STATE OF NEW YORK ________________________________________________________________________ 10346--A IN ASSEMBLY May 17, 2024 ___________ Introduced by COMMITTEE ON RULES -- (at request of M. of A. Paulin, McDonald, Kelles, Woerner, Solages) -- read once and referred to the Committee on Corporations, Authorities and Commissions -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to enact the "New York utility corporation securitization act" The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Short title. This act shall be known and may be cited as 2 the "New York utility corporation securitization act". 3 § 2. Definitions. As used in this act, the following terms shall have 4 the following meanings: 5 1. "Ancillary agreement" means any bond, insurance policy, letter of 6 credit, reserve account, surety bond, swap arrangement, hedging arrange- 7 ment, liquidity or credit support arrangement or other similar agreement 8 or arrangement entered into in connection with the issuance of recovery 9 bonds under this act, that is designed to promote the credit quality and 10 marketability of such recovery bonds or to mitigate the risk of an 11 increase in interest rates. 12 2. "Assignee" means any individual, corporation, limited liability 13 company, partnership or limited partnership, trust or other legally 14 recognized entity to which an interest in recovery property is created, 15 recognized, assigned, sold or transferred, other than as security, 16 including any assignee of such property. 17 3. "Commission" means the public service commission. 18 4. "Consumer" means any individual, governmental body, trust, business 19 entity, nonprofit organization or other legally recognized entity that 20 takes electric delivery service within the service area by means of 21 electric transmission or distribution facilities, whether those electric 22 transmission or distribution facilities are owned by a utility corpo- 23 ration or other entity. 24 5. "Financing costs" means: 25 (a) interest and acquisition, defeasance, or redemption premiums that 26 are payable on recovery bonds; EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD05310-05-4A. 10346--A 2 1 (b) any payment approved in the financing order and required under an 2 ancillary agreement or other accounts established under the terms of any 3 indenture, ancillary agreement, or other financing documents pertaining 4 to recovery bonds; 5 (c) provided that recovery bonds shall be the only method used to 6 recover the costs identified in this paragraph, any other cost related 7 to issuing, supporting, repaying, and servicing recovery bonds, includ- 8 ing but not limited to servicing fees, accounting and auditing fees, 9 trustee fees, legal fees, consulting fees, administrative fees, place- 10 ment and underwriting fees, capitalized interest, rating agency fees, 11 stock exchange listing and compliance fees, and filing fees, including 12 costs related to obtaining a financing order; or 13 (d) any federal, state or local taxes, payments in lieu of taxes, 14 franchise fees or license fees imposed on recovery charge revenues. 15 6. "Financing order" means an order of the commission which author- 16 izes: 17 (a) the issuance of recovery bonds; 18 (b) the imposition, collection, and periodic adjustments of recovery 19 charges; 20 (c) the creation or recognition of recovery property; and/or 21 (d) the sale, assignment, or transfer of recovery property to an 22 assignee. 23 7. "Financing party" means any holder of recovery bonds and any trus- 24 tee, collateral agent, or other person acting for the benefit of holders 25 of recovery bonds. 26 8. "Financing statement" shall have the same meaning as that provided 27 in paragraph 39 of subsection (a) of section 9-102 the uniform commer- 28 cial code. All financing statements under this act shall be filed in 29 accordance with section 9-501 of the uniform commercial code. 30 9. "Lien creditor" shall have the same meaning as that provided in 31 paragraph 52 of subsection (a) of section 9-102 of the uniform commer- 32 cial code. 33 10. "Recovery bonds" means bonds, debentures, notes, certificates of 34 participation, certificates of ownership, or other evidences of indebt- 35 edness or ownership that are issued pursuant to an indenture, contract, 36 or other agreement of a utility corporation or its assignee pursuant to 37 a financing order, the proceeds of which are used directly or indirectly 38 to provide, recover, finance, or refinance commission-approved recovery 39 costs and financing costs, to such level as the commission may authorize 40 in a financing order, and which are secured by or payable from recovery 41 property, and that have a final maturity date of no longer than twenty 42 years from the original issuance. If certificates of participation or 43 ownership are issued, references in this act to principal, interest, or 44 premium shall be construed to refer to comparable amounts under such 45 certificates. Recovery bonds shall be nonrecourse to the credit or any 46 assets of the utility corporation other than the recovery property as 47 specified in the financing order and any rights under any ancillary 48 agreement. Recovery bonds shall be legal investments for financial 49 institutions, insurance companies, fiduciaries, and other persons that 50 require statutory authority regarding legal investment. 51 11. "Recovery charge" means the amounts authorized by the commission 52 to recover recovery costs and financing costs. If provided for in a 53 financing order, such amounts shall be imposed on consumer bills and 54 collected by a utility corporation or its successors or assignees or a 55 collection agent, in full, through a charge paid by existing and future 56 consumers receiving transmission or distribution service, or both, fromA. 10346--A 3 1 the utility corporation or its successors or assignees under rate sched- 2 ules or special contracts approved by the commission. The recovery 3 charge shall be non-bypassable and imposed on all consumers in the 4 service area and collected by the utility corporation or its successor, 5 agent, subcontractor, assignee, or collection agent or any other entity 6 designated under the financing order. 7 12. "Recovery costs" means storm recovery costs identified for recov- 8 ery in a financing order. 9 13. "Recovery property" (a) means the property rights and interests 10 created pursuant to this act, including but not limited to any and all 11 right, title, and interest: 12 (i) in and to recovery charges established pursuant to a financing 13 order, as approved by the commission and adjusted from time to time in 14 accordance with such financing order; 15 (ii) in and to all revenues, collections, claims, payments, money, or 16 proceeds of or arising from the recovery charges or constituting recov- 17 ery charges that are the subject of a financing order, regardless of 18 whether such revenues, collections, claims, payments, money, or proceeds 19 are imposed, billed, received, collected, or maintained together with or 20 commingled with other revenues, collections, claims, payments, money, or 21 proceeds; and 22 (iii) in and to all rights to obtain periodic adjustments to the 23 recovery charges pursuant to the terms of the financing order; and 24 (b) shall constitute a vested, presently existing property right. 25 14. "Secured party" means a financing party in favor of which a utili- 26 ty corporation or its successors or assignees creates a security inter- 27 est in all or any portion of its interest in or right to recovery prop- 28 erty. A secured party may be granted a security interest in recovery 29 property under this act and a security interest in other collateral 30 subject to the uniform commercial code in a single security agreement. 31 15. "Security interest" means a pledge, hypothecation, or other encum- 32 brance of or other right over any portion of recovery property created 33 by contract to secure the payment or performance of an obligation. 34 16. "Service area" means the geographical area within which a utility 35 corporation provides electric distribution services as of the date of a 36 financing order. 37 17. "Service interruption" means the loss of service for five minutes 38 or more, for one or more consumers, which is the result of one or more 39 component failures. 40 18. "Storm" means a period of adverse weather during which service 41 interruptions affect at least ten percent of the consumers in an operat- 42 ing area and/or result in consumers being without electric service for 43 durations of at least twenty-four hours. 44 19. "Storm recovery activity" means any activity or activities by or 45 on behalf of a utility corporation taken before July 1, 2024 in 46 connection with the restoration of service and infrastructure associated 47 with electric power outages affecting consumers of a utility corporation 48 as the result of a storm or storms, including but not limited to mobili- 49 zation, staging, and construction, reconstruction, replacement, or 50 repair of electric generation, transmission, or distribution facilities. 51 20. "Storm recovery costs" means, if requested by a utility corpo- 52 ration and approved by the commission, costs incurred before July 1, 53 2024 by a utility corporation in undertaking a storm recovery activity. 54 Such costs may be net of applicable insurance proceeds, tax benefits, 55 and any other amounts intended to reimburse the utility corporation for 56 storm recovery activities such as governmental grants or aid of any kindA. 10346--A 4 1 and may include adjustments for normal capital replacement and operating 2 costs, or other potential offsetting adjustments. Storm recovery costs 3 may include retiring any existing indebtedness relating to storm recov- 4 ery activities. 5 21. "Utility corporation" means any electric corporations individually 6 or collectively who are subsidiaries of the same corporation who jointly 7 or collectively have storm recovery costs of $500 million or more as of 8 July 1, 2024. 9 § 3. Financing orders. 1. No utility corporation or its affiliate or 10 other assignee shall issue any recovery bonds unless it has been specif- 11 ically authorized to do so by a financing order issued pursuant to this 12 section. No later than two years after the effective date of this act, a 13 utility corporation may petition the commission for a financing order 14 granting such authority. Such petition shall be made under oath and 15 shall be signed and filed on behalf of the utility corporation or its 16 affiliate or other assignee by the president or by a vice president, 17 treasurer, or other executive officer having knowledge of the matters 18 set forth therein and shall be submitted in such form as the commission 19 shall prescribe. 20 2. Each petition filed under this section shall include all of the 21 following: 22 (a) A description of the storm recovery activities that the utility 23 corporation has undertaken and the reasons for undertaking the activ- 24 ities. 25 (b) The storm recovery costs the utility corporation has determined 26 would be appropriate to recover through recovery bonds and is seeking to 27 recover, and the level that the utility corporation is funding or will 28 seek to fund through other means, together with a description of the 29 factors and calculations used in determining such amounts and methods of 30 recovery. 31 (c) Whether the utility corporation proposes to finance all or a 32 portion of the recovery costs using recovery bonds. If the utility 33 corporation proposes to finance a portion of such costs, the utility 34 corporation must identify the specific portion in the petition. An 35 election not to finance a portion of the recovery costs using recovery 36 bonds by a utility corporation shall not be deemed to waive its right to 37 recover such costs pursuant to a separate proceeding with the commission 38 pursuant to this act. 39 (d) An estimate of the financing costs related to the recovery bonds. 40 (e) An estimate of the recovery charges necessary to recover the 41 recovery costs and financing costs and the period for recovery of such 42 costs. 43 (f) A comparison between the net present value of the costs to consum- 44 ers that are estimated to result from the issuance of recovery bonds and 45 the result from the application of the traditional method of financing 46 and recovering recovery costs from consumers. The comparison should 47 demonstrate that the issuance of recovery bonds and the imposition of 48 recovery charges are expected to provide quantifiable benefits to 49 consumers. 50 3. (a) The commission may grant a petition under subdivision one of 51 this section in whole or in part by issuing a financing order, with such 52 modifications thereto and upon such terms and conditions as the commis- 53 sion prescribes and that are consistent with this act, provided such 54 financing is prudent and would provide a net benefit to the consumer. If 55 the commission issues a financing order approving the issuance of recov- 56 ery bonds under this act, the commission shall consider whether:A. 10346--A 5 1 (i) the proposed issuance of recovery bonds and the imposition and 2 collection of a recovery charge are expected to provide quantifiable 3 benefits to consumers as compared to the costs that would have been 4 incurred absent the issuance of recovery bonds; and 5 (ii) the proposed structuring, expected pricing, and financing costs 6 of the recovery bonds are reasonably expected to result in the lowest 7 recovery charges consistent with market conditions at the time the 8 recovery bonds are priced and the terms of the financing order or would 9 avoid or mitigate rate impacts to consumers as compared with traditional 10 methods of financing or recovering recovery costs. 11 (b) The commission may determine what degree of flexibility to afford 12 to the utility corporation or assignees in establishing the terms and 13 conditions of the recovery bonds, including but not limited to repayment 14 schedules, interest rates, and other financing costs. A copy of any 15 financing order issued under this act duly certified by a commissioner 16 or other person authorized to act on behalf of the commission shall be 17 sufficient evidence for all purposes of whole and complete compliance by 18 the utility corporation with all procedural and other matters required 19 precedent to the issuance of the order. 20 4. Proceedings on a petition submitted pursuant to this section begin 21 with the petition for a financing order filed by a utility corporation 22 with the commission for review and approval within 135 days of the 23 filing of the petition and shall be disposed of in accordance with the 24 requirements of this act and the rules of the commission. 25 5. A financing order issued by the commission to a utility corporation 26 shall: 27 (a) Specify the amount of storm recovery costs, taking into consider- 28 ation, to the extent the commission deems appropriate, any other methods 29 used to recover these costs and any offsets or credits to those costs, 30 and provide with respect to the amount of financing costs which may be 31 recovered through recovery charges; 32 (b) Provide that the proposed financing through issuance of recovery 33 bonds and the imposition and collection of recovery charges are expected 34 to provide quantifiable benefits to consumers as compared to the costs 35 that would have been incurred absent the issuance of the recovery bonds 36 and that the net present value of the costs to consumers that are esti- 37 mated to result from the financing through issuance of recovery bonds 38 is less than the net present value of costs of the application of the 39 traditional method of financing and recovering recovery costs from 40 consumers; 41 (c) Provide that the structuring and pricing of the recovery bonds are 42 expected to result in the lowest recovery charges consistent with market 43 conditions at the time the recovery bonds are priced and the terms set 44 forth in such financing order; 45 (d) Specify and create the recovery property of a utility corporation 46 or its successors or assignees that may be used to pay or secure recov- 47 ery bonds and financing costs; 48 (e) Provide that such recovery property may be: (i) sold, assigned, or 49 transferred by the utility corporation to (A) a subsidiary which is 50 wholly owned, directly or indirectly, by the utility corporation and 51 which will be the issuer of the recovery bonds or (B) another assignee 52 which will be the issuer of the recovery bonds; or 53 (ii) created or recognized as property of an assignee which will be 54 the issuer of the recovery bonds; 55 (f) Provide that the recovery charges shall be sufficient at all times 56 to pay the principal of and interest on the recovery bonds as the sameA. 10346--A 6 1 shall become due and payable and all other financing costs and establish 2 a true-up mechanism requiring that the recovery charges be reviewed and 3 adjusted at least annually to correct any overcollection or undercol- 4 lection during the period since the issuance or preceding adjustment and 5 to ensure the projected recovery of amounts sufficient to provide timely 6 payment of all principal, interest and other financing costs. Each 7 adjustment to the recovery charge, in amounts as calculated by or on 8 behalf of the owner of recovery property, pursuant to a method estab- 9 lished in the financing order, shall automatically become effective 60 10 days following the date on which the periodic adjustment is filed with 11 the commission unless the commission approves an earlier effective date 12 requested by the issuer of recovery bonds; 13 (g) Provide and pledge that after the earlier of the transfer of 14 recovery property to an assignee or the issuance of recovery bonds 15 authorized thereby, a financing order is irrevocable until the indefeas- 16 ible payment in full of the recovery bonds and the financing costs and, 17 provided that, except as provided in subdivision 8 of this section or to 18 implement any true-up mechanism adopted by the commission as described 19 in paragraph (f) of this subdivision, the commission may not amend, 20 modify, or terminate the financing order by any subsequent action or 21 reduce, impair, postpone, terminate, or otherwise adjust recovery charg- 22 es approved in the financing order, provided nothing shall preclude 23 limitation or alteration if and when full compensation, including full 24 cost recovery, is made for the full protection of the recovery charges 25 collected pursuant to a financing order and the full protection of the 26 holders of recovery bonds and any assignee or financing party; 27 (h) Specify how amounts collected from consumers shall be allocated 28 between recovery charges and other charges; 29 (i) Provide that a financing order remains in effect until the recov- 30 ery bonds issued pursuant to the order have been indefeasibly paid in 31 full and the financing costs of such bonds have been recovered in full; 32 (j) Provide that a financing order shall remain in effect and unabated 33 notwithstanding the reorganization, bankruptcy, or other insolvency 34 proceedings, or merger or sale, of the applicable utility corporation or 35 its successors or assignees; 36 (k) Authorize and require the utility corporation, to the extent that 37 any interest in recovery property is sold or assigned, shall contract 38 with the assignee or any financing party to continue to operate its 39 system to provide service to its consumers, collect amounts in respect 40 of the recovery charges for the benefit and account of such assignee or 41 financing party, and account for and remit such amounts to or for the 42 account of such assignee or financing party, including pursuant to a 43 sequestration order authorized by subdivision 6 of section four or 44 subdivision 7 of section six of this act; and 45 (l) Provide that any cost to the consumer in connection with the 46 financing order, that is not identified in and provided for in such 47 financing order, shall not be recovered through any rates or recovery 48 charges, and shall solely be the obligation of the utility corporation 49 or its successors or assignees. 50 6. In each financing order issued to or on behalf of a utility corpo- 51 ration, the commission shall: 52 (a) Prescribe any limitations on potential assignees of recovery prop- 53 erty; 54 (b) Authorize an assignee which is a subsidiary of a utility corpo- 55 ration and which issues recovery bonds or another assignee which issues 56 recovery bonds to provide and establish in its organizational documents,A. 10346--A 7 1 partnership agreement, or operating agreement, as applicable, that in 2 order for a person to file a voluntary bankruptcy petition on behalf of 3 such assignee, the prior unanimous consent of the directors, partners, 4 or managers, as applicable, shall be required. If so authorized in a 5 financing order, any such provision set forth in the organizational 6 documents, partnership agreement, or operating agreement of such an 7 assignee shall constitute a legal, valid, and binding agreement of the 8 shareholders, partners, or members, as applicable, of such assignee and 9 shall be enforceable against such shareholders, partners, or members; 10 and 11 (c) Provide that the creation of the recovery property pursuant to 12 paragraph (d) of subdivision 5 of this section shall be conditioned 13 upon, and shall be simultaneous with either: (i) the sale, assignment, 14 or other transfer of the recovery property to an assignee; or (ii) the 15 issuance of the recovery bonds and the security interest created in the 16 recovery property to secure recovery bonds. 17 7. After the issuance of a financing order, and within such time and 18 subject to any other limitations set forth in the financing order, the 19 utility corporation retains discretion regarding whether to sell, 20 assign, or otherwise transfer recovery property or to cause the recovery 21 bonds to be issued, including the right to defer or postpone such sale, 22 assignment, transfer, or issuance. 23 8. At the request of a utility corporation, the commission may 24 commence a proceeding and issue a subsequent financing order that 25 provides for the refinancing, retiring, or refunding of recovery bonds 26 issued by an affiliate of the utility corporation pursuant to the 27 original financing order if the commission finds that the subsequent 28 financing order satisfies all of the criteria specified in subdivisions 29 3 and 5 of this section or that provides for an accounting, refunding, 30 or crediting to consumers of the proceeds of any true-up mechanism 31 adopted by the commission in accordance with paragraph (f) of subdivi- 32 sion 5 of this section. Effective on retirement of the refunded recov- 33 ery bonds and the issuance of new recovery bonds, the commission may 34 adjust the related recovery charges accordingly or establish substitute 35 recovery charges, provided any such subsequent order shall be consistent 36 with the provisions of subdivision 5 of this section. 37 9. (a) The commission shall not, in exercising its powers and carrying 38 out its duties regarding any matter within its authority pursuant to 39 this act, consider the recovery bonds issued pursuant to a financing 40 order to be the debt of the utility corporation other than for federal 41 income tax purposes, consider the recovery charges paid under the 42 financing order to be the revenue of the utility corporation for any 43 purpose, or consider the recovery costs or financing costs specified in 44 the financing order to be the costs of the utility corporation. 45 (b) The commission may not order or otherwise directly or indirectly 46 require a utility corporation to use recovery bonds to finance any 47 project, addition, plant, facility, extension, capital improvement, 48 equipment, or any other expenditure. After the issuance of a financing 49 order, the utility corporation retains sole discretion whether to cause 50 the recovery bonds to be issued, including the right to defer or post- 51 pone such sale, assignment, transfer or issuance. Nothing shall prevent 52 the utility corporation from abandoning the issuance of recovery bonds 53 under the financing order by filing with the commission a statement of 54 abandonment and the reasons therefor. The commission shall not refuse 55 to allow a utility corporation to recover recovery costs that would be 56 otherwise permissible for recovery or refuse or condition authorizationA. 10346--A 8 1 or approval of the issuance and sale by a utility corporation of securi- 2 ties or the assumption by the utility corporation of liabilities or 3 obligations, solely because of the potential availability of recovery 4 bond financing. 5 10. All financing orders issued by the commission shall be operative 6 and in full force and effect on the date of the issuance of such order. 7 11. Notwithstanding any other law to the contrary, any action, suit or 8 proceeding to which the commission or the recovery bond issuer may be a 9 party, in which any question arises as to the validity of this act or 10 any financing order, shall be preferred over all other civil causes in 11 all courts of the state, except election matters, and shall be heard and 12 determined in preference to all other civil business pending therein, 13 except election matters, irrespective of position on the calendar. Such 14 preference shall also be granted upon petition of counsel to the commis- 15 sion in any action or proceeding questioning the validity of any financ- 16 ing order or other decision made by the commission under this act in 17 which such counsel may be allowed to intervene. Notwithstanding any 18 other provision of law to the contrary, the validity of any financing 19 order or other decision may only be challenged by an aggrieved party 20 pursuant to an action, suit or proceeding filed within thirty days after 21 such financing order becomes final; provided, however, that any such 22 action, suit or proceeding and all supporting papers shall be commenced 23 directly in the supreme court, appellate division, third judicial 24 department. 25 12. A financing order shall require the recovery bond issuer or the 26 assignee to file at least annually with the commission, the governor, 27 the temporary president of the senate, the speaker of the assembly, the 28 chair of the senate finance committee, and the chair of the assembly 29 ways and means committee, a periodic report showing the billing and 30 collection of recovery charges, the application of recovery charge 31 revenues to debt service on the recovery bonds and other ongoing financ- 32 ing costs, and the balances in any accounts required by the financing 33 order, and any other information the commission deems necessary. 34 § 4. Recovery property. 1. All recovery property specified in a 35 financing order shall constitute an existing, present property right. 36 Such property shall exist whether or not the revenues or proceeds aris- 37 ing from the property have been billed, have accrued, or have been 38 collected. 39 2. Recovery property specified in a financing order shall continue to 40 exist until the recovery bonds issued pursuant to such order are paid in 41 full and all financing costs of the bonds have been recovered in full. 42 3. All or any portion of recovery property specified in a financing 43 order issued to a utility corporation may be sold, assigned, or trans- 44 ferred to a successor or an assignee, including an affiliate or affil- 45 iates of the utility corporation or any other assignee created for the 46 limited purpose of acquiring, owning, or administering recovery property 47 or issuing recovery bonds under the financing order. All or any portion 48 of recovery property may be encumbered by a security interest to secure 49 recovery bonds issued pursuant to the order and other financing costs. 50 Each such sale, assignment, transfer, or security interest granted by a 51 utility corporation or affiliate of a utility corporation or assignee 52 shall be considered to be a transaction in the ordinary course of busi- 53 ness. 54 4. The description of recovery property being sold, assigned, or 55 transferred to an assignee in any sale agreement, purchase agreement, or 56 other transfer agreement or created and recognized as property of anA. 10346--A 9 1 assignee in accordance with subdivision nine of this section, being 2 encumbered to a secured party in any security agreement, pledge agree- 3 ment, or other security document, or indicated in any financing state- 4 ment is only sufficient if such description or indication refers to the 5 specific financing order that created the recovery property and states 6 that such agreement or financing statement covers all or part of such 7 recovery property described in such financing order. A description of 8 recovery property in a financing statement shall be sufficient if it 9 refers to the financing order creating the recovery property. This 10 subdivision shall apply to all purported sales, assignments, or trans- 11 fers of, and all purported liens or security interests in, recovery 12 property, regardless of whether the related sale agreement, purchase 13 agreement, other transfer agreement, security agreement, pledge agree- 14 ment, or other security document was entered into, or any financing 15 statement was filed, before or after the effective date of this act. 16 5. Every electric bill issued by a utility corporation that has 17 obtained a financing order and caused recovery bonds to be issued shall 18 comply with the provisions of this subdivision; provided, however, that 19 the failure of a utility corporation to comply with this subdivision 20 shall not invalidate, impair, or affect any financing order, recovery 21 property, recovery charge, or recovery bonds. Every such bill shall: 22 (a) Explicitly reflect that a portion of the charges on such bill 23 represents recovery charges approved in a financing order issued to the 24 utility corporation and, if the recovery property has been transferred 25 to, or created at, an assignee, must include a statement to the effect 26 that the assignee is the owner of the rights to recovery charges and 27 that the utility corporation or other entity, if applicable, is acting 28 as a collection agent or servicer for that assignee. The tariff appli- 29 cable to consumers must indicate the recovery charge and the ownership 30 of the charge. 31 (b) Include the recovery charge on each consumer's bill as a separate 32 line item and include either the rate or the amount of the charge on 33 each bill. 34 6. If a utility corporation defaults on any required payment of charg- 35 es arising from recovery property specified in a financing order, the 36 supreme court, Albany county, upon petition by an interested party, and 37 without limiting any other remedies available to the applying party, 38 shall order the sequestration and payment of the revenues arising from 39 the recovery property to the financing parties or their representatives. 40 Any such order shall remain in full force and effect notwithstanding any 41 reorganization, bankruptcy, or other insolvency proceedings with respect 42 to the utility corporation or its successors or assignees. 43 7. The interest of an assignee or secured party in recovery property 44 specified in a financing order shall not be subject to setoff, counter- 45 claim, surcharge, or defense by the utility corporation or any other 46 person, or in connection with the reorganization, bankruptcy, or other 47 insolvency of the utility corporation or any other entity. 48 8. Any successor to a utility corporation, whether pursuant to any 49 reorganization, bankruptcy, or other insolvency proceeding or whether 50 pursuant to any merger or acquisition, sale, or other business combina- 51 tion, or transfer by operation of law, as a result of utility corpo- 52 ration restructuring or otherwise, shall perform and satisfy all obli- 53 gations of, and have the same rights under a financing order as the 54 utility corporation under the financing order in the same manner and to 55 the same extent as the utility corporation, including collection andA. 10346--A 10 1 payment of any revenues and proceeds of the recovery property to any 2 person entitled thereto. 3 9. Upon petition by the utility corporation, recovery property may be 4 immediately created by operation of law on the latter of the issuance of 5 a financing order, or the issuance of the recovery bonds by an assignee. 6 Recovery property created in accordance with this subdivision shall, 7 upon creation, belong to the assignee and such assignee will have the 8 same rights to and benefits arising from the recovery property as it 9 would have if it acquired such recovery property as a result of a 10 purchase, acquisition or other transfer from the utility corporation. 11 § 5. Sale, assignment, or transfer of recovery property. 1. The sale, 12 assignment, or other transfer of recovery property by a utility corpo- 13 ration to an assignee that the parties have in the governing contract 14 expressly stated to be a sale or other absolute transfer shall consti- 15 tute an absolute transfer and true sale of, and not a security interest 16 in, the transferor's right, title, and interest in, to, and under such 17 recovery property, other than for federal and state income tax purposes. 18 The parties' characterization of such transaction as a sale of an inter- 19 est in recovery property shall be conclusive that the transaction is a 20 true sale and that ownership has passed to the party characterized as 21 the purchaser, regardless of whether the purchaser has possession of any 22 documents evidencing or pertaining to the interest. After any such 23 transaction, the recovery property shall not be subject to any claims of 24 the transferor or the transferor's creditors, other than creditors hold- 25 ing a prior security interest in the recovery property perfected under 26 section eight of this act. 27 2. Notwithstanding any provision of law to the contrary, the charac- 28 terization of any sale, assignment, or other transfer as a true sale or 29 other absolute transfer pursuant to subdivision 1 of this section and 30 the corresponding characterization of the assignee's property interest 31 shall be determinative and conclusive irrespective of, and not affected 32 or impaired by, the existence of any or all of the following circum- 33 stances: 34 (a) Commingling of amounts arising with respect to the recovery prop- 35 erty with other amounts; 36 (b) The retention by the transferor of a partial or residual interest, 37 including an equity interest or entitlement to any surplus, in the 38 recovery property, whether direct or indirect, or whether subordinate or 39 otherwise; 40 (c) Any recourse that the assignee may have against the transferor, 41 except that any such recourse shall not be created, contingent upon, or 42 otherwise occurring or resulting from the inability or failure of one or 43 more of the transferor's consumers to timely pay all or a portion of the 44 recovery charge; 45 (d) Any indemnifications, obligations, or repurchase rights made or 46 provided by the transferor, except that such indemnity or repurchase 47 rights shall not be based solely upon the inability or failure of a 48 transferor's consumers to timely pay all or a portion of the recovery 49 charge; 50 (e) The transferor acting as the collector of the recovery charges or 51 the existence of any contract described in paragraph (k) of subdivision 52 5 of section three of this act; 53 (f) The contrary or other treatment of the sale, assignment, or other 54 transfer for tax, financial reporting, or other purposes; 55 (g) The granting or providing to holders of the recovery bonds of a 56 preferred right to the recovery property or credit enhancement by theA. 10346--A 11 1 utility corporation or its affiliates with respect to the recovery 2 bonds; or 3 (h) The status of the assignee as a direct or indirect wholly owned 4 subsidiary or other affiliate of the utility corporation. The separate 5 juridical personality of any assignee of recovery property which is a 6 subsidiary or affiliate of the utility corporation shall not be disre- 7 garded due to the fact that the assignee and the utility corporation 8 share any one or more incidents of control, including common managers, 9 officers, directors, members, accounting or administrative systems, 10 consolidated tax returns, or office space, that the assignee may be a 11 disregarded entity for tax purposes, that the electric corporation 12 caused the formation of the assignee, that a contract by the utility 13 corporation and the assignee described in paragraph (k) of subdivision 5 14 of section three of this act exists, that the assignee has no other 15 business other than pertaining to the recovery property, that the 16 capitalization of the assignee is limited to amounts required for 17 compliance with certain applicable federal income tax laws and revenue 18 procedures, or that other factors used in applying a single business 19 enterprise test to juridical persons are present. 20 3. Any right that a utility corporation has in the recovery property 21 prior to its sale, assignment, or transfer shall be in the form of a 22 contractual right or chose in action notwithstanding any contrary treat- 23 ment thereof for accounting or tax purposes. The ownership of an inter- 24 est in recovery property is voluntarily transferred by a contract 25 between the owner and the assignee that purports to transfer the owner- 26 ship of that interest. Unless otherwise provided, the transfer of 27 ownership between the parties shall be effective as soon as there is 28 written agreement on the interest, the purchase price is fixed, and the 29 financing order has been issued. Such transfer shall be perfected and 30 take effect against all third parties including, but not limited to, 31 subsequent lien creditors when the transfer has become effective between 32 the parties and when a financing statement giving notice of the sale, 33 assignment, or transfer is filed in accordance with subdivision 4 of 34 this section. Delivery of such an interest in recovery property shall 35 take place by operation of law upon the filing of the financing state- 36 ment. 37 4. Financing statements required to be filed under this section shall 38 be filed, indexed, maintained, and continued in the same manner and in 39 the same system of records maintained for the filing of financing state- 40 ments under article 9 of the uniform commercial code. The filing of 41 such financing statement shall be the only method of perfecting a sale, 42 assignment, or transfer of recovery property. The sale, assignment, or 43 transfer of an interest in recovery property perfected by filing a 44 financing statement shall be effective against any consumers owing 45 payment of the recovery charges, creditors of the transferor, subsequent 46 transferees, and all other third persons notwithstanding the absence of 47 actual knowledge of or notice to such consumers of such sale, assign- 48 ment, or transfer. 49 5. The priority of the conflicting ownership interests of assignees in 50 the same interest or rights in any recovery property shall be determined 51 as follows: 52 (a) Conflicting perfected interests or rights of assignees rank 53 according to priority in time of perfection. 54 (b) A perfected interest or right of an assignee has priority over a 55 conflicting unperfected interest or right of an assignee.A. 10346--A 12 1 (c) A perfected interest or right of an assignee has priority over a 2 person who becomes a lien creditor after the perfection of such 3 assignee's interest or right. 4 6. The priority of a sale, assignment, or transfer perfected under 5 this section shall not be impaired by any later modification of the 6 financing order or recovery property or by the commingling of funds 7 arising from recovery property with other funds. Any other security 8 interest that may apply to such funds, other than a security interest 9 perfected under section six of this act, shall be terminated when those 10 funds are transferred to a segregated account for the assignee or a 11 financing party. If recovery property has been transferred to an assig- 12 nee or financing party, any proceeds of such property shall be held for 13 and delivered to the assignee or financing party by any collector under 14 any contract described in paragraph (k) of subdivision 5 of section 15 three of this act as a mandatary and fiduciary. 16 § 6. Security interests. 1. The provisions of article 9 of the uniform 17 commercial code relating to secured transactions shall not apply to 18 recovery property or any right, title, or interest of a corporation or 19 assignee therein, whether before or after the issuance of a financing 20 order, except as provided in subdivision 1 of section seven of this act. 21 In addition, such right, title, or interest pertaining to a financing 22 order, including but not limited to, the associated recovery property, 23 and any revenues, collections, claims, rights to payment, payments, 24 money, or proceeds of or arising from recovery charges pursuant to such 25 order, shall not be deemed proceeds of any right or interest other than 26 of the financing order and the recovery property arising from the 27 financing order. All revenues and collections resulting from recovery 28 property shall constitute proceeds only of the recovery property arising 29 from the financing order. 30 2. Except to the extent provided in this act with respect to filings 31 of financing statements or control of deposit accounts or investment 32 property as original collateral, the creation, attachment, granting, 33 perfection, and priority of security interests in recovery property to 34 secure recovery bonds shall be governed solely by this article and not 35 by the uniform commercial code. 36 3. (a) A security interest in recovery property is valid and enforcea- 37 ble against the utility corporation and its successor or an assignee and 38 third parties and attaches to recovery property only after all of the 39 following conditions are met: 40 (i) The issuance of a financing order; 41 (ii) The execution and delivery of a security agreement with a financ- 42 ing party in connection with the issuance of recovery bonds; and 43 (iii) The receipt of value for the recovery bonds. 44 (b) A security interest attaches to recovery property without physical 45 delivery of collateral or other act when all of the foregoing conditions 46 have been met, unless the security agreement expressly postpones the 47 time of attachment. 48 4. A security interest in recovery property is perfected only if it 49 has attached and a financing statement indicating the recovery property 50 collateral covered thereby has been filed. A financing statement must 51 be filed to perfect all security interests and liens in storm recovery 52 property under this act. A security interest in recovery property is 53 perfected when it has attached and when the applicable financing state- 54 ment has been filed. The interest of a secured party is not perfected 55 unless a financing statement sufficient under this act and otherwise in 56 accordance with the uniform commercial code is filed, and afterA. 10346--A 13 1 perfection the secured party's interest continues in the recovery prop- 2 erty and all proceeds of such recovery property, whether or not billed, 3 accrued, or collected, and whether or not deposited into a deposit 4 account and however evidenced. A security interest in proceeds of 5 recovery property is a perfected security interest if the security 6 interest in the recovery property was perfected under this act. Financ- 7 ing statements required to be filed pursuant to this act shall be filed, 8 indexed, maintained, and continued in the same manner and in the same 9 system of records maintained for the filing of financing statements 10 under the uniform commercial code, except that the requirement as to 11 continuation statements does not apply. The filing of such a financing 12 statement shall be the only method of perfecting a lien or security 13 interest on recovery property. The financing statement shall be filed 14 as if the debtor named therein were located in this state. 15 5. The priority of the conflicting security interests of secured 16 parties in the same interest or rights in any recovery property is 17 determined as follows: 18 (a) Conflicting perfected security interests of secured parties rank 19 according to priority in time of perfection; 20 (b) A perfected security interest of a secured party has priority over 21 a conflicting unperfected security interest of a secured party; and 22 (c) A perfected security interest of a secured party has priority over 23 a person who becomes a lien creditor after the perfection of such 24 secured party's security interest. 25 6. A perfected security interest in recovery property and all proceeds 26 of such recovery property, whether or not billed, accrued, or collected, 27 and whether or not deposited into a deposit account and however 28 evidenced, shall have priority over a conflicting lien or privilege of 29 any nature in the same collateral property, except a security interest 30 is subordinate to the rights of a person that becomes a lien creditor 31 before the perfection of such security interest. A security interest in 32 recovery property which qualifies for priority over a conflicting secu- 33 rity interest, lien, or privilege also has priority over the conflicting 34 security interest, lien, or privilege in proceeds of the recovery prop- 35 erty. The relative priority of a perfected security interest of a 36 secured party is not adversely affected by any lien, privilege, or secu- 37 rity interest in a deposit account of the utility corporation that is a 38 collector as described in paragraph (k) of subdivision 5 of section 39 three of this act and into which the revenues are deposited. The priori- 40 ty of a security interest perfected under this section shall not be 41 defeated or impaired by any later modification of the financing order or 42 recovery property or by the commingling of funds arising from recovery 43 property with other funds. Any other security interest that may apply 44 to those funds shall be terminated as to all funds transferred to a 45 segregated account for the benefit of an assignee or a financing party 46 or to an assignee or financing party directly. The perfection by 47 control, the effect of perfection by control, and the priority of a 48 security interest granted by the issuer of and securing recovery bonds 49 held by a secured party having control of a segregated deposit account 50 or securities account as original collateral into which revenues, 51 collections, or proceeds of recovery property are deposited or credited 52 shall be governed by section 1-301 of uniform commercial code. 53 7. If a default occurs under the terms of any recovery bond, the 54 secured party may foreclose on or otherwise enforce the security inter- 55 est in any recovery property as if it was a secured party under the 56 uniform commercial code. A secured party holding a security interest inA. 10346--A 14 1 recovery property shall be entitled to exercise all of the same rights 2 and remedies available to a secured party under the uniform commercial 3 code, to the same extent as if those rights and remedies were set forth 4 in this act. The court may order that amounts arising from recovery 5 property be transferred to a separate account of the secured party for 6 the financing parties' benefit, to which their security interest shall 7 apply. On petition by or on behalf of a secured party, the court shall 8 order the sequestration and payment to the financing parties of revenues 9 arising from the recovery property. 10 8. A security interest created under this section may provide for a 11 security interest in after-acquired collateral. Such security interest 12 shall not be invalid or fraudulent against creditors solely because the 13 grantor or the utility corporation as collector or servicer has the 14 right or ability to commingle the collateral or proceeds, or collect, 15 compromise, enforce, and otherwise deal with collateral. 16 9. Any action arising under the provisions of this act to enforce a 17 security interest in recovery property, or which otherwise asserts an 18 interest in, or a right in, to or against any recovery property, wherev- 19 er located or deemed located, or any security interest governed by this 20 act, shall be brought in the supreme court, Albany county. Such actions 21 shall be governed by the applicable provisions of the civil practice law 22 and rules and other law applicable to executory proceedings, including 23 provisional remedies, but only to the extent such laws are consistent 24 with the language and purposes of this act. 25 § 7. Choice of law; conflicts. 1. The law governing the validity, 26 enforceability, attachment, perfection, priority, exercise of remedies, 27 and venue with respect to the creation, recognition, sale, assignment, 28 or transfer of an interest or right or the creation of a security inter- 29 est in any recovery property shall be exclusively the laws of this 30 state, without applying this state's law on conflict of laws and 31 notwithstanding any contrary contractual provision, except as provided 32 in subdivision 6 of section six of this act. The validity, enforceabili- 33 ty, attachment, perfection, priority, and exercise of remedies with 34 respect to the creation, recognition, sale, assignment, or transfer of 35 an interest or right or the creation of a security interest in any 36 recovery property shall be governed by this act, and solely to the 37 extent not addressed by this act, by the uniform commercial code and 38 other laws of this state. Notwithstanding the preceding sentence, this 39 act provides that the uniform commercial code applies to the filings of 40 financing statements referenced in this act, to perfection, the effect 41 of perfection or nonperfection, and the priority of security interests 42 held by a secured party having control of deposit accounts or securities 43 accounts as original collateral securing recovery bonds, notwithstanding 44 that proceeds of recovery charges are deposited therein, and to the 45 enforcement of security interests in recovery property, in each case 46 subject to subdivision 2 of this section. 47 2. Insofar as the provisions of this act are inconsistent with the 48 provisions of any other law or part thereof regarding the attachment, 49 creation, perfection, the effect of perfection, or priority of, and 50 sale, assignment, or transfer of, or security interest in, recovery 51 property, or the exercise of remedies with respect thereto, the 52 provisions of this act shall be controlling. 53 3. Nothing in this section shall be construed so as to conflict with 54 the provisions of subdivision 6 of section six of this act. 55 § 8. Recovery bonds not public debt. Recovery bonds are not a debt or 56 a general obligation of the state or any of its political subdivisions,A. 10346--A 15 1 agencies, or instrumentalities and are not a charge on their full faith 2 and credit. An issue of recovery bonds shall not, directly or indirect- 3 ly or contingently, obligate the state or any agency, political subdivi- 4 sion, or instrumentality of the state to levy any tax or make any appro- 5 priation for payment of the bonds, other than for paying recovery 6 charges in their capacity as consumers of electricity. All recovery 7 bonds authorized by a financing order by the commission must contain on 8 the face thereof a statement to the following effect: "Neither the full 9 faith and credit nor the taxing power of the State of New York is 10 pledged to the payment of the principal of, or interest on, this bond." 11 § 9. State pledge. 1. The state pledges to and agrees with the holders 12 of recovery bonds, any assignee and all financing parties that the state 13 will not in any way take or permit any action that limits, alters or 14 impairs the value of recovery property or, except as required by a true- 15 up mechanism described in the financing order, reduce, alter or impair 16 recovery charges that are imposed, collected and remitted for the bene- 17 fit of the owners of recovery bonds, any assignee, and all financing 18 parties, until all principal, interest and redemption premium in respect 19 of recovery bonds, all other financing costs and all amounts to be paid 20 to an assignee or financing party under an ancillary agreement are paid 21 or performed in full. 22 2. Any person that issues recovery bonds shall be permitted to include 23 the pledge specified in subdivision 1 of this section on the face of 24 such bonds and in any ancillary agreements or other documentation 25 related to the issuance and marketing of such bonds. 26 § 10. Assignee not a utility corporation. An assignee or financing 27 party shall not be considered a utility corporation as defined in subdi- 28 vision 24 of section 2 of the public service law solely by virtue of 29 engaging in any of the transactions described in this act. 30 § 11. Effect of invalidity. If any provision of this act is held 31 invalid or is invalidated, superseded, replaced, repealed, or expires 32 for any reason, such occurrence shall not affect the validity of any 33 action allowed under this act taken by a utility corporation, or an 34 assignee, a financing party, a collection agent, or a party to an ancil- 35 lary agreement. Any such action shall remain in full force and effect 36 with respect to all recovery bonds issued or authorized in a financing 37 order issued pursuant to this act on or before the date that such 38 provision is held invalid or is invalidated, superseded, replaced, or 39 repealed, or expires for any reason. 40 § 12. Effect of a financing order. Section 70 of the public service 41 law shall not apply to: 1. Any sale, assignment or transfer of recovery 42 property or any equity position held by the utility corporation in an 43 assignee; or 44 2. Any other transaction contemplated by or approved in a financing 45 order issued by the commission pursuant to this act. 46 § 13. This act shall take effect immediately.