SB 559 — Storm Securitization.

GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2019 S 21 SENATE BILL 559 Agriculture/Environment/Natural Resources Committee Substitute Adopted 4/18/19 Short Title:

Senators Rabon, Hise, and Blue (Primary Sponsors).

Rules and Operations of the Senate April 3, 2019 A BILL TO BE ENTITLED AN ACT TO PERMIT FINANCING FOR CERTAIN STORM RECOVERY COSTS AND TO AUTHORIZETHEUTILITIESCOMMISSIONTOFIXRATES FORELECTRICPUBLIC UTILITIES USING "MULTIYEAR RATE PLAN" AND "BANDING OF AUTHORIZED RETURN" MECHANISMS.

Any other cost related to issuing, supporting, repaying, refunding, and servicing storm recovery bonds, including, servicing fees, accounting and auditing fees, trustee fees, legal fees, consulting fees, structuring adviser fees, administrative fees, placement and underwriting fees, *S559-v-2**S559-v-1* General Assembly Of North Carolina Session 2019 independent director and manager fees, capitalized interest, rating agency fees, stock exchange listing and compliance fees, security registration fees, filing fees, information technology programming costs, and any other costs necessary to otherwise ensure the timely payment of storm recovery bonds or other amounts or charges payable in connection with the bonds, including costs related to obtaining the financing order.

– Bonds, debentures, notes, certificates of participation, certificates of beneficial interest, certificates of ownership, or otherevidences ofindebtedness orownershipthatorownershipthatareissuedbya areissuedbya publicutility or an assignee pursuant to a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance Commission-approved storm recovery costs and financing costs, and that are secured by or payable from storm recovery property.

Page 2 Senate Bill 559-Second559-First Edition General Assembly Of North Carolina Session 2019 (13) Storm recovery charge.

A description of the storm recoveryactivities that the public utility has undertaken or proposes to undertake and the reasons for undertaking theactivities,orifthepublicutilityissubjecttoasettlementagreement Senate Bill 559-Second559-First Edition Page 3 General Assembly Of North Carolina Session 2019 as contemplated by subdivision (2) of this subsection, a description of the settlement agreement.

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A formula-based true-up mechanism for making, at least annually, expeditious periodic adjustments in the storm recovery charges that customers are required to pay pursuant to the financing order and for making any adjustments that are necessary to correct for any overcollection or undercollection of the charges or to otherwise ensure the timely payment of storm recovery bonds and financing costs and other required Senate Bill 559-Second559-First Edition Page 5 General Assembly Of North Carolina Session 2019 amounts and charges payable in connection with the storm recovery bonds.

Within Page 6 Senate Bill 559-Second559-First Edition General Assembly Of North Carolina Session 2019 30 days after receiving a public utility's request pursuant to this paragraph, the Commission shall either approve the request or inform the public utility of any mathematical errors in its calculation.

– (1) The Commission may not, in exercising its powers and carrying out its duties regarding anymatter within its authoritypursuant to this Chapter, consider the storm recovery bonds issued pursuant to a financing order to be the debt of the public utility other than for federal income tax purposes, consider the Senate Bill 559-Second559-First Edition Page 7 General Assembly Of North Carolina Session 2019 storm recoverycharges paid under the financing order to be the revenue of the public utility for any purpose, or consider the storm recovery costs or financing costs specified in the financing order to be the costs of the public utility, nor maythe Commission determine anyaction taken bya public utility which is consistent with the financing order to be unjust or unreasonable.

Storm recovery property specified in a financing order exists until storm recovery bonds issued pursuant to the financing order are paid Page 8 Senate Bill 559-Second559-First Edition General Assembly Of North Carolina Session 2019 in full and all financing costs and other costs of such storm recovery bonds have been recovered in full.

The creation, perfection, and enforcement of any security interest in storm recovery property to secure the repayment of the principal and Senate Bill 559-Second559-First Edition Page 9 General Assembly Of North Carolina Session 2019 interest and other amounts payable in respect of storm recoverybonds, amounts payable under any ancillary agreement and other financing costs are governed by this subsection and not by the provisions of the Code.

If a default or termination occurs under the storm recovery bonds, the financingpartiesortheirrepresentativesmayforecloseonorotherwise enforce their lien and security interest in any storm recovery property as if theywere secured parties with a perfected and prior lien under the Code, and the Commission may order amounts arising from storm recovery charges be transferred to a separate account for the financing Page 10 Senate Bill 559-Second559-First Edition General Assembly Of North Carolina Session 2019 parties' benefit, to which their lien and securityinterest shall apply.

The transferor acting as the servicer of the storm recovery charges or the existence of any contract that authorizes or requires the public utility, to the extent that any interest in storm recovery property is sold or assigned, to contract with the assignee or any financing party that it will continue to operate its system to provide service to its customers, will collect amounts in respect of the storm recovery charges for Senate Bill 559-Second559-First Edition Page 11 General Assembly Of North Carolina Session 2019 thebenefitandaccountofsuchassigneeorfinancingparty,and will account for and remit such amounts to or for the account of such assignee or financing party.

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– (1) The State and its agencies, including the Commission, pledge and agree with bondholders, the owners of the storm recovery property, and other financing parties that the State and its agencies will not take any action listed in this Senate Bill 559-Second559-First Edition Page 13 General Assembly Of North Carolina Session 2019 subdivision.

or (14) The creation, perfection, priority, or enforcement of any lien on, assignment of, pledge of, or security in, any revenues, rights, funds, or other tangible or intangibleassets created, made,or grantedbythis Stateora governmentalunit in this State, including the assignment of rights as secured party in security interests granted by any party subject to the provisions of this Article to this Page 14 Senate Bill 559-Second559-First Edition General Assembly Of North Carolina Session 2019 State or a governmental unit in this State, to secure, directly or indirectly, any bond, note, other evidence of indebtedness, or other payment obligations for borrowed money issued by, or in connection with, installment or lease purchase financings by, this State or a governmental unit in this State.

(b) Upon application by an electric public utility, the Commission shall, after notice and anopportunityforinterestedpartiestobeheard,issueanorderdenyingorapprovingtheproposedan plan,opportunity withfor orinterested withoutparties modifications,to be heard, issue an order rendering its decision on an electric public utility's proposed rate-making mechanism, plan, or settlement that includes multiyear rate plans, banding of authorized returns, or a combination thereof, filed pursuant to this section within the time frames set forth in G.S.

The Commission mayapprovemay approve such rate-making mechanisms, plans, or settlements proposed by an electric public utility only upon a finding by the Commission that such mechanisms, plans, or settlements will establish rates that are just and reasonable, and which are in the public interest.

In reviewing anysuchany such application under this section, the Commission shall considerconsiderwhether whether the electric public utility's application, as proposed:

The Commission is granted explicit authority to impose any or all conditions for approval of an application submitted under this section that the Commission deems necessary to ensure that rates are just and reasonable, and are in the public interest, including periodic reviews to be held during the period that a multiyear rate plan may be in effect, with opportunities for public hearings during such periodic reviews so that interested parties may be heard.

If the Commission approves the application with modifications, the utility subject to such approval may, at its option, accept the modifications and implement the proposed plan as modified or may, at its option, withdraw its Senate Bill 559-Second Edition Page 15 General Assembly Of North Carolina Session 2019 application and:

(i) continue to be regulated under the form of regulation that existed at the time of filing the application or (ii) file a revised application pursuant to this section.

Senate Bill 559-First Edition Page 15 General Assembly Of North Carolina Session 2019 (e) Nothing in this section shall be construed to (i) limit or abrogate the existing rate-making authority of the Commission or (ii) invalidate or void any rates approved by the Commission prior to the effective date of this section.

In all respects, the rate-making mechanisms, plans, or settlements approved under this section, shall operate independently, and be considered separately, from riders or other cost recovery mechanisms otherwise allowed by law, unless otherwise incorporated into such mechanism, plan, or settlement." 8 PART III.

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