Enacts the "New York utility corporation securitization act"; allows electric corporations to petition the public service commission for authority to issue storm recovery bonds.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10346A
SPONSOR: Rules (Paulin) TITLE OF BILL:
An act to enact the "New York utility corporation securitization act"
PURPOSE OR GENERAL IDEA OF BILL::
To create the legislative framework required to enable the use of "secu-
ritization" to recover storm costs and arrearage costs incurred by inve-
stor-owned utilities ("recovery costs"). Securitization is a mechanism
for financing recovery costs that enables rate payer savings in the form
of lower debt service costs and longer recovery periods relative to the
standard ratemaking approach.
SUMMARY OF PROVISIONS::
Section 1. Title of the Act.
Section 2. A new article 12 is added to the Public Service Law entitled
the "New York Utility Corporation Recovery Securitization Act"
Article 12 provisions:
Section 302: Financing Orders
Amends section sixty-nine of the Public Service Law to add a new subdi-
vision b that would permit a utility corporation to petition the Public
Service Commission (Commission) for authorization to issue recovery
bonds by the utility corporation or its affiliate or another assignee.
Proscribes the affirmation attendant with and contents of the petition,
including a description of the (i) storm recovery activities and costs
both undertaken and not undertaken, level of the storm recovery reserves
and the amount for recovery through recovery bonds and/or (ii) the
amount of arrearages that are over 60 days past due recorded by a utili-
ty corporation, estimate of financing costs and recovery charges to
recover the costs, as well as the period for the recovery, and estimate
of customer benefit from utilization of recovery bonds. Authorizes the
Commission to grant in whole or in part the petition by issuance of a
financing order with terms and conditions that are consistent with the
Act.
In issuing a financing order, the Commission may consider the quantifi-
able benefits to customers and the structure, expected pricing and
financing costs, as market conditions warrant at the time of bond issu-
ance. The Commission may also provide flexibility to the utility corpo-
ration or assignees as to the terms and conditions of the bonds, includ-
ing repayment schedules, interest rates, and other financing costs. The
Commission is required to issue a final decision on the petition within
135 days of receipt of the petition.
Any financing order issued under this provision shall include the amount
of recovery costs, including consideration of storm reserves, plus any
other available funds or collection methods, associated financing costs
and the quantifiable benefits to customers. In addition to the authori-
zation to issue the recovery bonds, the order creates the right in and
to the recovery charges collected from the utility corporation's custom-
ers and the right to periodic adjustments of the recovery charges (these
rights being referred to as "recovery property"). The recovery property
is both the sole source of payment to pay the recovery bonds and financ-
ing costs and is the primary collateral to secure the recovery bonds.
The recovery property may be sold, assigned or transferred by the utili-
ty corporation to a subsidiary of the utility corporation, another
assignee, any of which shall be the issuer of the recovery bonds. Recov-
ery property may also be created or recognized as property of an assig-
nee.
This section also establishes the means for which the recovery charges
will be updated and trued-up periodically to ensure sufficient payment
of the principal and interest on the recovery bonds.It allows by opera-
tion of law the implementation of periodic adjustments to the recovery
charge 60-days from the filing of such change with the Commission to
ensure sufficient collections to pay principal, interest and other
financing costs on the recovery bonds. Apart from the periodic adjust-
ment of the recovery charges, and regardless of changes in ownership or
solvency of the utility corporation or successors, the financing order
remains in effect and is otherwise irrevocable and cannot be amended,
modified or terminated until the recovery bonds and any associated
financing costs are paid in full.
The financing order must specify how amounts collected from customers
will be allocated between the recovery charges and other utility charge
and direct the utility corporation to maintain service to its customers
and collect for and remit to the appropriate recovery charges for the
benefit of the assignee or financing party.
The Commission may include in the financing order limitations on poten-
tial assignees and requirements related the voluntary filing of a bank-
ruptcy petition on behalf of the assignee. This section authorizes the
Commission to require information related to the organization of assig-
nee and recognizes the creation of the recovery property upon certain
actions/events.
After issuance of the financing order, the utility corporation has
discretion to sell, transfer or assign the recovery property, and facil-
itate the issuance of the recovery bonds in a timeframe of the corpo-
ration's discretion. The Commission is also authorized to issue a subse-
quent financing order associated with the refinancing, retiring, or
refunding of recovery bonds and make associated changes to the recovery
charges, consistent with the provisions of the Act.
The recovery bonds issued pursuant to the financing order will not be
deemed by the Commission to be the debt of the utility corporation,
other than for federal income tax purposes, nor shall the recovery
charges be viewed as revenue or costs of the utility corporation and all
supporting acts in execution of the financing order shall be viewed as
just and reasonable. The recovery bonds cannot be used to finance any
other costs, will be issued at the discretion of the utility corpo-
ration, and cannot be used by the Commission to disallow access by the
corporation to other methods of storm or arrearage cost recovery.
Except for election matters, challenges to the Commission financing
order or issuance of recovery bonds shall be given priority for consid-
eration by the courts.
Section 303: Recovery property
Defines the nature of the property right created by a financing order
pursuant to the statute and the conditions under which such right may be
sold, assigned or transferred.
Requires that the utility corporation include recovery charges as a
separate line item on the customer bill.
Establishes that the recovery charges established pursuant to a financ-
ing order to service the recovery bonds are non-bypassable, meaning that
customers are not able to avoid paying recovery charges.
Section 304: True Sale
Governs the sale, assignment or other transfer of the recovery property
by a utility corporation and establishes the conditions for a true sale
to an assignee. The true sale is a critical component of a utility secu-
ritization because the segregation of the recovery property from the
rest of the utility corporation's property allows the transaction to be
"bankruptcy remote".
Establishes that the assignee shall be bankruptcy remote and that the
utility corporation will not have a claim on recovery property in the
event of a bankruptcy or reorganization of the utility corpora-
tion.Subsection (2) clarifies that notwithstanding several undertaken
back the utility corporation or any assignee, for purposes of state law,
the sale of the recovery property will be recognized as a sale by the
utility corporation to the assignee that ultimately will issue the
recovery bonds. This subsection is important for establishing the facts
to ensure the assignee is treated as bankruptcy remote which helps
ensure the transaction receives a higher credit rating which in turn
will lead to lower costs for rate payers.
Section 305: Security Interests
Establishes that the Act, and not the Uniform Commercial Code, governs
the granting of security interest in the recovery property. It is
customary that utility securitizations have their own procedures for
securing the liens created against the recovery property. The procedures
are mechanical in nature and expected by bondholders and rating agen-
cies.
Section 306: Choice of law; conflicts
Establishes that property rights and security interest created pursuant
to this statute shall be governed exclusively by New York State Law.
Section 307: Recovery bonds not public debt
Recovery bonds are not a debt or general obligation of the state or any
of its political subdivisions, agencies or instrumentalities. While the
utility gets authorization from the Commission in a financing order to
issue recovery bonds, recovery bonds are not issued by the state nor are
they state obligations and there are no state guarantees.
Section 308: State pledge
State pledges not to take any action that would limit, alter or impair
recovery property or, except as required by the periodic adjustment
process described in the financing order, reduce, alter or impair recov-
ery charges that are imposed, collected and remitted for the benefit of
the owners of recovery bonds, any assignee, and all financing parties,
until any principal, interest and redemption premium in respect of
recovery bonds, all other financing costs and all amounts to be paid to
an assignee or financing party under an ancillary agreement are paid or
performed in full.
The state pledge, and the periodic adjustment mechanism, are the two
most important features of a utility securitization.The rating agencies
and bondholders rely on the state pledge as protection against future
state action that could undermine the collection of recovery charges and
ultimately the recovery bonds. Because of the state pledge, rating agen-
cies no do not require expensive overcollateralization allowing for the
overall recovery charges billed to rate payers to be lower.
Section 309: Not a utility corporation
An assignee or financing party shall not be considered a utility corpo-
ration or person providing electric or gas service by virtue of engaging
in the transactions described in this section.
Section 310: Effect of invalidity
Subsequent invalidation of any provision of this statute does not affect
the validity of actions allowed by the Act.In addition to the state
pledge, bondholders rely on this section that their investment in recov-
ery bonds cannot be impaired by a future court action.
Section 311: Effect of Financing Order
The section clarifies that Section 70 of the PSL shall not apply to
recovery bonds, the sale of the recovery property or any other trans-
action contemplated by a financing order.
Section 3 of the bill provides the effective date.
JUSTIFICATION::
Destructive storms that were once every 100 years are becoming the norm
annually in New York State. Over the past several years, these damaging
storms have wreaked havoc on the state's infrastructure, primarily elec-
tric transmission and distribution systems. In 2024 alone, costs to
restore, and in many cases rebuild, the utility transmission and
distribution system has run into the hundreds of millions of dollars.
In addition, during the unprecedented COVID-19 pandemic and resulting
state of emergency, New York imposed a moratorium on the disconnection
of electrical or gas services from residential customers. As a result,
New York electric and gas corporations have significant legacy arrearag-
es from such customers. Despite the end of the state of emergency, many
of these residential customers are still facing unmanageable debt as a
result of the pandemic and unlike years past, the FY 2025 budget did not
include direct arrears assistance under the Energy Affordability
Program.As of March 2024, more than 1.3 million utility customers have
arrears of 60 days or more equating to $1.6 billion in debt owed to
their utility provider.
Legislation is required to authorize the PSC to accept a financing peti-
tion for securitization from a utility. This petition is reviewed by PSC
to determine if securitization is in the public interest. If granted by
the PSC, the financing order is issued allowing the recovery of costs by
issuing bonds with lower financing costs. Securitization involves
transferring the right to collect costs (e.g., major storm cost defer-
rals and legacy arrears) to a newly created entity formed specifically
for the securitization. The newly formed entity sells bonds with lower
financing costs to a bond issuer to fund its purchase of the assets from
the utility. Securitization enables bonds to be issued by a third party
at very advantageous interest rates, thereby lowering the financing cost
associated with these assets and in turn lowering customer bills. Total
customer bills are adjusted downward to reflect the impacts of the tran-
saction, with a dedicated line item to pay off the bonds, with periodic
true-ups to ensure utility compliance with the bond repayments.
The use of securitization to recover storm expenses already incurred and
arrearages will permit electrical or gas corporations to recover these
amounts at a lower cost than, would otherwise be imposed on the electric
or gas corporations' customers. Securitization is a mechanism to resolve
legacy debt, at no expense to the general fund and at lower interest
rate and lower cost for customers.
LEGISLATIVE HISTORY::
This is a new bill.
FISCAL IMPLICATIONS::
None.
EFFECTIVE DATE::
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
10346--A
IN ASSEMBLY
May 17, 2024
___________
Introduced by COMMITTEE ON RULES -- (at request of M. of A. Paulin,
McDonald, Kelles, Woerner, Solages) -- read once and referred to the
Committee on Corporations, Authorities and Commissions -- committee
discharged, bill amended, ordered reprinted as amended and recommitted
to said committee
AN ACT to enact the "New York utility corporation securitization act"
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Short title. This act shall be known and may be cited as
2 the "New York utility corporation securitization act".
3 § 2. Definitions. As used in this act, the following terms shall have
4 the following meanings:
5 1. "Ancillary agreement" means any bond, insurance policy, letter of
6 credit, reserve account, surety bond, swap arrangement, hedging arrange-
7 ment, liquidity or credit support arrangement or other similar agreement
8 or arrangement entered into in connection with the issuance of recovery
9 bonds under this act, that is designed to promote the credit quality and
10 marketability of such recovery bonds or to mitigate the risk of an
11 increase in interest rates.
12 2. "Assignee" means any individual, corporation, limited liability
13 company, partnership or limited partnership, trust or other legally
14 recognized entity to which an interest in recovery property is created,
15 recognized, assigned, sold or transferred, other than as security,
16 including any assignee of such property.
17 3. "Commission" means the public service commission.
18 4. "Consumer" means any individual, governmental body, trust, business
19 entity, nonprofit organization or other legally recognized entity that
20 takes electric delivery service within the service area by means of
21 electric transmission or distribution facilities, whether those electric
22 transmission or distribution facilities are owned by a utility corpo-
23 ration or other entity.
24 5. "Financing costs" means:
25 (a) interest and acquisition, defeasance, or redemption premiums that
26 are payable on recovery bonds;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05310-05-4
A. 10346--A 2
1 (b) any payment approved in the financing order and required under an
2 ancillary agreement or other accounts established under the terms of any
3 indenture, ancillary agreement, or other financing documents pertaining
4 to recovery bonds;
5 (c) provided that recovery bonds shall be the only method used to
6 recover the costs identified in this paragraph, any other cost related
7 to issuing, supporting, repaying, and servicing recovery bonds, includ-
8 ing but not limited to servicing fees, accounting and auditing fees,
9 trustee fees, legal fees, consulting fees, administrative fees, place-
10 ment and underwriting fees, capitalized interest, rating agency fees,
11 stock exchange listing and compliance fees, and filing fees, including
12 costs related to obtaining a financing order; or
13 (d) any federal, state or local taxes, payments in lieu of taxes,
14 franchise fees or license fees imposed on recovery charge revenues.
15 6. "Financing order" means an order of the commission which author-
16 izes:
17 (a) the issuance of recovery bonds;
18 (b) the imposition, collection, and periodic adjustments of recovery
19 charges;
20 (c) the creation or recognition of recovery property; and/or
21 (d) the sale, assignment, or transfer of recovery property to an
22 assignee.
23 7. "Financing party" means any holder of recovery bonds and any trus-
24 tee, collateral agent, or other person acting for the benefit of holders
25 of recovery bonds.
26 8. "Financing statement" shall have the same meaning as that provided
27 in paragraph 39 of subsection (a) of section 9-102 the uniform commer-
28 cial code. All financing statements under this act shall be filed in
29 accordance with section 9-501 of the uniform commercial code.
30 9. "Lien creditor" shall have the same meaning as that provided in
31 paragraph 52 of subsection (a) of section 9-102 of the uniform commer-
32 cial code.
33 10. "Recovery bonds" means bonds, debentures, notes, certificates of
34 participation, certificates of ownership, or other evidences of indebt-
35 edness or ownership that are issued pursuant to an indenture, contract,
36 or other agreement of a utility corporation or its assignee pursuant to
37 a financing order, the proceeds of which are used directly or indirectly
38 to provide, recover, finance, or refinance commission-approved recovery
39 costs and financing costs, to such level as the commission may authorize
40 in a financing order, and which are secured by or payable from recovery
41 property, and that have a final maturity date of no longer than twenty
42 years from the original issuance. If certificates of participation or
43 ownership are issued, references in this act to principal, interest, or
44 premium shall be construed to refer to comparable amounts under such
45 certificates. Recovery bonds shall be nonrecourse to the credit or any
46 assets of the utility corporation other than the recovery property as
47 specified in the financing order and any rights under any ancillary
48 agreement. Recovery bonds shall be legal investments for financial
49 institutions, insurance companies, fiduciaries, and other persons that
50 require statutory authority regarding legal investment.
51 11. "Recovery charge" means the amounts authorized by the commission
52 to recover recovery costs and financing costs. If provided for in a
53 financing order, such amounts shall be imposed on consumer bills and
54 collected by a utility corporation or its successors or assignees or a
55 collection agent, in full, through a charge paid by existing and future
56 consumers receiving transmission or distribution service, or both, from
A. 10346--A 3
1 the utility corporation or its successors or assignees under rate sched-
2 ules or special contracts approved by the commission. The recovery
3 charge shall be non-bypassable and imposed on all consumers in the
4 service area and collected by the utility corporation or its successor,
5 agent, subcontractor, assignee, or collection agent or any other entity
6 designated under the financing order.
7 12. "Recovery costs" means storm recovery costs identified for recov-
8 ery in a financing order.
9 13. "Recovery property" (a) means the property rights and interests
10 created pursuant to this act, including but not limited to any and all
11 right, title, and interest:
12 (i) in and to recovery charges established pursuant to a financing
13 order, as approved by the commission and adjusted from time to time in
14 accordance with such financing order;
15 (ii) in and to all revenues, collections, claims, payments, money, or
16 proceeds of or arising from the recovery charges or constituting recov-
17 ery charges that are the subject of a financing order, regardless of
18 whether such revenues, collections, claims, payments, money, or proceeds
19 are imposed, billed, received, collected, or maintained together with or
20 commingled with other revenues, collections, claims, payments, money, or
21 proceeds; and
22 (iii) in and to all rights to obtain periodic adjustments to the
23 recovery charges pursuant to the terms of the financing order; and
24 (b) shall constitute a vested, presently existing property right.
25 14. "Secured party" means a financing party in favor of which a utili-
26 ty corporation or its successors or assignees creates a security inter-
27 est in all or any portion of its interest in or right to recovery prop-
28 erty. A secured party may be granted a security interest in recovery
29 property under this act and a security interest in other collateral
30 subject to the uniform commercial code in a single security agreement.
31 15. "Security interest" means a pledge, hypothecation, or other encum-
32 brance of or other right over any portion of recovery property created
33 by contract to secure the payment or performance of an obligation.
34 16. "Service area" means the geographical area within which a utility
35 corporation provides electric distribution services as of the date of a
36 financing order.
37 17. "Service interruption" means the loss of service for five minutes
38 or more, for one or more consumers, which is the result of one or more
39 component failures.
40 18. "Storm" means a period of adverse weather during which service
41 interruptions affect at least ten percent of the consumers in an operat-
42 ing area and/or result in consumers being without electric service for
43 durations of at least twenty-four hours.
44 19. "Storm recovery activity" means any activity or activities by or
45 on behalf of a utility corporation taken before July 1, 2024 in
46 connection with the restoration of service and infrastructure associated
47 with electric power outages affecting consumers of a utility corporation
48 as the result of a storm or storms, including but not limited to mobili-
49 zation, staging, and construction, reconstruction, replacement, or
50 repair of electric generation, transmission, or distribution facilities.
51 20. "Storm recovery costs" means, if requested by a utility corpo-
52 ration and approved by the commission, costs incurred before July 1,
53 2024 by a utility corporation in undertaking a storm recovery activity.
54 Such costs may be net of applicable insurance proceeds, tax benefits,
55 and any other amounts intended to reimburse the utility corporation for
56 storm recovery activities such as governmental grants or aid of any kind
A. 10346--A 4
1 and may include adjustments for normal capital replacement and operating
2 costs, or other potential offsetting adjustments. Storm recovery costs
3 may include retiring any existing indebtedness relating to storm recov-
4 ery activities.
5 21. "Utility corporation" means any electric corporations individually
6 or collectively who are subsidiaries of the same corporation who jointly
7 or collectively have storm recovery costs of $500 million or more as of
8 July 1, 2024.
9 § 3. Financing orders. 1. No utility corporation or its affiliate or
10 other assignee shall issue any recovery bonds unless it has been specif-
11 ically authorized to do so by a financing order issued pursuant to this
12 section. No later than two years after the effective date of this act, a
13 utility corporation may petition the commission for a financing order
14 granting such authority. Such petition shall be made under oath and
15 shall be signed and filed on behalf of the utility corporation or its
16 affiliate or other assignee by the president or by a vice president,
17 treasurer, or other executive officer having knowledge of the matters
18 set forth therein and shall be submitted in such form as the commission
19 shall prescribe.
20 2. Each petition filed under this section shall include all of the
21 following:
22 (a) A description of the storm recovery activities that the utility
23 corporation has undertaken and the reasons for undertaking the activ-
24 ities.
25 (b) The storm recovery costs the utility corporation has determined
26 would be appropriate to recover through recovery bonds and is seeking to
27 recover, and the level that the utility corporation is funding or will
28 seek to fund through other means, together with a description of the
29 factors and calculations used in determining such amounts and methods of
30 recovery.
31 (c) Whether the utility corporation proposes to finance all or a
32 portion of the recovery costs using recovery bonds. If the utility
33 corporation proposes to finance a portion of such costs, the utility
34 corporation must identify the specific portion in the petition. An
35 election not to finance a portion of the recovery costs using recovery
36 bonds by a utility corporation shall not be deemed to waive its right to
37 recover such costs pursuant to a separate proceeding with the commission
38 pursuant to this act.
39 (d) An estimate of the financing costs related to the recovery bonds.
40 (e) An estimate of the recovery charges necessary to recover the
41 recovery costs and financing costs and the period for recovery of such
42 costs.
43 (f) A comparison between the net present value of the costs to consum-
44 ers that are estimated to result from the issuance of recovery bonds and
45 the result from the application of the traditional method of financing
46 and recovering recovery costs from consumers. The comparison should
47 demonstrate that the issuance of recovery bonds and the imposition of
48 recovery charges are expected to provide quantifiable benefits to
49 consumers.
50 3. (a) The commission may grant a petition under subdivision one of
51 this section in whole or in part by issuing a financing order, with such
52 modifications thereto and upon such terms and conditions as the commis-
53 sion prescribes and that are consistent with this act, provided such
54 financing is prudent and would provide a net benefit to the consumer. If
55 the commission issues a financing order approving the issuance of recov-
56 ery bonds under this act, the commission shall consider whether:
A. 10346--A 5
1 (i) the proposed issuance of recovery bonds and the imposition and
2 collection of a recovery charge are expected to provide quantifiable
3 benefits to consumers as compared to the costs that would have been
4 incurred absent the issuance of recovery bonds; and
5 (ii) the proposed structuring, expected pricing, and financing costs
6 of the recovery bonds are reasonably expected to result in the lowest
7 recovery charges consistent with market conditions at the time the
8 recovery bonds are priced and the terms of the financing order or would
9 avoid or mitigate rate impacts to consumers as compared with traditional
10 methods of financing or recovering recovery costs.
11 (b) The commission may determine what degree of flexibility to afford
12 to the utility corporation or assignees in establishing the terms and
13 conditions of the recovery bonds, including but not limited to repayment
14 schedules, interest rates, and other financing costs. A copy of any
15 financing order issued under this act duly certified by a commissioner
16 or other person authorized to act on behalf of the commission shall be
17 sufficient evidence for all purposes of whole and complete compliance by
18 the utility corporation with all procedural and other matters required
19 precedent to the issuance of the order.
20 4. Proceedings on a petition submitted pursuant to this section begin
21 with the petition for a financing order filed by a utility corporation
22 with the commission for review and approval within 135 days of the
23 filing of the petition and shall be disposed of in accordance with the
24 requirements of this act and the rules of the commission.
25 5. A financing order issued by the commission to a utility corporation
26 shall:
27 (a) Specify the amount of storm recovery costs, taking into consider-
28 ation, to the extent the commission deems appropriate, any other methods
29 used to recover these costs and any offsets or credits to those costs,
30 and provide with respect to the amount of financing costs which may be
31 recovered through recovery charges;
32 (b) Provide that the proposed financing through issuance of recovery
33 bonds and the imposition and collection of recovery charges are expected
34 to provide quantifiable benefits to consumers as compared to the costs
35 that would have been incurred absent the issuance of the recovery bonds
36 and that the net present value of the costs to consumers that are esti-
37 mated to result from the financing through issuance of recovery bonds
38 is less than the net present value of costs of the application of the
39 traditional method of financing and recovering recovery costs from
40 consumers;
41 (c) Provide that the structuring and pricing of the recovery bonds are
42 expected to result in the lowest recovery charges consistent with market
43 conditions at the time the recovery bonds are priced and the terms set
44 forth in such financing order;
45 (d) Specify and create the recovery property of a utility corporation
46 or its successors or assignees that may be used to pay or secure recov-
47 ery bonds and financing costs;
48 (e) Provide that such recovery property may be: (i) sold, assigned, or
49 transferred by the utility corporation to (A) a subsidiary which is
50 wholly owned, directly or indirectly, by the utility corporation and
51 which will be the issuer of the recovery bonds or (B) another assignee
52 which will be the issuer of the recovery bonds; or
53 (ii) created or recognized as property of an assignee which will be
54 the issuer of the recovery bonds;
55 (f) Provide that the recovery charges shall be sufficient at all times
56 to pay the principal of and interest on the recovery bonds as the same
A. 10346--A 6
1 shall become due and payable and all other financing costs and establish
2 a true-up mechanism requiring that the recovery charges be reviewed and
3 adjusted at least annually to correct any overcollection or undercol-
4 lection during the period since the issuance or preceding adjustment and
5 to ensure the projected recovery of amounts sufficient to provide timely
6 payment of all principal, interest and other financing costs. Each
7 adjustment to the recovery charge, in amounts as calculated by or on
8 behalf of the owner of recovery property, pursuant to a method estab-
9 lished in the financing order, shall automatically become effective 60
10 days following the date on which the periodic adjustment is filed with
11 the commission unless the commission approves an earlier effective date
12 requested by the issuer of recovery bonds;
13 (g) Provide and pledge that after the earlier of the transfer of
14 recovery property to an assignee or the issuance of recovery bonds
15 authorized thereby, a financing order is irrevocable until the indefeas-
16 ible payment in full of the recovery bonds and the financing costs and,
17 provided that, except as provided in subdivision 8 of this section or to
18 implement any true-up mechanism adopted by the commission as described
19 in paragraph (f) of this subdivision, the commission may not amend,
20 modify, or terminate the financing order by any subsequent action or
21 reduce, impair, postpone, terminate, or otherwise adjust recovery charg-
22 es approved in the financing order, provided nothing shall preclude
23 limitation or alteration if and when full compensation, including full
24 cost recovery, is made for the full protection of the recovery charges
25 collected pursuant to a financing order and the full protection of the
26 holders of recovery bonds and any assignee or financing party;
27 (h) Specify how amounts collected from consumers shall be allocated
28 between recovery charges and other charges;
29 (i) Provide that a financing order remains in effect until the recov-
30 ery bonds issued pursuant to the order have been indefeasibly paid in
31 full and the financing costs of such bonds have been recovered in full;
32 (j) Provide that a financing order shall remain in effect and unabated
33 notwithstanding the reorganization, bankruptcy, or other insolvency
34 proceedings, or merger or sale, of the applicable utility corporation or
35 its successors or assignees;
36 (k) Authorize and require the utility corporation, to the extent that
37 any interest in recovery property is sold or assigned, shall contract
38 with the assignee or any financing party to continue to operate its
39 system to provide service to its consumers, collect amounts in respect
40 of the recovery charges for the benefit and account of such assignee or
41 financing party, and account for and remit such amounts to or for the
42 account of such assignee or financing party, including pursuant to a
43 sequestration order authorized by subdivision 6 of section four or
44 subdivision 7 of section six of this act; and
45 (l) Provide that any cost to the consumer in connection with the
46 financing order, that is not identified in and provided for in such
47 financing order, shall not be recovered through any rates or recovery
48 charges, and shall solely be the obligation of the utility corporation
49 or its successors or assignees.
50 6. In each financing order issued to or on behalf of a utility corpo-
51 ration, the commission shall:
52 (a) Prescribe any limitations on potential assignees of recovery prop-
53 erty;
54 (b) Authorize an assignee which is a subsidiary of a utility corpo-
55 ration and which issues recovery bonds or another assignee which issues
56 recovery bonds to provide and establish in its organizational documents,
A. 10346--A 7
1 partnership agreement, or operating agreement, as applicable, that in
2 order for a person to file a voluntary bankruptcy petition on behalf of
3 such assignee, the prior unanimous consent of the directors, partners,
4 or managers, as applicable, shall be required. If so authorized in a
5 financing order, any such provision set forth in the organizational
6 documents, partnership agreement, or operating agreement of such an
7 assignee shall constitute a legal, valid, and binding agreement of the
8 shareholders, partners, or members, as applicable, of such assignee and
9 shall be enforceable against such shareholders, partners, or members;
10 and
11 (c) Provide that the creation of the recovery property pursuant to
12 paragraph (d) of subdivision 5 of this section shall be conditioned
13 upon, and shall be simultaneous with either: (i) the sale, assignment,
14 or other transfer of the recovery property to an assignee; or (ii) the
15 issuance of the recovery bonds and the security interest created in the
16 recovery property to secure recovery bonds.
17 7. After the issuance of a financing order, and within such time and
18 subject to any other limitations set forth in the financing order, the
19 utility corporation retains discretion regarding whether to sell,
20 assign, or otherwise transfer recovery property or to cause the recovery
21 bonds to be issued, including the right to defer or postpone such sale,
22 assignment, transfer, or issuance.
23 8. At the request of a utility corporation, the commission may
24 commence a proceeding and issue a subsequent financing order that
25 provides for the refinancing, retiring, or refunding of recovery bonds
26 issued by an affiliate of the utility corporation pursuant to the
27 original financing order if the commission finds that the subsequent
28 financing order satisfies all of the criteria specified in subdivisions
29 3 and 5 of this section or that provides for an accounting, refunding,
30 or crediting to consumers of the proceeds of any true-up mechanism
31 adopted by the commission in accordance with paragraph (f) of subdivi-
32 sion 5 of this section. Effective on retirement of the refunded recov-
33 ery bonds and the issuance of new recovery bonds, the commission may
34 adjust the related recovery charges accordingly or establish substitute
35 recovery charges, provided any such subsequent order shall be consistent
36 with the provisions of subdivision 5 of this section.
37 9. (a) The commission shall not, in exercising its powers and carrying
38 out its duties regarding any matter within its authority pursuant to
39 this act, consider the recovery bonds issued pursuant to a financing
40 order to be the debt of the utility corporation other than for federal
41 income tax purposes, consider the recovery charges paid under the
42 financing order to be the revenue of the utility corporation for any
43 purpose, or consider the recovery costs or financing costs specified in
44 the financing order to be the costs of the utility corporation.
45 (b) The commission may not order or otherwise directly or indirectly
46 require a utility corporation to use recovery bonds to finance any
47 project, addition, plant, facility, extension, capital improvement,
48 equipment, or any other expenditure. After the issuance of a financing
49 order, the utility corporation retains sole discretion whether to cause
50 the recovery bonds to be issued, including the right to defer or post-
51 pone such sale, assignment, transfer or issuance. Nothing shall prevent
52 the utility corporation from abandoning the issuance of recovery bonds
53 under the financing order by filing with the commission a statement of
54 abandonment and the reasons therefor. The commission shall not refuse
55 to allow a utility corporation to recover recovery costs that would be
56 otherwise permissible for recovery or refuse or condition authorization
A. 10346--A 8
1 or approval of the issuance and sale by a utility corporation of securi-
2 ties or the assumption by the utility corporation of liabilities or
3 obligations, solely because of the potential availability of recovery
4 bond financing.
5 10. All financing orders issued by the commission shall be operative
6 and in full force and effect on the date of the issuance of such order.
7 11. Notwithstanding any other law to the contrary, any action, suit or
8 proceeding to which the commission or the recovery bond issuer may be a
9 party, in which any question arises as to the validity of this act or
10 any financing order, shall be preferred over all other civil causes in
11 all courts of the state, except election matters, and shall be heard and
12 determined in preference to all other civil business pending therein,
13 except election matters, irrespective of position on the calendar. Such
14 preference shall also be granted upon petition of counsel to the commis-
15 sion in any action or proceeding questioning the validity of any financ-
16 ing order or other decision made by the commission under this act in
17 which such counsel may be allowed to intervene. Notwithstanding any
18 other provision of law to the contrary, the validity of any financing
19 order or other decision may only be challenged by an aggrieved party
20 pursuant to an action, suit or proceeding filed within thirty days after
21 such financing order becomes final; provided, however, that any such
22 action, suit or proceeding and all supporting papers shall be commenced
23 directly in the supreme court, appellate division, third judicial
24 department.
25 12. A financing order shall require the recovery bond issuer or the
26 assignee to file at least annually with the commission, the governor,
27 the temporary president of the senate, the speaker of the assembly, the
28 chair of the senate finance committee, and the chair of the assembly
29 ways and means committee, a periodic report showing the billing and
30 collection of recovery charges, the application of recovery charge
31 revenues to debt service on the recovery bonds and other ongoing financ-
32 ing costs, and the balances in any accounts required by the financing
33 order, and any other information the commission deems necessary.
34 § 4. Recovery property. 1. All recovery property specified in a
35 financing order shall constitute an existing, present property right.
36 Such property shall exist whether or not the revenues or proceeds aris-
37 ing from the property have been billed, have accrued, or have been
38 collected.
39 2. Recovery property specified in a financing order shall continue to
40 exist until the recovery bonds issued pursuant to such order are paid in
41 full and all financing costs of the bonds have been recovered in full.
42 3. All or any portion of recovery property specified in a financing
43 order issued to a utility corporation may be sold, assigned, or trans-
44 ferred to a successor or an assignee, including an affiliate or affil-
45 iates of the utility corporation or any other assignee created for the
46 limited purpose of acquiring, owning, or administering recovery property
47 or issuing recovery bonds under the financing order. All or any portion
48 of recovery property may be encumbered by a security interest to secure
49 recovery bonds issued pursuant to the order and other financing costs.
50 Each such sale, assignment, transfer, or security interest granted by a
51 utility corporation or affiliate of a utility corporation or assignee
52 shall be considered to be a transaction in the ordinary course of busi-
53 ness.
54 4. The description of recovery property being sold, assigned, or
55 transferred to an assignee in any sale agreement, purchase agreement, or
56 other transfer agreement or created and recognized as property of an
A. 10346--A 9
1 assignee in accordance with subdivision nine of this section, being
2 encumbered to a secured party in any security agreement, pledge agree-
3 ment, or other security document, or indicated in any financing state-
4 ment is only sufficient if such description or indication refers to the
5 specific financing order that created the recovery property and states
6 that such agreement or financing statement covers all or part of such
7 recovery property described in such financing order. A description of
8 recovery property in a financing statement shall be sufficient if it
9 refers to the financing order creating the recovery property. This
10 subdivision shall apply to all purported sales, assignments, or trans-
11 fers of, and all purported liens or security interests in, recovery
12 property, regardless of whether the related sale agreement, purchase
13 agreement, other transfer agreement, security agreement, pledge agree-
14 ment, or other security document was entered into, or any financing
15 statement was filed, before or after the effective date of this act.
16 5. Every electric bill issued by a utility corporation that has
17 obtained a financing order and caused recovery bonds to be issued shall
18 comply with the provisions of this subdivision; provided, however, that
19 the failure of a utility corporation to comply with this subdivision
20 shall not invalidate, impair, or affect any financing order, recovery
21 property, recovery charge, or recovery bonds. Every such bill shall:
22 (a) Explicitly reflect that a portion of the charges on such bill
23 represents recovery charges approved in a financing order issued to the
24 utility corporation and, if the recovery property has been transferred
25 to, or created at, an assignee, must include a statement to the effect
26 that the assignee is the owner of the rights to recovery charges and
27 that the utility corporation or other entity, if applicable, is acting
28 as a collection agent or servicer for that assignee. The tariff appli-
29 cable to consumers must indicate the recovery charge and the ownership
30 of the charge.
31 (b) Include the recovery charge on each consumer's bill as a separate
32 line item and include either the rate or the amount of the charge on
33 each bill.
34 6. If a utility corporation defaults on any required payment of charg-
35 es arising from recovery property specified in a financing order, the
36 supreme court, Albany county, upon petition by an interested party, and
37 without limiting any other remedies available to the applying party,
38 shall order the sequestration and payment of the revenues arising from
39 the recovery property to the financing parties or their representatives.
40 Any such order shall remain in full force and effect notwithstanding any
41 reorganization, bankruptcy, or other insolvency proceedings with respect
42 to the utility corporation or its successors or assignees.
43 7. The interest of an assignee or secured party in recovery property
44 specified in a financing order shall not be subject to setoff, counter-
45 claim, surcharge, or defense by the utility corporation or any other
46 person, or in connection with the reorganization, bankruptcy, or other
47 insolvency of the utility corporation or any other entity.
48 8. Any successor to a utility corporation, whether pursuant to any
49 reorganization, bankruptcy, or other insolvency proceeding or whether
50 pursuant to any merger or acquisition, sale, or other business combina-
51 tion, or transfer by operation of law, as a result of utility corpo-
52 ration restructuring or otherwise, shall perform and satisfy all obli-
53 gations of, and have the same rights under a financing order as the
54 utility corporation under the financing order in the same manner and to
55 the same extent as the utility corporation, including collection and
A. 10346--A 10
1 payment of any revenues and proceeds of the recovery property to any
2 person entitled thereto.
3 9. Upon petition by the utility corporation, recovery property may be
4 immediately created by operation of law on the latter of the issuance of
5 a financing order, or the issuance of the recovery bonds by an assignee.
6 Recovery property created in accordance with this subdivision shall,
7 upon creation, belong to the assignee and such assignee will have the
8 same rights to and benefits arising from the recovery property as it
9 would have if it acquired such recovery property as a result of a
10 purchase, acquisition or other transfer from the utility corporation.
11 § 5. Sale, assignment, or transfer of recovery property. 1. The sale,
12 assignment, or other transfer of recovery property by a utility corpo-
13 ration to an assignee that the parties have in the governing contract
14 expressly stated to be a sale or other absolute transfer shall consti-
15 tute an absolute transfer and true sale of, and not a security interest
16 in, the transferor's right, title, and interest in, to, and under such
17 recovery property, other than for federal and state income tax purposes.
18 The parties' characterization of such transaction as a sale of an inter-
19 est in recovery property shall be conclusive that the transaction is a
20 true sale and that ownership has passed to the party characterized as
21 the purchaser, regardless of whether the purchaser has possession of any
22 documents evidencing or pertaining to the interest. After any such
23 transaction, the recovery property shall not be subject to any claims of
24 the transferor or the transferor's creditors, other than creditors hold-
25 ing a prior security interest in the recovery property perfected under
26 section eight of this act.
27 2. Notwithstanding any provision of law to the contrary, the charac-
28 terization of any sale, assignment, or other transfer as a true sale or
29 other absolute transfer pursuant to subdivision 1 of this section and
30 the corresponding characterization of the assignee's property interest
31 shall be determinative and conclusive irrespective of, and not affected
32 or impaired by, the existence of any or all of the following circum-
33 stances:
34 (a) Commingling of amounts arising with respect to the recovery prop-
35 erty with other amounts;
36 (b) The retention by the transferor of a partial or residual interest,
37 including an equity interest or entitlement to any surplus, in the
38 recovery property, whether direct or indirect, or whether subordinate or
39 otherwise;
40 (c) Any recourse that the assignee may have against the transferor,
41 except that any such recourse shall not be created, contingent upon, or
42 otherwise occurring or resulting from the inability or failure of one or
43 more of the transferor's consumers to timely pay all or a portion of the
44 recovery charge;
45 (d) Any indemnifications, obligations, or repurchase rights made or
46 provided by the transferor, except that such indemnity or repurchase
47 rights shall not be based solely upon the inability or failure of a
48 transferor's consumers to timely pay all or a portion of the recovery
49 charge;
50 (e) The transferor acting as the collector of the recovery charges or
51 the existence of any contract described in paragraph (k) of subdivision
52 5 of section three of this act;
53 (f) The contrary or other treatment of the sale, assignment, or other
54 transfer for tax, financial reporting, or other purposes;
55 (g) The granting or providing to holders of the recovery bonds of a
56 preferred right to the recovery property or credit enhancement by the
A. 10346--A 11
1 utility corporation or its affiliates with respect to the recovery
2 bonds; or
3 (h) The status of the assignee as a direct or indirect wholly owned
4 subsidiary or other affiliate of the utility corporation. The separate
5 juridical personality of any assignee of recovery property which is a
6 subsidiary or affiliate of the utility corporation shall not be disre-
7 garded due to the fact that the assignee and the utility corporation
8 share any one or more incidents of control, including common managers,
9 officers, directors, members, accounting or administrative systems,
10 consolidated tax returns, or office space, that the assignee may be a
11 disregarded entity for tax purposes, that the electric corporation
12 caused the formation of the assignee, that a contract by the utility
13 corporation and the assignee described in paragraph (k) of subdivision 5
14 of section three of this act exists, that the assignee has no other
15 business other than pertaining to the recovery property, that the
16 capitalization of the assignee is limited to amounts required for
17 compliance with certain applicable federal income tax laws and revenue
18 procedures, or that other factors used in applying a single business
19 enterprise test to juridical persons are present.
20 3. Any right that a utility corporation has in the recovery property
21 prior to its sale, assignment, or transfer shall be in the form of a
22 contractual right or chose in action notwithstanding any contrary treat-
23 ment thereof for accounting or tax purposes. The ownership of an inter-
24 est in recovery property is voluntarily transferred by a contract
25 between the owner and the assignee that purports to transfer the owner-
26 ship of that interest. Unless otherwise provided, the transfer of
27 ownership between the parties shall be effective as soon as there is
28 written agreement on the interest, the purchase price is fixed, and the
29 financing order has been issued. Such transfer shall be perfected and
30 take effect against all third parties including, but not limited to,
31 subsequent lien creditors when the transfer has become effective between
32 the parties and when a financing statement giving notice of the sale,
33 assignment, or transfer is filed in accordance with subdivision 4 of
34 this section. Delivery of such an interest in recovery property shall
35 take place by operation of law upon the filing of the financing state-
36 ment.
37 4. Financing statements required to be filed under this section shall
38 be filed, indexed, maintained, and continued in the same manner and in
39 the same system of records maintained for the filing of financing state-
40 ments under article 9 of the uniform commercial code. The filing of
41 such financing statement shall be the only method of perfecting a sale,
42 assignment, or transfer of recovery property. The sale, assignment, or
43 transfer of an interest in recovery property perfected by filing a
44 financing statement shall be effective against any consumers owing
45 payment of the recovery charges, creditors of the transferor, subsequent
46 transferees, and all other third persons notwithstanding the absence of
47 actual knowledge of or notice to such consumers of such sale, assign-
48 ment, or transfer.
49 5. The priority of the conflicting ownership interests of assignees in
50 the same interest or rights in any recovery property shall be determined
51 as follows:
52 (a) Conflicting perfected interests or rights of assignees rank
53 according to priority in time of perfection.
54 (b) A perfected interest or right of an assignee has priority over a
55 conflicting unperfected interest or right of an assignee.
A. 10346--A 12
1 (c) A perfected interest or right of an assignee has priority over a
2 person who becomes a lien creditor after the perfection of such
3 assignee's interest or right.
4 6. The priority of a sale, assignment, or transfer perfected under
5 this section shall not be impaired by any later modification of the
6 financing order or recovery property or by the commingling of funds
7 arising from recovery property with other funds. Any other security
8 interest that may apply to such funds, other than a security interest
9 perfected under section six of this act, shall be terminated when those
10 funds are transferred to a segregated account for the assignee or a
11 financing party. If recovery property has been transferred to an assig-
12 nee or financing party, any proceeds of such property shall be held for
13 and delivered to the assignee or financing party by any collector under
14 any contract described in paragraph (k) of subdivision 5 of section
15 three of this act as a mandatary and fiduciary.
16 § 6. Security interests. 1. The provisions of article 9 of the uniform
17 commercial code relating to secured transactions shall not apply to
18 recovery property or any right, title, or interest of a corporation or
19 assignee therein, whether before or after the issuance of a financing
20 order, except as provided in subdivision 1 of section seven of this act.
21 In addition, such right, title, or interest pertaining to a financing
22 order, including but not limited to, the associated recovery property,
23 and any revenues, collections, claims, rights to payment, payments,
24 money, or proceeds of or arising from recovery charges pursuant to such
25 order, shall not be deemed proceeds of any right or interest other than
26 of the financing order and the recovery property arising from the
27 financing order. All revenues and collections resulting from recovery
28 property shall constitute proceeds only of the recovery property arising
29 from the financing order.
30 2. Except to the extent provided in this act with respect to filings
31 of financing statements or control of deposit accounts or investment
32 property as original collateral, the creation, attachment, granting,
33 perfection, and priority of security interests in recovery property to
34 secure recovery bonds shall be governed solely by this article and not
35 by the uniform commercial code.
36 3. (a) A security interest in recovery property is valid and enforcea-
37 ble against the utility corporation and its successor or an assignee and
38 third parties and attaches to recovery property only after all of the
39 following conditions are met:
40 (i) The issuance of a financing order;
41 (ii) The execution and delivery of a security agreement with a financ-
42 ing party in connection with the issuance of recovery bonds; and
43 (iii) The receipt of value for the recovery bonds.
44 (b) A security interest attaches to recovery property without physical
45 delivery of collateral or other act when all of the foregoing conditions
46 have been met, unless the security agreement expressly postpones the
47 time of attachment.
48 4. A security interest in recovery property is perfected only if it
49 has attached and a financing statement indicating the recovery property
50 collateral covered thereby has been filed. A financing statement must
51 be filed to perfect all security interests and liens in storm recovery
52 property under this act. A security interest in recovery property is
53 perfected when it has attached and when the applicable financing state-
54 ment has been filed. The interest of a secured party is not perfected
55 unless a financing statement sufficient under this act and otherwise in
56 accordance with the uniform commercial code is filed, and after
A. 10346--A 13
1 perfection the secured party's interest continues in the recovery prop-
2 erty and all proceeds of such recovery property, whether or not billed,
3 accrued, or collected, and whether or not deposited into a deposit
4 account and however evidenced. A security interest in proceeds of
5 recovery property is a perfected security interest if the security
6 interest in the recovery property was perfected under this act. Financ-
7 ing statements required to be filed pursuant to this act shall be filed,
8 indexed, maintained, and continued in the same manner and in the same
9 system of records maintained for the filing of financing statements
10 under the uniform commercial code, except that the requirement as to
11 continuation statements does not apply. The filing of such a financing
12 statement shall be the only method of perfecting a lien or security
13 interest on recovery property. The financing statement shall be filed
14 as if the debtor named therein were located in this state.
15 5. The priority of the conflicting security interests of secured
16 parties in the same interest or rights in any recovery property is
17 determined as follows:
18 (a) Conflicting perfected security interests of secured parties rank
19 according to priority in time of perfection;
20 (b) A perfected security interest of a secured party has priority over
21 a conflicting unperfected security interest of a secured party; and
22 (c) A perfected security interest of a secured party has priority over
23 a person who becomes a lien creditor after the perfection of such
24 secured party's security interest.
25 6. A perfected security interest in recovery property and all proceeds
26 of such recovery property, whether or not billed, accrued, or collected,
27 and whether or not deposited into a deposit account and however
28 evidenced, shall have priority over a conflicting lien or privilege of
29 any nature in the same collateral property, except a security interest
30 is subordinate to the rights of a person that becomes a lien creditor
31 before the perfection of such security interest. A security interest in
32 recovery property which qualifies for priority over a conflicting secu-
33 rity interest, lien, or privilege also has priority over the conflicting
34 security interest, lien, or privilege in proceeds of the recovery prop-
35 erty. The relative priority of a perfected security interest of a
36 secured party is not adversely affected by any lien, privilege, or secu-
37 rity interest in a deposit account of the utility corporation that is a
38 collector as described in paragraph (k) of subdivision 5 of section
39 three of this act and into which the revenues are deposited. The priori-
40 ty of a security interest perfected under this section shall not be
41 defeated or impaired by any later modification of the financing order or
42 recovery property or by the commingling of funds arising from recovery
43 property with other funds. Any other security interest that may apply
44 to those funds shall be terminated as to all funds transferred to a
45 segregated account for the benefit of an assignee or a financing party
46 or to an assignee or financing party directly. The perfection by
47 control, the effect of perfection by control, and the priority of a
48 security interest granted by the issuer of and securing recovery bonds
49 held by a secured party having control of a segregated deposit account
50 or securities account as original collateral into which revenues,
51 collections, or proceeds of recovery property are deposited or credited
52 shall be governed by section 1-301 of uniform commercial code.
53 7. If a default occurs under the terms of any recovery bond, the
54 secured party may foreclose on or otherwise enforce the security inter-
55 est in any recovery property as if it was a secured party under the
56 uniform commercial code. A secured party holding a security interest in
A. 10346--A 14
1 recovery property shall be entitled to exercise all of the same rights
2 and remedies available to a secured party under the uniform commercial
3 code, to the same extent as if those rights and remedies were set forth
4 in this act. The court may order that amounts arising from recovery
5 property be transferred to a separate account of the secured party for
6 the financing parties' benefit, to which their security interest shall
7 apply. On petition by or on behalf of a secured party, the court shall
8 order the sequestration and payment to the financing parties of revenues
9 arising from the recovery property.
10 8. A security interest created under this section may provide for a
11 security interest in after-acquired collateral. Such security interest
12 shall not be invalid or fraudulent against creditors solely because the
13 grantor or the utility corporation as collector or servicer has the
14 right or ability to commingle the collateral or proceeds, or collect,
15 compromise, enforce, and otherwise deal with collateral.
16 9. Any action arising under the provisions of this act to enforce a
17 security interest in recovery property, or which otherwise asserts an
18 interest in, or a right in, to or against any recovery property, wherev-
19 er located or deemed located, or any security interest governed by this
20 act, shall be brought in the supreme court, Albany county. Such actions
21 shall be governed by the applicable provisions of the civil practice law
22 and rules and other law applicable to executory proceedings, including
23 provisional remedies, but only to the extent such laws are consistent
24 with the language and purposes of this act.
25 § 7. Choice of law; conflicts. 1. The law governing the validity,
26 enforceability, attachment, perfection, priority, exercise of remedies,
27 and venue with respect to the creation, recognition, sale, assignment,
28 or transfer of an interest or right or the creation of a security inter-
29 est in any recovery property shall be exclusively the laws of this
30 state, without applying this state's law on conflict of laws and
31 notwithstanding any contrary contractual provision, except as provided
32 in subdivision 6 of section six of this act. The validity, enforceabili-
33 ty, attachment, perfection, priority, and exercise of remedies with
34 respect to the creation, recognition, sale, assignment, or transfer of
35 an interest or right or the creation of a security interest in any
36 recovery property shall be governed by this act, and solely to the
37 extent not addressed by this act, by the uniform commercial code and
38 other laws of this state. Notwithstanding the preceding sentence, this
39 act provides that the uniform commercial code applies to the filings of
40 financing statements referenced in this act, to perfection, the effect
41 of perfection or nonperfection, and the priority of security interests
42 held by a secured party having control of deposit accounts or securities
43 accounts as original collateral securing recovery bonds, notwithstanding
44 that proceeds of recovery charges are deposited therein, and to the
45 enforcement of security interests in recovery property, in each case
46 subject to subdivision 2 of this section.
47 2. Insofar as the provisions of this act are inconsistent with the
48 provisions of any other law or part thereof regarding the attachment,
49 creation, perfection, the effect of perfection, or priority of, and
50 sale, assignment, or transfer of, or security interest in, recovery
51 property, or the exercise of remedies with respect thereto, the
52 provisions of this act shall be controlling.
53 3. Nothing in this section shall be construed so as to conflict with
54 the provisions of subdivision 6 of section six of this act.
55 § 8. Recovery bonds not public debt. Recovery bonds are not a debt or
56 a general obligation of the state or any of its political subdivisions,
A. 10346--A 15
1 agencies, or instrumentalities and are not a charge on their full faith
2 and credit. An issue of recovery bonds shall not, directly or indirect-
3 ly or contingently, obligate the state or any agency, political subdivi-
4 sion, or instrumentality of the state to levy any tax or make any appro-
5 priation for payment of the bonds, other than for paying recovery
6 charges in their capacity as consumers of electricity. All recovery
7 bonds authorized by a financing order by the commission must contain on
8 the face thereof a statement to the following effect: "Neither the full
9 faith and credit nor the taxing power of the State of New York is
10 pledged to the payment of the principal of, or interest on, this bond."
11 § 9. State pledge. 1. The state pledges to and agrees with the holders
12 of recovery bonds, any assignee and all financing parties that the state
13 will not in any way take or permit any action that limits, alters or
14 impairs the value of recovery property or, except as required by a true-
15 up mechanism described in the financing order, reduce, alter or impair
16 recovery charges that are imposed, collected and remitted for the bene-
17 fit of the owners of recovery bonds, any assignee, and all financing
18 parties, until all principal, interest and redemption premium in respect
19 of recovery bonds, all other financing costs and all amounts to be paid
20 to an assignee or financing party under an ancillary agreement are paid
21 or performed in full.
22 2. Any person that issues recovery bonds shall be permitted to include
23 the pledge specified in subdivision 1 of this section on the face of
24 such bonds and in any ancillary agreements or other documentation
25 related to the issuance and marketing of such bonds.
26 § 10. Assignee not a utility corporation. An assignee or financing
27 party shall not be considered a utility corporation as defined in subdi-
28 vision 24 of section 2 of the public service law solely by virtue of
29 engaging in any of the transactions described in this act.
30 § 11. Effect of invalidity. If any provision of this act is held
31 invalid or is invalidated, superseded, replaced, repealed, or expires
32 for any reason, such occurrence shall not affect the validity of any
33 action allowed under this act taken by a utility corporation, or an
34 assignee, a financing party, a collection agent, or a party to an ancil-
35 lary agreement. Any such action shall remain in full force and effect
36 with respect to all recovery bonds issued or authorized in a financing
37 order issued pursuant to this act on or before the date that such
38 provision is held invalid or is invalidated, superseded, replaced, or
39 repealed, or expires for any reason.
40 § 12. Effect of a financing order. Section 70 of the public service
41 law shall not apply to: 1. Any sale, assignment or transfer of recovery
42 property or any equity position held by the utility corporation in an
43 assignee; or
44 2. Any other transaction contemplated by or approved in a financing
45 order issued by the commission pursuant to this act.
46 § 13. This act shall take effect immediately.
