Today's Law As Amended

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AB-33 2017 northern California wildfires.(2017-2018)



SECTION 1.
 The Legislature finds and declares all of the following:
(a) California faces unprecedented challenges. Climate change increases the odds of extreme weather, such as drought, high winds, low humidity, and heat waves, raising the frequency and severity of wildfires, storms, flooding, and mudslides. Development of housing in fire-prone areas has increased enormously over the past 40 years, thus placing more individuals and more property at risk from catastrophic wildfires. These factors in turn raise the potential liability faced by utilities in inverse condemnation and other claims. In particular, the 2017 northern California wildfires were catastrophic in size and effect.
(b) The potential liability from the 2017 northern California wildfires requires immediate legislative action. The number of persons affected by the wildfires, and the extent of their losses, highlight the need for timely and equitable resolution of their claims. At the same time, the magnitude of potential damage claims undermines Pacific Gas and Electric Company’s ability to invest in the infrastructure necessary to meet the state’s aggressive wildfire mitigation and clean energy plans and has the potential to create an unsustainable hardship for customers if passed on in the form of higher rates through the typical ratemaking processes. The potential liabilities and uncertainties surrounding the timing and extent of cost recovery create an imminent threat to the utility’s financial stability and ability to cost effectively carry out its public service mission.
(c) It is therefore in the public interest to provide a mechanism that will promote timely compensation for 2017 northern California wildfire victims and equitably allocate costs for strict liability inverse condemnation and other wildfire-related claims and costs while maintaining the financial health of the utility so that it is able to continue to provide safe and reliable electric and gas service to customers at affordable rates.
(d) Securitization is a well-established mechanism to reduce customer impacts that has been used successfully in California and in other states. The principal benefits of securitization are a lower cost of financing as compared to other forms of utility borrowing and a smaller rate impact as compared to usual cost recovery measures. Therefore, to minimize the economic impacts on customers, it is in the public interest to repurpose and modernize existing law to allow Pacific Gas and Electric Company the opportunity to securitize, over a reasonable time period, the costs related to 2017 northern California wildfire claims through issuance of recovery bonds funded through a dedicated rate component.
(e) It is therefore also in the public interest for the Public Utilities Commission to issue one or more financing orders, at the request of the utility and subject to the requirements of Article 5.6 (commencing with Section 848) of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code, to securitize costs related to the 2017 northern California wildfires upon a showing that doing so would benefit customers. The commission may adopt cost protection measures to minimize impacts on low-income customers.
(f) The Public Utilities Commission should conduct a prudency review of Pacific Gas and Electric Company’s actions related to the 2017 northern California wildfires. In the event the commission determines that any costs or expenses arising from the 2017 northern California wildfires should be disallowed, which may comprise only a portion of such costs or expenses, the commission should direct the utility to credit customers for that disallowed amount, but the commission should not amend, adjust, or modify any financing order the commission may have previously issued authorizing the securitization of costs as provided in Article 5.6 (commencing with Section 848) of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code.

SEC. 2.

 The heading of Article 5.6 (commencing with Section 848) of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code is amended to read:

Article  5.6. 2017 Northern California Wildfire Securitization

SEC. 3.

 Section 848 of the Public Utilities Code is amended to read:

848.
 For the purposes of this article, the following terms shall have the following meanings:
(a) “2017 northern California wildfire amounts” means all costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by Pacific Gas and Electric Company, excluding fines or penalties, for both of the following:
(1) Payments to third parties, including government entities, to resolve, by settlement or judgment, claims arising out of wildfires that occurred in northern California in 2017, including claims for property damage, personal injury, and response and suppression costs.
(2) Defense of claims described in subparagraph (A), including attorney’s and expert fees.
(b) “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 recovery 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.
(a) (c)  “Consumer” means any individual, governmental body, trust, business entity entity,  or nonprofit organization which 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 recovery corporation, or any other party.
(d) “Financing costs” means the costs to issue, service, repay, or refinance recovery bonds, whether incurred or paid upon issuance of the recovery bonds or over the life of the recovery 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 recovery 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 relating to the recovery bonds.
(4) Costs of retiring or funding an existing debt and equity security of a recovery corporation in connection with the issuance of recovery bonds to the extent the securities were issued for the purpose of financing recovery costs.
(5) Costs incurred by, on behalf of, or allocated to, a recovery corporation to obtain modifications of, or amendments to, an indenture, financing agreement, security agreement, or similar agreement or instrument relating to an existing secured or unsecured obligation of a recovery corporation or an affiliate of a recovery corporation, or any costs incurred by, or allocated to, a recovery corporation to obtain the consent, release, waiver, or approval from the holder of the obligation, that are necessary to be incurred to permit a recovery corporation to issue or cause the issuance of recovery bonds.
(6) Taxes, franchise fees, or license fees imposed on fixed recovery charges.
(7) Costs related to issuing and servicing recovery 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.
(8) Other costs as specifically authorized by a financing order.
(b) (e)  “Financing entity” means the recovery corporation or any subsidiary or affiliate of the recovery corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.
(c) (f)  “Financing order” means an order of the commission adopted in accordance with this article, which shall include, without limitation, a procedure to require the expeditious approval by the commission of periodic adjustments to fixed recovery amounts charges  and to any associated fixed recovery tax amounts included in that financing order to ensure recovery of all recovery costs and the costs associated with the proposed recovery, financing, or refinancing thereof, including the costs of servicing and retiring the recovery bonds contemplated by the financing order.
(d) (g)  “Fixed recovery amounts” charges”  means those nonbypassable rates and other charges, including, but not limited to, distribution, connection, disconnection, and termination rates and charges, that are authorized by the commission in a financing order to recover (1) recovery costs specified in the financing order, and (2) the costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds. both of the following: 
(1) Recovery costs specified in the financing order.
(2) The costs of recovering, financing, or refinancing those recovery costs through a plan approved by the commission in the financing order, including the costs of servicing and retiring recovery bonds.
(e) (h)  “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 of California income and franchise taxes associated with fixed recovery amounts charges  authorized by the commission in the financing order and that are not  a financing order, but are not approved as financing costs  financed from proceeds of recovery bonds.
(f) (i)  “Recovery bonds” means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture or other agreement of a financing entity, the proceeds of which are used, directly or indirectly, to recover, finance, or refinance recovery costs, and that are directly or indirectly secured by, or payable from, recovery property.
(g) (j)  “Recovery corporation” means Pacific Gas and Electric Company, the electrical corporation described in the commission’s Decision No. 03-12-035. Company. 
(k) “Recovery costs” means any of the following:
(1) The 2017 northern California wildfire amounts authorized by the commission in a financing order for recovery.
(2) Federal and State of California income and franchise taxes associated with recovery of the amounts pursuant to paragraph (1).
(3) Financing costs.
(h) (4)  “Recovery costs” means (1) the unamortized balance of the regulatory asset arising and existing pursuant to the commission’s Decision No. 03-12-035, (2) federal and State of California income and franchise taxes associated with recovery of the unamortized balance of that regulatory asset, (3) costs of issuing recovery bonds, and (4) professional  Professional  fees, consultant fees, redemption premiums, tender premiums and other costs incurred by the recovery corporation in using proceeds of recovery bonds to acquire outstanding securities of the recovery corporation. corporation, as authorized by the commission in a financing order. 
(i) (l)  (1) “Recovery property” means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the recovery corporation or its transferee:
(A) In and to the tariff  fixed recovery charges  established pursuant to a financing order, as adjusted from time to time  including all rights to obtain adjustments to the fixed recovery charges  in accordance with Section 848.1 and the financing order.
(B) To be paid the amount that is determined in a financing order to be the amount that the recovery corporation or its transferee is lawfully entitled to receive pursuant to the provisions of this article and the proceeds thereof, and in and to all revenues, collections, claims, payments, money, moneys,  or proceeds of or arising from the tariff or constituting  fixed recovery amounts charges  that are the subject of a financing order including those nonbypassable rates and other charges referred to in subdivision (d). order. 
(C) In and to all rights to obtain adjustments to the tariff relating to fixed recovery amounts pursuant to the terms of Section 848.1 and the financing order.
(2) “Recovery property” shall not include the a  right to be paid fixed recovery tax amounts.
(3) “Recovery 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 recovery corporation, the recovery corporation performing certain services.
(j) (m)  “Service territory” means the geographical area that the recovery corporation provided with electric distribution service as of December 19, 2003.
(n) “True-up adjustment” means an adjustment to the fixed recovery charges as they appear on customer bills that is necessary to correct for any overcollection or undercollection of the fixed recovery charges authorized by a financing order and to otherwise ensure the timely and complete payment and recovery of recovery costs over the authorized repayment term.

SEC. 4.

 Section 848.1 of the Public Utilities Code is amended to read:

848.1.
 (a) No later than 120 days after the effective date of this article, and from time to time thereafter, the recovery corporation shall  The recovery corporation may, upon its election,  apply to the commission for a determination that some or all of the recovery corporation’s recovery  its 2017 northern California wildfire amounts and other associated recovery  costs may be recovered through fixed recovery amounts, charges,  which would be  therefore constitute  recovery property under this article, and that any portion of the recovery corporation’s federal and State of California income and franchise taxes associated with those fixed recovery amounts charges  and not financed from proceeds of recovery bonds may  be recovered through fixed recovery tax amounts. The recovery corporation may request this determination by the commission in a separate proceeding or in an existing proceeding, or both. The recovery corporation shall in its application specify that consumers within its service territory would benefit from reduced rates on a present value basis through the issuance of recovery bonds. The commission shall designate fixed recovery amounts and any associated fixed recovery tax amounts as recoverable in one or more financing orders commission shall issue a financing order  if the commission determines, as part of its findings in connection with the financing order, that recovery of recovery costs through  the designation of the fixed recovery amounts charges  and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with fixed recovery amounts, charges,  would reduce the rates on a present value basis that consumers within the recovery corporation’s service territory would pay if the financing order were not adopted. Fixed recovery amounts as compared to the use of traditional utility financing mechanisms, which shall be calculated using the recovery corporation’s corporate debt and equity in the ratio approved by the commission at the time of the issuance of the financing order. If the commission makes that determination, the commission shall establish, as part of that financing order, a procedure for the recovery corporation to submit advice letters from time to time to request the issuance of additional financing orders designating fixed recovery charges and any associated fixed recovery tax amounts as recoverable. The recovery corporation may submit an advice letter with respect to recovery costs that a recovery corporation (1) has paid, (2) has an existing legal obligation to pay, or (3) would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 60 days of the filing of that advice letter, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the advice letter are recovery costs. Fixed recovery charges  and any associated fixed recovery tax amounts shall only  be imposed only  on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery amounts charges  and any associated fixed tax  recovery tax  amounts until the recovery bonds and associated financing costs  are paid in full by the financing entity. Once the recovery bonds have been paid in full, the payment by consumers of fixed recovery amounts charges  and fixed recovery tax amounts shall terminate. A recovery corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a customer’s nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a customer’s failure to pay any other charge payable to that recovery corporation. 
(b) The commission shall establish in a financing order  an effective mechanism that ensures recovery of recovery costs through nonbypassable  fixed recovery amounts charges  and any associated fixed recovery tax amounts from existing and future consumers in the service territory, and those consumers shall be required to pay those charges until the recovery bonds and all associated financing costs are paid in full by the financing entity, at which time those charges shall be terminated. Fixed recovery charges shall be irrevocable, notwithstanding the true-up adjustment pursuant to subdivision (i),  provided that the costs shall not be recoverable from any of the following:
(1) New load or incremental load of an existing consumer of the recovery corporation where the load is being met through a direct transaction and the transaction does not require the use of transmission or distribution facilities owned or controlled  by the recovery corporation.
(2) Customer Generation generation  departing load that is exempt from Department of Water Resources power charges pursuant to the commission’s Decision No. 03-04-030, as modified by Decision No. 03-04-041, and as clarified and affirmed by Decision No. 03-05-039, except that the load shall pay the costs as a component of and in proportion to any purchase of electricity delivered by the recovery corporation under standby or other service made following its departure.
(3) The Department of Water Resources, with respect to the pumping, generation, and transmission facilities and operations of the State Water Resources Development System, except to the extent that system facilities receive electric service from the recovery corporation on or after December 19, 2003, under a commission approved tariff.
(4) Retail electric load, continuously served by a local publicly owned electric utility from January 1, 2000, through the effective date of the act adding this section.
(5) Load that thereafter comes to take electric service from a city where all the following conditions are met:
(A) The new load is from locations that never received electric service from the recovery corporation.
(B) The city owns and operates the local publicly owned electric utility.
(C) The local publicly owned electric utility served more than 95 percent of the customers receiving electric service residing within the city limits prior to December 19, 2003.
(D) The city annexed the territory in which the load is located on or after December 19, 2003.
(E) Following annexation, the city provides all municipal services to the annexed territory that the city provides to other territory within the city limits, including electric service.
(F) The total load exempt from paying fixed recovery amounts charges  and associated fixed recovery tax amounts pursuant to subparagraphs (A) through to  (D), inclusive, does not exceed 50 megawatts, as determined by the commission, and any load above the 50 megawatt  50-megawatt  exemption amount shall be responsible for paying recovery amounts charges  and associated fixed recovery tax amounts, except as provided in subdivision (c).
(c) Except as provided in paragraphs (4) and (5) of subdivision (b), the commission shall determine the extent to which fixed recovery amounts charges  and any associated fixed recovery tax amounts are recoverable from new municipal load, consistent with the commission’s determination in the limited rehearing granted in Decision 03-08-076. The determination of the commission shall be made on the earlier of the date it adopts a financing order or December 31, 2004. load. 
(d) Except as provided in paragraphs (4) and (5) of subdivision (b) and in subdivision (c), the obligation to pay fixed recovery amounts charges  and any associated fixed recovery tax amounts cannot be avoided by the formation of a local publicly owned electric utility on or after December 19, 2003, or by annexation of any portion of the service territory of the recovery corporation by an existing local publicly owned electric utility.
(e) Recovery bonds authorized by the commission’s financing orders may be issued in one or more series on or before December 31, 2006. 2030. 
(f) The commission may issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of recovery costs. A financing order may be adopted only upon the application of the recovery corporation and shall become effective in accordance with its terms only after the recovery corporation files with the commission the recovery corporation’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 fixed recovery amounts, charges,  any associated fixed recovery tax amounts, and other charges.
(g) Notwithstanding Section 455.5 or 1708, or any other provision of  law, and  except as otherwise provided in Section 848.7 or in this subdivision  subdivision (i),  with respect to recovery property that has been made the basis for the issuance of recovery bonds and with respect to any associated fixed recovery tax amounts, the financing order, the fixed recovery amounts charges,  and any associated fixed recovery tax amounts shall be irrevocable, and the  irrevocable. The  commission shall not have authority  not,  either by rescinding, altering, or amending the financing order or otherwise, to  revalue or revise for ratemaking purposes, purposes  the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, determine that the fixed recovery amounts, charges,  any associated fixed recovery tax amounts or rates are unjust or unreasonable, or in any way reduce or impair the value of recovery property or of the right to receive any associated fixed recovery tax amounts either directly or indirectly by taking fixed recovery amounts charges  or any associated fixed recovery tax amounts into account when setting other rates for the recovery corporation or when setting charges for the Department of Water Resources; nor shall the  Resources. The  amount of revenues arising with respect thereto  shall not  be subject to reduction, impairment, postponement, or termination. Except as otherwise provided in this subdivision, the  The  State of California does hereby pledge and agree with the recovery corporation, owners of recovery property, financing entities,  and holders of recovery bonds that the state shall neither limit nor alter the fixed recovery amounts,  alter, except as otherwise provided with respect to the true-up adjustment of the fixed recovery charges pursuant to subdivision (i), the fixed recovery charges,  any associated fixed recovery tax amounts, recovery property, financing orders, or any rights thereunder  under a financing order  until the recovery bonds, together with the interest thereon,  on the recovery bonds and associated financing costs,  are fully paid and discharged, and any associated fixed recovery tax amounts have been satisfied or, in the alternative, have been refinanced through an additional issue of recovery bonds; bonds,  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 protection of the recovery corporation, owners, and holders.  corporation and of owners and holders of the recovery bonds.  The financing entity is authorized to include this pledge and undertaking for the state in these recovery bonds. Notwithstanding any other provision of this section, the commission shall approve adjustments to the fixed recovery amounts and any associated fixed recovery tax amounts as may be necessary to ensure timely recovery of all recovery costs that are the subject of the pertinent financing order, and the costs of capital associated with the recovery, financing, or refinancing thereof, including servicing and retiring the recovery bonds contemplated by the financing order.  When setting other rates for the recovery corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:
(1) Any collection of fixed recovery amounts charges  in excess of amounts actually required to pay recovery costs financed or refinanced by recovery bonds.
(2) Any collection of fixed recovery tax amounts in excess of amounts actually required to pay federal and State of California income and franchise taxes associated with fixed recovery amounts; charges,  provided that this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, either of the following:
(A) Treating the recovery bonds as debt of the recovery corporation or its affiliates for federal income tax purposes.
(B) Treating the transfer of the recovery property by the recovery corporation as a true sale for bankruptcy purposes.
(h) (1) Financing orders  Neither financing orders nor recovery bonds  issued under this article do not  shall  constitute a debt or liability of the state or of any political subdivision thereof, and do not nor shall they  constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. This subdivision shall in no way preclude bond guarantees or enhancements pursuant to this article. All recovery 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 California is pledged to the payment of the principal of, or interest on, this bond.”
(2) The issuance of recovery bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation therefor or to make any appropriation for their payment.
(i) The commission shall establish procedures for the expeditious processing of applications  an application  for financing orders, including  a financing order, which shall provide for  the approval or disapproval thereof  of the application  within 120 days of the recovery corporation making application therefor. The commission shall provide  application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall,  in any financing order  order, provide  for a procedure for the expeditious approval by the commission of periodic adjustments to the fixed recovery amounts and any associated fixed recovery tax amounts that are the subject of the pertinent financing order, as required by subdivision (g). The procedure shall require  periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The recovery corporation shall file an advice letter with  the commission to determine whether the adjustments are required on each anniversary of the issuance of the financing order, and at the additional intervals as may be provided for in the financing order, and for the adjustments, if required, to be approved within 90 days of each anniversary of the issuance of the financing order, or of each additional interval provided for in the financing order. implement any true-up adjustment. 
(j) Fixed recovery amounts charges  are recovery property when, and to the extent that, a financing order authorizing the fixed recovery amounts charges  has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes with purposes, and  all of the rights and privileges of this article  relating to that property accorded by this article shall continuously exist  for the period and to the extent provided in the financing order, but in any event until the recovery bonds are paid in full, including all principal, interest, premium, costs, and arrearages thereon. premiums, if any, and interest with respect to the recovery bonds, and all associated financing costs are paid in full. A financing order may provide that the creation of recovery property shall be simultaneous with the sale of the recovery property to a transferee or assignee as provided in the application of the pledge of the recovery property to secure the recovery bonds. 
(k) Notwithstanding anything in this article:
(1) The commission may not order or otherwise require, directly or indirectly, a recovery corporation to use recovery bonds to finance recovery costs.
(2) The commission may not refuse to allow the recovery corporation to recover recovery costs solely because a recovery corporation elected or may elect to finance those costs through a financing mechanism other than the issuance of recovery bonds.
(3) If a recovery corporation elects not to finance recovery costs through the issuance of recovery bonds as authorized by a financing order, recovery costs shall be recovered as authorized by the commission previously or in subsequent proceedings.
(l) The commission may set a discount for collection of recovery charges from low-income customers that is no less than the existing California Alternate Rates for Energy program discount, if it determines that the discount will have no significant impact on the ability of the financing entity to finance recovery costs. The commission may also allow the adjustment of the amount of the fixed recovery charges, as necessary, to cover any costs associated with implementation of the discount.
(k) (m)  This article and any financing order made pursuant to this article do not amend, reduce, modify, or otherwise affect the right of the Department of Water Resources to recover its revenue requirements and to receive the charges that it is to recover and receive pursuant to Division 27 (commencing with Section 80000) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to that division.

SEC. 5.

 Section 848.2 of the Public Utilities Code is amended to read:

848.2.
 (a) The financing entity may issue recovery bonds upon approval by the commission in the pertinent financing orders. Recovery bonds shall be nonrecourse to the credit or any assets of the recovery corporation, other than the recovery property as specified in the pertinent financing order.
(b) The recovery corporation may sell and assign all or portions of its interest in recovery property to one or more financing entities that make that recovery property the basis for issuance of recovery bonds, to the extent approved in the a  financing order. The recovery corporation or financing entity may pledge recovery property as collateral, directly or indirectly, for recovery bonds to the extent approved in the pertinent financing orders providing for a security interest in the recovery property, in the manner set forth in Section 848.3. In addition, recovery property may be sold or assigned by either of the following:  (1) the financing entity or a trustee for the holders of recovery bonds or the holders of an ancillary agreement  in connection with the exercise of remedies upon a default, or (2) any person acquiring the recovery property after a sale or assignment pursuant to this subdivision. article. 
(c) To the extent that any interest in recovery property is so sold or  sold,  assigned, or is so  pledged as collateral,  collateral pursuant to subdivision (b),  the commission shall authorize the recovery corporation to contract with the financing entity that it will continue to operate its system to provide service to consumers within its service territory, will collect amounts in respect of the fixed recovery amounts charges  for the benefit and account of the financing entity, and will account for and remit these amounts to or for the account of the financing entity. Contracting with the financing entity 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 electric service are provided to a consumer by any person or entity other than the recovery corporation in whose service territory the consumer is located, except as provided in subdivision (b) of Section 848.1, that person or entity shall collect the fixed recovery charges and any associated fixed recovery tax amounts from the consumer for the benefit and account of the recovery corporation or financing entity with the associated revenues remitted solely for the benefit and repayment of the recovery bonds and associated financing costs as a condition to the provision of electric service to that consumer. Each financing order shall impose commercially reasonable terms, consistent with the purposes and objectives of this article, on any person or entity responsible for billing, collection, and other related services, including, without limitation, collection of the fixed recovery charges and any associated fixed recovery tax amounts, that are the subject of the financing order. 
(d) Recovery property that is specified in a financing order shall constitute an existing, present property right, notwithstanding the fact that the imposition and collection of fixed recovery charges depend on the recovery corporation continuing to provide electricity service or continuing to perform its servicing functions relating to the collection of fixed recovery charges or on the level of future electricity consumption. Recovery property shall exist whether or not the fixed recovery charges have been billed, have accrued, or have been collected and notwithstanding the fact that the value for a security interest in the recovery property, or amount of the recovery property, is dependent on the future provision of service to consumers. All recovery property specified in a financing order shall continue to exist until the recovery bonds issued pursuant to a financing order and all associated financing costs are paid in full.
(e) Recovery property, fixed recovery charges, and the interests of an assignee, bondholder or financing entity, or any pledgee in recovery property and fixed recovery charges are not subject to setoff, counterclaim, surcharge, recoupment, or defense by the recovery corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the recovery corporation, any affiliate of the recovery corporation, or any other entity.
(d) (f)  Notwithstanding Section 1708 or any other provision of  law, any requirement under this article or a financing order that the commission take 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. The approval by the commission in a financing order of the issuance by the recovery corporation or a financing entity of recovery bonds shall include the approvals, if any, as may be required by Article 5 (commencing with Section 816) and Section 701.5. Nothing in Section 701.5 shall be construed to prohibit the issuance of recovery bonds upon the terms and conditions as may be approved by the commission in a financing order. Section 851 is not applicable to the transfer or pledge of recovery property, the issuance of recovery bonds, or related transactions approved in a financing order.

SEC. 6.

 Section 848.3 of the Public Utilities Code is amended to read:

848.3.
 (a) A security interest in recovery property is valid, is enforceable against the pledgor and third parties, is  subject to the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, and attaches when all of the following have taken place:
(1) The commission has issued the a  financing order authorizing the fixed recovery amounts charges  included in the recovery property.
(2) Value has been given by the pledgees of the recovery property.
(3) The pledgor has signed a security agreement covering the recovery property.
(b) A valid and enforceable security interest in recovery property is perfected when it has attached and when a financing statement has been filed in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the pledgor of the recovery property as “debtor” and identifying the recovery property. Any description of the recovery property shall be sufficient if it refers to the financing order creating the recovery property. A copy of the financing statement shall be filed with the commission by the recovery corporation that is the pledgor or transferor of the recovery property, and the commission may require the recovery corporation to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings shall not affect the perfection of the security interest.
(c) A perfected security interest in recovery property is a continuously perfected security interest in all recovery property  revenues and proceeds arising with respect thereto,  proceeds,  whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property  revenues and proceeds arising with respect thereto  have accrued.
(d) Subject to the terms of the security agreement covering the recovery property and the rights of any third parties holding security interests in the recovery property perfected in the manner described in this section, the validity and relative priority of a security interest created under this section is not defeated or adversely affected by the commingling of revenues arising with respect to the  recovery property revenues  with other funds of the recovery corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that recovery corporation perfected under Division 9 (commencing with Section 9101) of the Commercial Code into which the revenues are deposited. Subject to the terms of the security agreement, upon compliance with the requirements of paragraph (1) of subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the recovery property shall have a perfected security interest in all cash and deposit accounts of the recovery corporation in which revenues arising with respect to the  recovery property revenues  have been commingled with other funds, but the perfected security interest shall be limited to an amount not greater than the amount of the revenues with respect to the  recovery property revenues  received by the recovery corporation within 12 months before (1) any default under the security agreement or (2) the institution of insolvency proceedings by or against the recovery corporation, less payments from the revenues to the pledgees during that 12-month period.
(e) If an event of  a  default occurs under the security agreement covering the recovery property, the pledgees of the recovery property, subject to the terms of the security agreement, shall have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce their security interest in the recovery property, subject to the rights of any third parties holding prior security interests in the recovery property perfected in the manner provided in this section. In addition, the commission may require in the financing order creating the recovery property that, in the event of default by the recovery corporation in payment of revenues arising with respect to the recovery property,  recovery property revenues,  the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 848.4, of the recovery 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 revenues arising with respect to the recovery property.  recovery property revenues.  Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor.  debtor, pledgor, or transferor of the recovery property.  Any surplus in excess of amounts necessary to pay principal, premium, premiums,  if any, interest, costs, and arrearages on the recovery bonds, and other  associated financing  costs arising under the security agreement, shall be remitted to the debtor. debtor or to the pledgor or transferor. 
(f) Section 5451 of the Government Code shall not apply to any pledge of recovery property by a financing entity.  Sections 9204 and 9205 of the Commercial Code apply to a pledge of recovery property by the recovery corporation, an affiliate of the recovery corporation, or a financing entity.
(g) This section sets forth the terms by which a consensual security interest can shall  be created and perfected in the recovery property. Unless otherwise ordered by the commission with respect to any series of recovery bonds on or prior to the issuance of the series, there shall exist a statutory lien as provided in this subdivision. Upon the effective date of the financing order, there shall exist a first priority lien on all recovery property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this section automatically without any action on the part of the recovery corporation, any affiliate thereof, the financing entity, or any other person. This lien shall secure all obligations, then existing or subsequently arising, to the holders of the recovery bonds issued pursuant to the financing order, the trustee or representative for the holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall, upon the occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Division 9 (commencing with Section 9101) of the Commercial Code, and are entitled to foreclose or otherwise enforce this statutory lien in the recovery property. This lien attaches to the recovery property regardless of who owns, or is subsequently determined to own, the recovery property, including the recovery corporation, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the recovery property and all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but is not required to, file a financing statement in accordance with subdivision (b). Financing statements so filed may be “protective filings” and are not evidence of the ownership of the recovery property.
A perfected statutory lien in recovery property is a continuously perfected lien in all recovery property  revenues and proceeds arising with respect thereto,  proceeds,  whether or not the revenues or proceeds have accrued. Conflicting liens shall rank according to priority in time of perfection. Recovery property shall constitute property for all purposes, including for contracts securing recovery bonds, whether or not the recovery property  revenues and proceeds arising with respect thereto  have accrued.
In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the recovery corporation in the payment of revenues arising with respect to recovery property,  recovery property revenues,  the commission and any successor thereto, upon the application by the beneficiaries of the statutory lien, and without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of revenues arising with respect to the recovery property.  recovery property revenues.  Any order shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor. Any surplus in excess of amounts necessary to pay principal, premium, premiums,  if any, interest, costs, and arrearages on the recovery bonds, and other costs arising in connection with the documents governing the recovery bonds, shall be remitted to the debtor.

SEC. 7.

 Section 848.4 of the Public Utilities Code is amended to read:

848.4.
 (a) A transfer of recovery property by the recovery corporation to an affiliate or to a financing entity, or by an affiliate of the recovery corporation or a financing entity to another financing entity, which the parties in the governing documentation 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 interest, as  in a true sale), sale,  and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes. The grant to holders of recovery bonds of a preferred right to revenues of the recovery corporation, or the provision by the company of other credit enhancement with respect to recovery bonds, shall not impair or negate the characterization of any transfer as a true sale, other than for federal and state income and franchise tax purposes. 
(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 purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:
(1) Commingling of fixed recovery charge 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 recovery property, whether direct or indirect, subordinate or otherwise.
(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of fixed recovery charges.
(3) Any recourse that the purchaser may have against the seller.
(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.
(5) The obligation of the seller to collect fixed recovery charges on behalf of an assignee.
(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.
(7) Any true-up adjustment of the fixed recovery charges as provided in the financing order.
(b) (c)  A transfer of recovery property shall be deemed perfected as  against third persons when both of the following have taken place: occur: 
(1) The commission has issued  issues  the financing order authorizing the fixed recovery amounts charges  included in the recovery property.
(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.
(c) (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 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the recovery property as debtor and identifying the recovery property has priority. Any description of the recovery property is  shall be  sufficient if it refers to the financing order creating the recovery 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 it may establish, but these filings shall not affect the perfection of the transfer.

SEC. 8.

 Section 848.6 of the Public Utilities Code is amended to read:

848.6.
 The authority of the commission to issue financing orders pursuant to Section 848.1 shall expire on December 31, 2006. 2030.  The expiration of the authority shall have no effect upon financing orders adopted by the commission pursuant to this article or any recovery property arising therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests, and obligations of the recovery corporation or a financing entity or holders of recovery bonds pursuant to the financing order, or the authority of the commission to monitor, supervise, or take further action with respect to the order in accordance with the terms of this article and of the order.

SEC. 9.

 Section 848.7 of the Public Utilities Code is repealed.

848.7.
 Notwithstanding subdivision (g) of Section 848.1, the commission shall credit ratepayers, in a manner to be determined by the commission, with the net after tax amount of any payments, offsets, or other credits the recovery corporation actually receives from generators of electricity or other energy suppliers that would have reduced the unamortized balance of the recovery corporation’s regulatory asset created under the commission’s Decision No. 03-12-035 but for the prior issuance of recovery bonds.

SEC. 10.

 Section 848.7 is added to the Public Utilities Code, to read:

848.7.
 (a) Notwithstanding subdivision (g) of Section 848.1, if, subsequent to the issuance of a financing order, a recovery corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the recovery corporation for costs associated with 2017 northern California wildfire amounts included in the recovery costs addressed in that financing order, the recovery corporation shall credit customers, in a manner to be determined by the commission, with the net after tax amounts of those reimbursements, but the commission may not adjust, amend, or modify the 2017 northern California wildfire amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.
(b) In the event the commission determines, in any proceeding, that any 2017 northern California wildfire amounts are to be disallowed as not just and reasonable, which may comprise only a portion of the 2017 northern California wildfire amounts, the commission shall direct the recovery corporation to credit customers for that disallowed amount in a manner determined by the commission, but the commission shall not adjust, amend, or modify the 2017 northern California wildfire amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds. Any such disallowance shall have no effect on any past or future determination of what amounts constitute 2017 northern California wildfire amounts or recovery costs under this article.
(c) Nothing in this section shall be construed to permit setoff, counterclaim, surcharge, recoupment, or defense by the recovery corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the recovery corporation, any affiliate of the recovery corporation, or any other entity, against the recovery property, the fixed recovery charges, or the interests of an assignee, bondholder, or financing entity, or any pledgee in recovery property or fixed recovery charges.
SEC. 11.
 The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances applicable only to the Pacific Gas and Electric Company.
SEC. 12.
 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.