, Deal, Denney, Edmunson, Ellsworth,
      Eskridge, Field(18), Field(23), Garrett, Hart, Harwood, Henbest,
      Henderson, Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Martinez,
      Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen,
      Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche,
      Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley,
      Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail,
      Wills, Wood, Mr. Speaker
      NAYS -- None
      Absent and excused -- Crow
    Floor Sponsor - Eskridge
    Title apvd - to Senate
03/18    Senate intro - 1st rdg - to St Aff
03/25    Rpt out - rec d/p - to 2nd rdg
03/29    2nd rdg - to 3rd rdg
    Rls susp - PASSED - 35-0-0
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett,
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough,
      Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce,
      Richardson, Schroeder, Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- None
    Floor Sponsor - Stegner
    Title apvd - to House
03/30    To enrol
03/31    Rpt enrol - Sp signed - Pres signed
04/04    To Governor
04/13    Governor signed
         Session Law Chapter 372
         Effective: 07/01/05

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 333
                                                                        
                                 BY STATE AFFAIRS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO PUBLIC  UTILITY COST REDUCTION BONDS;  AMENDING  TITLE  61,  IDAHO
  3        CODE,  BY  THE ADDITION OF A NEW CHAPTER 16, TITLE 61, IDAHO CODE, TO PRO-
  4        VIDE LEGISLATIVE INTENT, TO DEFINE TERMS, TO PROVIDE  FOR  COST  REDUCTION
  5        ORDERS  OF  THE PUBLIC UTILITIES COMMISSION, TO LIMIT THE AGGREGATE AMOUNT
  6        OF COST REDUCTION FINANCING, TO PROVIDE COST REDUCTION RATES,  TO  PROVIDE
  7        PROCEDURES  FOR  ISSUANCE OF COST REDUCTION BONDS, TO PROVIDE FOR SECURITY
  8        INTERESTS, TO PROVIDE FOR TRANSFERS IN INTEREST, TO  PROVIDE  FOR  SUCCES-
  9        SORS,  TO PROVIDE DISCLAIMER OF STATE FULL FAITH AND CREDIT AND TO PROVIDE
 10        SEVERABILITY.
                                                                        
 11    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 12        SECTION 1.  That Title 61, Idaho Code, be, and the same is hereby  amended
 13    by  the addition thereto of a NEW CHAPTER, to be known and designated as Chap-
 14    ter 16, Title 61, Idaho Code, and to read as follows:
                                                                        
 15                                      CHAPTER 16
 16                             UTILITY COST REDUCTION BONDS
                                                                        
 17        61-1601.  LEGISLATIVE INTENT. It is  the  intent  of  the  legislature  in
 18    enacting  this chapter to authorize the public utilities commission to approve
 19    certain cost reduction charges or rates as a method of financing or  refinanc-
 20    ing  costs  incurred or to be incurred by electric and gas utilities that will
 21    accrue benefits to Idaho consumers through reduced utility rates.  The  legis-
 22    lature  believes  that  this  type  of securities legislation is in the public
 23    interest but should not be considered as endorsement of, or intended  to  pro-
 24    vide,  a  mechanism  for restructuring of the utility industry in the state of
 25    Idaho.
                                                                        
 26        61-1602.  DEFINITIONS. For purposes of this chapter, the  following  terms
 27    shall  have the following meanings, unless the context clearly requires other-
 28    wise:
 29        (1)  "Approved costs" means the amounts that a public utility or  assignee
 30    has  been authorized to recover by the commission pursuant to a cost reduction
 31    order including, without limitation:
 32        (a)  Amounts incurred or to be incurred for purposes for  which  a  public
 33        utility  may  issue  stock  and  stock  certificates or other evidences of
 34        interest or ownership, or bonds, notes or other evidences of  indebtedness
 35        under chapter 9, title 61, Idaho Code;
 36        (b)  Amounts  necessary to recover federal or state taxes actually paid by
 37        a public utility, which tax liability  is  modified  by  the  transactions
 38        approved  in  a  cost reduction order issued by the commission pursuant to
 39        this chapter; and
 40        (c)  Reasonable costs, as approved by  the  commission,  relating  to  the
 41        issuance, servicing or refinancing of cost reduction instruments under the
                                                                        
                                           2
                                                                        
  1        provisions  of  this  chapter  including,  without  limitation, principal,
  2        interest or other payments and accruals, sinking fund payments, debt  ser-
  3        vice  and  other  reserves,  costs of credit enhancement,  indemnities, if
  4        any, owed to an assignee or the trustee for the cost reduction instrument,
  5        issuance costs and redemption premiums, if any, and all  other  reasonable
  6        fees, costs and charges with respect to the cost reduction instrument.
  7        (2)  "Assignee"  means  any corporation, limited liability company, trust,
  8    partnership or other entity to which a public utility assigns, sells or trans-
  9    fers, other than as security, all or a portion of the public utility's  inter-
 10    est  in  or right to cost reduction property.  The term also includes any such
 11    entity to which an assignee assigns, sells or transfers, other than  as  secu-
 12    rity, the assignee's interest in or right to cost reduction property.
 13        (3)  "Chapter  9"  means  chapter 9, title 28, Idaho Code, as from time to
 14    time amended, including any successor provisions.
 15        (4)  "Cost reduction instrument" means any instrument,  pass-through  cer-
 16    tificate,  note,  bond,  debenture,  certificate  of participation, collateral
 17    trust certificate, beneficial interest or other evidence  of  indebtedness  or
 18    ownership  issued by a public utility or an assignee pursuant to a cost reduc-
 19    tion order and an executed indenture,  security  agreement  or  other  similar
 20    instrument  that  is  secured  by or payable from cost reduction rates or cost
 21    reduction property.
 22        (5)  "Cost reduction instrument holder" means any holder of a cost  reduc-
 23    tion  instrument  or  any trustee, collateral agent or other entity acting for
 24    the benefit of or on behalf of any such holder.
 25        (6)  "Cost reduction order" means an order of  the  commission  issued  in
 26    accordance  with this chapter that authorizes the imposition and collection of
 27    approved costs.
 28        (7)  "Cost reduction property"  means  the  irrevocable,  vested  property
 29    right  created  pursuant  to  this  chapter and one (1) or more cost reduction
 30    orders including, without limitation, the right, title and interest of a  pub-
 31    lic  service  company  or  assignee to all revenues, collections, claims, pay-
 32    ments, money or proceeds of or arising from a cost  reduction  rate,  and  all
 33    rights to obtain adjustments to such cost reduction rate pursuant to the terms
 34    of this chapter and any cost reduction order.
 35        (8)  "Cost  reduction  rate"  means  a  charge or rate that the commission
 36    authorizes in a cost reduction order, whether such amounts are  billed  and/or
 37    collected  by  the  public  utility,  an assignee, any subsidiary or affiliate
 38    thereof, or any third party that may assume the responsibility for billing  or
 39    collecting such cost reduction charges.
 40        (9)  "Public utility" means any electric or gas corporation subject to the
 41    jurisdiction,  regulation  and  control  of the public utilities commission as
 42    contained in chapter 1, title 61, Idaho Code.
                                                                        
 43        61-1603.  COST REDUCTION ORDER. (1) A public utility may apply to the com-
 44    mission for a cost reduction order authorizing the recovery of approved  costs
 45    through the imposition and collection of a cost reduction rate.
 46        (2)  A  public utility may apply to the commission from time to time for a
 47    cost reduction order in a manner prescribed by  the  commission,  in  separate
 48    proceedings  for this purpose or in connection with a general rate case.  Such
 49    application may also include a request for authority to issue  and  sell  cost
 50    reduction instruments to be secured by or payable from the cost reduction rate
 51    that  results  from  such  cost reduction order or the cost reduction property
 52    created by this chapter and the cost reduction  order  related  to  such  cost
 53    reduction  rate.   Upon  such an application, if the commission finds that the
 54    public interest would be served if the approved costs were recovered through a
                                                                        
                                           3
                                                                        
  1    cost reduction rate, the commission shall issue  a  cost  reduction  order  to
  2    allow  the  public utility to recover the approved costs through a cost reduc-
  3    tion rate and may also provide authority to  issue  and  sell  cost  reduction
  4    instruments.
  5        (3)  A  cost  reduction order shall detail the approved costs to be recov-
  6    ered and the period of time in which recovery of  the  approved  costs  is  to
  7    occur.   A cost reduction order shall specify the amount of the cost reduction
  8    rate and the method for determining the amount of the cost reduction rate that
  9    from time to time will be sufficient to  recover  all  approved  costs.   Cost
 10    reduction rates shall remain in effect until all approved costs have been paid
 11    in full.
 12        (4)  A  cost  reduction order may be issued only upon the application of a
 13    public utility and shall become effective only in accordance  with  its  terms
 14    and  conditions.   A  public  utility  may withdraw its application for a cost
 15    reduction order if it disagrees with any of the terms and  conditions  of  the
 16    order  within  fourteen  (14)  days  of service of a final order on the public
 17    utility.  A public utility shall effect the withdrawal of its  application  by
 18    filing  a  written  notice  of withdrawal with the commission within such time
 19    period.  Nothing in this section shall be construed to limit or preclude other
 20    remedies that may be available to the public utility under applicable law.
 21        (5)  No public utility shall be treated as having  acted  unreasonably  or
 22    imprudently  by  reason of its failure to apply for a cost reduction order, by
 23    reason of its withdrawal of an application for a cost reduction order,  or  by
 24    reason  of  its  failure to arrange for the issuance of cost reduction instru-
 25    ments pursuant to a cost reduction order.
 26        (6)  Upon issuance of a cost reduction order, a public utility  may  sell,
 27    assign or otherwise transfer or pledge cost reduction property created by this
 28    chapter and the applicable cost reduction order, and if authorized by the par-
 29    ticular  cost  reduction  order,  a public utility or an assignee may issue or
 30    cause to be issued cost reduction instruments.
 31        (7)  Any cost reduction order, and the approved costs and the cost  reduc-
 32    tion  rates that have been authorized by the commission in such cost reduction
 33    order, shall be irrevocable and binding upon the commission.   The  commission
 34    shall  not  have  authority  either by rescinding, altering or amending a cost
 35    reduction order or otherwise to, either directly  or  indirectly,  revalue  or
 36    revise for ratemaking purposes the approved costs or the cost reduction rates.
 37    Once the commission authorizes a cost reduction rate, it cannot determine in a
 38    later proceeding that the cost reduction rate is unjust or unreasonable, or in
 39    any  way reduce or impair the value of related cost reduction property, either
 40    directly or indirectly, by taking the cost reduction rate  into  account  when
 41    setting  other  rates for the public utility; nor shall the amount of revenues
 42    arising with respect thereto be subject to reduction, impairment, postponement
 43    or termination.  The state of Idaho does hereby pledge to and agree  with  the
 44    owners of cost reduction property and with any cost reduction instrument hold-
 45    ers  that neither the state nor any of its agencies, including the commission,
 46    shall (by administrative or legislative action,  ballot  initiative  or  other
 47    similar process) limit, alter, restrict or impair the approved costs, the cost
 48    reduction  rate, the cost reduction property, the cost reduction orders or any
 49    rights thereunder or ownership thereof or security interest therein or in  any
 50    way  impair  the  rights or remedies of any cost reduction instrument holders.
 51    The state does hereby acknowledge that any cost reduction  instrument  holders
 52    may  and will rely on this pledge and agreement and that they would be irrepa-
 53    rably harmed by any such limitation,  alteration,  restriction  or  impairment
 54    without such adequate provision.
 55        (8)  Notwithstanding  any  other provision of this chapter, the commission
                                                                        
                                           4
                                                                        
  1    will from time to time, and no less frequently than annually, approve  adjust-
  2    ments  to  the  cost  reduction rates as may be necessary to ensure timely and
  3    complete recovery of all approved costs that are the subject of the  pertinent
  4    cost reduction order.
  5        (9)  Subject  to  the  foregoing  limitations, the commission has the same
  6    authority  with respect to a proposed cost  reduction  rate  as  it  has  with
  7    regard  to any other tariff, schedule or classification the effect of which is
  8    to change any rate or charge, including, without limitation, the power granted
  9    by chapter 6, title 61, Idaho Code, to conduct a hearing concerning a proposed
 10    cost reduction rate and the reasonableness and justness thereof.
 11        (10)  The commission shall establish procedures for the expeditious  proc-
 12    essing  of  any application for cost reduction orders and adjustments thereto,
 13    including the approval or disapproval of any  such  orders  within  forty-five
 14    (45) days of the application therefor.
                                                                        
 15        61-1604.  LIMITATION  ON AGGREGATE AMOUNT OF COST REDUCTION FINANCING. The
 16    amount of approved costs in a cost reduction order, either individually or  in
 17    the aggregate with previously approved costs included in cost reduction orders
 18    that remain outstanding, may not exceed an amount equal to forty percent (40%)
 19    of  the public utility's total capitalization, including both debt and equity,
 20    as of the end of the fiscal year of such public utility preceding the applica-
 21    tion for such cost reduction order.
                                                                        
 22        61-1605.  COST REDUCTION RATE. (1) Each cost reduction order shall specify
 23    a procedure for making adjustments to the cost reduction rate that is the sub-
 24    ject of the order.
 25        (2)  Upon application by a public utility the commission may:
 26        (a)  Authorize the making of adjustments to the  cost  reduction  rate  at
 27        more frequent intervals than those specified in such order; and/or
 28        (b)  Authorize  a  change in the method for calculating the cost reduction
 29        rate from that specified in such order so as to better ensure  the  timely
 30        and complete recovery of all approved costs.
 31        (3)  The cost reduction rate shall be treated as a charge for utility ser-
 32    vices for purposes of determining both the credit and collection standards and
 33    the remedies for nonpayment that are available to a public utility.
 34        (4)  A  cost reduction rate shall constitute cost reduction property when,
 35    and to the extent that, a cost reduction order authorizing such cost reduction
 36    rate has become effective in accordance with this chapter, and the cost reduc-
 37    tion property shall thereafter continuously exist as property for all purposes
 38    with all of the rights and privileges of this chapter for the  period  and  to
 39    the  extent  provided  in the cost reduction order, but in any event until the
 40    approved costs are paid in full.
 41        (5)  Any surplus cost reduction rate collections in excess of the  amounts
 42    necessary to pay approved costs shall be used in such manner as the commission
 43    may reasonably determine.
 44        (6)  The  obligation  to  pay  amounts in respect of a cost reduction rate
 45    cannot be avoided by the formation of a local publicly owned utility or  other
 46    entity, or by annexation of any portion of the service territory of the public
 47    utility by a local publicly owned electric utility or other entity.
                                                                        
 48        61-1606.  COST  REDUCTION  INSTRUMENTS. (1) Public utilities and assignees
 49    may issue and sell cost reduction instruments upon approval by the  commission
 50    of such action in a cost reduction order.
 51        (2)  Public utilities and assignees may sell and assign all or portions of
 52    their  interest  in cost reduction property that is the basis for the issuance
                                                                        
                                           5
                                                                        
  1    of cost reduction instruments to the extent approved  in  the  pertinent  cost
  2    reduction  order.   To  the  extent  approved  in the pertinent cost reduction
  3    orders, public utilities and assignees may also pledge cost reduction property
  4    as collateral, directly or indirectly, for cost reduction instruments  provid-
  5    ing  for  a security interest in the cost reduction property, in the manner as
  6    set forth in this chapter.  Cost  reduction  property  may  also  be  sold  or
  7    assigned by:
  8        (a)  A  public  utility,  an assignee or a trustee for the holders of cost
  9        reduction instruments in connection with the exercise of remedies  upon  a
 10        default; or
 11        (b)  Any  person  acquiring  the  cost  reduction property after a sale or
 12        assignment pursuant to this subsection.
 13        (3)  To the extent that any interest in cost reduction property is so sold
 14    or assigned, or is so pledged as collateral, the commission may authorize  the
 15    public  utility  to contract with an assignee that it will continue to operate
 16    its system to provide service to its  customers,  will  collect  amounts  with
 17    respect  to  the  cost  reduction  rates  for  the  benefit and account of the
 18    assignee, and will account for and remit these amounts to or for  the  account
 19    of the assignee.  Contracting with the assignee in accordance with that autho-
 20    rization  shall not impair or negate the characterization of the sale, assign-
 21    ment or pledge as an absolute transfer, a true sale or security  interest,  as
 22    applicable.
 23        (4)  Upon  approval by the commission of a cost reduction order, any issu-
 24    ance of cost reduction instruments approved therein, any related  transfer  or
 25    pledge  of  cost  reduction  property and any other transactions incidental to
 26    such issuance shall be exempt from the requirements of 61-901 through  61-908,
 27    Idaho  Code.  The commission may include in any cost reduction order any addi-
 28    tional approvals that may be required in connection with such  issuance  under
 29    applicable law.
 30        (5)  An assignee shall not be considered to be an electric or gas corpora-
 31    tion solely by virtue of the transactions described in this chapter.
                                                                        
 32        61-1607.  SECURITY INTEREST. (1) To the extent the provisions of this sec-
 33    tion  conflict  with  chapter  9 as from time to time in effect, including any
 34    successor provisions, this section shall apply.
 35        (2)  A security interest in cost reduction property is valid, is  enforce-
 36    able against the pledgor and third parties, subject to the rights of any third
 37    parties holding security interests in the cost reduction property perfected in
 38    the  manner  described in this section, and attaches when all of the following
 39    have occurred:
 40        (a)  The commission has issued a cost reduction order authorizing  a  cost
 41        reduction  rate,  the  right  to the imposition and collection of which is
 42        included in the cost reduction;
 43        (b)  Value has been given by the pledgees of the cost reduction  property;
 44        and
 45        (c)  The  pledgor has signed a security agreement covering the cost reduc-
 46        tion property.
 47        (3)  A valid and enforceable security interest in cost reduction  property
 48    is  perfected  when  it  has  attached and when a financing statement has been
 49    filed in  accordance with chapter 9, naming the pledgor of the cost  reduction
 50    property  as  "debtor"  and  identifying  the  cost  reduction  property.  Any
 51    description of the cost reduction property shall be sufficient if it refers to
 52    the cost reduction order creating the cost reduction property.  A copy of  the
 53    financing  statement  shall  be  filed  with  the commission by the pledgor or
 54    transferor of the cost reduction property, and the commission may require  the
                                                                        
                                           6
                                                                        
  1    pledgor  or  transferor  to  make  other  filings with respect to the security
  2    interest in accordance with procedures it may  establish,  provided  that  the
  3    filings shall not affect the perfection of the security interest.  A financing
  4    statement filed pursuant to this section shall remain effective until a termi-
  5    nation statement is filed.
  6        (4)  A perfected security interest in cost reduction property is a contin-
  7    uously  perfected  security interest in all revenues and proceeds arising with
  8    respect thereto, whether or not the revenues or proceeds have  accrued.   Con-
  9    flicting  security  interests shall rank according to priority in time of per-
 10    fection.  Cost reduction property shall constitute property for all  purposes,
 11    including  for  contracts  securing cost reduction instruments, whether or not
 12    the revenues and proceeds arising with respect thereto have accrued.
 13        (5)  Subject to the terms of the  security  agreement  covering  the  cost
 14    reduction property and the rights of any third parties holding security inter-
 15    ests  in the cost reduction property perfected in the manner described in this
 16    section, the validity and relative priority of  a  security  interest  created
 17    under this section is not defeated or adversely affected by the commingling of
 18    revenues  arising with respect to the cost reduction property with other funds
 19    of the public utility that is the pledgor or transferor of the cost  reduction
 20    property,  or  by  any  security  interest in a deposit account of that public
 21    utility perfected under chapter 9, into  which  the  revenues  are  deposited.
 22    Subject  to  the  terms  of  the  security agreement, the pledgees of the cost
 23    reduction property shall have a perfected security interest in  all  cash  and
 24    deposit  accounts of the public utility in which revenues arising with respect
 25    to the cost reduction property have been commingled with other funds, but  the
 26    perfected security interest shall be limited to an amount not greater than the
 27    amount of the revenues with respect to the cost reduction property received by
 28    the public utility within twelve (12) months before: (a) any default under the
 29    security  agreement,  or  (b)  the institution of insolvency proceedings by or
 30    against the public utility, less payments from the revenues  to  the  pledgees
 31    during that twelve (12) month period.
 32        (6)  If  an  event of default occurs under the security agreement covering
 33    the cost reduction property, the pledgees of the cost reduction property, sub-
 34    ject to the terms of the security agreement, shall have all rights  and  reme-
 35    dies  of  a secured party upon default  under chapter 9, and shall be entitled
 36    to foreclose or otherwise enforce their security interest in the  cost  reduc-
 37    tion  property, subject to the rights of any third parties holding prior secu-
 38    rity interests in the cost reduction property perfected in the manner provided
 39    in this section.  In addition, the commission may require, in the cost  reduc-
 40    tion order creating the cost reduction property, that, in the event of default
 41    by  the public utility in payment of revenues arising with respect to the cost
 42    reduction property, the commission and any successor thereto, upon the  appli-
 43    cation  by  the  pledgees  or transferees, including transferees under section
 44    61-1608, Idaho Code, of the cost reduction property, and without limiting  any
 45    other  remedies  available  to  the  pledgees  or transferees by reason of the
 46    default, shall order the sequestration and payment to the pledgees  or  trans-
 47    ferees  of  revenues arising with respect to the cost reduction property.  Any
 48    order shall remain in full force and effect  notwithstanding  any  bankruptcy,
 49    reorganization,  or  other  insolvency proceedings with respect to the debtor,
 50    pledgor or transferor of the cost reduction property.
 51        (7)  Cost reduction property shall constitute a payment intangible as that
 52    term is defined under chapter 9.
 53        (8)  Sections 28-9-204 and 28-9-205, Idaho Code,  as  from  time  to  time
 54    amended,  including  any successor provisions, shall apply to a pledge of cost
 55    reduction property by a public utility, assignee or other issuer.
                                                                        
                                           7
                                                                        
  1        (9)  This section sets forth the terms  by  which  a  consensual  security
  2    interest  can  be  created  and  perfected  in cost reduction property. Unless
  3    otherwise ordered by the commission with respect to any series of cost  reduc-
  4    tion  instruments on or prior to the issuance of the series, there shall exist
  5    a statutory lien as provided in this section. Upon the effective date  of  the
  6    cost  reduction  order,  there  shall  exist a first priority lien on all cost
  7    reduction property then existing or thereafter arising pursuant to  the  terms
  8    of  the  cost reduction order. This lien shall arise by operation of this sec-
  9    tion automatically without any action on the part of the public  utility,  any
 10    assignee  or  other  issuer,  or  any other person. This lien shall secure all
 11    obligations, then existing or subsequently arising, to the holders of the cost
 12    reduction instruments issued pursuant to the cost reduction order, the trustee
 13    or representative for the holders, and any other entity specified in the  cost
 14    reduction  order.   The  persons  for  whose  benefit this lien is established
 15    shall, upon the occurrence of any defaults specified  in  the  pertinent  cost
 16    reduction  order, have all rights and remedies of a secured party upon default
 17    under chapter 9, and shall be entitled to foreclose or otherwise enforce  this
 18    statutory  lien  in the cost reduction property. This lien shall attach to the
 19    cost reduction property regardless of who shall own, or shall subsequently  be
 20    determined  to  own, the cost reduction property including any public utility,
 21    any assignee or other issuer, or any other person. This lien shall  be  valid,
 22    perfected,  and  enforceable  against the owner of the cost reduction property
 23    and all third parties upon the effectiveness of the cost reduction order with-
 24    out any further public notice; provided however,  that  any  person  may,  but
 25    shall  not  be required to, file a financing statement in accordance with sub-
 26    section (3) of this section. Financing statements so filed may be  "protective
 27    filings"  and  shall  not  be  evidence of the ownership of the cost reduction
 28    property.  A perfected statutory lien in cost reduction property is a continu-
 29    ously perfected lien  in  all  revenues  and  proceeds  arising  with  respect
 30    thereto,  whether  or  not the revenues or proceeds have accrued.  Conflicting
 31    liens shall rank according to priority in time of  perfection.   In  addition,
 32    the  commission  may  require,  in  the cost reduction order creating the cost
 33    reduction property, that, in the event of default by  the  public  utility  in
 34    payment  of revenues arising with respect to cost reduction property, the com-
 35    mission and any successor thereto, upon the application by  the  beneficiaries
 36    of  the  statutory lien, and without limiting  any other remedies available to
 37    the beneficiaries by reason of the default, shall order the sequestration  and
 38    payment  to  the  beneficiaries  of  revenues arising with respect to the cost
 39    reduction property.
                                                                        
 40        61-1608.  TRANSFERS IN INTEREST. (1) A transfer of cost reduction property
 41    by a public utility to an assignee, or by an  assignee  to  another  assignee,
 42    that  the parties have in the governing documentation expressly stated to be a
 43    sale or other absolute transfer, in a transaction approved in a cost reduction
 44    order, shall be treated as an absolute transfer of  all  of  the  transferor's
 45    right,  title  and  interest,  as in a true sale, and not as a pledge or other
 46    financing, of the cost reduction property, in each  case  notwithstanding  any
 47    contrary treatment for federal or state income and franchise taxes, accounting
 48    or other purposes.
 49        (2)  A  transfer  of  cost reduction property shall be deemed perfected as
 50    against third persons and shall vest title in the transferee when both of  the
 51    following have taken place:
 52        (a)  The  commission  has  issued the cost reduction order authorizing the
 53        cost reduction rate included in the cost reduction property; and
 54        (b)  A written assignment of the cost reduction property has been executed
                                                                        
                                           8
                                                                        
  1        and delivered to the transferee.
  2        (3)  As between bona fide assignees of the same right  for  value  without
  3    notice,  the  assignee  first  filing a financing statement in accordance with
  4    chapter 9, naming the assignor of the cost reduction property  as  debtor  and
  5    identifying  the cost reduction property has priority. Any description of cost
  6    reduction property shall be sufficient if it  refers  to  the  cost  reduction
  7    order creating the cost reduction property.  A copy of the financing statement
  8    shall  be  filed  by  the assignee with the commission, and the commission may
  9    require the assignor or the assignee to make other filings with respect to the
 10    transfer in accordance with procedures it may  establish,  but  these  filings
 11    shall not affect the perfection of the transfer.
 12        (4)  The interest of an assignee or pledgee in cost reduction property and
 13    in  the revenues and collections arising from such property are not subject to
 14    set-off, counterclaim, surcharge or defense by the public utility or any other
 15    person or in connection with the bankruptcy of the public utility or any other
 16    person.
                                                                        
 17        61-1609.  SUCCESSORS. Any successor to the public utility, whether  pursu-
 18    ant to any bankruptcy, reorganization or other insolvency proceeding, or  pur-
 19    suant to any merger, sale or transfer, by operation of law or otherwise, shall
 20    perform  and  satisfy  all  obligations of the public utility pursuant to this
 21    chapter in the same manner and to the same extent as was required of the  pub-
 22    lic  utility before such proceeding or merger, sale or transfer including, but
 23    not limited to, billing, collecting and paying to the cost  reduction  instru-
 24    ment  holders,  or  their  representatives or the applicable financing entity,
 25    cost reduction rates and any other revenues arising with respect to  the  cost
 26    reduction  property  sold  to  the  applicable  financing entity or pledged to
 27    secure  cost reduction instruments and seeking  cost  reduction  rate  adjust-
 28    ments,  as  necessary  and permitted by the pertinent cost reduction order, to
 29    recover all approved costs designated in such cost reduction order.
                                                                        
 30        61-1610.  DISCLAIMER OF STATE FULL FAITH AND CREDIT. Cost reduction rates,
 31    cost reduction property, and any related  cost  reduction  instruments  issued
 32    under  this chapter and any applicable cost reduction orders do not constitute
 33    a debt or liability of this state or of any political subdivision thereof  and
 34    do  not  constitute a pledge of the full faith and credit of this state or any
 35    of its political subdivisions, but are payable solely from the funds  provided
 36    therefor.  Any  cost reduction instruments shall contain on the face thereof a
 37    statement to the following effect: "Neither the full faith and credit nor  the
 38    taxing  power of the state of Idaho is pledged to the payment of the principal
 39    of, or interest on, this instrument."
                                                                        
 40        61-1611.  SEVERABILITY. If any provision of this act or its application to
 41    any person or circumstance is held invalid, the remainder of the  act  or  the
 42    application  of  the  provision  to  other  persons  or  circumstances  is not
 43    affected.

Statement of Purpose / Fiscal Impact


                    
                       STATEMENT OF PURPOSE

                             RS 15152

The purpose of this legislation is to provide the public
utilities commission with a method to approve certain cost
reduction charges or rates as a method of financing or
refinancing costs incurred or to be incurred by electric and gas
utilities that will accrue benefits to Idaho consumers through
reduced utility rates.  This legislation should not be construed
as endorsement of, or intended to provide a mechanism for,
restructuring of the utility industry in Idaho.

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


Contact
Name:  Rep. George Eskridge
Name:  Rep. Eric Anderson
Phone: 208-332-1000
Name:  Neil Colwell, Avista Corporation
Phone: 208-343-3821

          

STATEMENT OF PURPOSE/FISCAL NOTE                     H 333