BILL NUMBER: SB 772 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 13, 2004
AMENDED IN ASSEMBLY MARCH 22, 2004
AMENDED IN ASSEMBLY FEBRUARY 9, 2004
AMENDED IN ASSEMBLY JANUARY 29, 2004
AMENDED IN ASSEMBLY SEPTEMBER 9, 2003
AMENDED IN SENATE APRIL 29, 2003
INTRODUCED BY Senator Bowen
FEBRUARY 21, 2003
An act to amend Sections 955.1 and 3440.1 of the Civil Code, to
amend Section 9109 of the Commercial Code, and to amend Section 1731
of, to add and repeal Section 1769 of, and to add Article 5.6
(commencing with Section 848) to Chapter 4 of Part 1 of Division 1
of, the Public Utilities Code, relating to public utilities ,
and declaring the urgency thereof, to take effect immediately .
LEGISLATIVE COUNSEL'S DIGEST
SB 772, as amended, Bowen. Public utilities: financing utility
recovery.
(1) Under existing law, the Public Utilities Commission has
regulatory authority over public utilities, including electrical
corporations, and authorizes the commission to fix just and
reasonable rates and charges. The existing restructuring of the
electrical services industry provides for the issuance of rate
reduction bonds by the California Infrastructure and Economic
Development Bank for the recovery of transition costs, as defined, by
electrical corporations.
This bill would authorize the commission to issue financing
orders, to support the issuance of recovery bonds, as defined, by the
recovery corporation, as defined, secured by a dedicated rate
component, to finance the unamortized balance of the regulatory asset
awarded Pacific Gas and Electric Company in commission Decision
03-12-035. The bill would establish procedures for judicial review
of any order or decision made pursuant to these provisions. The bill
would make other technical and conforming changes.
(2) The bill would declare that, due to the special circumstances
applicable only to the Pacific Gas and Electric Company bankruptcy, a
general statute cannot be made applicable within the meaning of
Section 16 of Article IV of the California Constitution, and the
enactment of a special statute is therefore necessary.
(3) Existing law makes any public utility, as defined, and any
corporation other than a public utility, that violates the Public
Utilities Act guilty of a crime.
Because a violation of the provisions of this bill would be a
violation of the act, this bill would impose a state-mandated local
program by creating a new crime.
(4) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(5) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: majority 2/3 .
Appropriation: no. Fiscal committee: yes. State-mandated local
program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. In confirming the Public Utilities Commission's
authority to approve a dedicated rate component to support the
issuance of recovery bonds, the Legislature is not ratifying or
endorsing any particular outcome of the Pacific Gas and Electric
Company's federal bankruptcy proceeding, but rather is authorizing a
means by which the commission can reduce ratepayer costs in a plan of
reorganization.
SEC. 2. Section 955.1 of the Civil Code is amended to read:
955.1. (a) Except as provided in Sections 954.5 and 955 and
subject to subdivisions (b) and (c), a transfer other than one
intended to create a security interest (paragraph (1) or (3) of
subdivision (a) of Section 9109 of the Commercial Code) of any
payment intangible (Section 9102 of the Commercial Code) and any
transfer of accounts, chattel paper, payment intangibles, or
promissory notes excluded from the coverage of Division 9 of the
Commercial Code by paragraph (4) of subdivision (d) of Section 9109
of the Commercial Code shall be deemed perfected as against third
persons upon there being executed and delivered to the transferee an
assignment thereof in writing.
(b) As between bona fide assignees of the same right for value
without notice, the assignee first giving notice thereof to the
obligor in writing has priority.
(c) The assignment is not, of itself, notice to the obligor so as
to invalidate any payments made by the obligor to the transferor.
(d) This section does not apply to transfers or assignments of
transition property, as defined in Section 840 of the Public
Utilities Code, or to transfers or assignments of recovery property,
as defined in Section 848 of the Public Utilities Code.
SEC. 3. Section 3440.1 of the Civil Code is amended to read:
3440.1. This chapter does not apply to any of the following:
(a) Things in action.
(b) Ships or cargoes if either are at sea or in a foreign port.
(c) The sale of accounts, chattel paper, payment intangibles, or
promissory notes governed by the Uniform Commercial Code, security
interests, and contracts of bottomry or respondentia.
(d) Wines or brandies in the wineries, distilleries, or wine
cellars of the makers or owners of the wines or brandies, or other
persons having possession, care, and control of the wines or
brandies, and the pipes, casks, and tanks in which the wines or
brandies are contained, if the transfers are made in writing and
executed and acknowledged, and if the transfers are recorded in the
book of official records in the office of the county recorder of the
county in which the wines, brandies, pipes, casks, and tanks are
situated.
(e) A transfer or assignment made for the benefit of creditors
generally or by any assignee acting under an assignment for the
benefit of creditors generally.
(f) Property exempt from enforcement of a money judgment.
(g) Standing timber.
(h) Subject to the limitations in Section 3440.3, a transfer of
personal property if all of the following conditions are satisfied:
(1) Prior to the date of the intended transfer, the transferor or
the transferee files a financing statement, with respect to the
property transferred, signed by the transferor. The financing
statement shall be filed in the office of the Secretary of State in
accordance with Chapter 5 (commencing with Section 9501) of Division
9 of the Commercial Code, but may use the terms "transferor" in lieu
of "debtor" and "transferee" in lieu of "secured party." The
provisions of Chapter 5 (commencing with Section 9501) of Division 9
of the Commercial Code shall apply as appropriate to the financing
statement.
(2) The transferor or the transferee publishes a notice of the
intended transfer one time in a newspaper of general circulation
published in the judicial district in which the personal property is
located, if there is one, and if there is none in the judicial
district, then in a newspaper of general circulation in the county
embracing the judicial district. The publication shall be completed
not less than 10 days before the date the transfer occurs. The
notice shall contain the name and address of the transferor and
transferee and a general statement of the character of the personal
property intended to be transferred, and shall indicate the place
where the personal property is located and a date on or after which
the transfer is to be made.
(i) Personal property not located within this state at the time of
the transfer or attachment of the lien if the provisions of this
subdivision are not used for the purpose of evading this chapter.
(j) A transfer of property which (1) is subject to a statute or
treaty of the United States or a statute of this state that provides
for the registration of transfers of title or issuance of
certificates of title and (2) is so far perfected under that statute
or treaty that a bona fide purchaser cannot acquire an interest in
the property transferred that is superior to the interest of the
transferee.
(k) A transfer of personal property in connection with a
transaction in which the property is immediately thereafter leased by
the transferor from the transferee provided the transferee purchased
the property for value and in good faith (subdivision (c) of Section
10308 of the Commercial Code).
(l) Transition property, as defined in Section 840 of the Public
Utilities Code, or recovery property, as defined in Section 848 of
the Public Utilities Code.
SEC. 4. Section 9109 of the Commercial Code is amended to read:
9109. (a) Except as otherwise provided in subdivisions (c) and
(d), this division applies to each of the following:
(1) A transaction, regardless of its form, that creates a security
interest in personal property or fixtures by contract.
(2) An agricultural lien.
(3) A sale of accounts, chattel paper, payment intangibles, or
promissory notes.
(4) A consignment.
(5) A security interest arising under Section 2401 or 2505, or
under subdivision (3) of Section 2711, or subdivision (5) of Section
10508, as provided in Section 9110.
(6) A security interest arising under Section 4210 or 5118.
(b) The application of this division to a security interest in a
secured obligation is not affected by the fact that the obligation is
itself secured by a transaction or interest to which this division
does not apply.
(c) This division does not apply to the extent that either of the
following conditions is satisfied:
(1) A statute, regulation, or treaty of the United States preempts
this division.
(2) The rights of a transferee beneficiary or nominated person
under a letter of credit are independent and superior under Section
5114.
(d) This division does not apply to any of the following:
(1) A landlord's lien, other than an agricultural lien.
(2) A lien, other than an agricultural lien, given by statute or
other rule of law for services or materials, but Section 9333 applies
with respect to priority of the lien.
(3) An assignment of a claim for wages, salary, or other
compensation of an employee.
(4) A sale of accounts, chattel paper, payment intangibles, or
promissory notes as part of a sale of the business out of which they
arose.
(5) An assignment of accounts, chattel paper, payment intangibles,
or promissory notes which is for the purpose of collection only.
(6) An assignment of a right to payment under a contract to an
assignee that is also obligated to perform under the contract.
(7) An assignment of a single account, payment intangible, or
promissory note to an assignee in full or partial satisfaction of a
preexisting indebtedness.
(8) Any loan made by an insurance company pursuant to the
provisions of a policy or contract issued by it and upon the sole
security of the policy or contract.
(9) An assignment of a right represented by a judgment, other than
a judgment taken on a right to payment that was collateral.
(10) A right of recoupment or setoff, provided that both of the
following sections apply:
(A) Section 9340 applies with respect to the effectiveness of
rights of recoupment or setoff against deposit accounts.
(B) Section 9404 applies with respect to defenses or claims of an
account debtor.
(11) The creation or transfer of an interest in or lien on real
property, including a lease or rents thereunder, except to the extent
that provision is made for each of the following:
(A) Liens on real property in Sections 9203 and 9308.
(B) Fixtures in Section 9334.
(C) Fixture filings in Sections 9501, 9502, 9512, 9516, and 9519.
(D) Security agreements covering personal and real property in
Section 9604.
(12) An assignment of a claim arising in tort, other than a
commercial tort claim, but Sections 9315 and 9322 apply with respect
to proceeds and priorities in proceeds.
(13) An assignment of a deposit account in a consumer transaction,
but Sections 9315 and 9322 apply with respect to proceeds and
priorities in proceeds.
(14) Any security interest created by the assignment of the
benefits of any public construction contract under the Improvement
Act of 1911 (Division 7 (commencing with Section 5000) of the Streets
and Highways Code).
(15) Transition property, as defined in Section 840 of the Public
Utilities Code, except to the extent that the provisions of this
division are referred to in Article 5.5 (commencing with Section 840)
of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code,
and recovery property, as defined in Section 848 of the Public
Utilities Code, except to the extent that the provisions of this
division are referred to in Article 5.6 (commencing with Section 848)
of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code.
(16) A claim or right of an employee or employee's dependents to
receive workers' compensation under Division 1 (commencing with
Section 50) or Division 4 (commencing with Section 3200) of the Labor
Code.
(17) A transfer by a government or governmental unit.
SEC. 5. Article 5.6 (commencing with Section 848) is added to
Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to
read:
Article 5.6. Financing Utility Recovery
848. For the purposes of this article, the following terms shall
have the following meanings:
(a) "Consumer" means any individual, governmental body, trust,
business entity or nonprofit organization which consumes electricity
that has been transmitted or distributed by means of electric
transmission or distribution facilities, whether those electric
transmission or distribution facilities are owned by the consumer,
the recovery corporation, or any other party.
(b) "Financing entity" means the recovery corporation or any
subsidiary or affiliate of the recovery corporation that is
authorized by the commission to issue recovery bonds or acquire
recovery property, or both.
(c) "Financing order" means an order of the commission adopted in
accordance with this article, which shall include, without
limitation, a procedure to require the expeditious approval by the
commission of periodic adjustments to fixed recovery amounts and to
any associated fixed recovery tax amounts included in that financing
order to ensure recovery of all recovery costs and the costs
associated with the proposed recovery, financing, or refinancing
thereof, including the costs of servicing and retiring the recovery
bonds contemplated by the financing order.
(d) "Fixed recovery amounts" means those nonbypassable rates and
other charges, including, but not limited to, distribution,
connection, disconnection, and termination rates and charges, that
are authorized by the commission in a financing order to recover (1)
recovery costs specified in the financing order, and (2) the costs of
recovering, financing, or refinancing those recovery costs through a
plan approved by the commission in the financing order, including
the costs of servicing and retiring recovery bonds.
(e) "Fixed recovery tax amounts" means those nonbypassable rates
and other charges, including, but not limited to, distribution,
connection, disconnection, and termination rates and charges, that
are needed to recover federal and State of California income and
franchise taxes associated with fixed recovery amounts authorized by
the commission in the financing order and that are not financed from
proceeds of recovery bonds.
(f) "Local publicly owned electric utility" means a local publicly
owned electric utility as defined in Section 9604.
(g) "Recovery bonds" means bonds, notes, certificates of
participation or beneficial interest, or other evidences of
indebtedness or ownership, issued pursuant to an executed indenture
or other agreement of a financing entity, the proceeds of which are
used, directly or indirectly, to recover, finance, or refinance
recovery costs, and that are directly or indirectly secured by, or
payable from, recovery property.
(h) "Recovery corporation" means Pacific Gas and Electric Company,
the electrical corporation described in the commission's Decision
No. 03-12-035.
(i) "Recovery costs" means (1) the unamortized balance of the
regulatory asset arising and existing pursuant to the commission's
Decision No. 03-12-035, (2) federal and State of California income
and franchise taxes associated with recovery of the unamortized
balance of that regulatory asset, (3) costs of issuing recovery
bonds, and (4) professional fees, consultant fees, redemption
premiums, tender premiums and other costs incurred by the recovery
corporation in using proceeds of recovery bonds to acquire
outstanding securities of the recovery corporation.
(j) (1) "Recovery property" means the property right created
pursuant to this article, including, without limitation, the right,
title, and interest of the recovery corporation or its transferee:
(A) In and to the tariff established pursuant to a financing
order, as adjusted from time to time in accordance with Section 848.1
and the financing order.
(B) To be paid the amount that is determined in a financing order
to be the amount that the recovery corporation or its transferee is
lawfully entitled to receive pursuant to the provisions of this
article and the proceeds thereof, and in and to all revenues,
collections, claims, payments, money, or proceeds of or arising from
the tariff or constituting fixed recovery amounts that are the
subject of a financing order including those nonbypassable rates and
other charges referred to in subdivision (d).
(C) In and to all rights to obtain adjustments to the tariff
relating to fixed recovery amounts pursuant to the terms of Section
848.1 and the financing order.
(2) "Recovery property" shall not include the right to be paid
fixed recovery tax amounts.
(3) "Recovery property" shall constitute a current property right
notwithstanding the fact that the value of the property right will
depend on consumers using electricity or, in those instances where
consumers are customers of the recovery corporation, the recovery
corporation performing certain services.
(k) "Service territory" means the geographical area that the
recovery corporation provided with electric distribution service as
of December 19, 2003.
848.1. (a) No later than 120 days after the effective date of
this article, and from time to time thereafter, the recovery
corporation shall apply to the commission for a determination that
some or all of the recovery corporation's recovery costs may be
recovered through fixed recovery amounts, which would be recovery
property under this article, and that any portion of the recovery
corporation's federal and State of California income and franchise
taxes associated with those fixed recovery amounts and not financed
from proceeds of recovery bonds be recovered through fixed recovery
tax amounts. The recovery corporation may request this determination
by the commission in a separate proceeding or in an existing
proceeding, or both. The recovery corporation shall in its
application specify that consumers within its service territory would
benefit from reduced rates on a present value basis through the
issuance of recovery bonds. The commission shall designate fixed
recovery amounts and any associated fixed recovery tax amounts as
recoverable in one or more financing orders if the commission
determines, as part of its findings in connection with the financing
order, that the designation of the fixed recovery amounts and any
associated fixed recovery tax amounts, and the issuance of recovery
bonds in connection with fixed recovery amounts, would reduce the
rates on a present value basis that consumers within the recovery
corporation's service territory would pay if the financing order were
not adopted. Fixed recovery amounts and any associated fixed
recovery tax amounts shall only be imposed on existing and future
consumers in the service territory. Consumers within the service
territory shall continue to pay fixed recovery amounts and any
associated fixed tax recovery amounts until the recovery bonds are
paid in full by the financing entity. Once the recovery bonds have
been paid in full, the payment by consumers of fixed recovery amounts
and fixed recovery tax amounts shall terminate.
(b) The commission shall establish an effective mechanism that
ensures recovery of recovery costs through fixed recovery amounts and
any associated fixed recovery tax amounts from all
exiting and future consumers in the service
territory that receive electric distribution services from
the recovery corporation on or after January 1, 2000;
, provided that the costs shall not be recoverable from
(1) new any of the following:
(1) New load or incremental load of an existing consumer of
the recovery corporation where the load is being met through a direct
transaction and the transaction does not require the use of
transmission or distribution facilities owned by the recovery
corporation, (2) corporation.
(2) Customer Generation departing load that is exempt from
Department of Water Resources power charges pursuant to the
commission's Decision No. 03-04-030, as modified by Decision No.
03-04-041, and as clarified and affirmed by Decision No. 03-05-039,
except that the load shall pay the costs as a component of and in
proportion to any purchase of electricity delivered by the recovery
corporation under standby or other service made following its
departure, or (3) the departure.
(3) The Department of Water Resources, with respect to the
pumping, generation, and transmission facilities and operations of
the State Water Resources Development System, except to the extent
that system facilities receive electric service from the recovery
corporation on or after December 19, 2003, under a commission
approved tariff. The obligation of a consumer that has
received electric service from the recovery corporation on or after
January 1, 2000, to pay fixed recovery amounts and any associated
fixed recovery tax amounts cannot be avoided by the formation of a
local publicly owned electric utility on or after December 19, 2003,
or by annexation of any portion of the service territory of the
recovery corporation by an existing local publicly owned electric
utility.
(c)
(4) Retail electric load, continuously served by a local publicly
owned electric utility from January 1, 2000, through the effective
date of the act adding this section.
(5) Load that thereafter comes to take electric service from a
city where all the following conditions are met:
(A) The new load is from locations that never received electric
service from the recovery corporation.
(B) The city owns and operates the local publicly owned electric
utility.
(C) The local publicly owned electric utility served more than 95
percent of the customers receiving electric service residing within
the city limits prior to December 19, 2003.
(D) The city annexed the territory in which the load is located on
or after December 19, 2003.
(E) Following annexation, the city provides all municipal services
to the annexed territory that the city provides to other territory
within the city limits, including electric service.
(F) The total load exempt from paying fixed recovery amounts and
associated fixed recovery tax amounts pursuant to subparagraphs (A)
through (D), inclusive, does not exceed 50 megawatts, as determined
by the commission, and any load above the 50 megawatt exemption
amount shall be responsible for paying recovery amounts and
associated fixed recovery tax amounts, except as provided in
subdivision (c).
(c) Except as provided in paragraphs (4) and (5) of subdivision
(b), the commission shall determine the extent to which fixed
recovery amounts and any associated fixed recovery tax amounts are
recoverable from new municipal load, consistent with the commission's
determination in the limited rehearing granted in Decision
03-08-076. The determination of the commission shall be made on the
earlier of the date it adopts a financing order or December 31, 2004.
(d) Except as provided in paragraphs (4) and (5) of subdivision
(b) and in subdivision (c), the obligation to pay fixed recovery
amounts and any associated fixed recovery tax amounts cannot be
avoided by the formation of a local publicly owned electric utility
on or after December 19, 2003, or by annexation of any portion of the
service territory of the recovery corporation by an existing local
publicly owned electric utility.
(e) Recovery bonds authorized by the commission's financing
orders may be issued in one or more series on or before December 31,
2006.
(d)
(f) The commission may issue financing orders in accordance
with this article to facilitate the recovery, financing, or
refinancing of recovery costs. A financing order may be adopted only
upon the application of the recovery corporation and shall become
effective in accordance with its terms only after the recovery
corporation files with the commission the recovery corporation's
written consent to all terms and conditions of the financing order.
A financing order may specify how amounts collected from a consumer
shall be allocated between fixed recovery amounts, any associated
fixed recovery tax amounts, and other charges.
(e)
(g) Notwithstanding Section 455.5 or 1708, or any other
provision of law, except as otherwise provided in this subdivision
with respect to recovery property that has been made the basis for
the issuance of recovery bonds and with respect to any associated
fixed recovery tax amounts, the financing order, the fixed recovery
amounts and any associated fixed recovery tax amounts shall be
irrevocable, and the commission shall not have authority either by
rescinding, altering, or amending the financing order or otherwise,
to revalue or revise for ratemaking purposes, the recovery costs or
the costs of recovering, financing, or refinancing the recovery
costs, determine that the fixed recovery amounts, any associated
fixed recovery tax amounts or rates are unjust or unreasonable, or in
any way reduce or impair the value of recovery property or of the
right to receive any associated fixed recovery tax amounts either
directly or indirectly by taking fixed recovery amounts or any
associated fixed recovery tax amounts into account when setting other
rates for the recovery corporation or when setting charges for the
Department of Water Resources; nor shall the amount of revenues
arising with respect thereto be subject to reduction, impairment,
postponement, or termination. Except as otherwise provided in this
subdivision, the State of California does hereby pledge and agree
with the recovery corporation, owners of recovery property, and
holders of recovery bonds that the state shall neither limit nor
alter the fixed recovery amounts, any associated fixed recovery tax
amounts, recovery property, financing orders, or any rights
thereunder until the recovery bonds, together with the interest
thereon, are fully paid and discharged, and any associated fixed
recovery tax amounts have been satisfied or, in the alternative, have
been refinanced through an additional issue of recovery bonds;
provided nothing contained in this section shall preclude the
limitation or alteration if and when adequate provision shall be made
by law for the protection of the recovery corporation, owners, and
holders. The financing entity is authorized to include this pledge
and undertaking for the state in these recovery bonds.
Notwithstanding any other provision of this section, the commission
shall approve adjustments to the fixed recovery amounts and any
associated fixed recovery tax amounts as may be necessary to ensure
timely recovery of all recovery costs that are the subject of the
pertinent financing order, and the costs of capital associated with
the recovery, financing, or refinancing thereof, including servicing
and retiring the recovery bonds contemplated by the financing order.
When setting other rates for the recovery corporation, nothing in
this subdivision shall prevent the commission from taking into
account (1) any either of the following:
(1) Any collection of fixed recovery amounts in excess of
amounts actually required to pay recovery costs financed or
refinanced by recovery bonds , or (2) any .
(2) Any collection of fixed recovery tax amounts in excess
of amounts actually required to pay federal and State of California
income and franchise taxes associated with fixed recovery amounts;
provided that this would not result in a recharacterization of the
tax, accounting, and other intended characteristics of the financing,
including, but not limited to, either of the following:
(A) Treating the recovery bonds as debt of the recovery
corporation or its affiliates for federal income tax purposes.
(B) Treating the transfer of the recovery property by the recovery
corporation as a true sale for bankruptcy purposes.
(f)
(h) (1) Financing orders issued under this article do not
constitute a debt or liability of the state or of any political
subdivision thereof, and do not constitute a pledge of the full faith
and credit of the state or any of its political subdivisions, but
are payable solely from
the funds provided therefor under this article and shall be
consistent with Sections 1 and 18 of Article XVI of the California
Constitution. This subdivision shall in no way preclude bond
guarantees or enhancements pursuant to this article. All recovery
bonds shall contain on the face thereof a statement to the following
effect: "Neither the full faith and credit nor the taxing power of
the State of California is pledged to the payment of the principal
of, or interest on, this bond."
(2) The issuance of recovery bonds under this article shall not
directly, indirectly, or contingently obligate the state or any
political subdivision thereof to levy or to pledge any form of
taxation therefor or to make any appropriation for their payment.
(g)
(i) The commission shall establish procedures for the
expeditious processing of applications for financing orders,
including the approval or disapproval thereof within 120 days of the
recovery corporation making application therefor. The commission
shall provide in any financing order for a procedure for the
expeditious approval by the commission of periodic adjustments to the
fixed recovery amounts and any associated fixed recovery tax amounts
that are the subject of the pertinent financing order, as required
by subdivision (e). The procedure shall require the commission to
determine whether the adjustments are required on each anniversary of
the issuance of the financing order, and at the additional intervals
as may be provided for in the financing order, and for the
adjustments, if required, to be approved within 90 days of each
anniversary of the issuance of the financing order, or of each
additional interval provided for in the financing order.
(h)
(j) Fixed recovery amounts are recovery property when, and to
the extent that, a financing order authorizing the fixed recovery
amounts has become effective in accordance with this article, and the
recovery property shall thereafter continuously exist as property
for all purposes with all of the rights and privileges of this
article for the period and to the extent provided in the financing
order, but in any event until the recovery bonds are paid in full,
including all principal, interest, premium, costs, and arrearages
thereon.
(i)
(k) This article and any financing order made pursuant to
this article do not amend, reduce, modify, or otherwise affect the
right of the Department of Water Resources to recover its revenue
requirements and to receive the charges that it is to recover and
receive pursuant to Division 27 (commencing with Section 80000) of
the Water Code, or pursuant to any agreement entered into by the
commission and the Department of Water Resources pursuant to that
division.
848.2. (a) The financing entity may issue recovery bonds upon
approval by the commission in the pertinent financing orders.
Recovery bonds shall be nonrecourse to the credit or any assets of
the recovery corporation, other than the recovery property as
specified in the pertinent financing order.
(b) The recovery corporation may sell and assign all or portions
of its interest in recovery property to one or more financing
entities that make that recovery property the basis for issuance of
recovery bonds, to the extent approved in the financing order. The
recovery corporation or financing entity may pledge recovery property
as collateral, directly or indirectly, for recovery bonds to the
extent approved in the pertinent financing orders providing for a
security interest in the recovery property, in the manner set forth
in Section 848.3. In addition, recovery property may be sold or
assigned by (1) the financing entity or a trustee for the holders of
recovery bonds in connection with the exercise of remedies upon a
default, or (2) any person acquiring the recovery property after a
sale or assignment pursuant to this subdivision.
(c) To the extent that any interest in recovery property is so
sold or assigned, or is so pledged as collateral, the commission
shall authorize the recovery corporation to contract with the
financing entity that it will continue to operate its system to
provide service to consumers within its service territory, will
collect amounts in respect of the fixed recovery amounts for the
benefit and account of the financing entity, and will account for and
remit these amounts to or for the account of the financing entity.
Contracting with the financing entity in accordance with that
authorization shall not impair or negate the characterization of the
sale, assignment, or pledge as an absolute transfer, a true sale, or
security interest, as applicable.
(d) Notwithstanding Section 1708 or any other provision of law,
any requirement under this article or a financing order that the
commission take action with respect to the subject matter of a
financing order shall be binding upon the commission, as it may be
constituted from time to time, and any successor agency exercising
functions similar to the commission, and the commission shall have no
authority to rescind, alter, or amend that requirement in a
financing order. The approval by the commission in a financing order
of the issuance by the recovery corporation or a financing entity of
recovery bonds shall include the approvals, if any, as may be
required by Article 5 (commencing with Section 816) and Section
701.5. Nothing in Section 701.5 shall be construed to prohibit the
issuance of recovery bonds upon the terms and conditions as may be
approved by the commission in a financing order. Section 851 is not
applicable to the transfer or pledge of recovery property, the
issuance of recovery bonds, or related transactions approved in a
financing order.
848.3. (a) A security interest in recovery property is valid, is
enforceable against the pledgor and third parties, subject to the
rights of any third parties holding security interests in the
recovery property perfected in the manner described in this section,
and attaches when all of the following have taken place:
(1) The commission has issued the financing order authorizing the
fixed recovery amounts included in the recovery property.
(2) Value has been given by the pledgees of the recovery property.
(3) The pledgor has signed a security agreement covering the
recovery property.
(b) A valid and enforceable security interest in recovery property
is perfected when it has attached and when a financing statement has
been filed in accordance with Chapter 5 (commencing with Section
9501) of Division 9 of the Commercial Code naming the pledgor of the
recovery property as "debtor" and identifying the recovery property.
Any description of the recovery property shall be sufficient if it
refers to the financing order creating the recovery property. A copy
of the financing statement shall be filed with the commission by the
recovery corporation that is the pledgor or transferor of the
recovery property, and the commission may require the recovery
corporation to make other filings with respect to the security
interest in accordance with procedures it may establish, provided
that the filings shall not affect the perfection of the security
interest.
(c) A perfected security interest in recovery property is a
continuously perfected security interest in all revenues and proceeds
arising with respect thereto, whether or not the revenues or
proceeds have accrued. Conflicting security interests shall rank
according to priority in time of perfection. Recovery property shall
constitute property for all purposes, including for contracts
securing recovery bonds, whether or not the revenues and proceeds
arising with respect thereto have accrued.
(d) Subject to the terms of the security agreement covering the
recovery property and the rights of any third parties holding
security interests in the recovery property perfected in the manner
described in this section, the validity and relative priority of a
security interest created under this section is not defeated or
adversely affected by the commingling of revenues arising with
respect to the recovery property with other funds of the recovery
corporation that is the pledgor or transferor of the recovery
property, or by any security interest in a deposit account of that
recovery corporation perfected under Division 9 (commencing with
Section 9101) of the Commercial Code into which the revenues are
deposited. Subject to the terms of the security agreement, upon
compliance with the requirements of paragraph (1) of subdivision (b)
of Section 9312 of the Commercial Code, the pledgees of the recovery
property shall have a perfected security interest in all cash and
deposit accounts of the recovery corporation in which revenues
arising with respect to the recovery property have been commingled
with other funds, but the perfected security interest shall be
limited to an amount not greater than the amount of the revenues with
respect to the recovery property received by the recovery
corporation within 12 months before (1) any default under the
security agreement or (2) the institution of insolvency proceedings
by or against the recovery corporation, less payments from the
revenues to the pledgees during that 12-month period.
(e) If an event of default occurs under the security agreement
covering the recovery property, the pledgees of the recovery
property, subject to the terms of the security agreement, shall have
all rights and remedies of a secured party upon default under
Division 9 (commencing with Section 9101) of the Commercial Code, and
are entitled to foreclose or otherwise enforce their security
interest in the recovery property, subject to the rights of any third
parties holding prior security interests in the recovery property
perfected in the manner provided in this section. In addition, the
commission may require in the financing order creating the recovery
property that, in the event of default by the recovery corporation in
payment of revenues arising with respect to the recovery property,
the commission and any successor thereto, upon the application by the
pledgees or transferees, including transferees under Section 848.4,
of the recovery property, and without limiting any other remedies
available to the pledgees or transferees by reason of the default,
shall order the sequestration and payment to the pledgees or
transferees of revenues arising with respect to the recovery
property. Any order shall remain in full force and effect
notwithstanding any bankruptcy, reorganization, or other insolvency
proceedings with respect to the debtor. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest, costs,
and arrearages on the recovery bonds, and other costs arising under
the security agreement, shall be remitted to the debtor.
(f) Sections 9204 and 9205 of the Commercial Code apply to a
pledge of recovery property by the recovery corporation, an affiliate
of the recovery corporation, or a financing entity.
(g) This section sets forth the terms by which a consensual
security interest can be created and perfected in the recovery
property. Unless otherwise ordered by the commission with respect to
any series of recovery bonds on or prior to the issuance of the
series, there shall exist a statutory lien as provided in this
subdivision. Upon the effective date of the financing order, there
shall exist a first priority lien on all recovery property then
existing or thereafter arising pursuant to the terms of the financing
order. This lien shall arise by operation of this section
automatically without any action on the part of the recovery
corporation, any affiliate thereof, the financing entity, or any
other person. This lien shall secure all obligations, then existing
or subsequently arising, to the holders of the recovery bonds issued
pursuant to the financing order, the trustee or representative for
the holders, and any other entity specified in the financing order.
The persons for whose benefit this lien is established shall, upon
the occurrence of any defaults specified in the financing order, have
all rights and remedies of a secured party upon default under
Division 9 (commencing with Section 9101) of the Commercial Code, and
are entitled to foreclose or otherwise enforce this statutory lien
in the recovery property. This lien attaches to the recovery property
regardless of who owns, or is subsequently determined to own, the
recovery property, including the recovery corporation, any affiliate
thereof, the financing entity, or any other person. This lien shall
be valid, perfected, and enforceable against the owner of the
recovery property and all third parties upon the effectiveness of the
financing order without any further public notice; provided,
however, that any person may, but is not required to, file a
financing statement in accordance with subdivision (b). Financing
statements so filed may be "protective filings" and are not evidence
of the ownership of the recovery property.
A perfected statutory lien in recovery property is a continuously
perfected lien in all revenues and proceeds arising with respect
thereto, whether or not the revenues or proceeds have accrued.
Conflicting liens shall rank according to priority in time of
perfection. Recovery property shall constitute property for all
purposes, including for contracts securing recovery bonds, whether or
not the revenues and proceeds arising with respect thereto have
accrued.
In addition, the commission may require, in the financing order
creating the recovery property, that, in the event of default by the
recovery corporation in the payment of revenues arising with respect
to recovery property, the commission and any successor thereto, upon
the application by the beneficiaries of the statutory lien, and
without limiting any other remedies available to the beneficiaries by
reason of the default, shall order the sequestration and payment to
the beneficiaries of revenues arising with respect to the recovery
property. Any order shall remain in full force and effect
notwithstanding any bankruptcy, reorganization, or other insolvency
proceedings with respect to the debtor. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest, costs,
and arrearages on the recovery bonds, and other costs arising in
connection with the documents governing the recovery bonds, shall be
remitted to the debtor.
848.4. (a) A transfer of recovery property by the recovery
corporation to an affiliate or to a financing entity, or by an
affiliate of the recovery corporation or a financing entity to
another financing entity, which the parties in the governing
documentation have expressly stated to be a sale or other absolute
transfer, in a transaction approved in a financing order, shall be
treated as an absolute transfer of all of the transferor's right,
title, and interest (as in a true sale), and not as a pledge or other
financing, of the recovery property, other than for federal and
state income and franchise tax purposes. The grant to holders of
recovery bonds of a preferred right to revenues of the recovery
corporation, or the provision by the company of other credit
enhancement with respect to recovery bonds, shall not impair or
negate the characterization of any transfer as a true sale, other
than for federal and state income and franchise tax purposes.
(b) A transfer of recovery property shall be deemed perfected as
against third persons when both of the following have taken place:
(1) The commission has issued the financing order authorizing the
fixed recovery amounts included in the recovery property.
(2) An assignment of the recovery property in writing has been
executed and delivered to the transferee.
(c) As between bona fide assignees of the same right for value
without notice, the assignee first filing a financing statement in
accordance with Chapter 5 (commencing with Section 9501) of Division
9 of the Commercial Code naming the assignor of the recovery property
as debtor and identifying the recovery property has priority. Any
description of the recovery property is sufficient if it refers to
the financing order creating the recovery property. A copy of the
financing statement shall be filed by the assignee with the
commission, and the commission may require the assignor or the
assignee to make other filings with respect to the transfer in
accordance with procedures it may establish, but these filings shall
not affect the perfection of the transfer.
848.5. Any successor to the recovery corporation, whether
pursuant to any bankruptcy, reorganization, or other insolvency
proceeding, or pursuant to any merger, sale, or transfer, by
operation of law, or otherwise, shall perform and satisfy all
obligations of the recovery corporation pursuant to this article in
the same manner and to the same extent as the recovery corporation,
including, but not limited to, collecting and paying to the holders
of recovery bonds, or their representatives, or the applicable
financing entity revenues arising with respect to the recovery
property sold to the applicable financing entity or pledged to secure
recovery bonds. Any successor to the recovery corporation is
entitled to receive any fixed recovery tax amounts otherwise payable
to the recovery corporation.
848.6. The authority of the commission to issue financing orders
pursuant to Section 848.1 shall expire on December 31, 2006. The
expiration of the authority shall have no effect upon financing
orders adopted by the commission pursuant to this article or any
recovery property arising therefrom, or upon the charges authorized
to be levied thereunder, or the rights, interests, and obligations of
the recovery corporation or a financing entity or holders of
recovery bonds pursuant to the financing order, or the authority of
the commission to monitor, supervise, or take further action with
respect to the order in accordance with the terms of this article and
of the order.
848.7. Notwithstanding subdivision (e) of Section 848.1, the
commission shall credit ratepayers, in a manner to be determined by
the commission, with the net after tax amount of any payments,
offsets, or other credits the recovery corporation actually receives
from generators of electricity or other energy suppliers that would
have reduced the unamortized balance of the recovery corporation's
regulatory asset created under the commission's Decision No.
03-12-035 but for the prior issuance of recovery bonds.
848.8. Notwithstanding any other law, regulations adopted to
implement this article are not subject to the rulemaking provisions
of the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code).
SEC. 6. Section 1731 of the Public Utilities Code is amended to
read:
1731. (a) The commission shall set an effective date when issuing
an order or decision. The commission may set the effective date of
an order or decision prior to the date of issuance of the order or
decision.
(b) After any order or decision has been made by the commission,
any party to the action or proceeding, or any stockholder or
bondholder or other party pecuniarily interested in the public
utility affected, may apply for a rehearing in respect to any matters
determined in the action or proceeding and specified in the
application for rehearing. The commission may grant and hold a
rehearing on those matters, if in its judgment sufficient reason is
made to appear. No cause of action arising out of any order or
decision of the commission shall accrue in any court to any
corporation or person unless the corporation or person has filed an
application to the commission for a rehearing within 30 days after
the date of issuance or within 10 days after the date of issuance in
the case of an order issued pursuant to either Article 5 (commencing
with Section 816) or Article 6 (commencing with Section 851) of
Chapter 4 relating to security transactions and the transfer or
encumbrance of utility property. For purposes of this article, "date
of issuance" means the date when the commission mails the order or
decision to the parties to the action or proceeding.
(c) No cause of action arising out of any order or decision of the
commission construing, applying, or implementing the provisions of
Chapter 4 of the Statutes of the 2001-02 First Extraordinary Session
shall accrue in any court to any corporation or person unless the
corporation or person has filed an application to the commission for
a rehearing within 10 days after the date of issuance of the order or
decision. The commission shall issue its decision and order on
rehearing within 20 days after the filing of that application.
(d) No cause of action arising out of any order or decision of the
commission construing, applying, or implementing the provisions of
Article 5.6 (commencing with Section 848) of Chapter 4 shall accrue
in any court to any corporation or person unless the corporation or
person has filed an application to the commission for a rehearing
within 10 days after the date of issuance of the order or decision.
The commission shall issue its decision and order on rehearing within
20 days after the filing of that application.
SEC. 7. Section 1769 is added to the Public Utilities Code, to
read:
1769. The following procedures shall apply to judicial review of
an order or decision of the commission interpreting, implementing, or
applying the provisions of Article 5.6 (commencing with Section 848)
of Chapter 4:
(a) Within 10 days after the commission issues its order or
decision denying the application for a rehearing, or, if the
application is granted, then within 10 days after the commission
issues its decision on rehearing, any aggrieved party may petition
for a writ of review in the California Supreme Court for the purpose
of determining the lawfulness of the original order or decision or of
the order or decision on rehearing. If the writ issues, it shall be
made returnable at a time and place specified by court order and
shall direct the commission to certify its record in the case to the
court within the time specified. No order of the commission
interpreting, implementing, or applying the provisions of Article 5.6
(commencing with Section 848) of Chapter 4 shall be subject to
review in the courts of appeal.
(b) The petition for review shall be served upon the executive
director of the commission either personally or by service at the
office of the commission.
(c) For purposes of this section, the issuance of a decision or
the granting of an application shall be construed to have occurred on
the date when the commission mails the decision or grant to the
parties to the action or proceeding.
(d) The Legislature hereby declares that if a writ issues in an
action under this section, delay in the determination of the writ
will delay implementation of a securitized financing, thereby
diminishing approximately $1 billion of total savings to Pacific Gas
and Electric Company's ratepayers that might be achieved if a
securitized financing were implemented immediately. Therefore, to
maximize ratepayer benefits, review under this section should be
expedited.
(e) The provisions of this article apply to actions under this
section to the extent that those provisions are not in conflict with
this section.
(f) This section shall remain in effect only until January 1, 2008,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2008, deletes or extends that date.
SEC. 8. The provisions of this act are severable. If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.
SEC. 9. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 10. The Legislature finds and declares that, because of the
unique circumstances applicable only to the Pacific Gas and Electric
Company bankruptcy, a statute of general applicability cannot be
enacted within the meaning of subdivision (b) of Section 16 of
Article IV of the California Constitution. Therefore, this special
statute is necessary.
SEC. 11. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
(a) In Decision 03-12-035, dated December 18, 2003, the California
Public Utilities Commission approved a modified settlement agreement
with Pacific Gas and Electric Company (PG&E) and PG&E Corporation
allowing PG&E to emerge from bankruptcy promptly.
(b) The modified settlement agreement authorizes PG&E to recover a
new regulatory asset and specified taxes from ratepayers.
(c) PG&E has agreed that, after emerging from bankruptcy, it will
seek to implement, as expeditiously as practical, a securitized
financing using a dedicated rate component to refinance the
unamortized amount of the regulatory asset and associated taxes,
provided several conditions are met.
(d) One of the conditions is that satisfactory authorizing
legislation is enacted.
(e) The California Public Utilities Commission estimates that
approximately $1 billion of total ratepayer savings might be achieved
if a securitized financing were implemented immediately for this
purpose.
(f) The amount of ratepayer savings will be reduced if the
securitized financing is delayed.
(g) To maximize ratepayer benefits within the service area of
PG&E, it is necessary for this act to take effect immediately.