SB0047

SENATE BILL 47

53rd legislature - STATE OF NEW MEXICO - second session, 2018

INTRODUCED BY

Jacob R. Candelaria and Steven P. Neville and Rod Montoya

AN ACT

RELATING TO PUBLIC UTILITIES; ENACTING THE ENERGY REDEVELOPMENT 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 ENERGY REDEVELOPMENT CHARGES FROM FRANCHISE AND CERTAIN OTHER GOVERNMENT FEES; PROVIDING FOR NONIMPAIRMENT OF ENERGY REDEVELOPMENT CHARGES AND BONDS; PROVIDING FOR CONFLICTS IN LAW; PROVIDING THAT ACTIONS TAKEN PURSUANT TO THE ENERGY REDEVELOPMENT 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 "Energy Redevelopment Bond Act".

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

A. "adjustment mechanism" means a formula-based calculation used to make adjustments to the amount of the energy redevelopment charges that are necessary to correct for any over-collection or under-collection of the energy redevelopment charges and to provide for the timely and complete payment of scheduled principal and interest on the energy redevelopment 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 an energy redevelopment 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 energy redevelopment 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 an energy redevelopment 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. "energy redevelopment 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 or an assignee pursuant to a financing order, the proceeds of which are used directly or indirectly to recover, finance or refinance energy redevelopment costs and financing costs that are secured by or payable from energy redevelopment property and that are non-recourse to the qualifying utility;

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

I. "energy redevelopment 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 and costs associated with decommissioning, reclamation of mines that provide coal to qualifying generating facilities, contract termination fees, engineering work, severance pay, job training and the undepreciated investment of property that is abandoned;

(b) any demolition or similar cost that exceeds the salvage value of the property and any other 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;

(c) costs that have not been determined to be unrecoverable from customers by the time of filing the application for a financing order; and

(d) 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 energy redevelopment bonds; and

(2) does not include:

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

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

J. "energy redevelopment property" means:

(1) the rights and interests of a qualifying utility or an assignee under a financing order, including the right to impose, charge, collect and receive energy redevelopment charges in the amount necessary to provide for the full payment and recovery of all energy redevelopment costs and financing costs identified in the financing order as costs to be financed by energy redevelopment bonds and to obtain adjustments to the charges as provided in Section 5 of the Energy Redevelopment 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;

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

L. "financing cost" means the costs incurred by the qualifying utility or an assignee to issue, service, repay or refinance energy redevelopment bonds, whether incurred or paid on 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 energy redevelopment 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 energy redevelopment bonds;

(3) any costs related to issuing, supporting, repaying, servicing and refunding energy redevelopment 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 and 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 energy redevelopment bonds;

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

(6) any other costs and charges approved by the commission for inclusion in an energy redevelopment charge; and

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

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

(1) authorizes the issuance of energy redevelopment bonds;

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

(3) creates energy redevelopment property;

N. "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 energy redevelopment bonds, the rights and obligations of which relate to or depend upon the existence of energy redevelopment property, the enforcement and priority of a security interest in energy redevelopment property or the timely collection and payment of energy redevelopment revenues;

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

P. "non-bypassable" means that the payment of an energy redevelopment 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 energy redevelopment bonds secured by the charge are outstanding and the related financing costs have not been recovered in full;

Q. "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, that provides retail utility service to customers in the state;

R. "qualifying generating facility" means a coal- fired electric generating facility 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; and

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

S. "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;

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

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

V. "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 energy redevelopment bonds issued pursuant to a financing order are outstanding and the related energy redevelopment 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 obtain approval to abandon a qualifying generating facility pursuant to Section 62-9-5 NMSA 1978. The application for the financing order may be filed as part of the application for approval to abandon a qualifying generating facility. The application may include a request for the issuance of certificates of public convenience and necessity pursuant to Section 62-9-1 NMSA 1978 for some or all of any power supply resources that may be needed to replace the power supplied by the qualifying generating facilities for which abandonment authority is requested. The qualifying utility may defer an application for certificates of public convenience and necessity to a separate proceeding provided that the application identifies potential adequate replacement power resources that would be available at the time the replacement power is needed to serve customers.

B. An application for a financing order shall include:

(1) evidence that the applicant is a qualifying utility;

(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 energy redevelopment costs associated with the abandonment of the qualifying generating facility described in the application;

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

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

(6) an estimate of the amount of the energy redevelopment charges necessary to recover the energy redevelopment costs and financing costs the qualifying utility proposes to finance through the issuance of energy redevelopment 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 energy redevelopment bonds proposed to be issued;

(7) a proposed methodology for allocating the energy redevelopment 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 energy redevelopment bonds to the customers of the qualifying utility expected to result from the financing of the energy redevelopment costs with energy redevelopment bonds as compared to the use of traditional utility financing mechanisms;

(10) an estimate of the date on which the energy redevelopment 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 energy redevelopment 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 energy redevelopment costs financed by energy redevelopment bonds and the final pretax energy redevelopment costs incurred by the qualifying utility; and

(14) any other information reasonably required by the commission to determine if approval to abandon a qualifying generating facility or if 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 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 as filed, 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 Subsection B of Section 3 of the Energy Redevelopment Bond Act, and approval of the acquisition of any needed replacement power resources for which a specific certificate of public convenience and necessity was requested in the application. 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 application has been approved by operation of law.

C. If an application for a financing order is accompanied by a request for issuance of a certificate 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 govern.

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

(3) estimate of the energy redevelopment charges necessary to recover the energy redevelopment costs and the financing costs the qualifying utility proposes to be financed by energy redevelopment bonds and the proposed calculation thereof are reasonable;

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

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

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

F. A financing order shall include the following provisions:

(1) approval for the qualifying utility to issue energy redevelopment bonds as requested in the application, to use energy redevelopment bonds to finance the maximum amount of the energy redevelopment costs as requested in the application and to use the proceeds thereof as provided in Subsection A of Section 10 of the Energy Redevelopment Bond Act;

(2) approval for the qualifying utility to recover the financing costs requested in the application through energy redevelopment charges, subject to the application of the adjustment mechanism as provided in Section 5 of the Energy Redevelopment Bond Act, until the energy redevelopment 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 energy redevelopment charge as a separate line item on its customer bills;

(4) approval of the adjustment mechanism;

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

(6) approval of the energy redevelopment charges necessary to recover the energy redevelopment costs and the financing costs the qualifying utility proposes to be financed by energy redevelopment bonds and the proposed calculation thereof;

(7) approval of the allocation of the energy redevelopment 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 energy redevelopment property; and

(10) approval of a proposed ratemaking process to reconcile any difference between the projected pretax costs included in the amount of energy redevelopment costs financed by energy redevelopment bonds and the final pretax energy redevelopment costs incurred by the qualifying utility, which shall not affect the amount of the energy redevelopment bonds proposed to be issued or the proposed energy redevelopment charges.

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

H. A financing order may authorize the qualifying utility to issue more than one series of energy redevelopment 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 energy redevelopment bonds or for each scheduled activity associated with abandonment of the qualifying generating facility, such as decommissioning activities.

I. 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 Energy Redevelopment Bond Act, that, during any period in which energy redevelopment bonds issued pursuant to the financing order are outstanding, an assignee that is a non-utility affiliate and issues energy redevelopment 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.

J. A financing order may require the qualifying utility to file with the commission a periodic report showing the receipt and disbursement of proceeds of energy redevelopment bonds. A financing order may authorize the staff of the commission to review and audit the books and records of the qualifying utility relating to the receipt and disbursement of proceeds of energy redevelopment bonds. The provisions of this subsection shall not be construed to limit the authority of the commission to investigate the practices of the qualifying utility or to audit the books and records of the qualifying utility.

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 energy redevelopment charges and to provide for timely payment of scheduled principal of and interest on the energy redevelopment 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 energy redevelopment charge is sufficient to provide for timely payment of scheduled principal of and interest on the energy redevelopment 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 energy redevelopment 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 energy redevelopment bonds.

C. The adjustment mechanism shall remain available until the energy redevelopment bonds and all financing costs have been fully paid and recovered.

D. On the same day the qualifying utility files with the commission its calculation of the adjustment to the energy redevelopment charge, the qualifying utility shall cause notice of the filing to be given to the parties of record in the case in which the financing order was issued.

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

(1) a party of record in the case in which the financing order was issued files a challenge to the mathematical accuracy of the adjustment no later than twenty days from the date the qualifying utility filed the calculation of the adjustment; provided that challenge identifies the mathematical inaccuracy with specificity; and

(2) the commission determines that the challenge demonstrates good cause to suspend the operation of the adjustment; provided that the suspension shall not exceed sixty days from the date the qualifying utility filed the adjustment pursuant to Subsection F of this section.

F. If the commission determines that a hearing is necessary, the commission shall hold a hearing on the challenge 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 inaccurate, the commission shall issue an order that rejects the adjustment and that determines the mathematically accurate calculation. The qualifying utility shall be authorized to adjust the energy redevelopment 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 accurate calculation within sixty days from the date the qualifying utility filed the adjustment, the adjustment to the energy redevelopment 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 Energy Redevelopment 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 energy redevelopment charges approved in the financing order, the energy redevelopment property or the collection or recovery of energy redevelopment revenues.

B. A financing order may be amended on or after the date of issuance of energy redevelopment bonds authorized by the financing order 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 energy redevelopment 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 F of Section 4 of the Energy Redevelopment Bond Act;

(2) adjusts the amount of energy redevelopment costs to be financed by energy redevelopment 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 and give the action precedence over all other civil cases.

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

A. A financing order shall remain in effect until the energy redevelopment bonds issued pursuant to the financing order have been paid in full and all financing costs relating to the energy redevelopment 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 energy redevelopment bonds issued pursuant to a financing order are outstanding and the related energy redevelopment costs and financing costs have not been paid in full, the energy redevelopment 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 its successors or assignees, 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 or distribution service from the qualifying utility or its successor or assignees under commission-approved rate schedules or special contracts; and

(2) who purchase electricity, including electricity received from distributed generation facilities owned or controlled by the customer or another non-utility, from an alternative or subsequent electricity supplier in the utility service area, to the extent that those purchases are permitted by New Mexico 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 energy redevelopment bonds issued pursuant to the financing order to be the debt of the qualifying utility; the energy redevelopment charges paid under the financing order to be revenue of the qualifying utility; or the energy redevelopment costs to be financed by energy redevelopment bonds or financing costs specified in the financing order to be the costs of the qualifying utility. An action taken by a qualifying utility that is consistent 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 Energy Redevelopment 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 Energy Redevelopment 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 Energy Redevelopment Bond Act; or

(4) prevent or preclude the commission from including the qualifying utility's investment in 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 energy redevelopment bonds to finance any costs associated with abandonment of a qualifying generating facility. A qualifying utility's election not to use energy redevelopment bonds shall not affect its right to recover the prudent and reasonable costs associated with the abandonment of a qualifying generating facility by the qualifying utility, including full recovery of undepreciated investment at the time of abandonment.

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

A. A qualifying utility shall use the proceeds of the issuance of energy redevelopment bonds for paying energy redevelopment costs and financing costs and to acquire utility-owned replacement resources and investments in other public utility property for inclusion in the rate base.

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

C. Energy redevelopment revenues shall be applied solely to the repayment of energy redevelopment bonds and financing costs.

D. The failure of a qualifying utility to apply the proceeds of an issuance of energy redevelopment bonds in a reasonable, prudent and appropriate manner, or otherwise comply with any provision of the Energy Redevelopment Bond Act, shall not invalidate, impair or affect a financing order, energy redevelopment property, energy redevelopment charge or energy redevelopment bonds; provided that, subject to the limitations set forth in Section 6 of the Energy Redevelopment Bond Act, nothing in this subsection shall 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 Energy Redevelopment Bond Act.

SECTION 11. [NEW MATERIAL] ENERGY REDEVELOPMENT PROPERTY--ENERGY REDEVELOPMENT REVENUES.--

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

B. All energy redevelopment property created in a financing order shall continue to exist until the energy redevelopment 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 energy redevelopment 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 energy redevelopment property or issuing energy redevelopment bonds under the financing order; or

(3) a combination of these purposes.

D. All or any portion of energy redevelopment property may be pledged to secure the payment of energy redevelopment 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 energy redevelopment property or issuing energy redevelopment 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 energy redevelopment 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 energy redevelopment 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 energy redevelopment 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. Energy redevelopment property, energy redevelopment revenues and the interests of an assignee, bondholder or financing party in energy redevelopment property and energy redevelopment 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 Energy Redevelopment 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 energy redevelopment 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 energy redevelopment property to secure the repayment of the principal of and interest on energy redevelopment 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 Energy Redevelopment Bond Act.

B. The description or indication of energy redevelopment property in a transfer or security agreement and a financing statement is sufficient only if the description or indication refers to the Energy Redevelopment Bond Act and the financing order creating the energy redevelopment property. This section applies to all purported transfers of, and all purported grants of liens on or security interests in, energy redevelopment property, regardless of whether the related transfer or security agreement was entered into, or the related financing statement was filed, before or after the effective date of the Energy Redevelopment Bond Act.

C. A security interest in energy redevelopment 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 energy redevelopment 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 Chapter 55, Article 9 NMSA 1978. 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 energy redevelopment 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 energy redevelopment property unless the holder of the security interest has agreed in writing otherwise.

F. The priority of a security interest in energy redevelopment property is not affected by the commingling of energy redevelopment revenues with other funds. Any pledgee or secured party shall have a perfected security interest in the amount of all energy redevelopment revenues that are deposited in any cash or deposit account of the qualifying utility in which energy redevelopment 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 Energy Redevelopment 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 energy redevelopment property.

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

A. Any sale, assignment or transfer of energy redevelopment 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 energy redevelopment 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 energy redevelopment property shall be created when:

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

(2) the documents evidencing the transfer of energy redevelopment 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 Energy Redevelopment Bond Act, a transfer of an interest in energy redevelopment 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 energy redevelopment property previously perfected in accordance with this section or Section 12 of the Energy Redevelopment 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 energy redevelopment revenues with other funds;

(2) the retention by the seller of:

(a) a partial or residual interest, including an equity interest, in the energy redevelopment 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 energy redevelopment 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 energy redevelopment 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 Energy Redevelopment 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 an energy redevelopment 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] ENERGY REDEVELOPMENT BONDS NOT PUBLIC DEBT.--Energy redevelopment bonds issued pursuant to the Energy Redevelopment 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 energy redevelopment bonds. The issuance of energy redevelopment 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] ENERGY REDEVELOPMENT BONDS AS LEGAL INVESTMENTS.--Energy redevelopment 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 energy redevelopment property or, except as allowed pursuant to Section 5 of the Energy Redevelopment Bond Act, reduce, alter or impair energy redevelopment charges that are imposed, collected and remitted for the benefit of the bondholders, any assignee and any financing parties, until any principal, interest and redemption premium in respect of energy redevelopment 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 energy redevelopment bonds is permitted to include the pledge specified in Subsection A of this section in the energy redevelopment bonds, ancillary agreements and documentation related to the issuance and marketing of the energy redevelopment bonds.

SECTION 18. [NEW MATERIAL] LOCATION OF RESOURCE REDEVELOPMENT AFTER ABANDONMENT.--

A. A qualifying utility shall, within five years after abandonment of a qualifying generating facility, select sites for needed utility-owned replacement power resources that are located in the county in New Mexico where the abandoned qualifying generating facility is located if:

(1) replacement power resources located there maintain adequate system reliability; and

(2) the costs of locating replacement power resources there are less than the costs of locating them elsewhere plus the amount of the cost savings attributable to the use of energy redevelopment bonds.

B. The commission shall grant certificates of public convenience and necessity for replacement power resources at those sites and allow full 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 utility-owned resource that meets the conditions of Subsection A of this section should be approved.

C. In considering responses to requests for proposals for utility-owned 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] 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 energy redevelopment property, energy redevelopment charge or financing order shall be the laws of the state of New Mexico as set forth in the Energy Redevelopment Bond Act.

SECTION 20. [NEW MATERIAL] CONFLICTS.--In the event of conflict between the Energy Redevelopment 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 energy redevelopment property, the Energy Redevelopment Bond Act shall govern to the extent of the conflict.

SECTION 21. [NEW MATERIAL] VALIDITY ON ACTIONS IF ACT HELD INVALID.--Effective on the date that energy redevelopment bonds are first issued under the Energy Redevelopment 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 energy redevelopment 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 energy redevelopment 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 22. TEMPORARY PROVISION--PENDING APPLICATIONS.--If an application for approval 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 B of Section 3 of the Energy Redevelopment Bond Act shall become applicable to the joined or consolidated case.

SECTION 23. APPLICABILITY.--The provisions of this act shall not apply to a qualifying utility that makes an initial application for a financing order more than twenty 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 Energy Redevelopment Bond Act.

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