Current through Reg. 50, No. 13; March 28, 2025
(a) Application. This section applies to
securitization transactions carried out by a river authority or electric
cooperative. A river authority or electric cooperative may adopt and use
securitization provisions having the effect of the provisions provided by the
Public Utility Regulatory Act (PURA), Chapter 39, Subchapter G, to recover its
stranded costs in accordance with this section.
(b) Definition of stranded costs.
(1) For electric cooperatives, the term
"stranded costs" when used in this section shall mean "stranded investment" as
defined in PURA §41.002(3).
(2) For river authorities, the term "stranded
costs" when used in this section shall mean the positive excess of the combined
net book value of generation assets over the combined market value of the
assets, taking into account all of the river authority's generation assets, any
above market purchased power costs, and any deferred debit related to a
utility's discontinuance of the application of Statement of Financial
Accounting Standards Number 71 ("Accounting for the Effects of Certain Types of
Regulation") for generation-related assets.
(c) Quantification of stranded costs. Only
those river authorities and electric cooperatives having positive stranded
costs as determined by this section may securitize such costs.
(1) For electric cooperatives, the board of
directors has the exclusive jurisdiction to reasonably determine the amount of
the electric cooperative's stranded investments.
(2) For river authorities, the governing body
shall determine the amount of stranded costs using an administrative model or
other reasonable methodology, and such determinations shall be subject to
review and approval by the commission.
(d) Demonstration of tangible and
quantifiable benefits to ratepayers. A river authority or electric cooperative
may not utilize securitization financing to recover stranded costs unless it
demonstrates that securitization provides tangible and quantifiable benefits to
ratepayers greater than would have been achieved absent the issuance of
transition bonds. Such demonstration shall be performed on an asset-by-asset
basis.
(e) Limit on amount of
qualified costs to be securitized. The amount securitized may not exceed the
sum of:
(1) the present value, calculated
using a discount rate equal to the proposed interest rate on the transition
bonds, of the revenue requirement over the life of the proposed transition
bonds associated with the stranded costs sought to be securitized,
and
(2) the costs of issuing,
supporting, and servicing the transition bonds and any costs of retiring and
refunding existing debt of the river authority or electric
cooperative.
(f) Use of
proceeds. The proceeds of the transition bonds shall be used solely for the
purpose of reducing the amount of recoverable stranded costs as determined
pursuant to this section, through the refinancing or retirement of debt of the
river authority or electric cooperative.
(g) True-up in the event of sale. A river
authority or electric cooperative shall not overrecover its stranded costs. If
the recovery of an asset has been securitized through a sale of transition
bonds, and the asset is subsequently sold in a bona fide third-party
transaction, then that asset shall be subject to true-up. To the extent the
total net value received from the sale of such asset exceeds its remaining book
value, the river authority or electric cooperative shall make refunds of the
entire overcollected amounts, with interest, to its ratepayers through an
appropriate mechanism.
(h) Recovery
of stranded costs. An electric cooperative or river authority may recover its
securitized stranded costs and the reasonable costs of issuing, supporting, and
servicing the transition bonds through a transition charge.
(1) Electric Cooperatives. An electric
cooperative may recover its stranded costs through transition charges from all
existing or future customers, including the facilities, premises and loads of
those customers taking service from the cooperative as of May 1, 1999. An
electric cooperative's board of directors has the exclusive jurisdiction to
establish non-discriminatory transition charges reasonably designed to recover
the stranded costs over an appropriate period of time consistent with this
section.
(2) River Authorities. A
river authority may recover its qualified costs, as defined in PURA, Chapter
39, Subchapter G, including its stranded costs as defined herein, through
transition charges reasonably designed to recover the stranded costs over an
appropriate period of time consistent with this section. Payment of transition
charges shall be made by customers taking service from the river authority as
of May 1, 1999 or those customers' successors or assigns. Transition charges of
a river authority in a financing order adopted pursuant to this section shall
be collected by the river authority, and such charges shall not be subject to
challenge provided that a river authority's determination as to the existence
and amount of stranded costs has been approved under subsections (b) and (c) of
this section.
(3) Transition
charges for both electric cooperatives and river authorities.
(A) The transition charge shall be sufficient
to recover the stranded costs at the level, up to 100%, deemed appropriate by
the electric cooperative or river authority.
(B) Any transition charges adopted in
accordance with this section shall constitute property rights, as described in
PURA, Chapter 39, Subchapter G, and otherwise conform in all material respects
to the transition charges provided by PURA, Chapter 39, Subchapter G.
(C) A river authority or electric cooperative
may recover a transition charge notwithstanding the expiration of a wholesale
contract.
(i)
Financing order. A cooperative or river authority which chooses to adopt and
use securitization provisions shall adopt a financing order consistent with
this section.
(1) The financing order shall
contain a finding that the present value total amount of revenues to be
collected under the financing order is less than the present value of the
revenue requirement that would be recovered over the remaining life of the
stranded costs using conventional financing methods.
(2) The financing order shall have the
effects of the provisions provided by PURA, Chapter 39, Subchapter G. The
effects shall be detailed in the financing order and shall include, but are not
limited to, provisions regarding property rights, set-off, security interests,
no bypass, true-up, true sale, and security interests.
(3) The financing order shall detail the
stranded costs to be recovered and the period over which the nonbypassable
transition charges shall be recovered, which period may not exceed 15
years.
(4) The financing order
shall detail how the proceeds from the transition bond are being used to
refinance or retire river authority or cooperative debt as prescribed by
subsection (f) of this section.
(5)
The financing order shall contain findings detailing the tangible and
quantifiable benefits as prescribed by subsection (d) of this
section.
(6) The financing order
shall contain a finding that the amount to be securitized does not exceed the
limit on qualified costs as prescribed in subsection (e) of this
section.
(7) The financing order
shall detail the allocation of the stranded costs to applicable classes and the
corresponding design of transition charges.
(8) The financing order shall provide for a
structure and pricing of the transition bonds that results in the lowest
transition charges consistent with market conditions.
(9) The financing order shall include a
mechanism requiring that transition charges be reviewed and adjusted at least
annually, within 45 days of the anniversary date of the issuance of the
transition bonds, to correct any overcollections or undercollections of the
preceding 12 months and to ensure the expected recovery of amounts sufficient
to timely provide all payments of debt service and other required amounts and
charges in connection with the transition bonds.
(10) The financing order shall become
effective in accordance with its terms, and the financing order, together with
the transition charges, shall thereafter be irrevocable and not subject to
reduction, impairment, or adjustment by further action of the cooperative,
river authority or the commission, except for periodic true-ups as specified in
this section.
(11) Findings made by
the governing body of the electric cooperative or river authority under the
rules and procedures described in this section shall be conclusive, subject to
the provisions of subsection (c)(2) of this section.
