2010 Pennsylvania Code
Title 66 - PUBLIC UTILITIES
Chapter 28 - Restructuring of Electric Utility Industry
2812 - Approval of transition bonds.

     § 2812.  Approval of transition bonds.
        (a)  Qualified rate orders.--Notwithstanding any other
     provision of law, the commission is authorized to issue
     qualified rate orders in accordance with the provisions of this
     subsection to facilitate the recovery or financing of qualified
     transition expenses of an electric utility or assignee.
            (1)  A qualified rate order may be adopted by the
        commission only upon the application of an electric utility
        and shall become effective in accordance with its terms.
        After the issuance of a qualified rate order, the electric
        utility retains sole discretion regarding whether to assign,
        sell or otherwise transfer intangible transition property or
        to cause the transition bonds to be issued, including the
        right to defer or postpone such assignment, sale, transfer or
        issuance.
            (2)  After the effective date of this chapter, an
        electric utility may file an application for a qualified rate
        order pursuant to the following procedures:
                (i)  Each application for a qualified rate order
            shall contain a complete accounting of the utility's
            transition or stranded costs, detailed information
            regarding the utility's proposal for the sale of
            intangible transition property or the issuance of
            transition bonds and information regarding the electric
            utility's planned use of the proceeds of the sale or
            issuance. After the utility has filed its restructuring
            plan under section 2806 (relating to implementation,
            pilot programs and performance-based rates), the utility
            may incorporate by reference the information in the
            restructuring plan in providing the information.
                (ii)  An electric utility may file an application for
            a qualified rate order concurrently with, prior to,
            during or following the filing of its restructuring plan
            under section 2806. If an electric utility requests
            expedited review under subsection (b)(1)(i) or (ii), it
            shall designate in its application the portion of its
            total claimed transition or stranded costs for which it
            requests such expedited review.
                (iii)  After notice and an opportunity to be heard,
            the commission may issue a final qualified rate order for
            all or a portion of the amount of transition or stranded
            costs that it finds would be just and reasonable for the
            utility to recover from ratepayers under sections 2804
            (relating to standards for restructuring of electric
            industry) and 2808 (relating to competitive transition
            charge). The commission shall issue a final qualified
            rate order only for the amounts for which it finds such
            issuance to be in the public interest. The commission
            shall complete its review of the application and issue
            its final determination by the later of nine months from
            the filing, unless the electric utility requests
            expedited treatment under subsection (b), or 15 days
            following the filing of the electric utility's
            restructuring plan under section 2806.
        (b)  Expedited review procedures.--
            (1)  The commission shall provide for expedited review of
        applications for qualified rate orders upon request of the
        electric utility pursuant to the following procedures:
                (i)  If the utility elects to file an application
            prior to the filing of its restructuring plan and
            requests expedited review, the commission, after notice
            and an opportunity to be heard, may issue a final
            qualified rate order approving the issuance of transition
            bonds for a portion of the utility's transition or
            stranded costs that the commission finds would be just
            and reasonable to recover from ratepayers under sections
            2804 and 2808. The commission shall consider only the
            portion of the transition or stranded costs for which the
            utility requests approval to issue transition bonds.
            Consideration of all remaining amounts and amounts not
            resolved by the commission shall be deferred for
            consideration in the electric utility's restructuring
            plan proceeding under section 2806. The commission shall
            complete its review of the application and issue its
            final determination within 120 days after the request for
            expedited review but in no event earlier than 15 days
            after the utility has filed its restructuring plan under
            section 2806.
                (ii)  If the electric utility files an application
            for a qualified rate order concurrently with its
            restructuring plan or during the course of the
            restructuring plan proceeding, the electric utility may
            request, and the commission may allow, an accelerated
            determination of the application. After notice and an
            opportunity to be heard, the commission may issue a final
            qualified rate order approving the issuance of transition
            bonds for a portion of the utility's stranded or
            transition costs that the commission finds would be just
            and reasonable to recover from ratepayers under sections
            2804 and 2808. The commission shall consider only the
            portion of the utility's transition or stranded costs for
            which the utility seeks expedited review. Consideration
            of all remaining amounts and amounts not resolved by the
            commission shall be deferred for consideration in a final
            order regarding the utility's restructuring plan under
            section 2806. The commission shall complete its review of
            the application and issue its final determination within
            120 days after the request for expedited review.
                (iii)  If the electric utility files an application
            for a qualified rate order after the commission enters a
            final order regarding the utility's restructuring plan,
            and requests expedited treatment, the commission shall
            complete its review and issue its final determination
            within 120 days of the request for expedited review.
            (2)  The qualified rate order shall require that the
        proceeds from the assignment, sale or transfer or other
        financing of intangible transition property shall be used
        principally to reduce the electric utility's transition or
        stranded costs and to reduce the related capitalization,
        pursuant to a plan submitted by the electric utility in its
        application for a qualified rate order and approved by the
        commission.
            (3)  Notwithstanding any other provision of law, the
        commission has the power to specify that all or a portion of
        a qualified rate order shall be irrevocable. To the extent so
        specified, neither the order nor the intangible transition
        charges authorized to be imposed and collected under the
        order shall be subject to reduction, postponement, impairment
        or termination by any subsequent action of the commission.
        Nothing in this paragraph is intended to supersede the right
        of any party to judicial review of the qualified rate order.
            (4)  The commission shall provide in any qualified rate
        order for a procedure for the expeditious approval by the
        commission of periodic adjustments to the intangible
        transition charges that are the subject of the pertinent
        qualified rate order. Such adjustments shall ensure the
        recovery of revenues sufficient to provide for the payment of
        principal, interest, acquisition or redemption premium and
        for other fees, costs and charges in respect of transition
        bonds approved by the commission as part of or in conjunction
        with a qualified rate order. The commission shall determine
        whether the adjustments are required on each anniversary of
        the issuance of the qualified rate order and at the
        additional intervals as may be provided for in the qualified
        rate order. The adjustments, if required, shall be approved
        within 90 days of each anniversary of the issuance of the
        qualified rate order or of each additional interval provided
        for in the qualified rate order.
            (5)  Notwithstanding any other provision of law, on such
        conditions as the commission may approve, all or portions of
        the interest of an electric utility in intangible transition
        property may be assigned, sold or transferred to an assignee
        and may be pledged or assigned as security by an electric
        utility or assignee to or for the benefit of a financing
        party. To the extent that an interest is assigned, sold or
        transferred or is pledged or assigned as security, the
        commission shall authorize the electric utility to contract
        with the assignee or financing party that the electric
        utility will continue to operate its system to provide
        service to its customers, will impose and collect the
        applicable intangible transition charges for the benefit and
        account of the assignee or financing party and will account
        for and remit the applicable intangible transition charge to
        or for the account of the assignee or financing party. If the
        qualified rate order so provides, the obligations of the
        electric utility:
                (i)  shall be binding upon the electric utility, its
            successors and assigns; and
                (ii)  shall be required by the commission to be
            undertaken and performed by the electric utility and any
            other entity which provides electric service to a person
            that was a customer of an electric utility located within
            the certificated territory of the electric utility on the
            effective date of this chapter or that became a customer
            of electric services within such territory after the
            effective date of this chapter and is still located
            within such territory, as a condition to the provision of
            service to such customer by such electric utility or
            other entity, unless the customer has paid a termination
            charge in the manner and on the basis specified in the
            qualified rate order.
            (6)  The irrevocable status of any portion of a qualified
        rate order under paragraph (3) shall lapse and terminate to
        the extent that an assignment, sale or transfer of the
        intangible transition property resulting from the rate order
        or the issuance of the related transition bonds is not
        effected within the period specified in the qualified rate
        order.
            (7)  The effect of any subsequent refinancing of
        transition bonds upon the rates authorized in a qualified
        rate order shall be as provided in such order.
            (8)  In its qualified rate order, the commission shall
        afford flexibility in establishing the terms and conditions
        of the transition bonds, including repayment schedules,
        interest rates and other financing costs. The electric
        utility shall file the final terms of issuance with the
        commission.
        (c)  Intangible transition property.--
            (1)  Any right that an electric utility has in the
        intangible transition property prior to its sale or transfer
        or any other right created under this section or created in
        the qualified rate order and assignable under this section or
        assignable pursuant to a qualified rate order shall be only a
        contract right.
            (2)  The Commonwealth pledges to and agrees with the
        holders of any transition bonds issued under this section and
        with any assignee or financing party who may enter into
        contracts with an electric utility under this section that
        the Commonwealth will not limit or alter or in any way impair
        or reduce the value of intangible transition property or
        intangible transition charges approved by a qualified rate
        order until the transition bonds and interest on the
        transition bonds are fully paid and discharged or the
        contracts are fully performed on the part of the electric
        utility. Subject to other requirements of law, nothing in
        this paragraph shall preclude limitation or alteration if
        adequate compensation is made by law for the full protection
        of the intangible transition charges collected pursuant to a
        qualified rate order and of the holder of this transition
        bond and any assignee or financing party entering into
        contract with the electric utility.
        (d)  Security interests in intangible transition property.--
            (1)  Neither intangible transition property nor any
        right, title or interest of a utility or assignee described
        in paragraph (1) of the definition of "intangible transition
        property" in subsection (g), whether before or after the
        issuance of the qualified rate order, shall constitute "an
        account" or "general intangibles" under 13 Pa.C.S. § 9102
        (relating to definitions and index of definitions) nor shall
        any such right, title or interest pertaining to a qualified
        rate order, including the associated intangible transition
        property and any revenues, collections, claims, payments,
        money or proceeds of or arising from intangible transition
        charges pursuant to such order, be deemed proceeds of any
        right or interest other than in the order and the intangible
        transition property arising from the order.
            (2)  The granting, perfection and enforcement of security
        interests in intangible transition property to secure
        transition bonds is governed by this section rather than by
        Title 13 (relating to commercial code).
            (3)  A valid and enforceable security interest in
        intangible transition property shall attach and be perfected
        only by means of a separate filing with the commission, under
        regulations the commission prescribes. For this purpose:
                (i)  If the transition bonds are issued to finance
            any qualified transition expenses, as specified in the
            applicable qualified rate order, the lien of the bonds
            shall attach automatically to the intangible transition
            property relating to the expenses from the time of
            issuance of the bonds.
                (ii)  The lien under subparagraph (i) shall be deemed
            a valid and enforceable security interest in the
            intangible transition property securing the qualified
            transition bonds and shall be continuously perfected if,
            before the date of issuance specified in subparagraph (i)
            or within no more than ten days after the date, a filing
            has been made by or on behalf of the financing party to
            protect that security interest in accordance with the
            procedures prescribed by the commission under this
            subsection. Any filing in respect to such transition
            bonds shall take precedence over any other filing.
                (iii)  The lien under subparagraph (i) is enforceable
            against the assignee and all third parties, including
            judicial lien creditors, subject only to the rights of
            any third parties holding security interests in the
            intangible transition property previously perfected in
            the manner described in this subsection if value has been
            given by the purchasers of transition bonds. A perfected
            lien in intangible transition property is a continuously
            perfected security interest in all revenues and proceeds
            arising with respect to the associated intangible
            transition property, whether or not revenues have
            accrued. Intangible transition property constitutes
            property for the purposes of contracts securing
            transition bonds, whether or not the related revenues
            have accrued. The lien created under this paragraph is
            perfected and ranks prior to any other lien, including
            any judicial lien, which subsequently attaches to the
            intangible transition property, to the intangible
            transition charges and to the qualified rate order and
            any rights created by the order or any proceeds of the
            order. The relative priority of a lien created under this
            paragraph is not defeated or adversely affected by
            changes to the qualified rate order or to the intangible
            transition charges payable by any customer.
                (iv)  The relative priority of a lien created under
            this paragraph is not defeated or adversely affected by
            the commingling of revenues arising with respect to
            intangible transition property with funds of the electric
            utility or other funds of the assignee.
                (v)  If an event of default occurs under approved
            transition bonds, the holders of transition bonds or
            their authorized representatives, as secured parties, may
            foreclose or otherwise enforce the lien in the intangible
            transition property securing the transition bonds,
            subject to the rights of any third parties holding prior
            security interests in the intangible transition property
            perfected in the manner provided in this subsection. Upon
            application by the holders or their representatives,
            without limiting their other remedies, the commission
            shall order the sequestration and payment to the holders
            or their representatives of revenues arising with respect
            to the intangible transition property pledged to the
            holders. An order under this subparagraph shall remain in
            full force and effect notwithstanding any bankruptcy,
            reorganization or other insolvency proceedings with
            respect to the electric utility or assignee.
            (4)  The commission shall establish and maintain a
        separate system of records to reflect the date and time of
        receipt of all filings made under this subsection and may
        provide that transfers of intangible transition property to
        an assignee be filed in accordance with the same system.
        (e)  True sale.--A transfer of intangible transition property
     by an electric utility to an assignee which the parties have in
     the governing documentation expressly stated to be a sale or
     other absolute transfer, in a transaction approved in a
     qualified rate order, shall be treated as an absolute transfer
     of all of the transferor's right, title and interest, as in a
     true sale, and not as a pledge or other financing, of the
     intangible transition property, other than for Federal and State
     income and franchise tax purposes. Granting to holders of
     transition bonds a preferred right to the intangible transition
     property or the provision by the electric utility of any credit
     enhancement with respect to transition bonds shall not impair or
     negate the characterization of any transfer as a true sale,
     other than for Federal and State income and franchise tax
     purposes. A transfer of intangible transition property shall be
     deemed perfected as against third persons, including any
     judicial lien creditors, when all of the following have taken
     place:
            (1)  The commission has issued the qualified rate order
        creating intangible transition property.
            (2)  A sale or transfer of the intangible transition
        property in writing has been executed and delivered to the
        assignee.
        (f)  Actions with respect to intangible transition charges.--
            (1)  Nothing in this chapter shall entitle any person to
        bring an action against a retail electric customer for
        nonpayment of intangible transition charges, other than the
        electric utility, its successor or any other entity which
        provides electric service to a person that was a customer of
        an electric utility located within the certificated territory
        of the electric utility on the effective date of this chapter
        or that became a customer of electric services within such
        territory after the effective date of this chapter and is
        still located within such territory.
            (2)  The commission has exclusive jurisdiction over any
        dispute arising out of the obligations to impose and collect
        intangible transition charges of an electric utility, its
        successor or any other entity which provides electric service
        to a person that was a customer of an electric utility
        located within the certificated territory of the electric
        utility on the effective date of this chapter or that became
        a customer of electric services within such territory after
        the effective date of this chapter and is still located
        within such territory.
        (g)  Definitions.--As used in this section, the following
     words and phrases shall have the meanings given to them in this
     subsection:
        "Assignee."  An entity, including a corporation, public
     authority, trust or financing vehicle, to which an electric
     utility assigns, sells or transfers other than as security all
     or a portion of its interest in or right to intangible
     transition property. The term includes an entity, including a
     corporation, public authority, trust or financing vehicle to
     which a direct assignee of an electric utility may assign, sell
     or transfer other than as security its interest in or right to
     intangible transition property.
        "Financing party."  A holder of transition bonds, including
     trustees, collateral agents and other entities acting for the
     benefit of such a holder.
        "Intangible transition charges."  The amounts authorized to
     be imposed on all customer bills and collected, through a
     nonbypassable mechanism by the electric utility or its successor
     or by any other entity which provides electric service to a
     person that was a customer of an electric utility located within
     the certificated territory of the electric utility on the
     effective date of this chapter or that, after this effective
     date of this chapter, became a customer of electric services
     within such territory and is still located within such
     territory, to recover qualified transition expenses pursuant to
     a qualified rate order. The amounts shall be allocated to
     customer classes in a manner that does not shift interclass or
     intraclass costs and maintains consistency with the allocation
     methodology for utility production plant accepted by the
     commission in the electric utility's most recent base rate
     proceeding.
        "Intangible transition property."
            (1)  The property right created under this section
        representing the irrevocable right of the electric utility or
        an assignee to receive through intangible transition charges
        amounts sufficient to recover all of its qualified transition
        expenses. The term includes all right, title and interest of
        the electric utility or assignee in the qualified rate order
        and in all revenues, collections, claims, payments, money or
        proceeds of or arising from intangible transition charges
        pursuant to the order to the extent that, in accordance with
        this chapter, the order and the rates and other charges
        authorized under the order are declared to be irrevocable.
            (2)  Intangible transition property shall arise and exist
        only when, as and to the extent that an electric utility or
        assignee has qualified transition expenses for which
        intangible transition charges are authorized in a qualified
        rate order that has become effective in accordance with
        subsection (a) and shall thereafter continuously exist to the
        extent provided in the order.
        "Qualified rate order."  An order of the commission adopted
     in accordance with this section, authorizing the imposition and
     collection of intangible transition charges.
        "Qualified transition expenses."  The transition or stranded
     costs of an electric utility approved by the commission for
     recovery under sections 2804 (relating to standards for
     restructuring of electric industry) and 2808 (relating to
     competitive transition charge) through the issuance of
     transition bonds; the costs of retiring existing debt or equity
     capital of the electric utility or its holding company parent,
     including accrued interest and acquisition or redemption
     premium, costs of defeasance, and other related fees, costs and
     charges relating to, through the issuance of transition bonds or
     the assignment, sale or other transfer of intangible transition
     property; and the costs incurred to issue, service or refinance
     the transition bonds, including accrued interest and acquisition
     or redemption premium, and other related fees, costs and
     charges, or to assign, sell or otherwise transfer intangible
     transition property.
        "Transition bonds."  Bonds, debentures, notes, certificates
     of participation or of beneficial interest or other evidences of
     indebtedness or ownership which:
            (1)  are issued by or on behalf of the electric utility
        or assignee pursuant to a qualified rate order;
            (2)  are secured by or payable from intangible transition
        property; and
            (3)  reach final maturity in no longer than ten years.
     (June 8, 2001, P.L.123, No.18, eff. July 1, 2001)

        2001 Amendment.  Act 18 amended subsec. (d)(1).
        Cross References.  Section 2812 is referred to in section
     2808 of this title; section 9109 of Title 13 (Commercial Code).