HB0604

HOUSE BILL 604

54th legislature - STATE OF NEW MEXICO - first session, 2019

INTRODUCED BY

Rod Montoya and James R.J. Strickler and

Paul C. Bandy and David M. Gallegos

AN ACT

RELATING TO PUBLIC UTILITIES; ENACTING THE SECURITIZATION BOND ACT; AUTHORIZING CERTAIN UTILITIES TO ISSUE BONDS PURSUANT TO A FINANCING ORDER ISSUED BY THE PUBLIC REGULATION COMMISSION; PROVIDING PROCEDURES FOR REHEARING AND JUDICIAL REVIEW; PROVIDING LIMITS ON THE JURISDICTION OF THE COMMISSION; CREATING SECURITY INTERESTS IN CERTAIN PROPERTY; PROVIDING FOR THE PERFECTION OF INTERESTS IN CERTAIN PROPERTY; EXEMPTING SECURITIZATION CHARGES FROM FRANCHISE AND CERTAIN OTHER GOVERNMENT FEES; PROVIDING FOR NONIMPAIRMENT OF SECURITIZATION CHARGES AND BONDS; REQUIRING CERTAIN UTILITIES TO TRANSFER A PORTION OF BOND PROCEEDS TO A COUNTY WHERE A GENERATING FACILITY IS BEING ABANDONED; PROVIDING FOR CONFLICTS IN LAW; PROVIDING THAT ACTIONS TAKEN PURSUANT TO THE SECURITIZATION BOND ACT SHALL NOT BE INVALIDATED IF THE ACT IS HELD INVALID.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Securitization Bond Act".

SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Securitization Bond Act:

A. "adjustment mechanism" means a formula-based calculation used to make adjustments to the amount of the securitization charges that are necessary to correct for any over-collection or under-collection of the securitization charges and to provide for the timely and complete payment of scheduled principal and interest on the securitization bonds and the payment and recovery of other financing costs in accordance with the financing order;

B. "ancillary agreement" means a bond, insurance policy, letter of credit, reserve account, surety bond, interest rate lock or swap arrangement, hedging arrangement, liquidity or credit support arrangement or other similar agreement or arrangement entered into in connection with the issuance of a securitization bond that is designed to promote the credit quality and marketability of the bond or to mitigate the risk of an increase in interest rates;

C. "assignee" means a person or legal entity to which an interest in securitization property is sold, assigned, transferred or conveyed, other than as security, and any successor to or subsequent assignee of such a person or legal entity;

D. "bondholder" means a holder or owner of a securitization bond;

E. "commission" means the public regulation commission;

F. "credit rating" means the investment rating for the unsecured debt obligations of a qualifying utility as published by at least one nationally recognized statistical rating organization as recognized by the United States securities and exchange commission;

G. "displaced worker" means a New Mexico resident who:

(1) within the previous twelve months was terminated from employment, or whose contract was terminated, due to the closure and abandonment of a qualifying generating facility, including workers employed by a mine that supplied coal to such a facility;

(2) received at least seventy-five percent of the displaced worker's net income, as that term is defined in the Income Tax Act, from the employment or contract described in Paragraph (1) of this subsection; and

(3) does not qualify to receive full benefits pursuant to a pension or retirement plan from the qualifying generating facility or the associated mine;

H. "financing cost" means the reasonable and prudent costs incurred by the qualifying utility to issue, service, repay or refinance securitization bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, and approved for recovery by the commission in a financing order. "Financing cost" includes:

(1) principal, interest, acquisition, defeasance and redemption premiums that are payable on securitization bonds;

(2) any payment required under an ancillary agreement and any amount required to fund or replenish a reserve account or other account established under any indenture, ancillary agreement or other financing document relating to the securitization bonds;

(3) any costs related to issuing, supporting, repaying, servicing and refunding securitization bonds or the application for a financing order, including servicing fees and expenses, accounting and auditing fees and expenses, trustee fees and expenses, legal fees and expenses, administrative fees and expenses, consulting fees and expenses, placement and underwriting fees and expenses, printing and edgarizing fees, capitalized interest, rating agency fees, government registration fees, stock exchange listing and compliance and filing fees;

(4) any costs incurred to obtain modifications of or amendments to any indenture, financing agreement, security agreement or similar agreement or instrument relating to any existing secured or unsecured obligation of a qualifying utility or an affiliate of a qualifying utility, or any costs incurred by or allocated to a qualifying utility to obtain any consent, release, waiver or approval from any holder of such an obligation, that are necessary to be incurred to permit a qualifying utility to issue or cause the issuance of securitization bonds;

(5) any taxes, fees, charges or other assessments imposed on securitization revenues;

(6) any other costs and charges approved by the commission for inclusion in a securitization charge; and

(7) any other related costs that are approved for recovery in the financing order;

I. "financing order" means an order of the commission that:

(1) authorizes the issuance of securitization bonds;

(2) authorizes the imposition, collection and periodic adjustments of the securitization charge; and

(3) creates securitization property;

J. "financing parties" means:

(1) a trustee, collateral agent or other person acting for the benefit of a bondholder; and

(2) a party to an ancillary agreement or the securitization bonds, the rights and obligations of which relate to or depend upon the existence of securitization property, the enforcement and priority of a security interest in securitization property or the timely collection and payment of securitization revenues;

K. "financing statement" means "financing statement" as defined in the Uniform Commercial Code-Secured Transactions;

L. "non-bypassable" means that the payment of a securitization charge may not be avoided by an electric service customer located within a utility service area and shall be paid by the customer that receives electric delivery service from the qualifying utility imposing the charge for as long as the securitization bonds secured by the charge are outstanding and the related financing costs have not been recovered in full;

M. "non-utility affiliate" means, with respect to any qualifying utility, a person that:

(1) is an "affiliated interest", as that term is used in the Public Utility Act, of a qualifying utility; and

(2) is not a "public utility", as that term is used in the Public Utility Act;

N. "qualifying generating facility" means a coal- fired electric generating facility, which may be composed of multiple generating units, that:

(1) has been granted a certificate of public convenience and necessity and has generated electric energy for ultimate sale to utility customers in the state before the effective date of this section and for which abandonment authority is granted after December 31, 2017;

(2) is owned or leased, in whole or in part, by a qualifying utility; and

(3) is operated by a qualifying utility prior to the effective date of the Securitization Bond Act and for which the qualifying utility obtains a financing order and approval from the commission to abandon prior to January 1, 2024;

O. "qualifying utility" means a public utility pursuant to Paragraph (1) of Subsection G of Section 62-3-3 NMSA 1978 that owns or leases all or a portion of a qualifying generating facility and its successor or assignees;

P. "replacement power resources":

(1) means four hundred fifty megawatts of nameplate capacity as replacement for the qualifying generating facility; and

(2) does not include the expanded use of any generation resources located outside of New Mexico that are in the utility's generation portfolio but have not been placed in the rate base as of January 1, 2019;

Q. "securitization bond" means a bond, debenture, note, certificate of participation, certificate of beneficial interest, certificate of ownership or other evidences of indebtedness or ownership that is issued by a qualifying utility pursuant to a financing order, the proceeds of which are used directly or indirectly to recover, finance or refinance securitization costs and financing costs that are secured by or payable from securitization property and that are non-recourse to the qualifying utility;

R. "securitization charge" means a non-bypassable charge paid by all customers of a qualifying utility for the recovery of securitization costs and financing costs and collected by a qualifying utility or a collection agent;

S. "securitization costs" means costs incurred or expected to be incurred by a qualifying utility that are caused by the abandonment of or associated with qualifying generating facilities, that:

(1) includes:

(a) costs relating to regulatory assets that are associated with or attributable to the qualifying generating facility that were authorized by the commission prior to the issuance of the financing order or determined by the commission in the financing order to be reasonable for inclusion in securitization costs;

(b) reasonable and prudent costs associated with or attributed to decommissioning, severance pay and job training for displaced workers and the qualifying utility's share of payments for which the qualifying utility is contractually obligated to make to pay for reclamation of mines that provide coal to qualifying generating facilities, contract termination fees and engineering work;

(c) any reasonable and prudent demolition or similar cost that exceeds the salvage value of the property and any other reasonable and prudent cost that has been incurred or will be incurred by the qualifying utility relating to the qualifying generating facilities that have not been fully recovered at the time of abandonment;

(d) costs that have been allowed to be recovered from customers, either by commission approval or by the commission not disapproving recovery from customers, by the effective date of the Securitization Bond Act; provided that such costs have been included in the cost of service applied for by the qualifying utility in a general rate case unless the commission expressly reserved determination of cost recovery for a future proceeding and disallowed recovery of such costs before the issuance of the financing order or in the financing order;

(e) costs that the commission has disallowed pending a determination of cost recovery in a future proceeding and the commission determines that such costs are reasonable and prudent before the issuance of the financing order or in the financing order;

(f) reasonable and prudent preliminary costs associated with activities that are incurred prior to the issuance of a financing order and that are to be reimbursed from the proceeds of securitization bonds;

(g) reasonable and prudent capital investments that, considering the proposed abandonment date, are necessary to operate and maintain the qualifying generating facility in good working condition, according to good utility practice, until the facility is abandoned;

(h) the undepreciated investment in property that is being abandoned; and

(i) payments required pursuant to Section 19 of the Securitization Bond Act; and

(2) does not include:

(a) the costs of investing in replacement power resources;

(b) any costs lawfully disallowed or limited by the commission prior to the effective date of the Securitization Bond Act; or

(c) any monetary penalty, fine or forfeiture assessed against a qualifying utility by a government agency or court under a federal or state statute, rule or regulation;

T. "securitization property" means:

(1) the rights and interests of a qualifying utility under a financing order, including the right to impose, charge, collect and receive securitization charges in the amount necessary to provide for the full payment and recovery of all securitization costs and financing costs identified in the financing order as costs to be financed by securitization bonds and to obtain adjustments to the charges as provided in Section 5 of the Securitization Bond Act, and any interest in such rights and interests; and

(2) all revenues, receipts, collections, rights to payment, payments, money, claims or other proceeds arising from the rights and interests specified in Paragraph (1) of this subsection;

U. "securitization revenues" means all revenues, receipts, collections, claims, rights to payments, payments, money or other proceeds arising from securitization property and collected by a qualifying utility or other collection agent that is attributable to a securitization charge;

V. "termination statement" means "termination statement" as defined in the Uniform Commercial Code-Secured Transactions;

W. "traditional utility financing mechanism" means a return on investment at the qualifying utility's weighted average cost of capital; and

X. "utility service area" means:

(1) the geographic area of the state in which a qualifying utility provides electric delivery service to customers at the time of issuance of a financing order; and

(2) for as long as securitization bonds issued pursuant to a financing order are outstanding and the related securitization costs and financing costs have not been recovered in full, any additions to or enlargements of the geographic area, whether or not approved by the commission in a formal proceeding.

SECTION 3. [NEW MATERIAL] FINANCING ORDER--APPLICATION.--

A. A qualifying utility may apply to the commission for a financing order pursuant to this section. To obtain a financing order, a qualifying utility shall comply with Section 19 of the Securitization Bond Act and obtain approval to abandon a qualifying generating facility pursuant to Section 62-9-5 NMSA 1978.

B. An application for a financing order shall include:

(1) evidence that the applicant is a qualifying utility and that the coal-fired facilities to which a financing order would apply meet the requirements of qualifying generating facilities;

(2) a description of the qualifying generating facility that the qualifying utility proposes to abandon or for which abandonment authority was granted after December 31, 2017;

(3) an estimate of the securitization costs associated with the abandonment of the qualifying generating facility described in the application, including compliance with Section 19 of the Securitization Bond Act;

(4) the amount of the securitization costs the qualifying utility proposes to finance through the issuance of one or more series of securitization bonds;

(5) an estimate of the financing costs associated with each series of securitization bonds proposed to be issued;

(6) an estimate of the amount of the securitization charges necessary to recover the securitization costs and financing costs the qualifying utility proposes to finance through the issuance of securitization bonds and the proposed calculation thereof, which estimate and calculation should take into account the estimated date of issuance and estimated principal amount of each series of securitization bonds proposed to be issued;

(7) a proposed methodology for allocating the securitization costs among customer classes;

(8) a description of the proposed adjustment mechanism;

(9) an estimate, based on current market conditions, of the cost savings on a net present value basis over the proposed term of the securitization bonds to the customers of the qualifying utility expected to result from the financing of the securitization costs with securitization bonds as compared to the use of traditional utility financing mechanisms;

(10) an estimate of the date on which the securitization bonds are expected to be issued and the expected term over which the financing costs associated with the issuance are expected to be recovered or, if the bonds are expected to be issued in more than one series, the estimated issuance date and expected term for each bond issuance; provided that the maximum term for each bond issuance shall be no longer than twenty-five years;

(11) identification of plans to sell, assign, transfer or convey, other than as a security, interest in securitization property, including identification of assignees;

(12) identification of ancillary agreements that may be necessary or appropriate;

(13) a description of a proposed ratemaking process to reconcile any difference between the projected pretax costs included in the amount of securitization costs and financing costs financed by securitization bonds and the final pretax securitization costs incurred by the qualifying utility. The proposed ratemaking process shall include evidence as to the reasons for costs that exceed the projected costs financed by the securitization bonds and provide for:

(a) the recovery of reasonable and prudent securitization costs and financing costs actually incurred by the qualifying utility that exceed the projected costs financed by the securitization bonds; or

(b) the refund to customers of the projected costs financed by securitization bonds that exceed the actual securitization costs and financing costs incurred by the qualifying utility; and

(14) any other information reasonably required by the commission to determine whether a financing order should be issued and if approval to abandon a qualifying generating facility and any requests for certificates of public convenience and necessity should be granted.

C. Notice of an application for a financing order shall be given to the parties of record in the qualifying utility's most recent general rate case and published in newspapers of general circulation in the qualifying utility's service area in the state and in the county in the state in which the qualifying generating facility proposed to be abandoned is located and as otherwise may be ordered by the commission.

SECTION 4. [NEW MATERIAL] FINANCING ORDER--ISSUANCE--TERMS OF BONDS--NON-UTILITY AFFILIATE REQUIREMENTS--REPORTS TO COMMISSION.--

A. The commission may approve an application for a financing order without a formal hearing if no protest establishing good cause for a formal hearing is filed within thirty days of the date when notice is given of the filing of the application for the financing order. The commission shall issue an order granting or denying the application for a financing order and the final order on an accompanying application of the qualifying utility for approval to abandon the qualifying generating facility within six months from the date the application for the financing order is filed with the commission. For good cause shown, the commission may extend the time for issuing the order for an additional three months.

B. Failure to issue an order within the time prescribed by Subsection A of this section shall be deemed approval of the application for a financing order, including approval to abandon the qualifying generating facility, if abandonment approval was requested in, consolidated or joined with the application for the financing order pursuant to this section. The commission chair or the chair's designee shall, within two days after expiration of the time prescribed by this subsection, issue an order declaring that the abandonment and application for a financing order has been approved by operation of law.

C. If an application for a financing order is accompanied by a request for issuance of certificates of public convenience and necessity for replacement power resources, this section provides an alternative time frame to the time frame provided in Subsection C of Section 62-9-1 NMSA 1978 and the time frame specified in this section shall apply to requests for issuance of certificates of public convenience and necessity, unless the request has been deferred to a separate proceeding pursuant to Subsection A of Section 3 of the Securitization Bond Act.

D. The issuance of a financing order shall be the only approval required for the authority granted in the financing order.

E. The commission shall issue a financing order if the commission finds that the:

(1) applicant is a qualifying utility and that the facility being abandoned is a qualifying generating facility;

(2) proposed issuance of securitization bonds will result in cost savings to customers of the qualifying utility on a net present value basis over the projected term of the securitization bonds compared to the use of traditional utility financing mechanisms; provided that, in calculating the comparison, the commission shall not exclude recovery of any securitization costs in estimating the amount of costs to customers associated with traditional utility financing mechanisms;

(3) estimate of the securitization charges necessary to recover the securitization costs, including compliance with Section 19 of the Securitization Bond Act, and the financing costs the qualifying utility proposes to be financed by securitization bonds and the proposed calculation thereof are reasonable;

(4) proposed methodology for allocating the securitization costs among customer classes is reasonable;

(5) proposed adjustment mechanism is reasonable and complies with Section 5 of the Securitization Bond Act;

(6) proposed ratemaking process to reconcile any difference between the projected pretax costs included in the amount of securitization costs and financing costs financed by securitization bonds and the final pretax securitization costs and financing costs incurred by the qualifying utility is reasonable and does not affect the amount of the securitization bonds proposed to be issued or the proposed securitization charges; and

(7) term of the securitization bonds is sufficient to secure the highest bond rating possible.

F. If the commission determines that the findings specified in Subsection E of this section cannot be made, the commission shall determine what changes in the application would allow the findings to be made and provide the qualifying utility with the opportunity to amend the qualifying utility's proposal in the manner that allows the commission to make the findings.

G. A financing order shall include the following provisions:

(1) approval for the qualifying utility to issue securitization bonds in compliance with Section 19 of the Securitization Bond Act, to use securitization bonds to finance the maximum amount of the securitization costs as requested in the application and to use the proceeds thereof as provided in Subsection A of Section 10 of the Securitization Bond Act;

(2) approval for the qualifying utility to recover the financing costs through securitization charges, subject to the adjustment mechanism as provided in Section 5 of the Securitization Bond Act, until the securitization bonds issued pursuant to the financing order and the financing costs related to those bonds are paid in full;

(3) approval for the qualifying utility to impose a non-bypassable securitization charge as a separate line item on its customer bills;

(4) approval of an adjustment mechanism;

(5) a description of the securitization property that is created by the financing order and that may be used to pay, and secure the payment of, the securitization bonds and financing costs authorized to be issued in the financing order;

(6) approval of the securitization charges necessary to recover the securitization costs and the financing costs the qualifying utility would have in issuing securitization bonds and the proposed calculation thereof;

(7) approval of the allocation of the securitization costs among customer classes;

(8) approval to enter into ancillary agreements as necessary or appropriate;

(9) approval of any plans for selling, assigning, transferring or conveying, other than as a security, an interest in securitization property; and

(10) approval of a ratemaking and rate adjustment process to reconcile any difference between the projected pretax costs included in the amount of securitization costs and financing costs financed by securitization bonds and the final pretax securitization costs incurred by the qualifying utility, which shall not affect the amount of the securitization bonds proposed to be issued or the proposed securitization charges. The ratemaking process approved shall require evidence as to the reasons for costs that exceed the projected costs financed by the securitization bonds and provide for:

(b) the refund to customers of the projected costs financed by securitization bonds that exceed the actual securitization costs and financing costs incurred by the qualifying utility.

H. A financing order may provide that the creation of securitization property shall be simultaneous with the sale of the securitization property to an assignee as provided in the application and the pledge of the securitization property to secure securitization bonds.

I. A financing order may authorize the qualifying utility to issue more than one series of securitization bonds for a maximum term of no more than twenty-five years for each series. With such authorization, the qualifying utility shall not subsequently be required to secure a separate financing order for each issuance of securitization bonds or for each scheduled activity associated with abandonment of the qualifying generating facility, such as decommissioning activities.

J. The commission may require, as a condition to the effectiveness of the financing order and in every circumstance subject to the limitations set forth in Subsection A of Section 6 of the Securitization Bond Act, that, during any period in which securitization bonds issued pursuant to the financing order are outstanding, an assignee that is a non-utility affiliate and issues securitization bonds will provide in the affiliate's articles of incorporation, partnership agreement or operating agreement, as applicable, that in order for a person to file a voluntary bankruptcy petition on behalf of that assignee, the prior unanimous consent of the directors, partners or managers, as applicable, shall be required. Any such provision shall constitute a legal, valid and binding agreement of the shareholders, partners or members, as applicable, of the assignee and is enforceable against such shareholders, partners or members.

K. A financing order may require the qualifying utility to file with the commission a periodic report showing the receipt and disbursement of proceeds of securitization bonds. A financing order may authorize the staff of the commission to review and audit the books and records of the qualifying utility, and an assignee that is a non-utility affiliate and issues securitization bonds, relating to the receipt and disbursement of proceeds of securitization bonds. SECTION 5. [NEW MATERIAL] ADJUSTMENT MECHANISM--REPORTS TO COMMISSION--HEARING PROCEDURES.--

A. If the commission issues a financing order, the commission shall periodically approve the use of the adjustment mechanism approved in the financing order to correct for any over-collection or under-collection of the securitization charges and to provide for timely payment of scheduled principal of and interest on the securitization bonds and the payment and recovery of other financing costs in accordance with the financing order. Except as provided in Subsection B of this section, the qualifying utility shall file at least semiannually, or more frequently as provided in the financing order:

(1) a calculation estimating whether the existing securitization charge is sufficient to provide for timely payment of scheduled principal of and interest on the securitization bonds and the payment and recovery of other financing costs in accordance with the financing order or if either an over-collection or under-collection is projected; and

(2) a calculation showing the adjustment to the securitization charge to correct for any over-collection or under-collection.

B. The qualifying utility shall file the calculations described in Subsection A of this section at least quarterly during the two-year period preceding the final maturity date of the securitization bonds.

C. The adjustment mechanism shall remain in effect until the securitization bonds and all financing costs have been fully paid and recovered, and any under-collection is recovered from customers and any over-collection is returned to customers.

D. On the same day the qualifying utility files with the commission its calculation of the adjustment to the securitization charge, the qualifying utility shall cause a copy of the filing to be served on the parties of record in the case in which the financing order was issued.

E. An adjustment to the securitization charge filed by the qualifying utility shall be deemed approved without hearing thirty days after filing the adjustment unless:

(1) no later than twenty days from the date the qualifying utility filed the calculation of the adjustment, the staff of the commission notifies the commission of a potential mathematical error in the adjustment and identifies the mathematical error with specificity; and

(2) the commission determines, after due consideration of the notice from the staff of the commission, that good cause exists to suspend the operation of the adjustment, pending hearing on the mathematical error in the adjustment, for a period not to exceed sixty days from the date the qualifying utility filed the calculation of the adjustment. For purposes of this paragraph, "good cause" means that the calculation of the adjustment is unlikely to provide for timely payment of scheduled principal of and interest on the securitization bonds and the payment and recovery of other financing costs in accordance with the financing order.

F. If the commission determines that a hearing is necessary, the commission shall hold a hearing within forty days of the date the qualifying utility filed the calculation of the adjustment. The hearing shall be limited to determining whether there is any mathematical error in the calculation of the adjustment. If the commission determines that the calculation of the adjustment is mathematically in error, the commission shall issue an order that rejects the adjustment and that determines the mathematically correct calculation. The qualifying utility shall be authorized to adjust the securitization charge in accordance with the commission's calculation within five days from issuance of the order. If the commission does not issue an order rejecting the adjustment with a determination of the mathematically corrected calculation within sixty days from the date the qualifying utility filed the adjustment, the adjustment to the securitization charge shall be deemed approved.

G. No adjustment pursuant to this section, and no proceeding held pursuant to this section, shall affect the irrevocability of the financing order pursuant to Section 6 of the Securitization Bond Act.

SECTION 6. [NEW MATERIAL] FINANCING ORDER-- IRREVOCABILITY--AMENDMENTS.--

A. A financing order is irrevocable, and the commission shall not reduce, impair, postpone or terminate the securitization charges approved in the financing order, the securitization property or the collection or recovery of securitization revenues.

B. A financing order may be amended at the request of the qualifying utility to commence a proceeding and issue an amended financing order that:

(1) provides for refinancing, retiring or refunding all or a portion of an outstanding series of securitization bonds issued pursuant to the original financing order if the commission includes in the amended financing order the findings and requirements specified in Subsections E and G of Section 4 of the Securitization Bond Act;

(2) adjusts the amount of securitization costs to be financed by securitization bonds that have not yet been issued to reflect updated estimated or actual costs that differ from costs estimated at the time of the initial financing order; and

(3) is subject to the limitations set forth in Subsection A of this section.

C. No change in the credit rating of a qualifying utility from the credit rating at the time of issuance of a financing order shall impair the irrevocability of a financing order.

SECTION 7. [NEW MATERIAL] AGGRIEVED PARTIES--REQUEST FOR REHEARING--JUDICIAL REVIEW--PRECEDENCE OVER OTHER CASES.--

A. A financing order is a final order of the commission. A party aggrieved by the issuance of a financing order may apply to the commission for a rehearing in accordance with Section 62-10-16 NMSA 1978; provided that such application shall be due no later than ten calendar days after issuance of the financing order. An application for rehearing shall be deemed denied if not acted upon by the commission within ten calendar days after the filing of the application.

B. An aggrieved party may file a notice of appeal with the supreme court in accordance with Section 62-11-1 NMSA 1978; provided that such notice shall be due no later than ten calendar days after denial of an application for rehearing or, if rehearing is not applied for, no later than ten calendar days after issuance of the financing order. The supreme court shall proceed to hear and determine the appeal as expeditiously as practicable.

SECTION 8. [NEW MATERIAL] CONDITIONS THAT KEEP FINANCING ORDERS IN EFFECT AND SECURITIZATION CHARGES IMPOSED.--

A. A financing order shall remain in effect until the securitization bonds issued pursuant to the financing order have been paid in full and all financing costs relating to the securitization bonds have been paid in full.

B. A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization or insolvency of the qualifying utility or any non-utility affiliate or the commencement of any judicial or non-judicial proceeding for bankruptcy or for appointment of a receiver.

C. If securitization bonds issued pursuant to a financing order are outstanding and the related securitization costs and financing costs have not been paid in full, the securitization charges authorized to be imposed in the financing order shall be a part of all customer bills and be collected by the qualifying utility, or a collection agent, in full through a non-bypassable charge that is a separate line item on customer bills and separate and apart from the qualifying utility's base rates. The charge shall be paid by all customers:

(1) receiving transmission, distribution or any other service from the qualifying utility under commission-approved rate schedules or special contracts; and

(2) who acquire electricity from an alternative or subsequent electricity supplier in the utility service area, to the extent that such acquisition is permitted by law.

SECTION 9. [NEW MATERIAL] LIMITATIONS ON JURISDICTION OF COMMISSION.--

A. If the commission issues a financing order, the commission shall not, in exercising its powers and carrying out its duties regarding regulation and ratemaking, consider securitization bonds issued pursuant to the financing order to be the debt of the qualifying utility; the securitization charges paid under the financing order to be revenue of the qualifying utility; or the securitization costs to be financed by securitization bonds or financing costs specified in the financing order to be the costs of the qualifying utility. Reasonable actions taken by a qualifying utility to comply with the financing order shall be deemed to be just and reasonable; provided that, subject to the limitations set forth in Section 6 of the Securitization Bond Act, nothing in this subsection shall:

(1) affect the authority of the commission to apply the adjustment mechanism as provided in Section 5 of the Securitization Bond Act;

(2) prevent or preclude the commission from investigating the compliance of a qualifying utility with the terms and conditions of a financing order and requiring compliance therewith;

(3) prevent or preclude the commission from imposing regulatory sanctions against a qualifying utility for failure to comply with the terms and conditions of a financing order or the requirements of the Securitization Bond Act; or

(4) prevent or preclude the commission from including the qualifying utility's costs of replacement power resources in the qualifying utility's cost of service.

B. The commission shall not order or otherwise require, directly or indirectly, a qualifying utility to issue securitization bonds to finance any costs associated with abandonment of a qualifying generating facility. The commission shall not use a qualifying utility's decision not to issue securitization bonds as a basis to refuse to allow a qualifying utility to recover securitization costs in an otherwise permissible fashion, or as a basis to refuse or condition authorization to issue securities pursuant to Sections 62-6-6 and 62-6-7 NMSA 1978.

SECTION 10. [NEW MATERIAL] QUALIFYING UTILITY--DUTIES.--

A. A qualifying utility shall use the proceeds of the issuance of securitization bonds for paying securitization costs, payments required pursuant to Section 19 of the Securitization Bond Act and financing costs and to acquire replacement power resources and for other utility purposes as provided in Section 62-6-6 NMSA 1978.

B. A qualifying utility shall only close a qualifying generating facility in accordance with Section 19 of the Securitization Bond Act.

C. A qualifying utility for which a financing order has been issued shall annually provide to its customers a concise explanation of the securitization charges approved in a financing order, as modified by subsequent issuances of securitization bonds authorized under a financing order, if any, and by the adjustment mechanism as provided in Section 5 of the Securitization Bond Act. The explanations may be made by bill inserts, website information or other appropriate means.

D. Securitization revenues shall be applied solely to the repayment of securitization bonds and financing costs.

E. The failure of a qualifying utility to apply the proceeds of an issuance of securitization bonds in a reasonable, prudent and appropriate manner, or otherwise comply with any provision of the Securitization Bond Act, shall not invalidate, impair or affect a financing order, securitization property, securitization charge or securitization bonds; provided that, subject to the limitations set forth in Section 6 of the Securitization Bond Act, nothing in this subsection shall prevent or preclude the commission from imposing regulatory sanctions or other remedies allowed by law against a qualifying utility for failure to comply with the terms and conditions of a financing order or the requirements of the Securitization Bond Act.

SECTION 11. [NEW MATERIAL] SECURITIZATION PROPERTY--SECURITIZATION REVENUES.--

A. Securitization property that is created in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of securitization charges depend on the qualifying utility continuing to provide electric energy or continuing to perform its servicing functions relating to the collection of securitization charges or on the level of future energy consumption. Securitization property shall exist whether or not the securitization revenues have been billed, have accrued or have been collected and notwithstanding the fact that the value or amount of the securitization property is dependent on the future provision of service to customers by the qualifying utility.

B. All securitization property created in a financing order shall continue to exist until the securitization bonds issued pursuant to a financing order are paid in full and the financing costs relating to the bonds have been paid in full.

C. All or any portion of securitization property may be transferred, sold, conveyed or assigned to a non-utility affiliate that is:

(1) wholly owned, directly or indirectly, by the qualifying utility;

(2) created for the limited purposes of acquiring, owning or administering securitization property or issuing securitization bonds under the financing order; or

(3) a combination of these purposes.

D. All or any portion of securitization property may be pledged to secure the payment of securitization bonds, amounts payable to financing parties and bondholders, amounts payable under any ancillary agreement and other financing costs.

E. The formation by a qualifying utility of a non-utility affiliate for the limited purpose of acquiring, owning or administering securitization property or issuing securitization bonds pursuant to a financing order, or a combination of these purposes, and any transfer, sale, conveyance, assignment, grant of a security interest in or pledge of securitization property by a qualifying utility to a non-utility affiliate, to the extent previously authorized in a financing order, does not require any further approval of the commission and shall not otherwise be subject to the rules of the commission regarding class II transactions as defined by Subsection L of Section 62-3-3 NMSA 1978.

F. If a qualifying utility defaults on any required payment of securitization revenues, a court with jurisdiction in the matter, on application by an interested party and without limiting any other remedies available to the applying party, shall order the sequestration and payment of the securitization revenues for the benefit of bondholders, any assignee and any financing parties. The order shall remain in full force and effect notwithstanding any bankruptcy, reorganization or other insolvency or receivership proceedings with respect to the qualifying utility or any non-utility affiliate.

G. Securitization property, securitization revenues and the interests of an assignee, bondholder or financing party in securitization property and securitization revenues are not subject to set-off, counterclaim, surcharge or defense by the qualifying utility or any other person or in connection with the bankruptcy, reorganization or other insolvency or receivership proceeding of the qualifying utility, any non-utility affiliate or any other entity.

H. Any successor to a qualifying utility shall be bound by the requirements of the Securitization Bond Act and shall perform and satisfy all obligations of, and have the same rights under a financing order as, the qualifying utility under the financing order in the same manner and to the same extent as the qualifying utility, including the obligation to collect and pay securitization revenues to the person entitled to receive the revenues.

SECTION 12. [NEW MATERIAL] SECURITY INTERESTS--APPLICABILITY OF OTHER ACTS--CREATION OF SECURITY INTEREST--ATTACHMENT ON FILING WITH SECRETARY OF STATE--PRIORITY OVER OTHER LIENS.--

A. Except as otherwise provided in this section, the creation, perfection and enforcement of a security interest in securitization property to secure the repayment of the principal of and interest on securitization bonds, amounts payable pursuant to an ancillary agreement and other financing costs are governed by this section. This section shall be deemed to provide alternatives to the provisions of the Uniform Commercial Code and Chapter 62, Article 13 of the Public Utility Act, which, to the extent the Uniform Commercial Code or that article is inconsistent with this section, are declared to be inapplicable to the Securitization Bond Act.

B. The description or indication of securitization property in a transfer or security agreement and a financing statement is sufficient only if the description or indication refers to the Securitization Bond Act and the financing order creating the securitization property. This section applies to all purported transfers of, and all purported grants of liens on or security interests in, securitization property.

C. A security interest in securitization property is created, valid and binding at the later of the time when:

(1) the financing order is issued;

(2) a security agreement is executed and delivered; or

(3) value is received for the securitization bonds.

D. The security interest attaches without any physical delivery of collateral or other act and the lien of the security interest shall be valid, binding and perfected against all parties having claims of any kind in tort, contract or otherwise against the person granting the security interest, regardless of whether such parties have notice of the lien, on the filing of a financing statement with the secretary of state. The secretary of state shall maintain the financing statement in the same manner and in the same recordkeeping system maintained for financing statements filed pursuant to the Uniform Commercial Code-Secured Transactions. The filing of a financing statement pursuant to this subsection shall be governed by the provisions regarding the filing of financing statements in that article; provided that financing statements filed pursuant to this section shall be effective until a termination statement is filed.

E. A security interest in securitization property is a continuously perfected security interest and has priority over any other lien, created by operation of law or otherwise, that may subsequently attach to the securitization property unless the holder of the security interest has agreed in writing otherwise.

F. The priority of a security interest in securitization property is not affected by the commingling of securitization revenues with other funds. Any pledgee or secured party shall have a perfected security interest in the amount of all securitization revenues that are deposited in any cash or deposit account of the qualifying utility in which securitization revenues have been commingled with other funds and any other security interest that may apply to those funds shall be terminated when they are transferred to a segregated account for the assignee or a financing party.

G. No order of the commission amending a financing order pursuant to Subsection B of Section 6 of the Securitization Bond Act, and no application of the adjustment mechanism as provided in Section 5 of that act, will affect the validity, perfection or priority of a security interest in or transfer of securitization property.

SECTION 13. [NEW MATERIAL] SALE OF SECURITIZATION PROPERTY--PERFECTING INTERESTS--ABSOLUTE TRANSFER AND TRUE SALE REQUIREMENTS.--

A. Any sale, assignment or transfer of securitization property shall be an absolute transfer and true sale of, and not a pledge of or secured transaction relating to, the seller's right, title and interest in, to and under the securitization property if the documents governing the transaction expressly state that the transaction is a sale or other absolute transfer. A transfer of an interest in securitization property shall be created when:

(1) the financing order creating the securitization property has become effective;

(2) the documents evidencing the transfer of securitization property have been executed and delivered to the assignee; and

(3) value is received.

B. On the filing of a financing statement with the secretary of state pursuant to Section 12 of the Securitization Bond Act, a transfer of an interest in securitization property shall be perfected against all third persons, including any judicial lien or other lien creditors or any claims of the seller or creditors of the seller, other than creditors holding a prior security interest, ownership interest or assignment in the securitization property previously perfected in accordance with this section or Section 12 of the Securitization Bond Act.

C. The characterization of the sale, assignment or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser, shall not be affected or impaired by, among other things, the occurrence of any of the following factors:

(1) commingling of securitization revenues with other funds;

(2) the retention by the seller of:

(a) a partial or residual interest, including an equity interest, in the securitization property, whether direct or indirect, or whether subordinate or otherwise; or

(b) the right to recover costs associated with taxes or license fees imposed on the collection of securitization revenues;

(3) any recourse that the purchaser may have against the seller;

(4) any indemnification rights, obligations or repurchase rights made or provided by the seller;

(5) the obligation of the seller to collect securitization revenues on behalf of an assignee;

(6) the treatment of the sale, assignment or transfer for tax, financial reporting or other purposes;

(7) any subsequent order of the commission amending a financing order pursuant to Subsection B of Section 6 of the Securitization Bond Act; or

(8) any use of an adjustment mechanism approved in the financing order.

SECTION 14. [NEW MATERIAL] EXEMPTION FROM FEE ASSESSMENTS.--The imposition, collection and receipt of a securitization charge shall be exempt from an assessment of a franchise fee imposed by a municipality, county or other political subdivision of the state and inspection and supervision fees assessed pursuant to the Public Utility Act.

SECTION 15. [NEW MATERIAL] SECURITIZATION BONDS NOT PUBLIC DEBT.--Securitization bonds issued pursuant to the Securitization Bond Act shall not constitute a debt or a pledge of the faith and credit or taxing power of this state or of any county, municipality or any other political subdivision of this state. Bondholders shall have no right to have taxes levied by the legislature or the taxing authority of any county, municipality or other political subdivision of this state for the payment of the principal of or interest on securitization bonds. The issuance of securitization bonds does not, directly or indirectly or contingently, obligate the state or a political subdivision of the state to levy any tax or make any appropriation for payment of the principal of or interest on the bonds.

SECTION 16. [NEW MATERIAL] SECURITIZATION BONDS AS LEGAL INVESTMENTS.--Securitization bonds shall be legal investments for all governmental units, permanent funds of the state, finance authorities, financial institutions, insurance companies, fiduciaries and other persons requiring statutory authority regarding legal investments.

SECTION 17. [NEW MATERIAL] STATE PLEDGE NOT TO IMPAIR.--

A. The state pledges to and agrees with the bondholders, any assignee and any financing parties that the state will not take or permit any action that impairs the value of securitization property or, except as allowed pursuant to Section 5 of the Securitization Bond Act, reduce, alter or impair securitization charges that are imposed, collected and remitted for the benefit of the bondholders, any assignee and any financing parties, until all principal, interest and redemption premium in respect of securitization bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid and performed in full.

B. Any person who issues securitization bonds is permitted to include the pledge specified in Subsection A of this section in the securitization bonds, ancillary agreements and documentation related to the issuance and marketing of the securitization bonds.

SECTION 18. [NEW MATERIAL] LOCATION OF REPLACEMENT POWER RESOURCES AFTER ABANDONMENT.--

A. A qualifying utility shall, within five years after obtaining approval from the commission to abandon, but prior to actual closure of a qualifying generating facility, select sites for needed replacement power resources that are located in the school district in New Mexico where the qualifying generating facility is located.

B. The commission shall grant certificates of public convenience and necessity for replacement power resources and allow reasonable cost recovery in rates, except that the commission may determine that the particular resource proposed by the qualifying utility should not be approved and that, instead, an alternative resource that meets the provisions of Subsection A of this section should be approved. The commission shall not disallow recovery of reasonable costs necessary to comply with the locational directives provided in Subsection A of this section.

C. In considering responses to requests for proposals for replacement power resources pursuant to this section, a qualifying utility shall inform prospective contractors and subcontractors that it promotes and encourages the use of workers residing in New Mexico to the greatest extent practicable and shall take that use into consideration in evaluating proposals.

SECTION 19. [NEW MATERIAL] LOCAL ECONOMIC TRANSITION.-- Closure of a qualifying generating facility operated by a qualifying utility may occur only after obtaining a financing order and an abandonment order from the commission in accordance with either of the following conditions:

A. the qualifying generating facility is closed no earlier than twelve years after the qualifying utility obtains a financing order and an abandonment order from the commission; or

B. the qualifying generating facility is closed no earlier than seven years after the qualifying utility obtains a financing order and abandonment order from the commission and securitization bonds have been issued; provided that the qualifying utility shall transfer fifty million dollars ($50,000,000) within ninety days of issuance of the securitization bonds to the county in New Mexico where the qualifying generating facility being abandoned is located.

SECTION 20. [NEW MATERIAL] CHOICE OF LAW.--The law governing the validity, enforceability, attachment, perfection, priority and exercise of remedies with respect to the transfer of an interest or right or creation of a security interest in any securitization property, securitization charge or financing order shall be the laws of the state of New Mexico as set forth in the Securitization Bond Act.

SECTION 21. [NEW MATERIAL] CONFLICTS.--In the event of conflict between the Securitization Bond Act and any other law regarding the attachment, assignment or perfection, or the effect of perfection, or priority of any security interest in or transfer of securitization property, the Securitization Bond Act shall govern to the extent of the conflict.

SECTION 22. [NEW MATERIAL] VALIDITY ON ACTIONS IF ACT HELD INVALID.--Effective on the date that securitization bonds are first issued under the Securitization Bond Act, if any provision of that act is held to be invalid or is invalidated, superseded, replaced, repealed or expires for any reason, that occurrence shall not affect the validity of any action allowed pursuant to that act that is taken by the commission, a qualifying utility, an assignee, a collection agent, a financing party, a bondholder or a party to an ancillary agreement and, to prevent the impairment of securitization bonds issued or authorized in a financing order issued pursuant to that act, any such action shall remain in full force and effect with respect to all securitization bonds issued or authorized in a financing order issued pursuant to that act before the date that such provision is held to be invalid or is invalidated, superseded, replaced, repealed or expires for any reason.

SECTION 23. TEMPORARY PROVISION--PENDING APPLICATIONS.--If an abandonment application or proceeding to abandon a qualifying generating facility is pending before the public regulation commission on the effective date of this act, the qualifying utility may file a separate application for a financing order and the commission shall join or consolidate the application for a financing order with the pending proceeding involving abandonment of the qualifying generating facility. On such joinder or consolidation, the time periods prescribed by Subsection A of Section 4 of the Securitization Bond Act shall become applicable to the joined or consolidated case.

SECTION 24. APPLICABILITY.--The provisions of this act shall not apply to a qualifying utility that makes an initial application for a financing order more than twelve years after the effective date of this act. This section shall not preclude a qualifying utility for which the public regulation commission has issued a financing order from applying to the commission for a subsequent order amending the financing order pursuant to Section 6 of the Securitization Bond Act.

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