Bill Text: HI HB2407 | 2024 | Regular Session | Amended
Bill Title: Relating To Wildfire Risk Mitigation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed) 2024-03-07 - Referred to PSM, CPN/WAM. [HB2407 Detail]
Download: Hawaii-2024-HB2407-Amended.html
|
HOUSE OF REPRESENTATIVES |
H.B. NO. |
2407 |
|
THIRTY-SECOND LEGISLATURE, 2024 |
H.D. 2 |
|
|
STATE OF HAWAII |
|
|
|
|
|
|
|
|
||
|
|
||
A BILL FOR AN ACT
RELATING TO WILDFIRE RISK MITIGATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
The legislature also finds that a resilience working group, convened throughout 2019 and 2020, sought to: (1) identify and prioritize resilience threat scenarios and potential grid impacts; (2) identify key customer and infrastructure sector capabilities and needs following a severe event and loss of power; (3) identify gaps and priorities in grid and customer capabilities following a severe event and loss of power; (4) provide recommendations and inputs for investor-owned utility grid planning to address resilience needs; and (5) recommend additional grid and customer actions to close gaps and capabilities following severe events. The resilience working group identified wildfires as one of five types of severe events of utmost importance to consider for achieving a resilient grid and provided resilience options for utilities to consider.
The legislature further finds that securitization may be the most efficient, least-cost way to finance wildfire risk mitigation costs and expenses. Utility rate securitization transactions have an extensive track record of success. Bonds securitized by rates receive investment grade credit ratings from credit rating agencies and thus provide a means of securing capital at a lower interest rate than those currently available to utilities, in particular utilities without an investment grade credit rating.
The purpose of this Act is to create a process whereby electric utilities develop and submit effective risk-based wildfire protection plans to the public utilities commission for approval; the public utilities commission evaluates those plans and either approves them or does so with modifications; the electric utilities are able to timely recover the prudently incurred costs and expenses of developing, implementing, and administrating those plans; and those costs and expenses are not borne disproportionately by any particular ratepayer or county.
SECTION 2. Chapter 269, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:
"PART . WILDFIRE PROTECTION AND MITIGATION
§269-A Definitions. As used in this part:
"Ancillary agreement" means a bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other similar agreement or arrangement entered into in connection with the issuance of bonds that is designed to promote the credit quality and marketability of the bonds or to mitigate the risk of an increase in interest rates.
"Assignee" means a legally recognized entity:
(1) To which an electric utility company assigns, sells, or transfers, other than as security, all or a portion of its interest in or right to wildfire protection property; or
(2) Who acquires, by way of assignment or otherwise, all or a portion of the wildfire protection property following the exercise of remedies upon a default.
"Assignee" includes a corporation, limited liability company, general partnership or limited partnership, public authority, trust, financing entity, or any entity to which an assignee assigns, sells, or transfers, other than as security, its interest in or right to wildfire protection property.
"Bond" means any bond, note, certificate of participation or beneficial interest, or other evidence of indebtedness or ownership that is issued by the financing entity under a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance financing costs of any wildfire protection costs, and that are directly or indirectly secured by or payable from wildfire protection property.
"Catastrophic wildfire" means any wildfire in the State that damaged or destroyed more than five hundred residential or commercial structures.
"Commission" means the public utilities commission.
"Consumer" means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electric transmission or distribution facilities, whether those electric transmission or distribution facilities are owned by the consumer, the electric utility, or any other party.
"Electric utility" means a public utility that is engaged in the production, transmission, or distribution of electricity.
"Financing costs" means the costs to issue, service, repay, or refinance bonds, whether incurred or paid upon issuance of the bonds or over the life of the bonds, if they are approved for recovery by the commission in a financing order. "Financing costs" may include any of the following:
(1) Principal, interest, and redemption premiums that are payable on bonds;
(2) A payment required under an ancillary agreement;
(3) An amount required to fund or replenish reserve accounts or other accounts established under an indenture, ancillary agreement, or other financing document related to the bonds;
(4) Taxes, franchise fees, or license fees imposed on the wildfire protection fee, or otherwise resulting from the collection of the charges, in any such case whether paid, payable, or accrued;
(5) Costs related to issuing and servicing bonds or the application for a financing order, including without limitation servicing fees and expenses, trustee fees and expenses, legal fees and expenses, accounting fees, administrative fees, underwriting and placement fees, financial advisory fees, original issue discount, capitalized interest, rating agency fees, and any other related costs that are approved for recovery in the financing order; and
(6) Other costs as specifically authorized by a financing order.
"Financing entity" means the electric utility; an affiliate of the electric utility; a special purpose vehicle, regardless of whether the special purpose vehicle is affiliated with an electric utility; or a governmental financing entity that is authorized by the commission to issue bonds or acquire wildfire protection property, or both, pursuant to a financing order.
"Financing order" means an order of the commission under this part that has become final as provided by law, and that authorizes the issuance of bonds and the imposition and collection of wildfire protection fees. "Financing order" includes without limitation a procedure to require the expeditious approval by the commission of periodic adjustments to wildfire protection fees and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all wildfire protection costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the bonds contemplated by the financing order.
"Financing party" means any holder of bonds, any party to or beneficiary of an ancillary agreement, and any trustee, collateral agent, or other person acting for the benefit of any of the foregoing.
"Fixed recovery tax amounts" means those nonbypassable rates and other charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are needed to recover federal and state taxes associated with wildfire protection fees authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of bonds.
"Governmental financing entity" means the State or a political subdivision thereof or any department, agency, or instrumentality of the State or a political subdivision to which a public utility has assigned or pledged its interest in wildfire protection property as security for the payment of debt service on bonds, and related administrative costs and funding of reserves, issued by the governmental financing entity; provided that the bonds issued by the entity shall not constitute a debt or liability of the entity or of the State or any political subdivision of the State and shall not constitute a pledge of the full faith and credit of the entity or of the State or any political subdivision of the State, but shall be payable solely from the funds provided under this chapter.
"True-up adjustment" means a formulaic adjustment to the wildfire protection fees as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the wildfire protection fees authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of wildfire protection costs over the authorized repayment term.
"Wildfire protection costs" means any capital costs and operation and maintenance expenses related to the development, implementation, and administration of a wildfire protection plan prepared pursuant to section 269-C(a). "Wildfire protection costs" does not include any penalties levied against an electric utility pursuant to section 269-D. "Wildfire protection costs" may also include any of the following:
(1) Catastrophic wildfire costs or expenses authorized by the commission in a financing order for recovery;
(2) Federal and state taxes associated with recovery of the amounts pursuant to paragraph (1);
(3) Financing costs; and
(4) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electric utility in using proceeds of bonds to acquire outstanding securities of the electric utility, as authorized by the commission in a financing order.
"Wildfire protection fee" means the nonbypassable fees and charges, including but not limited to distribution, connection, disconnection, and termination rates and charges, that are authorized by section 269-E and in a financing order authorized under this part to be imposed on and collected from all existing and future consumers of a financing entity or any successor to recover both of the following:
(1) Wildfire protection costs specified in the financing order; and
(2) The costs of recovering, financing, or refinancing wildfire protection costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring bonds.
"Wildfire protection plan" means the risk-based wildfire protection plan mandated by section 269-C(a) and approved by the commission.
"Wildfire protection property" means the property right created pursuant to this part, including without limitation the right, title, and interest of the public utility, financing entity, or its assignee:
(1) In and to the wildfire protection fee established pursuant to a financing order, including the right to impose, bill, collect, and receive fixed recovery charges under the financing order and all rights to obtain adjustments to the wildfire protection fee in accordance with section 269-E and the financing order; and
(2) To be paid the amount that is determined in a financing order to be the amount that the public utility or its assignee is lawfully entitled to receive pursuant to this part and the proceeds thereof, and in and to all revenues, collections, claims, payments, moneys, or proceeds of, or arising from, the wildfire protection fee that is the subject of a financing order.
"Wildfire protection property" does not include a right to be paid fixed recovery tax amounts. "Wildfire protection property" shall constitute a current property right, notwithstanding the fact that the value of the property right will depend on consumers using electricity or, in those instances where consumers are customers of the public utility, the public utility performing certain services.
§269-B Electric utility workshops. The commission may periodically convene workshops to help electric utilities develop and share information for the identification, adoption, and implementation of best practices regarding wildfires, including but not limited to risk-based wildfire protection and risk-based wildfire mitigation procedures and standards.
§269-C Wildfire protection plans. (a) Each electric utility shall have and operate in compliance with a risk-based wildfire protection plan, which shall be filed with and evaluated by the commission. The risk-based wildfire protection plan shall be based on reasonable and prudent practices, which may be identified through workshops and regulatory proceedings conducted by the commission pursuant to section 269-B, and commission standards adopted by rule or order. The electric utility shall design the risk-based wildfire protection plan to protect public safety, reduce risk to electric utility customers, and promote resilience of the Hawaii electric system to wildfire damage. Each electric utility's wildfire protection plan shall, at a minimum:
(1) Account for the responsibilities of persons responsible for executing the plan;
(2) Describe the objectives of the plan;
(3) Identify areas that are subject to a heightened risk of wildfire and are:
(A) Within the right of way or legal control or ownership of the electric utility; and
(B) Outside the right of way or legal control or ownership of the electric utility but within a reasonable distance, as determined by the commission, of the electric utility's generation or transmission assets;
(4) Identify a means for mitigating wildfire risk that reflects a reasonable balancing of mitigation costs continuity of reliable service and reduction of wildfire risk;
(5) Identify preventive actions and programs that the electric utility shall carry out to minimize the risk of electric utility facilities causing wildfire;
(6) Identify the metrics the electric utility plans to use to evaluate the plan's performance and the assumptions that underlie the use of those metrics;
(7) Describe how the application of previously identified metrics to previous plan performances has informed the plan;
(8) After seeking information from state and local entities, identify a protocol for the deenergizing of power lines and adjusting of power system operations to mitigate wildfires, promote the safety of the public and first responders, and preserve health and communication infrastructure;
(9) Describe appropriate and feasible procedures for notifying a customer who may be impacted by the deenergizing of electrical lines. The procedures shall consider the need to notify, as a priority, critical first responders, health care facilities, operators of wastewater and water delivery infrastructure, and operators of telecommunications infrastructure;
(10) Describe the procedures, standards, and time frames that the electric utility shall use to inspect electric utility infrastructure in areas that the electric utility identifies under paragraph (3), including whether those procedures, standards, and time frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;
(11) Describe the procedures, standards, and time frames that the electric utility will use to carry out vegetation management in areas that the electric utility identifies under paragraph (3), including whether those procedures, standards, and time frames are already set forth in the electric utility's existing plans or protocols and in coordination with any relevant entities;
(12) Include a list that identifies, describes, and prioritizes all wildfire risks, and drivers for those risks, throughout the electric utility's service territory. The list shall include but not be limited to the following:
(A) Risks and risk drivers associated with design, construction, operations, and maintenance of the electric utility's equipment and facilities; and
(B) Particular risks and risk drivers associated with topographic and climatological risk factors throughout the different parts of the electric utility's service territory;
(13) Describe how the plan accounts for the wildfire risk identified in the electric utility's risk assessment;
(14) Describe the actions the electric utility will take to ensure its system will achieve the highest level of safety, reliability, and resiliency, and to ensure that its system is prepared for a wildfire, including hardening and modernizing its infrastructure with improved engineering, system design, standards, equipment, and facilities, including but not limited to undergrounding lines, insulation of distribution wires, and pole replacement;
(15) Demonstrate that the electric utility has an adequately sized and trained workforce to promptly restore service after a wildfire, taking into account employees of other utilities pursuant to mutual aid agreements and employees of entities that have entered into contracts with the electric utility;
(16) Identify the estimated development, implementation, and administration costs for the plan;
(17) Identify the timelines, as applicable, for development, implementation, and administration of any aspects of the plan;
(18) Describe how the plan is consistent with the electric utility's other hazard mitigation and grid hardening plans, including plans to prepare for, and to restore service after, a wildfire, including workforce mobilization and prepositioning equipment and employees;
(19) Identify community outreach and public awareness efforts that the electric utility will use before, during, and after a wildfire;
(20) Describe the processes and procedures the electric utility will use to do all of the following:
(A) Monitor and audit the implementation of the plan;
(B) Identify any deficiencies in the plan or the plan's implementation and correct those deficiencies; and
(C) Monitor and audit the effectiveness of electrical line and equipment inspections, including inspections performed by contractors, carried out under the plan and other applicable statutes and rules of the commission;
(21) Demonstrate elements of data governance, including enterprise systems; and
(22) Any modifications to paragraphs (1) to (21), or other information as required by the commission.
(b) Each electric utility shall regularly update its risk-based wildfire protection plan on a schedule determined by the commission.
(c) To develop the risk-based wildfire protection plan, the electric utility may consult with and consider information from federal, state, local, and other expert entities.
(d) The commission, in consultation with the department of land and natural resources, Hawaii emergency management agency, and local emergency services agencies, shall evaluate each electric utility's risk-based wildfire protection plan and plan updates through a public process.
(e) No more than ninety days after the last party filing, and no more than a total of one hundred eighty days after the initial filing in the docket or non-docketed case related to the commission's evaluation of a risk-based wildfire protection plan or plan update from an electric utility, the commission shall approve or approve with conditions the plan or update if the commission finds that the plan or update is based on reasonable and prudent practices and designed to meet all applicable rules and standards adopted by the commission. The commission may, in approving the plan or update with conditions, direct the electric utility to make modifications to the plan or updates that the commission believes represent a reasonable balancing of mitigation costs with the resulting reduction of wildfire risk based on the information provided by the electric utility and based on best practices. The commission shall issue a decision explaining any such directed modifications at the time it approves the plan.
(f) The electric utility shall track the costs that it actually incurs to develop, implement, and administer the risk-based wildfire protection plan. In the electric utility's risk-based wildfire protection plan update, the electric utility shall report on the costs as actually incurred for the most recent past period for which the information is available.
If the actual costs are less than the amounts that the commission determined were reasonable in its decision under subsection (e), the commission shall direct the electric utility to refund or credit the costs to ratepayers.
If the actual costs are equal to or greater than the amounts that the commission determined were reasonable in its decision under subsection (e), the commission shall not direct the electric utility to refund to ratepayers the amount the commission previously determined was reasonable but may disallow the recovery from ratepayers of any additional costs the commission finds unreasonable. For purposes of evaluating additional costs, the following shall apply:
(1) Actual costs that are no more than fifteen per cent greater than the costs the commission previously determined were reasonable shall be presumed prudent and authorized for recovery from ratepayers absent proof by clear and convincing evidence that the costs were unreasonable; and
(2) The electric utility shall have the burden of proving the reasonableness of actual costs that are more than fifteen per cent greater than the costs the commission previously determined were reasonable.
(g) The commission's approval of a risk-based wildfire protection plan does not by itself establish a defense to any enforcement action for violation of a commission rule or order, or relieve an electric utility from proactively managing wildfire risk, including by monitoring emerging practices and technologies. Electric utilities are expected to continuously improve and take reasonable actions outside of approved plans to mitigate wildfire risk.
(h) The commission shall, as appropriate, adopt rules or issue orders for the implementation of this section. The rules or orders may include but need not be limited to procedures and standards regarding data governance, risk-based decision-making, vegetation management, public power safety shutoffs and restorations, pole materials, circuitry, and monitoring systems.
§269-D Penalties. In addition to any other penalties provided by law, a failure by an electric utility to comply with an approved plan or part of an approved plan shall be subject to a civil penalty, as determined by the commission. Imposition of penalties pursuant to this section shall otherwise be in accordance with section 269-28 and all applicable administrative rules. All moneys collected under this section shall be deposited into the public utilities commission special fund.
§269-E Applications to issue bonds and authorize wildfire protection fees. (a) An electric utility may apply to the commission for one or more financing orders to issue bonds to recover any wildfire protection costs, each of which authorizes the following:
(1) The imposition, charging, and collection of a wildfire protection fee, to become effective upon the issuance of the bonds, and an adjustment of any such wildfire protection fee in accordance with a true-up adjustment mechanism under this part in amounts sufficient to pay the principal of and interest on bonds and all related financing costs on a timely basis;
(2) The creation of wildfire protection property under the financing order; and
(3) The imposition, charging, and collection of fixed recovery tax amounts to recover any portion of the public utility's federal and state taxes associated with those wildfire protection fees and not financed from the proceeds of bonds.
(b) The application shall include all of the following:
(1) The principal amount of the bonds proposed to be issued;
(2) An estimate of the date each series of bonds is expected to be issued;
(3) The expected term, which shall include a scheduled final payment date not to exceed thirty years, and a legal final maturity that may be longer, subject to rating agency and market conditions, during which the wildfire protection fee associated with the issuance of each series of bonds is expected to be imposed and collected;
(4) An estimate of the financing costs associated with the issuance of each series of bonds;
(5) An estimate of the amount of the wildfire protection fee revenues necessary to pay principal and interest on the bonds and related financing costs as set forth in the application and the calculation for that estimate;
(6) A proposed methodology for allocating the wildfire protection fee among customer classes;
(7) A description of the true-up adjustment for the adjustment of the wildfire protection fee to correct for any overcollection or undercollection of the wildfire protection fee, and to otherwise ensure the timely payment of principal and interest on the bonds and related financing costs; and
(8) Any other information required by the commission.
(c) The commission shall issue an approval or denial of any application for a financing order filed pursuant to this section within ninety days of the last filing in the applicable docket.
(d) In exercising its duties under this section, the commission shall consider:
(1) Whether the wildfire protection costs to be financed by any bonds to be issued are just and reasonable;
(2) Whether the recovery of such costs is consistent with the public interest;
(3) Whether the terms and conditions of any bonds to be issued, including without limitation interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application, are just and reasonable;
(4) Whether the immediate ratepayer bill impact of any financing order is minimized to the furthest extent practicable; and
(5) Any other factors that the commission deems reasonable and in the public interest.
The public utility may request the determination specified in this section by the commission in a separate proceeding, in an existing proceeding, or both. If the commission makes the determination specified in this section, the commission shall establish, as part of the financing order, a procedure for the public utility to submit applications from time to time to request the issuance of additional financing orders designating wildfire protection fees and any associated fixed recovery tax amounts as recoverable. The public utility may submit an application with respect to wildfire protection costs that a public utility has paid, has an existing legal obligation to pay, or would be obligated to pay pursuant to an agreement. The commission shall, within ninety days of the filing of that application, issue a financing order, if the commission determines that the amounts identified in the application are wildfire protection costs.
(e) Wildfire protection fees shall be imposed only on existing and future ratepayers in the utility service territory. Ratepayers within the utility service territory shall continue to pay wildfire protection fees until the bonds and associated financing costs are paid in full by the financing entity or, in the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt of proceeds by such assignee in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding.
(f) The wildfire protection plan fee and any associated fixes recovery tax amounts shall be collected by a financing entity or its successors, in accordance with subsection (h), in full through a surcharge, fee, or charge that is separate and apart from the financing entity's rates.
(g) A public utility may exercise the same rights and remedies under its tariff and applicable law and regulation based on a consumer's nonpayment of the wildfire protection plan fee as it could for a consumer's failure to pay any other charge payable to that public utility.
(h) The commission may establish in a financing order an effective mechanism that ensures recovery of wildfire protection costs through nonbypassable wildfire protection fees from existing and future consumers in the utility service territory. The wildfire protection fee and any associated fixed recovery tax amounts may be a usage-based surcharge, a flat user fee, or a charge based upon customer revenues as determined by the commission for each customer class in any financing order. Consumers shall be required to pay those charges until:
(1) The bonds and all associated financing costs are paid in full by the financing entity; or
(2) In the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt of proceeds by such assignee in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding, at which time those charges shall be terminated.
A financing order shall remain in effect and unabated notwithstanding the bankruptcy, reorganization, or insolvency of the electric utility or the commencement of any judicial or nonjudicial proceeding on the financing order. Wildfire protection fees shall be irrevocable, notwithstanding the true-up adjustment pursuant to subsection (m).
(i) The commission shall issue financing orders in accordance with this chapter to facilitate the recovery, financing, or refinancing of wildfire protection costs. A financing order may be adopted only upon the application of the public utility and shall become effective in accordance with its terms only after the public utility files with the commission the public utility's written consent to all terms and conditions of the financing order. A financing order may specify how amounts collected from a consumer shall be allocated between wildfire protection fees, any associated fixed recovery tax amounts, and other charges.
(j) Notwithstanding any other law, and except as otherwise provided in section 269-G(e), with respect to wildfire protection property that has been made the basis for the issuance of bonds and with respect to any associated fixed recovery tax amounts, the financing order, the wildfire protection fees, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the wildfire protection costs or the costs of recovering, financing, or refinancing the wildfire protection costs, in any way to reduce or impair the value of wildfire protection property or of the right to receive any associated wildfire protection fees either directly or indirectly by taking wildfire protection fees into account when setting other rates for the public utility. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State does hereby pledge and agree with the public utility, owners and assignees of wildfire protection property, financing entities, and holders of bonds that the State shall neither limit nor alter, except as otherwise provided with respect to the true-up adjustment of the wildfire protection fees pursuant to subsection (m), wildfire protection fees, wildfire protection property, financing orders, or any rights under a financing order until:
(1) The bonds, together with the interest on the bonds and associated financing costs, are fully paid and discharged;
(2) In the alternative, the bonds have been refinanced through an additional issue of bonds; or
(3) In the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt of proceeds by such assignee in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding;
provided that nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the full protection of the public utility and of owners and holders of the bonds and the wildfire protection property. Any financing entity may include this pledge and undertaking for the State in these bonds. When setting other rates for the public utility, nothing in this subsection shall prevent the commission from taking into account any collection of wildfire protection fees in excess of amounts actually required, or would have been required had the bonds remained outstanding following a default, to pay wildfire protection costs financed or refinanced by bonds; provided that this shall not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including but not limited to either treating the bonds as debt of the applicable financing entity for federal income tax purposes or treating the transfer of the wildfire protection property by the public utility as a true sale for bankruptcy purposes.
(k) Under a final financing order, the bonds may be issued in one or more series, and the electric utility shall retain sole discretion to cause bonds to be issued, including the right to defer or postpone such issuance, assignment, sale, or transfer.
(l) Neither financing orders nor bonds issued under this chapter shall constitute a debt or liability of the State or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the State or any of its political subdivisions, but shall be payable solely from the funds provided under this chapter. All bonds shall contain on the face thereof a statement to the following effect: "Neither the full faith and credit nor the taxing power of the State of Hawaii is pledged to the payment of the principal of, or interest and premium on, this bond.".
The issuance of bonds under this chapter shall not directly, indirectly, or contingently obligate the State or any political subdivision thereof to levy or to pledge any form of taxation or to make any appropriation for their payment.
(m) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within ninety days of the application. Any wildfire protection fees authorized by a financing order shall appear on ratepayer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to wildfire protection fees, which shall be made at least annually and may be made more frequently; provided that no true-up adjustment may be made if such adjustment could reasonably be expected to negatively impact the rights, including the economic rights, of the owners and holders of the bonds or the wildfire protection property. The public utility shall file an application with the commission to implement any true-up adjustment.
(n) Wildfire protection fees are wildfire protection property when, and to the extent that, a financing order authorizing the wildfire protection fees has become effective in accordance with this chapter, and the wildfire protection property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges relating to that property shall continuously exist for the period and to the extent provided in the financing order, but in any event until the bonds are paid in full, including all principal, premiums, if any, and interest with respect to the bonds, and all associated financing costs are paid in full or, in the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt by such assignee of proceeds in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding. A financing order may provide that the creation of wildfire protection property shall be simultaneous with the sale of the wildfire protection property to an assignee as provided in the application of the pledge of the wildfire protection property to secure the bonds.
(o) Any successor to a financing entity shall be bound by the requirements of this chapter and shall perform and satisfy all obligations of, and have the same rights under a financing order as, and to the same extent as, the financing entity.
§269-F Bonds; issuance; wildfire protection property interests. (a) The public utility may sell and assign all or portions of its interest in wildfire protection property to one or more financing entities that make that wildfire protection property the basis for issuance of bonds, to the extent approved in a financing order. The public utility or financing entity may pledge wildfire protection property as collateral, directly or indirectly, for bonds to the extent approved in the pertinent financing orders providing for a security interest in the wildfire protection property, in the manner set forth herein. In addition, wildfire protection property may be sold or assigned by either of the following:
(1) The financing entity or a trustee for the holders of bonds or the holders of an ancillary agreement in connection with the exercise of remedies upon a default; or
(2) Any person acquiring the wildfire protection property after a sale or assignment pursuant to this chapter.
(b) To the extent that any interest in wildfire protection property is sold, assigned, or is pledged as collateral pursuant to subsection (a), the commission shall authorize the public utility to contract with the financing entity and its assignees that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the wildfire protection fees for the benefit and account of the financing entity and its assignees, and will account for and remit these amounts to or for the account of the financing entity or its assignees. Contracting with the financing entity and its assignees in accordance with that authorization shall not impair or negate the characterization of the sale, assignment, or pledge as an absolute transfer, a true sale, or a security interest, as applicable. To the extent that billing, collection, and other related services with respect to the provision of the public utility's services are provided to a consumer by any person or entity other than the public utility in whose service territory the consumer is located, that person or entity shall collect the wildfire protection fees and any associated fixed recovery tax amounts from the consumer for the benefit and account of the public utility, financing entity, or assignees with the associated revenues remitted solely for such person's benefit as a condition to the provision of electric service to that consumer. Each financing order shall impose terms and conditions, consistent with the purposes and objectives of this chapter, on any person or entity responsible for billing, collection, and other related services, including without limitation collection of the wildfire protection fees and any associated fixed recovery tax amounts, that are the subject of the financing order.
(c) The financing entity may issue bonds upon approval by the commission in a financing order. Bonds shall be nonrecourse to the credit or any assets of the public utility, other than the wildfire protection property as specified in that financing order.
(d) Wildfire protection property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of wildfire protection fees depend on the electric utility continuing to provide services or continuing to perform its servicing functions relating to the collection of wildfire protection fees or on the level of future service consumption. Wildfire protection property shall exist whether or not the wildfire protection fees have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the wildfire protection property, or amount of the wildfire protection property, is dependent on the future provision of service to consumers. All wildfire protection property specified in a financing order shall continue to exist until the bonds issued pursuant to a financing order and all associated financing costs are paid in full or, in the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, until the receipt by such assignee of proceeds in an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding.
(e) Wildfire protection property, wildfire protection fees, and the interests of an assignee, bondholder, or financing entity, or any pledgee in wildfire protection property and wildfire protection fees shall not be subject to setoff, counterclaim, surcharge, recoupment, or defense by the electric utility or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electric utility, any affiliate of the electric utility, or any other entity.
(f) Notwithstanding any other law to the contrary, any requirement under this part or a financing order that the public utilities commission takes action with respect to the subject matter of a financing order shall be binding upon the commission, as it may be constituted from time to time, and any successor agency exercising functions similar to the commission, and the commission shall have no authority to rescind, alter, or amend that requirement in a financing order.
§269-G Security interests in wildfire protection property; financing statements. (a) A security interest in wildfire protection property is valid and enforceable against the pledgor and third parties, subject to the rights of any third parties holding security interests in the wildfire protection property perfected in the manner described in this section, and attaches when all of the following have taken place:
(1) The commission has issued a financing order authorizing the wildfire protection fee included in the wildfire protection property;
(2) Value has been given by the pledgees of the wildfire protection property; and
(3) The pledgor has signed a security agreement covering the wildfire protection property.
(b) A valid and enforceable security interest in wildfire protection property is perfected when it has attached and when a financing statement has been filed naming the pledgor of the wildfire protection property as "debtor" and identifying the wildfire protection property.
Any description of the wildfire protection property shall be sufficient if it refers to the financing order creating the wildfire protection property. A copy of the financing statement shall be filed with the commission by the public utility that is the pledgor or transferor of the wildfire protection property, and the commission may require the public utility to make other filings with respect to the security interest in accordance with procedures that the commission may establish; provided that the filings shall not affect the perfection of the security interest.
(c) A perfected security interest in wildfire protection property shall be a continuously perfected security interest in all wildfire protection property revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Wildfire protection property shall constitute property for all purposes, including for contracts securing bonds, whether or not the wildfire protection property revenues and proceeds have accrued.
(d) Subject to the terms of the security agreement covering the wildfire protection property and the rights of any third parties holding security interests in the wildfire protection property, the validity and relative priority of a security interest created under this section shall not be defeated or adversely affected by the commingling of revenues arising with respect to the wildfire protection property with other funds of the public utility, or by any security interest in a deposit account of that public utility perfected under chapter 490, article 9, into which the revenues are deposited.
Subject to the terms of the security agreement, upon compliance with the requirements of section 490:9-312(b)(1), the pledgees of the wildfire protection property shall have a perfected security interest in all cash and deposit accounts of the electrical corporation in which wildfire protection property revenues have been commingled with other funds; provided that the perfected security interest shall be limited to an amount no greater than the amount of the wildfire protection property revenues received by the public utility within twelve months before:
(1) Any default under the security agreement; or
(2) The institution of insolvency proceedings by or against the public utility, less payments from the revenues to the pledgees during that twelve-month period.
(e) If default occurs under the security agreement covering the wildfire protection property, the pledgees of the wildfire protection property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under chapter 490, article 9, and shall be entitled to foreclose or otherwise enforce their security interest in the wildfire protection property, subject to the rights of any third parties holding prior security interests in the wildfire protection property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the wildfire protection property that, in the event of default by the electrical corporation in payment of wildfire protection property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under section 269-H of the wildfire protection property, and without limiting any other remedies available to the pledgees or transferees by reason of the default, shall order the sequestration and payment to the pledgees or transferees of wildfire protection property revenues. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the wildfire protection property. Any surplus in excess of:
(1) Amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the bonds, and associated financing costs arising under the security agreement; or
(2) In the event the wildfire protection property has been assigned to an assignee in connection with the exercise of remedies upon a default, an amount sufficient to repay the principal amount of, and interest that would have accrued on, the bonds had they remained outstanding,
shall be remitted to the debtor or to the pledgor or transferor.
(f) Sections 490:9-204 and 490:9-205 shall apply to a pledge of wildfire protection property by the public utility, an affiliate of the public utility, or a financing entity.
§269-H Transfers of wildfire protection property. (a) A transfer of wildfire protection property by the public utility to an assignee or to a financing entity, or by an assignee of the public utility or a financing entity to another financing entity, which the parties in the governing documents have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor's right, title, and interest, as in a true sale, and not as a pledge or other financing, of the wildfire protection property, other than for federal and state income and franchise tax purposes.
(b) 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 assignee shall not be affected or impaired by, among other things, the occurrence of any of the following:
(1) Commingling of wildfire protection fee revenues with other amounts;
(2) The retention by the seller of either of the following:
(A) A partial or residual interest, including an equity interest, in the financing entity or the wildfire protection property, whether direct or indirect, subordinate or otherwise; or
(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of wildfire protection fee;
(3) Any recourse that the assignee 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 wildfire protection fees on behalf of an assignee;
(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purpose; or
(7) Any true-up adjustment of the wildfire protection fee as provided in the financing order.
(c) A transfer of wildfire protection property shall be deemed perfected against third persons when both of the following occur:
(1) The commission issues the financing order authorizing the wildfire protection fee included in the wildfire protection property; and
(2) An assignment of the wildfire protection property in writing has been executed and delivered to the transferee.
(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with chapter 490, article 9, part 5, naming the assignor of the wildfire protection property as debtor and identifying the wildfire protection property shall have priority. Any description of the wildfire protection property shall be sufficient if it refers to the financing order creating the wildfire protection property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures the commission may establish, but these filings shall not affect the perfection of the transfer.
§269-I Successor requirements; default. (a) Any successor to an electric utility that has received a financing order, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall be bound by the requirements of this part. The successor of the electric utility shall perform and satisfy all obligations of the electric utility under the financing order, in the same manner and to the same extent as the electric utility, including the obligation to collect and pay the wildfire protection fee to any financing party as required by a financing order or any assignee. Any successor to the electric utility shall be entitled to receive any fixed recovery tax amounts otherwise payable to the electric utility company.
(b) The commission may require in a financing order that if a default by the electric utility in remittance of the wildfire protection fee collected arising with respect to wildfire protection property occurs, the commission, without limiting any other remedies available to any financing party by reason of the default, shall order the sequestration and payment to the beneficiaries of the wildfire protection fee collected arising with respect to the wildfire protection property. Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the electric utility.
§269-J Severability. If any provision of this part is held to be invalid or is superseded, replaced, repealed, or expires for any reason:
(1) That occurrence shall not affect any action allowed under this part that is taken prior to that occurrence by the commission, a financing entity, a bondholder, or any financing party, and any such action shall remain in full force and effect; and
(2) The validity and enforceability of the rest of this part shall remain unaffected."
SECTION 3. Chapter 269-17, Hawaii Revised Statutes, is amended to read as follows:
"§269-17
Issuance of securities. A public utility corporation or a
financing entity may, on securing the prior approval of the public
utilities commission, and not otherwise, except as provided in section
269-E, issue stocks and stock certificates, bonds, notes, and other
evidences of indebtedness, payable at periods of more than twelve months after
the date thereof, for the following purposes and no other, namely: for the acquisition of property or for the
construction, completion, extension, or improvement of or addition to its
facilities or service, or for the discharge or lawful refunding of its
obligations or for the reimbursement of moneys actually expended from income or
from any other moneys in its treasury not secured by or obtained from the issue
of its stocks or stock certificates, or bonds, notes, or other evidences of
indebtedness, for any of the aforesaid purposes except maintenance of service,
replacements, and substitutions not constituting capital expenditure in cases
where the corporation has kept its accounts for such expenditures in such
manner as to enable the commission to ascertain the amount of moneys so expended
and the purposes for which the expenditures were made, and the sources of the
funds in its treasury applied to the expenditures. As used [herein,] in this section,
"property" and "facilities"[,] mean property and
facilities used in all operations of a public utility corporation whether or
not included in its public utility operations or rate base. A public utility corporation may not issue
securities to acquire property or to construct, complete, extend or improve or
add to its facilities or service if the commission determines that the proposed
purpose will have a material adverse effect on its public utility operations.
All stock and every stock certificate, and
every bond, note, or other evidence of indebtedness of a public utility
corporation not payable within twelve months, issued without an order of the
commission authorizing the same, then in effect, shall be void."
SECTION 4. Each electric utility shall file its first risk-based wildfire protection plan with the public utilities commission required under section 269-C, Hawaii Revised Statutes, established by section 2 of this Act, no later than December 31, 2024.
SECTION 5. Notwithstanding the provisions of section 39A-191, Hawaii Revised Statutes, and the provisions of Act 182, Session Laws of Hawaii 2022, as amended by Act 262, Session Laws of Hawaii 2023, the legislature authorizes the issuance of special purpose revenue bonds for wildfire protection costs that require an allocation of the annual state ceiling under section 39B-2, Hawaii Revised Statutes, for the period July 1, 2024, through December 31, 2028, and further authorizes project agreements with an affiliate of a public utility or a special purpose vehicle in connection with the issuance of special purpose revenue bonds for wildfire protection costs.
SECTION 6. The legislature authorizes the allocation of the annual state ceiling under section 39B-2, Hawaii Revised Statutes, to the issuance of bonds issued pursuant to section 2 of this Act that require such allocation in order for interest on the bonds to be tax-exempt for federal income tax purposes.
SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 8. In codifying the new part added to chapter 269, Hawaii Revised Statutes, by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating and referring to the new sections in this Act.
SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 10. This Act shall take effect on July 1, 3000.
Report Title:
Wildfires; Mitigation; Protection; Public Utilities Commission; Electric Utilities; Securitization; Risk Protection Plans
Description:
Creates a process for electric utilities to develop and submit wildfire protection plans to the Public Utilities Commission for approval and allow the recovery of related costs and expenses through securitization, while avoiding a disproportionate impact on a specific ratepayer or county. Effective 7/1/3000. (HD2)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
