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Key: Green = existing Code. Red = new code to be enacted
H. B. 2858
(By Delegates White, Cowles, Andes, Boggs, R. Phillips,
Marcum, Skaff, Craig and Storch)
[Introduced March 7, 2013; referred to the
Committee on Finance.]
A BILL to amend and reenact §24-2-4f of the Code of West Virginia,
1931, as amended, relating generally to consumer rate relief
bonds; correcting an internal reference to clarify that the
rate adjustment mechanism under subsection (k) is the
exception to the state's pledge not to reduce, alter or impair
consumer rate relief charges until all amounts to be paid to
an assignee or financing party are paid or performed in full.
Be it enacted by the Legislature of West Virginia:
That §24-2-4f of the Code of West Virginia, 1931, as amended,
be amended and reenacted to read as follows:
ARTICLE 2. POWERS AND DUTIES OF PUBLIC SERVICE COMMISSION.
§24-2-4f. Consumer rate relief bonds.
(a) Legislative findings. - The Legislature hereby finds and
declares as follows:
(1) That some electric utilities in the state have experienced
expanded net energy costs of a magnitude problematic to recover from their customers through the commission's traditional cost
recovery mechanisms, which have resulted in unusually large under-
recoveries;
(2) That the financing costs of carrying such under-recovery
balances and projected costs can be considerable;
(3) That the use of traditional utility financing mechanisms
to finance or refinance the recovery of such under-recovery
balances and projected costs may result in considerable additional
costs to be reflected in the approved rates of electric utility
customers;
(4) That customers of electric utilities in the state have an
interest in the electric utilities financing the costs of such
under-recovery balances and projected costs at a lower cost than
would be afforded by traditional utility financing mechanisms;
(5) That alternative financing mechanisms exist which can
result in lower costs and mitigate rate impacts to customers and
the use of these mechanisms can prove highly beneficial to such
customers; and
(6) That in order to use such alternative financing
mechanisms, the commission must be empowered to adopt a financing
order that advances these goals. The Legislature, therefore,
determines that it is in the interest of the state and its citizens
to encourage and facilitate the use of alternative financing
mechanisms that will enable electric utilities to finance or refinance expanded net energy costs at the lowest reasonably
practical cost under certain conditions and to empower the
commission to review and approve alternative financing mechanisms
when it determines that such approval is in the public interest, as
set forth in this section.
(b) Definitions. - As used in this section:
(1) "Adjustment mechanism" means a formula-based mechanism for
making adjustments to consumer rate relief charges to correct for
over-collection or under-collection of such charges or otherwise to
ensure the timely and complete payment and recovery of such charges
and financing costs. The adjustment mechanism shall accommodate:
(i) Standard adjustments to consumer rate relief charges that are
limited to relatively stable conditions of operations; and (ii)
nonstandard adjustments to consumer rate relief charges that are
necessary to reflect significant changes from historical conditions
of operations, such as the loss of significant electrical load. The
adjustment mechanism is not to be used as a means to authorize the
issuance of consumer rate relief bonds in a principal amount
greater, or the payment or recovery of expanded net energy costs in
an amount greater, than that which was authorized in the financing
order which established the adjustment mechanism.
(2) "Ancillary agreement" means a bond insurance policy letter
of credit, reserve account, surety bond, swap arrangement, hedging
arrangement, liquidity or credit support arrangement or other similar agreement or arrangement entered into in connection with
the issuance of consumer rate relief bonds that is designed to
promote the credit quality and marketability of the bonds or to
mitigate the risk of an increase in interest rates.
(3) "Assignee" means a person, corporation, limited liability
company, trust, partnership or other entity to which an interest in
consumer rate relief property is assigned, sold or transferred,
other than as security. The term also includes any entity to which
an assignee assigns, sells or transfers, other than as security,
the assignee's interest in or right to consumer rate relief
property.
(4) "Bond" includes debentures, notes, certificates of
participation, certificates of beneficial interest, certificates of
ownership or other evidences of indebtedness or ownership that are
issued by an electric utility or an assignee under a final
financing order, the proceeds of which are used directly or
indirectly to recover, finance, or refinance expanded net energy
costs and that are secured by or payable from revenues from
consumer rate relief charges.
(5) "Bondholder" means any holder or owner of a consumer rate
relief bond.
(6) "Commission" means the Public Service Commission of West
Virginia, as it may be constituted from time to time, and any
successor agency exercising functions similar in purpose thereto. (7) "Consumer rate relief charges" means the amounts which are
authorized by the commission in a financing order to be collected
from a qualifying utility's customers in order to pay and secure
the debt service payments of consumer rate relief bonds and
associated financing costs.
(8) "Consumer rate relief costs" means those costs, including
financing costs, which are to be defrayed through consumer rate
relief charges.
(9) "Consumer rate relief property" means the property,
rights, and interests of a qualifying utility or an assignee
under a final financing order, including the right to impose,
charge, and collect the consumer rate relief charges that shall be
used to pay and secure the payment of consumer rate relief bonds
and financing costs, and including the right to obtain adjustments
to those charges, and any revenues, receipts, collections, rights
to payment, payments, moneys, claims, or other proceeds arising
from the rights and interests created under the final financing
order.
(10) "Expanded net energy costs" means historical and, if
deemed appropriate by the commission, projected costs, inclusive of
carrying charges on under-recovery balances authorized by the
commission, including costs incurred prior to the effective date of
this statute, adjudicated pursuant to the commission's expanded net
energy cost proceedings, which have been authorized for recovery by an order of the commission, whether or not subject to judicial
appeal.
(11) "Financing costs" means any of the following:
(A) Principal, interest and redemption premiums that are
payable on consumer rate relief bonds;
(B) A payment required under an ancillary agreement;
(C) An amount required to fund or replenish a reserve account
or another account established under an indenture, ancillary
agreement or other financing document relating to consumer rate
relief bonds or the payment of any return on the capital
contribution approved by the commission to be made by a qualifying
utility to an assignee;
(D) Costs of retiring or refunding an existing debt and equity
securities of a qualifying utility in connection with the issuance
of consumer rate relief bonds but only to the extent the securities
were issued for the purpose of financing expanded net energy costs;
(E) Costs incurred by a qualifying utility to obtain
modifications of or amendments to an indenture, financing
agreement, security agreement, or similar agreement or instrument
relating to an existing secured or unsecured obligation of the
utility in connection with the issuance of consumer rate relief
bonds;
(F) Costs incurred by a qualifying utility to obtain a
consent, release, waiver, or approval from a holder of an obligation described in subparagraph (E) of this subdivision that
are necessary to be incurred for the utility to issue or cause the
issuance of consumer rate relief bonds;
(G) Taxes, franchise fees or license fees imposed on consumer
rate relief charges;
(H) Costs related to issuing or servicing consumer rate relief
bonds or related to obtaining a financing order, including
servicing fees and expenses, trustee fees and expenses, legal fees
and expenses, administrative fees, placement fees, underwriting
fees, capitalized interest and equity, rating-agency fees and other
related costs authorized by the commission in a financing order;
and
(I) Costs that are incurred by the commission for a financial
adviser with respect to consumer rate relief bonds.
(12) "Financing order" means an order issued by the commission
under subsection (e) of this section that authorizes a qualifying
utility to issue consumer rate relief bonds and recover consumer
rate relief charges. A financing order may set forth conditions or
contingencies on the effectiveness of the relief authorized therein
and may grant relief that is different from that which was
requested in the application.
(13) "Final financing order" means a financing order that has
become final and has taken effect as provided in subdivision (10)
of subsection (e) of this section.
(14) "Financing party" means either of the following:
(A) A trustee, collateral agent or other person acting for the
benefit of any bondholder; or
(B) A party to an ancillary agreement, the rights and
obligations of which relate to or depend upon the existence of
consumer rate relief property, the enforcement and priority of a
security interest in consumer rate relief property, the timely
collection and payment of consumer rate relief charges or a
combination of these factors.
(15) "Financing statement" has the same meaning as in section
one-hundred-two, article nine, chapter forty-six of this code.
(16) "Investment grade" means, with respect to the unsecured
debt obligations of a utility at any given time of determination,
a rating that is within the top four investment rating categories
as published by at least one nationally recognized statistical
rating organization as recognized by the United States Securities
and Exchange Commission.
(17) "Nonbypassable" means that the payment of consumer rate
relief charges may not be avoided by any West Virginia retail
customer of a qualifying utility or its successors and must be
paid by any such customer that receives electric delivery service
from such utility or its successors for as long as the consumer
rate relief bonds are outstanding.
(18) "Nonutility affiliate" means, with respect to any utility, a person that: (i) Is an affiliate of the utility as
defined in 42 U.S.C.§16451(1); and (ii) is not a public utility
that provides retail utility service to customers in the state
within the meaning of section two, article one of this chapter.
(19) "Parent" means, with respect to a utility, a registered
holding company or other person that holds a majority ownership or
membership interest in the utility.
(20) "Qualifying utility" means a public utility engaged in
the sale of electric service to retail customers in West Virginia
which has applied for and received from the commission a final
financing order under this section, including an affiliated
electric public utility which has applied jointly for and received
such an order.
(21) "Registered holding company" means, with respect to a
utility, a person that is: (i) A registered holding company as
defined in 42 U.S.C.§16451(8); and (ii) an affiliate of the utility
as defined in 42 U.S.C.§16451(1).
(22) "Regulatory sanctions" means, under the circumstances
presented, a regulatory or ratemaking sanction or penalty that the
commission is authorized to impose pursuant to this chapter or any
proceeding for the enforcement of any provision of this chapter or
any order of the commission that the commission is authorized to
pursue or conduct pursuant to this chapter, including without
limitation: (i) The initiation of any proceeding in which the utility is required to show cause why it should not be required to
comply with the terms and conditions of a financing order or the
requirements of this section; (ii) the imposition of penalties
pursuant to article four of this chapter; and (iii) a proceeding by
mandamus, injunction or other appropriate proceeding as provided in
section two of this article.
(23) "Successor" means, with respect to an entity, another
entity that succeeds by operation of law to the rights and
obligations of the first legal entity pursuant to any bankruptcy,
reorganization, restructuring, or other insolvency proceeding, any
merger, acquisition, or consolidation, or any sale or transfer of
assets, regardless of whether any of these occur as a result of a
restructuring of the electric power industry or otherwise.
(c) Application for financing order.
(1) If an electric utility or affiliate obtains from the
commission an authorization or waiver required by any other
provision of this chapter or by commission order with respect to
the underlying expanded net energy costs proposed to be financed
through the mechanism of consumer rate relief bonds, an electric
utility, or two or more affiliated electric utilities engaged in
the delivery of electric service to customers in this state, may
apply to the commission for a financing order that authorizes the
following:
(A) The issuance of consumer rate relief bonds, in one or more series, to recover only those expanded net energy costs that could
result in an under-recovery;
(B) The imposition, charging, and collection of consumer rate
relief charges, in accordance with the adjustment mechanism
approved by the commission under subparagraph (E), subdivision (6),
subsection (e) of this section to recover sufficient amounts to pay
and secure the debt service payments of consumer rate relief bonds
and associated financing costs; and
(C) The creation of consumer rate relief property under the
financing order.
(2) The commission may only consider applications made
pursuant to this subsection for the recovery of underlying expanded
net energy costs that would be reflected in schedules of rates
filed in calendar year 2012.
(d) Information required in application for financing order.
The application shall include all of the following:
(1) A description and quantification of the uncollected
expanded net energy costs that the electric utility seeks to
recover through the issuance of consumer rate relief bonds;
(2) An estimate of the date each series of consumer rate
relief bonds is expected to be issued;
(3) The expected term during which the consumer rate relief
costs for each series of consumer rate relief bonds are expected
to be recovered;
(4) An estimate of the financing costs associated with the
issuance of each series of consumer rate relief bonds;
(5) An estimate of the amount of consumer rate relief charges
necessary to recover the consumer rate relief costs set forth in
the application and the calculation for that estimate, which
calculation shall take into account the estimated date or dates of
issuance and the estimated principal amount of each series of
consumer rate relief bonds;
(6) A proposed methodology for allocating consumer rate relief
charges between and within tariff schedules and to special contract
customers;
(7) A description of a proposed adjustment mechanism,
reflecting the allocation methodology in subdivision (6) of this
subsection;
(8) A description of the benefits to the qualifying utility's
customers that are expected to result from the issuance of the
consumer rate relief bonds, including a demonstration that the
bonds and their financing costs are just and reasonable and are
reasonably expected to achieve the lowest reasonably attainable
cost in order to produce cost savings to customers and to mitigate
rate impacts on customers, as compared to traditional financing
mechanisms or traditional cost-recovery methods available to the
electric utility; and
(9) Other information required by commission rules.
(e) Issuance of financing order.
(1) Except as otherwise provided in this section, proceedings
on an application submitted by an electric utility under subsection
(c) of this section are governed by the commission's standard
procedural rules. Any party that participated in a proceeding in
which the subject expanded net energy costs were authorized or
approved automatically has standing to participate in the financing
order proceedings and the commission shall determine the standing
or lack of standing of any other petitioner for party status.
(2) Within thirty days after the filing of an application
under subsection (c) of this section, the commission shall issue a
scheduling order for the proceeding.
(3) At the conclusion of proceedings on an application
submitted by an electric utility under subsection (c) of this
section, the commission shall issue either a financing order,
granting the application, in whole or with modifications, or an
order denying the application.
(4) The commission may issue a financing order under this
subsection if the commission finds that the issuance of the
consumer rate relief bonds and the consumer rate relief charges
authorized by the order are just and reasonable and are reasonably
expected to achieve the lowest reasonably attainable cost in order
to produce cost savings to customers and to mitigate rate impacts
on customers, as compared to traditional financing mechanisms or traditional cost-recovery methods available to the electric
utility.
(5) The commission shall include all of the following in a
financing order issued under this subsection:
(A) A determination of the maximum amount and a description of
the expanded net energy costs that may be recovered through
consumer rate relief bonds issued under the financing order;
(B) A description of consumer rate relief property, the
creation of which is authorized by the financing order;
(C) A description of the financing costs that may be recovered
through consumer rate relief charges and the period over which
those costs may be recovered;
(D) A description of the methodology and calculation for
allocating consumer rate relief charges between and within tariff
schedules and to special contract customers;
(E) A description and approval of the adjustment mechanism for
use in the imposition, charging, and collection of the consumer
rate relief charges, including: (i) The allocation referred to in
paragraph (D) of this subdivision and (ii) any specific
requirements for adjusting and reconciling consumer rate relief
charges for standard adjustments that are limited to relatively
stable conditions of operations and nonstandard adjustments that
are necessary to reflect significant changes from historical
conditions of operations, such as the loss of substantial electrical load, so long as each and every application of the
adjustment mechanism is designed to assure the full and timely
payment of consumer rate relief bonds and associated financing
costs.
(F) The maximum term of the consumer rate relief bonds;
(G) A finding that the issuance of the consumer rate relief
bonds, including financing costs, is just and reasonable and are
reasonably expected to achieve the lowest reasonably attainable
cost in order to produce cost savings to customers and to mitigate
rate impacts on customers, as compared to traditional financing
mechanisms or traditional cost-recovery methods available to the
electric utility; and
(H) Any other provision the commission considers appropriate
to ensure the full and timely imposition, charging, collection and
adjustment, pursuant to an approved adjustment mechanism, of the
consumer rate relief charges.
(6) To the extent the commission deems appropriate and
compatible with the issuance advice letter procedure under
subdivision (9) of this subsection, the commission, in a financing
order, shall afford the electric utility flexibility in
establishing the terms and conditions for the consumer rate relief
bonds to accommodate changes in market conditions, including
repayment schedules, interest rates, financing costs, collateral
requirements, required debt service and other reserves, and the ability of the qualifying utility, at its option, to effect a
series of issuances of consumer rate relief bonds and correlated
assignments, sales, pledges, or other transfers of consumer rate
relief property. Any changes made under this subdivision to terms
and conditions for the consumer rate relief bonds shall be in
conformance with the financing order.
(7) A financing order shall provide that the creation of
consumer rate relief property shall be simultaneous with the sale
of that property to an assignee as provided in the application and
the pledge of the property to secure consumer rate relief bonds.
(8) The commission, in a financing order, shall require that,
after the final terms of each issuance of consumer rate relief
bonds have been established, and prior to the issuance of those
bonds, the qualifying utility shall determine the resulting initial
consumer rate relief charges in accordance with the adjustment
mechanism described in the financing order. These consumer rate
relief charges shall be final and effective upon the issuance of
the consumer rate relief bonds, without further commission action.
(9) Because the actual structure and pricing of the consumer
rate relief bonds will not be known at the time the financing order
is issued, in the case of every securitization approved by the
commission, the qualifying utility which intends to cause the
issuance of such bonds will provide to the commission and the
commission's financial adviser, if any, prior to the issuance of the bonds, an issuance advice letter following the determination of
the final terms of the bonds. The issuance advice letter shall
indicate the final structure of the consumer rate relief bonds and
provide the best available estimate of total ongoing costs. The
issuance advice letter should report the initial consumer rate
relief charges and other information specific to the consumer rate
relief bonds to be issued, as the financing order may require. The
qualifying utility may proceed with the issuance of the consumer
rate relief bonds unless, prior to noon on the fourth business day
after the commission receives the issuance advice letter, the
commission issues a disapproval letter directing that the bonds as
proposed shall not be issued and the basis for that disapproval.
The financing order may provide such additional provisions relating
to the issuance advice letter process as the commission deems
appropriate.
(10) An order of the commission issued pursuant to this
subsection is a final order of the commission. Any party aggrieved
by the issuance of any such order may petition for suspension and
review thereof by the Supreme Court of Appeals pursuant to section
one, article five of this chapter. In the case of a petition for
suspension and review, the Supreme Court of Appeals shall proceed
to hear and determine the action as expeditiously as practicable
and give the action precedence over other matters not accorded
similar precedence by law.
(11) The financing order shall also provide for a procedure
requiring the qualifying utility to adjust its rates or provide
credits in a manner that would return to customers any overpayments
resulting from the securitization for the expanded net energy costs
in excess of actual prudently incurred costs as subsequently
determined by the commission. The adjustment mechanism may not
affect or impair the consumer rate relief property or the right to
impose, collect, or adjust the consumer rate relief charges under
this section.
(12) The commission may require, as a condition to the
effectiveness of the financing order but in every circumstance
subject to the limitations set forth in subdivision (3), subsection
(g) of this section, that the qualifying utility give appropriate
assurances to the commission that the qualifying utility and its
parent will abide by the following conditions during any period in
which any consumer rate relief bonds issued pursuant to the
financing order are outstanding, in addition to any other
obligation either may have under this code or federal law. Without
first obtaining the prior consent and approval of the commission,
the qualifying utility will not:
(A) Lend money, directly or indirectly, to a registered
holding company or a nonutility affiliate; or
(B) Guarantee the obligations of a registered holding company
or a nonutility affiliate.
(13) A financing order may require the qualifying utility to
file with the commission a periodic report showing the receipt and
disbursement of proceeds of consumer rate relief bonds and consumer
rate relief charges. A financing order may authorize the staff of
the commission to review and audit the books and records of the
qualifying utility relating to the receipt and disbursement of such
proceeds. The provisions of this subdivision do not limit the
authority of the commission under this chapter to investigate the
practices of the qualifying utility or to audit the books and
records of the qualifying utility.
(14) In the case of two or more affiliated utilities that have
jointly applied for a financing order as provided in subdivision
(1), subsection (c) of this section, a financing order may
authorize each affiliated utility to impose consumer rate relief
charges on its customers and to cause to be issued consumer rate
relief bonds and to receive and use the proceeds which it receives
with respect thereto as provided in subdivision (1), subsection (j)
of this section.
(15) The commission, in its discretion, may engage the
services of a financial adviser for the purpose of assisting the
commission in its consideration of an application for a financing
order and a subsequent issuance of consumer rate relief bonds
pursuant to a financing order.
(f) Allowed disposition of consumer rate relief property.
(1) The consumer rate relief property created in a final
financing order may be transferred, sold, conveyed or assigned to
any affiliate of the qualifying utility created for the limited
purpose of acquiring, owning or administering that property,
issuing consumer rate relief bonds under the final financing order
or a combination of these purposes.
(2) All or any portion of the consumer rate relief property
may be pledged to secure the payment of consumer rate relief bonds,
amounts payable to financing parties and bondholders, amounts
payable under any ancillary agreement and other financing costs.
(3) A transfer, sale, conveyance, assignment, grant of a
security interest in or pledge of consumer rate relief property by
a qualifying utility to an affiliate of the utility, to the extent
previously authorized in a financing order, does not require the
prior consent and approval of the commission under section twelve
of this article.
(4) The consumer rate relief property constitutes an existing,
present property right, notwithstanding any requirement that the
imposition, charging, and collection of consumer rate relief
charges depend on the qualifying utility continuing to deliver
retail electric service or continuing to perform its servicing
functions relating to the billing and collection of consumer rate
relief charges or on the level of future energy consumption. That
property exists regardless of whether the consumer rate relief charges have been billed, have accrued or have been collected and
notwithstanding any requirement that the value or amount of the
property is dependent on the future provision of service to
customers by the qualifying utility.
(5) All such consumer rate relief property continues to exist
until the consumer rate relief bonds issued under the final
financing order are paid in full and all financing costs relating
to the bonds have been paid in full.
(g) Final financing order to remain in effect.
(1) A final financing order remains in effect until the
consumer rate relief bonds issued under the final financing order
and all financing costs related to the bonds have been paid in
full.
(2) A final financing order remains in effect and unabated,
notwithstanding the bankruptcy, reorganization or insolvency of the
qualifying utility, or any affiliate of the qualifying utility, or
the commencement of any judicial or nonjudicial proceeding on the
final financing order.
(3) A final financing order is irrevocable and the commission
may not reduce, impair, postpone or terminate the consumer rate
relief charges authorized in the final financing order or impair
the property or the collection or recovery of consumer rate relief
costs.
(h) Subsequent commission proceeding.
Upon petition, or upon its own motion, the commission may
commence a proceeding and issue a subsequent financing order that
provides for retiring and refunding consumer rate relief bonds
issued under the final financing order if the commission finds that
the subsequent financing order satisfies all of the requirements of
subsection (e) of this section. Effective on retirement of the
refunded consumer rate relief bonds and the issuance of new
consumer rate relief bonds, the commission shall adjust the related
consumer rate relief charges accordingly.
(i) Limits on commission authority.
(1) The commission, in exercising its powers and carrying out
its duties regarding regulation and ratemaking, may not do any of
the following:
(A) Consider consumer rate relief bonds issued under a final
financing order to be the debt of the qualifying utility;
(B) Consider the consumer rate relief charges imposed, charged
or collected under a final financing order to be revenue of the
qualifying utility; or
(C) Consider the consumer rate relief costs or financing costs
authorized under a final financing order to be costs of the
qualifying utility.
(2) The commission may not order or otherwise require,
directly or indirectly, an electric utility to use consumer rate
relief bonds to finance the recovery of expanded net energy costs.
(3) The commission may not refuse to allow the recovery of
expanded net energy costs solely because an electric utility has
elected or may elect to finance those costs through a financing
mechanism other than the issuance of consumer rate relief bonds.
(4) If a qualifying utility elects not to finance such costs
through the issuance of consumer rate relief bonds as authorized in
a final financing order, those costs shall be recovered as
authorized by the commission previously or in subsequent
proceedings.
(j) Duties of qualifying utility.
(1) A qualifying utility shall cause the proceeds which it
receives with respect to consumer rate relief bonds issued pursuant
to a financing order to be used for the recovery of the expanded
net energy costs which occasioned the issuance of the bonds,
including the retirement of debt and/or equity of the qualifying
utility which was incurred to finance or refinance such costs and
for no other purpose.
(2) A qualifying utility shall annually provide a plain-
English explanation of the consumer rate relief charges approved in
the financing order, as modified by subsequent issuances of
consumer rate relief bonds authorized under the financing order, if
any, and by application of the adjustment mechanism as provided in
subsection (k) of this section. These explanations may be made by
bill inserts, website information or other appropriate means as required, or approved if proposed by the qualifying utility, by the
commission.
(3) Collected consumer rate relief charges shall be applied
solely to the repayment of consumer rate relief bonds and other
financing costs.
(4) The failure of a qualifying utility to apply the proceeds
which it receives with respect to an issuance of consumer rate
relief bonds in a reasonable, prudent and appropriate manner or
otherwise comply with any provision of this section does not
invalidate, impair or affect any financing order, consumer rate
relief property, consumer rate relief charges or consumer rate
relief bonds. Subject to the limitations set forth in subsection
(g) of this section, nothing in this subdivision prevents or
precludes the commission from imposing regulatory sanctions against
a qualifying utility for failure to comply with the terms and
conditions of a financing order or the requirements of this
section.
(k) Application of adjustment mechanism; filing of schedules
with commission.
(1) A qualifying utility shall file with the commission, and
the commission shall approve, with or without such modification as
is allowed under this subsection, at least annually, or more
frequently as provided in the final financing order, a schedule
applying the approved adjustment mechanism to the consumer rate relief charges authorized under the final financing order, based on
estimates of demand and consumption for each tariff schedule and
special contract customer and other mathematical factors. The
qualifying utility shall submit with the schedule a request for
approval to make the adjustments to the consumer rate relief
charges in accordance with the schedule.
(2) On the same day a qualifying utility files with the
commission its calculation of the adjustment, it shall cause notice
of the filing to be given, in the form specified in the financing
order, as a Class I legal advertisement in compliance with the
provisions of article three, chapter fifty-nine of this code in a
newspaper of general circulation published each weekday in Kanawha
County. This publication is only required if the calculation of
the adjustment filed by the utility with the commission would
result in an increase in the amount of the consumer rate relief
charges.
(3) The commission's review of a request for a standard
adjustment is limited to a determination of whether there is a
mathematical error in the application of the adjustment mechanism
to the consumer rate relief charges. No hearing is required for
such an adjustment. Each standard adjustment to the consumer rate
relief charges, in an amount as calculated by the qualifying
utility but incorporating any correction for a mathematical error
as determined by the commission, automatically becomes effective fifteen days following the date on which the qualifying utility
files with the commission its calculation of the standard
adjustment.
(4) If the commission authorizes a nonstandard adjustment
procedure in the financing order, and the qualifying utility files
for such an adjustment, the commission shall allow interested
parties thirty days from the date the qualifying utility filed the
calculation of a nonstandard adjustment to make comments. The
commission's review of the total amount required for a nonstandard
adjustment shall be limited to the mathematical accuracy of the
total adjustment needed to assure the full and timely payment of
all debt service costs and related financing costs of the consumer
rate relief bonds. The commission may also determine the proper
allocation of those costs within and between classes of customers
and to special contract customers, the proper design of the
consumer rate relief charges and the appropriate application of
those charges under the methodology set forth in the formula-based
adjustment mechanism approved in the financing order. If the
commission determines that a hearing is necessary, the commission
shall hold a hearing on the comments within forty days of the date
the qualifying utility filed the calculation of the nonstandard
adjustment. The nonstandard adjustment, as modified by the
commission, if necessary, shall be approved by the commission
within sixty days and the commission may shorten the filing and hearing periods above in the financing order to ensure this result.
Any procedure for a nonstandard adjustment must be consistent with
assuring the full and timely payment of debt service of the
consumer rate relief bonds and associated financing costs.
(5) No adjustment approved or deemed approved under this
section affects the irrevocability of the final financing order as
specified in subdivision (3) of subsection (g) of this section.
(l) Nonbypassability of consumer rate relief charges.
(1) As long as consumer rate relief bonds issued under a final
financing order are outstanding, the consumer rate relief charges
authorized under the final financing order are nonbypassable and
apply to all existing or future West Virginia retail customers of
a qualifying utility or its successors and must be paid by any
customer that receives electric delivery service from the utility
or its successors.
(2) The consumer rate relief charges shall be collected by the
qualifying utility or the qualifying utility's successors or
assignees, or a collection agent, in full through a charge that is
separate and apart from the qualifying utility's base rates.
(m) Utility default.
(1) If a qualifying utility defaults on a required payment of
consumer rate relief charges collected, a court, upon application
by an interested party, or the commission, upon application to the
commission or upon its own motion, and without limiting any other remedies available to the applying party, shall order the
sequestration and payment of the consumer rate relief charges
collected for the benefit of bondholders, assignees and financing
parties. The order remains in full force and effect notwithstanding
a bankruptcy, reorganization or other insolvency proceedings with
respect to the qualifying utility or any affiliate thereof.
(2) Customers of a qualifying utility shall be held harmless
by the qualifying utility for its failure to remit any required
payment of consumer rate relief charges collected but such failure
does not affect the consumer rate relief property or the rights to
impose, collect and adjust the consumer rate relief charges under
this section.
(3) Consumer rate relief property under a final financing
order and the interests of an assignee, bondholder or financing
party in that property under a financing agreement are not subject
to set off, counterclaim, surcharge or defense by the qualifying
utility or other person, including as a result of the qualifying
utility's failure to provide past, present, or future services, or
in connection with the bankruptcy, reorganization, or other
insolvency proceeding of the qualifying utility, any affiliate, or
any other entity.
(n) Successors to qualifying utility.
A successor to a qualifying utility is bound by the
requirements of this section. The successor shall perform and satisfy all obligations of the electric utility under the final
financing order in the same manner and to the same extent as the
qualifying utility including the obligation to collect and pay
consumer rate relief charges to the person(s) entitled to receive
them. The successor has the same rights as the qualifying utility
under the final financing order in the same manner and to the same
extent as the qualifying utility.
(o) Security interest in consumer rate relief property.
(1) Except as provided in subdivisions (3) through (5) of this
subsection, the creation, perfection and enforcement of a security
interest in consumer rate relief property under a final financing
order to secure the repayment of the principal of and interest on
consumer rate relief bonds, amounts payable under any ancillary
agreement and other financing costs are governed by this section
and not article nine of chapter forty-six of this code.
(2) The description of the consumer rate relief property in a
transfer or security agreement and a financing statement is
sufficient only if the description refers to this section and the
final financing order creating the property. This section applies
to all purported transfers of, and all purported grants of, liens
on or security interests in that property, regardless of whether
the related transfer or security agreement was entered into or the
related financing statement was filed, before or after the
effective date of this section.
(3) A security interest in consumer rate relief property under
a final financing order is created, valid and binding at the latest
of the date that the security agreement is executed and delivered
or the date that value is received for the consumer rate relief
bonds.
(4) The security interest attaches without any physical
delivery of collateral or other act and upon the filing of the
financing statement with the Office of the Secretary of State. The
lien of the security interest is valid, binding and perfected
against all parties having claims of any kind in tort, contract or
otherwise against the person granting the security interest,
regardless of whether the parties have notice of the lien. Also
upon this filing, a transfer of an interest in the consumer rate
relief property is perfected against all parties having claims of
any kind, including any judicial lien, or other lien creditors or
any claims of the seller or creditors of the seller, other than
creditors holding a prior security interest, ownership interest or
assignment in the property previously perfected in accordance with
this subsection.
(5) The Secretary of State shall maintain any financing
statement filed under this subsection in the same manner that the
secretary maintains financing statements filed by utilities under
article nine of chapter forty-six of this code. The filing of a
financing statement under this subsection is governed by the provisions regarding the filing of financing statements in article
nine of chapter forty-six of this code. However, a person filing
a financing statement under this subsection is not required to file
any continuation statements to preserve the perfected status of its
security interest.
(6) A security interest in consumer rate relief property under
a final financing order is a continuously perfected security
interest and has priority over any other lien, created by operation
of law or otherwise, that may subsequently attach to that property
or those rights or interests unless the holder of any such lien has
agreed in writing otherwise.
(7) The priority of a security interest in consumer rate
relief property is not affected by the commingling of collected
consumer rate relief charges with other amounts. Any pledged or
secured party has a perfected security interest in the amount of
all consumer rate relief charges collected that are deposited in a
cash or deposit account of the qualifying utility in which such
collected charges have been commingled with other funds. Any other
security interest that may apply to those funds shall be terminated
when the funds are transferred to a segregated account for an
assignee or a financing party.
(8) No application of the adjustment mechanism as described in
subsection (j) of this section affects the validity, perfection or
priority of a security interest in or the transfer of consumer rate relief property under the final financing order.
(p) Transfer, sale, etc. of consumer rate relief property.
(1) A sale, assignment or transfer of consumer rate relief
property under a final financing order is an absolute transfer and
true sale of, and not a pledge of or secured transaction relating
to, the seller's right, title and interest in, to and under the
property, if the documents governing the transaction expressly
state that the transaction is a sale or other absolute transfer. A
transfer of an interest in that property may be created only when
all of the following have occurred:
(A) The financing order has become final and taken effect;
(B) The documents evidencing the transfer of the property have
been executed and delivered to the assignee; and
(C) Value has been received for the property.
(2) The characterization of the sale, assignment or transfer
as an absolute transfer and true sale and the corresponding
characterization of the property interest of the purchaser shall be
effective and perfected against all third parties and is not
affected or impaired by, among other things, the occurrence of any
of the following:
(A) Commingling of collected consumer rate relief charges with
other amounts;
(B) The retention by the seller of any of the following:
(i) A partial or residual interest, including an equity interest, in the consumer rate relief property, whether direct or
indirect, or whether subordinate or otherwise;
(ii) The right to recover costs associated with taxes,
franchise fees or license fees imposed on the collection of
consumer rate relief charges;
(iii) Any recourse that the purchaser or any assignee may have
against the seller;
(iv) Any indemnification rights, obligations or repurchase
rights made or provided by the seller;
(v) The obligation of the seller to collect consumer rate
relief charges on behalf of an assignee;
(vi) The treatment of the sale, assignment or transfer for
tax, financial reporting or other purposes; or
(vii) Any application of the adjustment mechanism under the
final financing order.
(q) Taxation of consumer rate relief charges; consumer rate
relief bonds not debt of governmental entities or a pledge of
taxing powers.
(1) The imposition, billing, collection and receipt of
consumer rate relief charges under this section are exempt from
state income, sales, franchise, gross receipts, business and
occupation and other taxes or similar charges: Provided, That
neither this exemption nor any other provision of this subsection
shall preclude any municipality from taxing consumer rate relief charges under the authority granted to municipalities pursuant to
sections five and five-a of article thirteen in chapter eight of
this code.
(2) Consumer rate relief bonds issued under a final financing
order do not constitute a debt or a pledge of the faith and credit
or taxing power of this state or of any county, municipality or any
other political subdivision of this state. Bondholders have no
right to have taxes levied by this state or the taxing authority of
any county, municipality or any other political subdivision of this
state for the payment of the principal of or interest on the bonds.
The issuance of consumer rate relief bonds does not, directly,
indirectly or contingently, obligate this state or a county,
municipality or political subdivision of this state to levy a tax
or make an appropriation for payment of the principal of or
interest on the bonds.
(r) Consumer rate relief bonds as legal investments. Any of
the following may legally invest any sinking funds, moneys or other
funds belonging to them or under their control in consumer rate
relief bonds:
(1) The state, the West Virginia Investment Management Board,
the West Virginia Housing Development Fund, municipal corporations,
political subdivisions, public bodies and public officers except
for members of the Public Service Commission;
(2) Banks and bankers, savings and loan associations, credit unions, trust companies, building and loan associations, savings
banks and institutions, deposit guarantee associations, investment
companies, insurance companies and associations and other persons
carrying on a banking or insurance business, including domestic for
life and domestic not for life insurance companies; and
(3) Personal representatives, guardians, trustees and other
fiduciaries.
(s) Pledge of state.
(1) The state pledges to and agrees with the bondholders,
assignees and financing parties under a final financing order that
the state will not take or permit any action that impairs the value
of consumer rate relief property under the final financing order or
revises the consumer rate relief costs for which recovery is
authorized under the final financing order or, except as allowed
under subsection (j) (k) of this section, reduce, alter or impair
consumer rate relief charges that are imposed, charged, collected
or remitted for the benefit of the bondholders, assignees and
financing parties, until any principal, interest and redemption
premium in respect of consumer rate relief bonds, all financing
costs and all amounts to be paid to an assignee or financing party
under an ancillary agreement are paid or performed in full.
(2) A person who issues consumer rate relief bonds is
permitted to include the pledge specified in subdivision (1) of
this subsection in the consumer rate relief bonds, ancillary agreements and documentation related to the issuance and marketing
of the consumer rate relief bonds.
(t) West Virginia law governs; this section controls.
(1) The law governing the validity, enforceability,
attachment, perfection, priority and exercise of remedies with
respect to the transfer of consumer rate relief property under a
final financing order, the creation of a security interest in any
such property, consumer rate relief charges or final financing
order are the laws of this state as set forth in this section.
(2) This section controls in the event of a conflict between
its provisions and any other law regarding the attachment,
assignment, or perfection, the effect of perfection or priority of
any security interest in or transfer of consumer rate relief
property under a final financing order.
(u) Severability.
If any provision of this section or the application thereof to
any person, circumstance or transaction is held by a court of
competent jurisdiction to be unconstitutional or invalid, the
unconstitutionality or invalidity does not affect the
Constitutionality or validity of any other provision of this
section or its application or validity to any person, circumstance
or transaction, including, without limitation, the irrevocability
of a financing order issued pursuant to this section, the validity
of the issuance of consumer rate relief bonds, the imposition of consumer rate relief charges, the transfer or assignment of
consumer rate relief property or the collection and recovery of
consumer rate relief charges. To these ends, the Legislature
hereby declares that the provisions of this section are intended to
be severable and that the Legislature would have enacted this
section even if any provision of this section held to be
unconstitutional or invalid had not been included in this section.
(v) Nonutility status.
An assignee or financing party is not an electric public
utility or person providing electric service by virtue of engaging
in the transactions with respect to consumer rate relief bonds.
NOTE: The purpose of this bill is to correct an internal
reference to clarify that the rate adjustment mechanism under
subsection (k) is the exception to the state's pledge not to
reduce, alter or impair consumer rate relief charges until all
amounts to be paid to an assignee or financing party are paid or
performed in full.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.