2005 Legislation
Print Friendly

HOUSE BILL NO. 310 – Utility cost reduction bonds

HOUSE BILL NO. 310

View Bill Status

View Bill Text

View Statement of Purpose / Fiscal Impact



Text to be added within a bill has been marked with Bold and
Underline. Text to be removed has been marked with
Strikethrough and Italic. How these codes are actually displayed will
vary based on the browser software you are using.

This sentence is marked with bold and underline to show added text.

This sentence is marked with strikethrough and italic, indicating
text to be removed.

Bill Status



H0310......................................................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.
                                                                        
03/09    House intro - 1st rdg - to printing
03/10    Rpt prt - to St Aff

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   First Regular Session - 2005
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 310
                                                                        
                                 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 ten (10) days of service of a final order on the public utility.
 17    A public utility shall effect the withdrawal of its application  by  filing  a
 18    written  notice  of  withdrawal  with  the commission within such time period.
 19    Nothing in this section shall be construed to limit or preclude other remedies
 20    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        (11)  The  following  procedures  shall apply to judicial review of a cost
 16    reduction order or decision of the commission interpreting,  implementing,  or
 17    applying the provisions of this chapter:
 18        (a)  Within  ten  (10) days after the commission issues its order or deci-
 19        sion denying the application, any aggrieved party may petition for a  writ
 20        of  review  in  the Idaho supreme court for the purpose of determining the
 21        lawfulness of the original order or decision. If the writ issues, it shall
 22        be made returnable at a time and place specified by court order and  shall
 23        direct  the  commission  to  certify  its  record in the case to the court
 24        within the time specified.   No  order  of  the  commission  interpreting,
 25        implementing,  or applying the provisions of this chapter shall be subject
 26        to review in the courts of appeal;
 27        (b)  The petition for review shall be served upon the  executive  director
 28        of  the  commission  either  personally or by service at the office of the
 29        commission;
 30        (c)  For purposes of this section, the  issuance  of  a  decision  or  the
 31        granting of an application shall be construed to have occurred on the date
 32        when  the  commission  mails  the  decision or grant to the parties to the
 33        action or proceeding;
 34        (d)  The legislature hereby declares that if a writ issues  in  an  action
 35        under  this  section,  delay  in  the determination of the writ will delay
 36        implementation of a cost reduction financing,  thereby  diminishing  total
 37        savings to ratepayers that might be achieved if a cost reduction financing
 38        were  implemented  immediately, and therefore, to maximize ratepayer bene-
 39        fits, review under this section should be expedited.
                                                                        
 40        61-1604.  LIMITATION ON AGGREGATE AMOUNT OF COST REDUCTION FINANCING.  The
 41    amount  of approved costs in a cost reduction order, either individually or in
 42    the aggregate with previously approved costs included in cost reduction orders
 43    that remain outstanding, may not exceed an amount equal to forty percent (40%)
 44    of the public utility's total capitalization, including both debt and  equity,
 45    as of the end of the fiscal year of such public utility preceding the applica-
 46    tion for such cost reduction order.
                                                                        
 47        61-1605.  COST REDUCTION RATE. (1) Each cost reduction order shall specify
 48    a procedure for making adjustments to the cost reduction rate that is the sub-
 49    ject of the order.
 50        (2)  Upon application by a public utility the commission may:
 51        (a)  Authorize  the  making  of  adjustments to the cost reduction rate at
 52        more frequent intervals than those specified in such order; and/or
 53        (b)  Authorize a change in the method for calculating the  cost  reduction
                                                                        
                                           5
                                                                        
  1        rate  from  that specified in such order so as to better ensure the timely
  2        and complete recovery of all approved costs.
  3        (3)  The cost reduction rate shall be treated as a charge for utility ser-
  4    vices for purposes of determining both the credit and collection standards and
  5    the remedies for nonpayment that are available to a public utility.
  6        (4)  A cost reduction rate shall constitute cost reduction property  when,
  7    and to the extent that, a cost reduction order authorizing such cost reduction
  8    rate has become effective in accordance with this chapter, and the cost reduc-
  9    tion property shall thereafter continuously exist as property for all purposes
 10    with  all  of  the rights and privileges of this chapter for the period and to
 11    the extent provided in the cost reduction order, but in any  event  until  the
 12    approved costs are paid in full.
 13        (5)  Any  surplus cost reduction rate collections in excess of the amounts
 14    necessary to pay approved costs shall be used in such manner as the commission
 15    may reasonably determine.
 16        (6)  The obligation to pay amounts in respect of  a  cost  reduction  rate
 17    cannot  be avoided by the formation of a local publicly owned utility or other
 18    entity, or by annexation of any portion of the service territory of the public
 19    utility by a local publicly owned electric utility or other entity.
                                                                        
 20        61-1606.  COST REDUCTION INSTRUMENTS. (1) Public utilities  and  assignees
 21    may  issue and sell cost reduction instruments upon approval by the commission
 22    of such action in a cost reduction order.
 23        (2)  Public utilities and assignees may sell and assign all or portions of
 24    their interest in cost reduction property that is the basis for  the  issuance
 25    of  cost  reduction  instruments  to the extent approved in the pertinent cost
 26    reduction order.  To the extent  approved  in  the  pertinent  cost  reduction
 27    orders, public utilities and assignees may also pledge cost reduction property
 28    as  collateral, directly or indirectly, for cost reduction instruments provid-
 29    ing for a security interest in the cost reduction property, in the  manner  as
 30    set  forth  in  this  chapter.   Cost  reduction  property may also be sold or
 31    assigned by:
 32        (a)  A public utility, an assignee or a trustee for the  holders  of  cost
 33        reduction  instruments  in connection with the exercise of remedies upon a
 34        default; or
 35        (b)  Any person acquiring the cost reduction  property  after  a  sale  or
 36        assignment pursuant to this subsection.
 37        (3)  To the extent that any interest in cost reduction property is so sold
 38    or  assigned, or is so pledged as collateral, the commission may authorize the
 39    public utility to contract with an assignee that it will continue  to  operate
 40    its  system  to  provide  service  to its customers, will collect amounts with
 41    respect to the cost reduction  rates  for  the  benefit  and  account  of  the
 42    assignee,  and  will account for and remit these amounts to or for the account
 43    of the assignee.  Contracting with the assignee in accordance with that autho-
 44    rization shall not impair or negate the characterization of the sale,  assign-
 45    ment  or  pledge as an absolute transfer, a true sale or security interest, as
 46    applicable.
 47        (4)  Upon approval by the commission of a cost reduction order, any  issu-
 48    ance  of  cost reduction instruments approved therein, any related transfer or
 49    pledge of cost reduction property and any  other  transactions  incidental  to
 50    such  issuance shall be exempt from the requirements of 61-901 through 61-908,
 51    Idaho Code.  The commission may include in any cost reduction order any  addi-
 52    tional  approvals  that may be required in connection with such issuance under
 53    applicable law.
 54        (5)  An assignee shall not be considered to be an electric or gas corpora-
                                                                        
                                           6
                                                                        
  1    tion solely by virtue of the transactions described in this chapter.
                                                                        
  2        61-1607.  SECURITY INTEREST. (1) To the extent the provisions of this sec-
  3    tion conflict with chapter 9 as from time to time  in  effect,  including  any
  4    successor provisions, this section shall apply.
  5        (2)  A  security interest in cost reduction property is valid, is enforce-
  6    able against the pledgor and third parties, subject to the rights of any third
  7    parties holding security interests in the cost reduction property perfected in
  8    the manner described in this section, and attaches when all of  the  following
  9    have occurred:
 10        (a)  The  commission  has issued a cost reduction order authorizing a cost
 11        reduction rate, the right to the imposition and  collection  of  which  is
 12        included in the cost reduction;
 13        (b)  Value  has been given by the pledgees of the cost reduction property;
 14        and
 15        (c)  The pledgor has signed a security agreement covering the cost  reduc-
 16        tion property.
 17        (3)  A  valid and enforceable security interest in cost reduction property
 18    is perfected when it has attached and when  a  financing  statement  has  been
 19    filed  in  accordance with chapter 9, naming the pledgor of the cost reduction
 20    property as  "debtor"  and  identifying  the  cost  reduction  property.   Any
 21    description of the cost reduction property shall be sufficient if it refers to
 22    the  cost reduction order creating the cost reduction property.  A copy of the
 23    financing statement shall be filed with  the  commission  by  the  pledgor  or
 24    transferor  of the cost reduction property, and the commission may require the
 25    pledgor or transferor to make other  filings  with  respect  to  the  security
 26    interest  in  accordance  with  procedures it may establish, provided that the
 27    filings shall not affect the perfection of the security interest.  A financing
 28    statement filed pursuant to this section shall remain effective until a termi-
 29    nation statement is filed.
 30        (4)  A perfected security interest in cost reduction property is a contin-
 31    uously perfected security interest in all revenues and proceeds  arising  with
 32    respect  thereto,  whether or not the revenues or proceeds have accrued.  Con-
 33    flicting security interests shall rank according to priority in time  of  per-
 34    fection.   Cost reduction property shall constitute property for all purposes,
 35    including for contracts securing cost reduction instruments,  whether  or  not
 36    the revenues and proceeds arising with respect thereto have accrued.
 37        (5)  Subject  to  the  terms  of  the security agreement covering the cost
 38    reduction property and the rights of any third parties holding security inter-
 39    ests in the cost reduction property perfected in the manner described in  this
 40    section,  the  validity  and  relative priority of a security interest created
 41    under this section is not defeated or adversely affected by the commingling of
 42    revenues arising with respect to the cost reduction property with other  funds
 43    of  the public utility that is the pledgor or transferor of the cost reduction
 44    property, or by any security interest in a  deposit  account  of  that  public
 45    utility  perfected  under  chapter  9,  into which the revenues are deposited.
 46    Subject to the terms of the security  agreement,  the  pledgees  of  the  cost
 47    reduction  property  shall  have a perfected security interest in all cash and
 48    deposit accounts of the public utility in which revenues arising with  respect
 49    to  the cost reduction property have been commingled with other funds, but the
 50    perfected security interest shall be limited to an amount not greater than the
 51    amount of the revenues with respect to the cost reduction property received by
 52    the public utility within twelve (12) months before: (a) any default under the
 53    security agreement, or (b) the institution of  insolvency  proceedings  by  or
 54    against  the  public  utility, less payments from the revenues to the pledgees
                                                                        
                                           7
                                                                        
  1    during that twelve (12) month period.
  2        (6)  If an event of default occurs under the security  agreement  covering
  3    the cost reduction property, the pledgees of the cost reduction property, sub-
  4    ject  to  the terms of the security agreement, shall have all rights and reme-
  5    dies of a secured party upon default  under chapter 9, and shall  be  entitled
  6    to  foreclose  or otherwise enforce their security interest in the cost reduc-
  7    tion property, subject to the rights of any third parties holding prior  secu-
  8    rity interests in the cost reduction property perfected in the manner provided
  9    in  this section.  In addition, the commission may require, in the cost reduc-
 10    tion order creating the cost reduction property, that, in the event of default
 11    by the public utility in payment of revenues arising with respect to the  cost
 12    reduction  property, the commission and any successor thereto, upon the appli-
 13    cation by the pledgees or transferees,  including  transferees  under  section
 14    61-1608,  Idaho Code, of the cost reduction property, and without limiting any
 15    other remedies available to the pledgees  or  transferees  by  reason  of  the
 16    default,  shall  order the sequestration and payment to the pledgees or trans-
 17    ferees of revenues arising with respect to the cost reduction  property.   Any
 18    order  shall  remain  in full force and effect notwithstanding any bankruptcy,
 19    reorganization, or other insolvency proceedings with respect  to  the  debtor,
 20    pledgor or transferor of the cost reduction property.
 21        (7)  Cost reduction property shall constitute a payment intangible as that
 22    term is defined under chapter 9.
 23        (8)  Sections  28-9-204  and  28-9-205,  Idaho  Code, as from time to time
 24    amended, including any successor provisions, shall apply to a pledge  of  cost
 25    reduction property by a public utility, assignee or other issuer.
 26        (9)  This  section  sets  forth  the  terms by which a consensual security
 27    interest can be created and  perfected  in  cost  reduction  property.  Unless
 28    otherwise  ordered by the commission with respect to any series of cost reduc-
 29    tion instruments on or prior to the issuance of the series, there shall  exist
 30    a  statutory  lien as provided in this section. Upon the effective date of the
 31    cost reduction order, there shall exist a first  priority  lien  on  all  cost
 32    reduction  property  then existing or thereafter arising pursuant to the terms
 33    of the cost reduction order. This lien shall arise by operation of  this  sec-
 34    tion  automatically  without any action on the part of the public utility, any
 35    assignee or other issuer, or any other person.  This  lien  shall  secure  all
 36    obligations, then existing or subsequently arising, to the holders of the cost
 37    reduction instruments issued pursuant to the cost reduction order, the trustee
 38    or  representative for the holders, and any other entity specified in the cost
 39    reduction order.  The persons for  whose  benefit  this  lien  is  established
 40    shall,  upon  the  occurrence  of any defaults specified in the pertinent cost
 41    reduction order, have all rights and remedies of a secured party upon  default
 42    under  chapter 9, and shall be entitled to foreclose or otherwise enforce this
 43    statutory lien in the cost reduction property. This lien shall attach  to  the
 44    cost  reduction property regardless of who shall own, or shall subsequently be
 45    determined to own, the cost reduction property including any  public  utility,
 46    any  assignee  or other issuer, or any other person. This lien shall be valid,
 47    perfected, and enforceable against the owner of the  cost  reduction  property
 48    and all third parties upon the effectiveness of the cost reduction order with-
 49    out  any  further  public  notice;  provided however, that any person may, but
 50    shall not be required to, file a financing statement in accordance  with  sub-
 51    section  (3) of this section. Financing statements so filed may be "protective
 52    filings" and shall not be evidence of the  ownership  of  the  cost  reduction
 53    property.  A perfected statutory lien in cost reduction property is a continu-
 54    ously  perfected  lien  in  all  revenues  and  proceeds  arising with respect
 55    thereto, whether or not the revenues or proceeds  have  accrued.   Conflicting
                                                                        
                                           8
                                                                        
  1    liens  shall  rank  according to priority in time of perfection.  In addition,
  2    the commission may require, in the cost  reduction  order  creating  the  cost
  3    reduction  property,  that,  in  the event of default by the public utility in
  4    payment of revenues arising with respect to cost reduction property, the  com-
  5    mission  and  any successor thereto, upon the application by the beneficiaries
  6    of the statutory lien, and without limiting  any other remedies  available  to
  7    the  beneficiaries by reason of the default, shall order the sequestration and
  8    payment to the beneficiaries of revenues arising  with  respect  to  the  cost
  9    reduction property.
                                                                        
 10        61-1608.  TRANSFERS IN INTEREST. (1) A transfer of cost reduction property
 11    by  a  public  utility  to an assignee, or by an assignee to another assignee,
 12    that the parties have in the governing documentation expressly stated to be  a
 13    sale or other absolute transfer, in a transaction approved in a cost reduction
 14    order,  shall  be  treated  as an absolute transfer of all of the transferor's
 15    right, title and interest, as in a true sale, and not as  a  pledge  or  other
 16    financing,  of  the  cost reduction property, in each case notwithstanding any
 17    contrary treatment for federal or state income and franchise taxes, accounting
 18    or other purposes.
 19        (2)  A transfer of cost reduction property shall be  deemed  perfected  as
 20    against  third persons and shall vest title in the transferee when both of the
 21    following have taken place:
 22        (a)  The commission has issued the cost reduction  order  authorizing  the
 23        cost reduction rate included in the cost reduction property; and
 24        (b)  A written assignment of the cost reduction property has been executed
 25        and delivered to the transferee.
 26        (3)  As  between  bona  fide assignees of the same right for value without
 27    notice, the assignee first filing a financing  statement  in  accordance  with
 28    chapter  9,  naming  the assignor of the cost reduction property as debtor and
 29    identifying the cost reduction property has priority. Any description of  cost
 30    reduction  property  shall  be  sufficient  if it refers to the cost reduction
 31    order creating the cost reduction property.  A copy of the financing statement
 32    shall be filed by the assignee with the commission,  and  the  commission  may
 33    require the assignor or the assignee to make other filings with respect to the
 34    transfer  in  accordance  with  procedures it may establish, but these filings
 35    shall not affect the perfection of the transfer.
 36        (4)  The interest of an assignee or pledgee in cost reduction property and
 37    in the revenues and collections arising from such property are not subject  to
 38    set-off, counterclaim, surcharge or defense by the public utility or any other
 39    person or in connection with the bankruptcy of the public utility or any other
 40    person.
                                                                        
 41        61-1609.  SUCCESSORS.  Any successor to the public utility, whether pursu-
 42    ant to any bankruptcy, reorganization or other insolvency proceeding, or  pur-
 43    suant to any merger, sale or transfer, by operation of law or otherwise, shall
 44    perform and satisfy all obligations of the public  utility  pursuant  to  this
 45    chapter  in the same manner and to the same extent as was required of the pub-
 46    lic utility before such proceeding or merger, sale or transfer including,  but
 47    not  limited  to, billing, collecting and paying to the cost reduction instru-
 48    ment holders, or their representatives or  the  applicable  financing  entity,
 49    cost  reduction  rates and any other revenues arising with respect to the cost
 50    reduction property sold to the  applicable  financing  entity  or  pledged  to
 51    secure   cost  reduction  instruments  and seeking cost reduction rate adjust-
 52    ments, as necessary and permitted by the pertinent cost  reduction  order,  to
 53    recover all approved costs designated in such cost reduction order.
                                                                        
                                           9
                                                                        
  1        61-1610.  DISCLAIMER OF STATE FULL FAITH AND CREDIT. Cost reduction rates,
  2    cost  reduction  property,  and  any related cost reduction instruments issued
  3    under this chapter and any applicable cost reduction orders do not  constitute
  4    a  debt or liability of this state or of any political subdivision thereof and
  5    do not constitute a pledge of the full faith and credit of this state  or  any
  6    of  its political subdivisions, but are payable solely from the funds provided
  7    therefor. Any cost reduction instruments shall contain on the face  thereof  a
  8    statement  to the following effect: "Neither the full faith and credit nor the
  9    taxing power of the state of Idaho is pledged to the payment of the  principal
 10    of, or interest on, this instrument."
                                                                        
 11        61-1611.  SEVERABILITY. If any provision of this act or its application to
 12    any  person  or  circumstance is held invalid, the remainder of the act or the
 13    application of  the  provision  to  other  persons  or  circumstances  is  not
 14    affected.

Statement of Purpose / Fiscal Impact


                    
                       STATEMENT OF PURPOSE

                            RS 15114C1

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 310