text:
(a) A security interest in water supply property is valid, is enforceable against the pledgor and third parties, is subject to the rights of any third party holding a security interest in the water supply property perfected in the manner described in this section, and attaches when all of the following occur:

(1) The commission has issued the financing order authorizing the water supply charges included in the water supply property.

(2) Value has been given by the pledgees of the water supply property.

(3) The pledgor has signed a security agreement that includes an indenture or financing agreement relating to the issuance of the water rater relief bonds covering the water supply property.

(b) A valid and enforceable security interest in water supply 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 water supply property as “debtor” and identifying the water supply property. Any description of the water supply property shall be sufficient if it refers to the financing order creating the water supply property. A copy of the financing statement shall be filed with the commission by the qualifying water utility that is the pledgor or transferor of the water supply property, and the commission may require the qualifying water utility to make other filings with respect to the security interest in accordance with procedures it may establish, provided that the filings do not affect the perfection of the security interest.

(c) A perfected security interest in water supply property is a continuously perfected security interest in all revenues and proceeds arising with respect to the water supply property, whether or not the revenues or proceeds have accrued. Conflicting security interests shall rank according to priority in time of perfection. Water supply property shall constitute property for all purposes, including for contracts securing water rate relief bonds, whether or not the revenues and proceeds arising with respect to the water supply property have accrued.

(d) Subject to the terms of the security agreement covering the water supply property and the rights of any third party holding a security interest in the water supply 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 water supply property with other funds of the qualifying water utility that is the pledgor or transferor of the water supply property, or by any security interest in a deposit account of that qualifying water utility 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 subdivision (b) of Section 9312 of the Commercial Code, the pledgees of the water supply property shall have a perfected security interest in all cash and deposit accounts of the qualifying water utility in which revenues arising with respect to the water supply property 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 water supply property received by the qualifying water utility within 12 months before either of the following:

(1) A default under the security agreement.

(2) The institution of insolvency proceedings by or against the qualifying water utility, less payments from the revenues to the pledgees during that 12-month period.

(e) If a default occurs under the security agreement covering the water supply property, the pledgees of the water supply 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 shall be entitled to foreclose or otherwise enforce their security interest in the water supply property, subject to the rights of any third party holding a prior security interest in the water supply property perfected in the manner provided in this section. In addition, the commission may require, in the financing order creating the water supply property, that in the event of default by the qualifying water utility in payment of revenues arising with respect to the water supply property, the commission and any successor to the commission, upon the application by the pledgees or transferees, including transferees under Section 849.5, of the water supply 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 water supply property. Any order shall remain in full force and effect notwithstanding bankruptcy, reorganization, or other insolvency proceedings with respect to the debtor, pledgor, or transferor of the water supply property. Any surplus in excess of amounts necessary to pay principal, premium, if any, interest on the water rate relief bonds, and other financing costs arising under the security agreement, shall be remitted to the debtor or to the pledgor or transferor.

(f) Sections 9204 and 9205 of the Commercial Code shall apply to a pledge of water supply property by a qualifying water utility, an affiliate of a qualifying water utility, or a financing entity, other than a public financing entity.

(g) (1) This section sets forth the terms by which a consensual security interest shall be created and perfected in the water supply property. Unless otherwise ordered by the commission with respect to any series of water rate relief bonds on or before the issuance of the series, there shall exist a statutory lien as provided in this subdivision.

(2) Upon the effective date of the financing order, there shall exist a first priority lien on all water supply property then existing or thereafter arising pursuant to the terms of the financing order. This lien shall automatically arise pursuant to this section without any action on the part of the qualifying water utility, any affiliate of the qualifying water utility, the issuing entity, or any other person. This lien shall secure all obligations, then existing and subsequently arising, to the holders of the water rate relief 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 occurrence of any defaults specified in the financing order, have all rights and remedies of a secured party upon default under Chapter 1 (commencing with Section 9101) of Division 9 of the Commercial Code, and shall be entitled to foreclose or otherwise enforce this statutory lien in the water supply property. This lien shall attach to the water supply property regardless of who shall own, or shall subsequently be determined to own, the water supply property, including any qualifying water utility, affiliate of the qualifying water utility, financing entity, or any other person. This lien shall be valid, perfected, and enforceable against the owner of the water supply property and all third parties upon the effectiveness of the financing order without any further public notice, provided, however, that any person may, but shall not be required to, file a financing statement in accordance with subdivision (b). These financing statements may be protective filings and shall not be evidence of the ownership of the water supply property.

(h) Notwithstanding any other provision of law, Section 5451 of the Government Code shall apply to any pledge by the public financing entity of water supply property or other security for any water rate relief bonds issued by a public financing entity.


kind: section

code: PUC

text:
(a) A sale, assignment, or transfer of water supply property by a qualifying water utility to an affiliate or to a financing entity, or by an affiliate of a qualifying water utility 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 in a true sale, and not as a pledge or other financing order of the water supply property, other than for federal and state income and franchise tax purposes.

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

(1) Commingling of water supply 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 water supply 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 water supply charge revenues.

(3) Any recourse that the purchaser may have against the seller.

(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.

(5) The obligation of the seller to collect water supply charge revenues 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 water supply charges as provided in the financing order.

(c) A sale, assignment, or transfer of water supply property shall be deemed perfected against third persons when both of the following occur:

(1) The commission issues the financing order authorizing the water supply charges included in the water supply property.

(2) An assignment of the water supply property in writing has been executed and delivered to the transferee.

(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the water supply property as debtor and identifying the water supply property has priority. Any description of the water supply property shall be sufficient if it refers to the financing order creating the water supply 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.

history: (History: Added by Stats. 2014, Ch. 482, Sec. 6. (SB 936) Effective January 1, 2015.)

division: 1. REGULATION OF PUBLIC UTILITIES

part: 1. PUBLIC UTILITIES ACT

chapter: 4. Regulation of Public Utilities

path: 1. REGULATION OF PUBLIC UTILITIES > 1. PUBLIC UTILITIES ACT > 4. Regulation of Public Utilities > 5.7. Monterey Peninsula Water Supply Securitization Act


text: A successor to the qualified water utility, whether pursuant to bankruptcy, reorganization, or other insolvency proceeding, or pursuant to merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the qualifying water utility pursuant to this article in the same manner and to the same extent as the qualified water utility, including, but not limited to, collecting and paying to the holders of water rate relief bonds or any financing entities or their pledgees revenues arising with respect to the water supply property sold to the applicable financing entity or pledged to secure water rate relief bonds.

article: 5.7. Monterey Peninsula Water Supply Securitization Act


citation: PUC § 850

text:
(a) This article applies in any of the following circumstances:

(1) If an electrical corporation applies to the commission for recovery of costs and expenses related to a catastrophic wildfire and the commission finds some or all of the costs and expenses to be reasonable pursuant to Section 451.1, or for the amount of costs and expenses determined pursuant to subdivision (c) of Section 451.2, then the electrical corporation may file an application requesting the commission to issue a financing order to authorize these costs and expenses to be recovered through fixed recovery charges pursuant to this article.

(2) If an electrical corporation submits an application for recovery of costs and expenses related to catastrophic wildfires, including fire risk mitigation capital expenditures identified in subdivision (e) of Section 8386.3 or subdivision (a) of Section 8386.10, in a proceeding to recover costs and expenses in rates and the commission finds that some or all of the costs and expenses identified in the electrical corporation’s application are just and reasonable pursuant to Section 451, the electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of those just and reasonable costs and expenses by means of a financing order, with those costs and expenses being recovered through a fixed charge pursuant to this article. This paragraph does not apply for costs and expenses incurred by the electrical corporation after December 31, 2035.

(3) Notwithstanding paragraphs (1) and (2), for a catastrophic wildfire that was ignited between January 1, 2025, and the effective date of this paragraph, if a large electrical corporation has settled or finally adjudicated claims and the Wildfire Fund assets are exhausted, the electrical corporation, before filing an application for a just and reasonable determination pursuant to Section 451 or 451.1, may file an application requesting the commission to issue a financing order to authorize the costs and expenses of those settled and finally adjudicated claims that cannot be paid by the Wildfire Fund to be recovered through fixed recovery charges pursuant to this article. For purposes of this paragraph, “large electrical corporation” and “Wildfire Fund assets” have the same meanings as set forth in Section 3280.

(4) (A) An electrical corporation may file an application requesting the commission to issue a financing order to authorize the recovery of verified incremental undercollection amounts for calendar year 2020 through fixed recovery charges pursuant to this article, if an electrical corporation’s annual true-up advice letter is accepted and either or both of the following incremental undercollection amounts are verified for calendar year 2020:

(i) An incremental undercollection amount equal to the difference between the forecasted amount of billed revenues for that year, based on the authorized sales forecast, and the revenues actually billed by an electrical corporation with respect to all revenue balancing accounts, if the incremental amount as a percent of the forecasted amount of billed revenues for that year is at least 5 percent.

(ii) An incremental undercollection amount equal to the residential and small business customer bad debt expense recorded for that year that exceeds the bad debt expense for that year that was adopted by the commission in the general rate case, if the incremental undercollection amount is otherwise eligible for recovery in rates.

(B) The incremental undercollection amounts subject to a commission-approved financing order shall be prohibited from being recovered through any other cost recovery application, mechanism, or request by the electrical corporation.

(C) The commission shall ensure any costs included in incremental undercollections described in this paragraph and subject to a financing order are just and reasonable consistent with the requirements of subdivision (a) of Section 850.1.

(D) In resolving a request for the issuance of a financing order, the commission may assign cost recovery to each customer class based on their contribution to the incremental undercollection described in this paragraph.

(b) For purposes of this article, the following terms shall have the following meanings:

(1) “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.

(2) “Catastrophic wildfire amounts” means the portion of costs and expenses the commission finds to be just and reasonable pursuant to Section 451.1 or the amount determined pursuant to subdivision (c) of Section 451.2.

(3) “Consumer” means any individual, governmental body, trust, business entity, or nonprofit organization that consumes electricity that has been transmitted or distributed by means of electrical transmission or distribution facilities, whether those electrical transmission or distribution facilities are owned by the consumer, the electrical corporation, or any other party.

(4) “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:

(A) Principal, interest, and redemption premiums that are payable on recovery bonds.

(B) A payment required under an ancillary agreement.

(C) 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.

(D) Taxes, franchise fees, or license fees imposed on fixed recovery charges.

(E) 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.

(F) Other costs as specifically authorized by a financing order.

(5) “Financing entity” means the electrical corporation or any subsidiary or affiliate of the electrical corporation that is authorized by the commission to issue recovery bonds or acquire recovery property, or both.

(6) “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 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.

(7) “Fixed recovery 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 both of the following:

(A) Recovery costs specified in the financing order.

(B) 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.

(8) “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 charges authorized by the commission in a financing order, but are not approved as financing costs financed from proceeds of recovery bonds.

(9) “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.

(10) “Recovery costs” means any of the following:

(A) The catastrophic wildfire amounts or costs pursuant to paragraph (2) of subdivision (a) authorized by the commission in a financing order for recovery.

(B) The incremental undercollection amounts that the commission authorizes for recovery in a financing order pursuant to paragraph (3) of subdivision (a).

(C) Federal and State of California income and franchise taxes associated with recovery of the amounts pursuant to subparagraph (A) or (B).

(D) Financing costs.

(E) Professional fees, consultant fees, redemption premiums, tender premiums, and other costs incurred by the electrical corporation in using proceeds of recovery bonds to acquire outstanding securities of the electrical corporation, as authorized by the commission in a financing order.

(11) (A) “Recovery property” means the property right created pursuant to this article, including, without limitation, the right, title, and interest of the electrical corporation or its transferee:

(i) In and to the fixed recovery charges established pursuant to a financing order, including all rights to obtain adjustments to the fixed recovery charges in accordance with Section 850.1 and the financing order.

(ii) To be paid the amount that is determined in a financing order to be the amount that the electrical 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, moneys, or proceeds of or arising from the fixed recovery charges that are the subject of a financing order.

(B) “Recovery property” shall not include a right to be paid fixed recovery tax amounts.

(C) “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 electrical corporation, the electrical corporation performing certain services.

(12) (A) “Revenue balancing account” means a balancing account reflecting the balance between the electrical corporation’s authorized revenue requirements relating to the volumetric sale of electricity and billed revenues associated with those sales. A revenue balancing account includes accounts reflecting the balance between the electrical corporation’s authorized distribution base revenue requirements and recorded billed revenues from authorized distribution rates, and accounts reflecting the difference between the amount of the discount provided to consumers enrolled in the California Alternative Rates for Energy (CARE) program and the CARE surcharge charged to non-CARE consumers.

(B) “Revenue balancing account” shall not include amounts reflecting the balance between costs and expenses relating to fuel and purchased electricity by the electrical corporation.

(13) “Service territory” means the geographical area that the electrical corporation provides with electrical distribution service.

(14) “True-up adjustment” means a formulaic 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.

history: (History: Amended by Stats. 2025, Ch. 119, Sec. 33. (SB 254) Effective September 19, 2025.)

path: 1. REGULATION OF PUBLIC UTILITIES > 1. PUBLIC UTILITIES ACT > 4. Regulation of Public Utilities > 5.8. Catastrophic Wildfire and Ratepayer Protection Financing


text:
(a) If an electrical corporation files for recovery of recovery costs and the commission finds some or all of those costs and expenses to be just and reasonable pursuant to Section 451 or 451.1, as applicable, or the commission allocates to the ratepayers some or all of those costs and expenses pursuant to subdivision (c) of Section 451.2, the commission may issue a financing order to allow recovery through fixed recovery charges, which would therefore constitute recovery property under this article, and order that any portion of the electrical corporation’s federal and State of California income and franchise taxes associated with those fixed recovery charges and not financed from proceeds of recovery bonds may be recovered through fixed recovery tax amounts.

(1) (A) (i) Except as provided in clause (ii), following application by an electrical corporation, the commission shall issue a financing order if the commission determines that both of the following conditions are satisfied:

(I) The recovery cost to be reimbursed from the recovery bonds have been found to be just and reasonable pursuant to Section 451 or 451.1, as applicable, or are allocated to the ratepayers pursuant to subdivision (c) of Section 451.2.

(II) The issuance of the recovery bonds, including all material terms and conditions of the recovery bonds, including, without limitation, interest rates, rating, amortization redemption, and maturity, and the imposition and collection of fixed recovery charges as set forth in an application satisfy all of the following conditions, as applicable:

(ia) They are just and reasonable.

(ib) They are consistent with the public interest.

(ic) The recovery of recovery costs through the designation of the fixed recovery charges and any associated fixed recovery tax amounts, and the issuance of recovery bonds in connection with the fixed recovery charges, would reduce, to the maximum extent possible, the rates on a present value basis that consumers within the electrical corporation’s service territory would pay as compared to the use of traditional utility financing mechanisms, which shall be calculated using the electrical corporation’s corporate debt and equity in the ratio approved by the commission at the time of the financing order.

(ii) (I) Notwithstanding clause (i), following application by an electrical corporation pursuant to paragraph (3) of subdivision (a) of Section 850, the commission shall issue a financing order if the commission makes a determination that the conditions set forth in subclause (II) of clause (i) are satisfied. The issuance of recovery bonds pursuant to this clause is deemed to be consistent with the public interest. However, the commission may authorize recovery through fixed recovery charges of less than the full amount sought in the application if the commission determines that the recovery of the full amount of costs and expenses through a financing order pursuant to this subclause would not be cost effective for ratepayers.

(II) If the commission subsequently determines any costs or expenses included in the recovery bonds authorized by a financing order issued pursuant to subclause (i) are not just and reasonable pursuant to Section 451 or 451.1, the commission shall order the electrical corporation to credit ratepayers the disallowed costs and expenses plus any costs and expenses resulting from the inclusion of the disallowed costs and expenses in the recovery bonds with the credit provided over a period that matches the remaining duration of the bonds.

(B) The electrical corporation may request the determination specified in subparagraph (A) by the commission in a separate proceeding or in an existing proceeding or both. If the commission makes the determination specified in subparagraph (A), the commission shall establish, as part of the financing order, a procedure for the electrical corporation to submit applications 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 electrical corporation may submit an application with respect to recovery costs that an electrical corporation (i) has paid, (ii) has an existing legal obligation to pay, or (iii) would be obligated to pay pursuant to an executed settlement agreement. The commission shall, within 180 days of the filing of that application, issue a financing order, which may take the form of a resolution, if the commission determines that the amounts identified in the application are recovery costs.

(2) Fixed recovery charges and any associated fixed recovery tax amounts shall be imposed only on existing and future consumers in the service territory. Consumers within the service territory shall continue to pay fixed recovery charges and any associated fixed recovery tax amounts until the recovery bonds and associated financing costs are paid in full by the financing entity.

(3) An electrical corporation may exercise the same rights and remedies under its tariff and applicable law and regulation based upon a consumer’s nonpayment of fixed recovery charges and any associated fixed recovery tax as it could for a consumer’s failure to pay any other charge payable to that electrical corporation.

(b) The commission may establish in a financing order an effective mechanism that ensures recovery of recovery costs through nonbypassable fixed recovery 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 (g).

(c) Recovery bonds authorized by the commission’s financing orders may be issued in one or more series on or before December 31, 2035.

(d) The commission shall 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 electrical corporation and shall become effective in accordance with its terms only after the electrical corporation files with the commission the electrical 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 charges, any associated fixed recovery tax amounts, and other charges.

(e) Notwithstanding Section 455.5 or 1708, or any other law, and except as otherwise provided in subdivision (g), 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 charges, and any associated fixed recovery tax amounts shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the recovery costs or the costs of recovering, financing, or refinancing the recovery costs, 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 charges or any associated fixed recovery tax amounts into account when setting other rates for the electrical corporation or when setting charges for the Department of Water Resources. The amount of revenues shall not be subject to reduction, impairment, postponement, or termination. The State of California does hereby pledge and agree with the electrical corporation, owners of recovery property, financing entities, and holders of recovery bonds that the state shall neither limit nor 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 under a financing order until the recovery bonds, together with the interest 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, 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 electrical 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. When setting other rates for the electrical corporation, nothing in this subdivision shall prevent the commission from taking into account either of the following:

(1) Any collection of fixed recovery 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 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 electrical corporation or its affiliates for federal income tax purposes.

(B) Treating the transfer of the recovery property by the electrical corporation as a true sale for bankruptcy purposes.

(f) (1) Neither financing orders nor recovery bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision thereof, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but 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. 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.

(g) The commission shall establish procedures for the expeditious processing of an application for a financing order, which shall provide for the approval or disapproval of the application within 120 days of the application. Any fixed recovery charge authorized by a financing order shall appear on consumer bills. The commission shall, in any financing order, provide for a procedure for periodic true-up adjustments to fixed recovery charges, which shall be made at least annually and may be made more frequently. The electrical corporation shall file an application with the commission to implement any true-up adjustment.

(h) Fixed recovery charges are recovery property when, and to the extent that, a financing order authorizing the fixed recovery charges has become effective in accordance with this article, and the recovery property shall thereafter continuously exist as property for all purposes, and all of the rights and privileges 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, 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.

(i) Recovery costs shall not be imposed upon customers participating in the California Alternative Rates for Energy or Family Electric Rate Assistance programs discount pursuant to Section 739.1.

(j) Any successor to a financing entity shall be bound by the requirements of this article and shall perform and satisfy all obligations of, and have the same rights under a financing order as and to the same extent as, the financing entity, including the obligation to collect and pay energy transition revenues to persons entitled to receive the revenues.

(k) 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) and Division 28 (commencing with Section 80500) of the Water Code, or pursuant to any agreement entered into by the commission and the Department of Water Resources pursuant to the applicable division.

history: (History: Amended by Stats. 2025, Ch. 119, Sec. 34. (SB 254) Effective September 19, 2025.)

article: 5.8. Catastrophic Wildfire and Ratepayer Protection Financing


text:
(a) The financing entity may issue recovery bonds upon approval by the commission in a financing order. Recovery bonds shall be nonrecourse to the credit or any assets of the electrical corporation, other than the recovery property as specified in that financing order.

(b) The electrical 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 a financing order. The electrical 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 850.3. 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 article.

(c) To the extent that any interest in recovery property is sold, assigned, or is pledged as collateral pursuant to subdivision (b), the commission shall authorize the electrical 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 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 electrical corporation in whose service territory the consumer is located, 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 electrical 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 terms and conditions, 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 electrical 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 electrical corporation or any other person or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical corporation, or any other entity.

(f) Notwithstanding Section 1708 or any other 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 electrical 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.

history: (History: Added by Stats. 2018, Ch. 626, Sec. 32. (SB 901) Effective January 1, 2019.)


text:
(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 a financing order authorizing the fixed recovery 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 electrical corporation that is the pledgor or transferor of the recovery property, and the commission may require the electrical 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, 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 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 with other funds of the electrical corporation that is the pledgor or transferor of the recovery property, or by any security interest in a deposit account of that electrical 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 electrical corporation in which 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 recovery property revenues received by the electrical corporation within 12 months before (1) any default under the security agreement or (2) the institution of insolvency proceedings by or against the electrical corporation, less payments from the revenues to the pledgees during that 12-month period.

(e) If 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 electrical corporation in payment of recovery property revenues, the commission and any successor thereto, upon the application by the pledgees or transferees, including transferees under Section 850.4, 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 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, pledgor, or transferor of the recovery property. Any surplus in excess of amounts necessary to pay principal, premiums, if any, interest, costs, and arrearages on the recovery bonds, and associated financing costs arising under the security agreement, shall be remitted to the 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 electrical corporation, an affiliate of the electrical corporation, or a financing entity.

(g) This section sets forth the terms by which a consensual security interest 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 electrical 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 electrical 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, 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 have accrued.

In addition, the commission may require, in the financing order creating the recovery property, that, in the event of default by the electrical corporation in the payment of 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 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, 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.


text:
(a) A transfer of recovery property by the electrical corporation to an affiliate or to a financing entity, or by an affiliate of the electrical 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 in a true sale, and not as a pledge or other financing, of the recovery property, other than for federal and state income and franchise tax purposes.

(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the 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.

(c) A transfer of recovery property shall be deemed perfected against third persons when both of the following occur:

(1) The commission issues the financing order authorizing the fixed recovery charges included in the recovery property.

(2) An assignment of the recovery property in writing has been executed and delivered to the transferee.

(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 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 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.


text: Any successor to the electrical corporation, whether pursuant to any bankruptcy, reorganization, or other insolvency proceeding, or pursuant to any merger, sale, or transfer, by operation of law, or otherwise, shall perform and satisfy all obligations of the electrical corporation pursuant to this article in the same manner and to the same extent as the electrical corporation, including, but not limited to, collecting and paying to the holders of recovery bonds, or their representatives, or the applicable financing entity revenues arising with respect to the recovery property sold to the applicable financing entity or pledged to secure recovery bonds. Any successor to the electrical corporation is entitled to receive any fixed recovery tax amounts otherwise payable to the electrical corporation.


text: The authority of the commission to issue financing orders pursuant to Section 850.1 shall expire on December 31, 2035. 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 electrical 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.


text:
(a) Notwithstanding subdivision (e) of Section 850.1, if, subsequent to the issuance of a financing order, an electrical corporation receives additional insurance proceeds, tax benefits, or other amounts that reimburse the electrical corporation for costs associated with catastrophic wildfire amounts included in the recovery costs addressed in that financing order, the electrical 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 catastrophic wildfire amounts, fixed recovery charges, the fixed recovery tax amounts, the financing order, recovery costs, the recovery property, or the recovery bonds.

(b) Nothing in this section shall be construed to permit setoff, counterclaim, surcharge, recoupment, or defense by the electrical corporation or any other person, or in connection with the bankruptcy, reorganization, or other insolvency proceeding of the electrical corporation, any affiliate of the electrical 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.


text: This article shall not affect any civil action or proceeding.


citation: PUC § 851

text:
(a) Except as provided in subdivision (c), a public utility, other than a common carrier by railroad subject to Part A of the Interstate Commerce Act (49 U.S.C. Sec. 10101 et seq.), shall not sell, lease, assign, mortgage, or otherwise dispose of, or encumber the whole or any part of, its railroad, street railroad, line, plant, system, or other property necessary or useful in the performance of its duties to the public, or any franchise or permit or any right thereunder, or by any means whatsoever, directly or indirectly, merge or consolidate its railroad, street railroad, line, plant, system, or other property, or franchises or permits or any part thereof, without first having either secured an order from the commission authorizing it to do so for qualified transactions valued above five million dollars ($5,000,000), or for qualified transactions valued at five million dollars ($5,000,000) or less, filed an advice letter and obtained approval from the commission authorizing it to do so. If the advice letter is uncontested, approval may be given by the executive director or the director of the division of the commission having regulatory jurisdiction over the utility. The commission shall determine the types of transactions valued at five million dollars ($5,000,000) or less, that qualify for advice letter handling. For a qualified transaction valued at five million dollars ($5,000,000) or less, the commission may designate a procedure different than the advice letter procedure if it determines that the transaction warrants a more comprehensive review. Absent protest or incomplete documentation, the commission shall approve or deny the advice letter within 120 days of its filing by the applicant public utility. The commission shall reject any advice letter that seeks to circumvent the five-million-dollar ($5,000,000) threshold by dividing a single asset with a value of more than five million dollars ($5,000,000) into component parts, each valued at less than five million dollars ($5,000,000). Every sale, lease, assignment, mortgage, disposition, encumbrance, merger, or consolidation made other than in accordance with the advice letter and approval from the commission authorizing it is void. The permission and approval of the commission to the exercise of a franchise or permit under Article 1 (commencing with Section 1001) of Chapter 5, or the sale, lease, assignment, mortgage, or other disposition or encumbrance of a franchise or permit under this article, shall not revive or validate any lapsed or invalid franchise or permit, or enlarge or add to the powers or privileges contained in the grant of any franchise or permit, or waive any forfeiture.

(b) (1) Subdivision (a) shall apply to any transaction described in subparagraph (F) of paragraph (1) of subdivision (b) of Section 854.2.

(2) For any transaction described in subparagraph (F) of paragraph (1) of subdivision (b) of Section 854.2, as part of its review under subdivision (a), the commission shall determine whether the transaction is fair and reasonable to affected public utility employees, including both union and nonunion employees.

(c) (1) Subdivision (a) shall not apply to an easement, or a change to an easement, that has a ratepayer financial impact valued at one hundred thousand dollars ($100,000) or less if a public utility that is a party to the qualified transaction has gross annual California revenues of five hundred million dollars ($500,000,000) or more.

(2) On January 1, 2030, and every five years thereafter, the threshold values specified in paragraph (1) shall be adjusted to reflect any increase in inflation as measured by the Consumer Price Index for All Urban Consumers (CPI-U) published by the United States Bureau of Labor Statistics.

(3) Each public utility shall annually file a Tier 1 advice letter with the commission by April 1, with a report of all transactions performed pursuant to paragraph (1), enumerated by date, value, location, and party.

(d) This section does not prevent the sale, lease, encumbrance, or other disposition by any public utility of property that is not necessary or useful in the performance of its duties to the public, and any disposition of property by a public utility shall be conclusively presumed to be of property that is not useful or necessary in the performance of its duties to the public, as to any purchaser, lessee, or encumbrancer dealing with that property in good faith for value, provided that this section does not apply to the interchange of equipment in the regular course of transportation between connecting common carriers.

history: (History: Amended by Stats. 2025, Ch. 150, Sec. 1. (AB 420) Effective January 1, 2026.)

path: 1. REGULATION OF PUBLIC UTILITIES > 1. PUBLIC UTILITIES ACT > 4. Regulation of Public Utilities > 6. Transfer or Encumbrance of Utility Property


citation: PUC § 852

text: No public utility, and no subsidiary or affiliate of, or corporation holding a controlling interest in, a public utility, shall purchase or acquire, take or hold, any part of the capital stock of any other public utility, organized or existing under or by virtue of the laws of this state, without having been first authorized to do so by the commission; provided, however, that the commission may establish by order or rule categories of stock acquisitions which it determines will not be harmful to the public interest, and purchases within those categories are exempt from this section. Every assignment, transfer, contract, or agreement for assignment or transfer of any stock by or through any person or corporation to any corporation or otherwise in violation of any of the provisions of this article is void and of no effect, and no such transfer shall be made on the books of any public utility. Nothing in this section prevents the holding of stock previously lawfully acquired.

history: (History: Amended by Stats. 1989, Ch. 390, Sec. 1.)

article: 6. Transfer or Encumbrance of Utility Property


citation: PUC § 853

text:
(a) This article does not apply to any person or corporation which transacts no business subject to regulation under this part, except performing services or delivering commodities for or to public utilities or municipal corporations or other public agencies primarily for resale or use in serving the public or any portion thereof, but shall apply to any public utility, and any subsidiary or affiliate of, or corporation holding a controlling interest in, a public utility, if the commission finds, in a proceeding to which the public utility is or may become a party, that the application of this article is required by the public interest.

(b) The commission may from time to time by order or rule, and subject to those terms and conditions as may be prescribed therein, exempt any public utility or class of public utility from this article if it finds that the application thereof with respect to the public utility or class of public utility is not necessary in the public interest. The commission may establish rules or impose requirements deemed necessary to protect the interest of the customers or subscribers of the public utility or class of public utility exempted under this subdivision. These rules or requirements may include, but are not limited to, notification of a proposed sale or transfer of assets or stock and provision for refunds or credits to customers or subscribers.

(c) The provisions of Sections 851 and 854 that prohibit any assignment, acquisition, or change of control without advance authorization from the commission, do not apply to the transfer of the ownership interest in a water utility, with 10,000 or fewer service connections, from a decedent to a member of the decedent’s family in the manner provided in Section 240 of the Probate Code or by a will, trust, or other instrument.

(d) It is the intent of the Legislature that transactions with monetary values that materially impact a public utility’s rate base should not qualify for expedited advice letter treatment pursuant to this article. It is the further intent of the Legislature that the commission maintain all of its oversight and review responsibilities subject to the California Environmental Quality Act, and that public utility transactions that jurisdictionally require a review by the commission, as the lead agency, under the act should not qualify for expedited advice letter treatment pursuant to this article. An advice letter may be filed for transactions by the public utility if the lead agency has completed the appropriate review under the California Environmental Quality Act for the transaction, and the commission is the responsible agency under the act. The advice letter shall be subject to approval by resolution voted upon by the commission.

history: (History: Amended by Stats. 2009, Ch. 370, Sec. 2. (AB 698) Effective January 1, 2010.)


text:
For a water or sewer system corporation or an entity merging with or acquiring control of a water or sewer system corporation with less than 2,000 service connections, the following shall apply to transactions valued at five million dollars ($5,000,000) or less, notwithstanding Sections 851 and 854:

(a) (1) A water or sewer system corporation or an entity merging with or acquiring control of a water or sewer system corporation shall receive the commission’s approval before entering into a transaction that would otherwise be subject to Section 851 or 854.

(2) If a water or sewer system corporation or an entity merging with or acquiring control of a water or sewer system corporation fails to receive the commission’s approval pursuant to paragraph (1), the transaction is voidable by the commission until the commission does either of the following:

(A) Retroactively approves the transaction upon a determination that the transaction is in the best interests of both the corporation and its ratepayers.

(B) Conditionally approves the transaction, subject to the fulfillment of specified conditions that would ensure that the transaction is in the best interests of both the corporation and its ratepayers.

(b) The commission may delegate the authority to make the determinations described in subdivision (a) to the director of the division that investigates water and sewer system service quality issues and analyzes and processes utility rate change requests.

history: (History: Added by Stats. 2016, Ch. 631, Sec. 1. (SB 1112) Effective September 25, 2016.)


citation: PUC § 854

text:
(a) A person or corporation, whether or not organized under the laws of this state, shall not directly or indirectly merge, acquire, or control, including pursuant to a change in control as described in subparagraphs (D) or (E) of paragraph (1) of subdivision (b) of Section 854.2, any public utility organized and doing business in this state without first securing authorization to do so from the commission. The commission may establish, by order or rule, the definitions of what constitutes a merger, acquisition, or control activity that is subject to this section. Any merger, acquisition, or control without that prior authorization is void. A public utility organized and doing business under the laws of this state, and a subsidiary or affiliate of, or corporation holding a controlling interest in, a public utility, shall not aid or abet any violation of this section.

(b) Before authorizing the merger, acquisition, or control of any electrical, gas, or telephone corporation organized and doing business in this state, if any utility that is a party to the proposed transaction has gross annual California revenues exceeding five hundred million dollars ($500,000,000), the commission shall find that the proposal does all of the following:

(1) Provide short-term and long-term economic benefits to ratepayers.

(2) Equitably allocate, where the commission has ratemaking authority, the total short-term and long-term forecasted economic benefits, as determined by the commission, of the proposed merger, acquisition, or control, between shareholders and ratepayers. Ratepayers shall receive not less than 50 percent of those benefits.

(3) Not adversely affect competition. In making this finding, the commission shall request an advisory opinion from the Attorney General regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result.

(4) For an electrical or gas corporation, ensure the corporation will have an adequate workforce to maintain the safe and reliable operation of the utility assets.

(c) Before authorizing the merger, acquisition, or control of any electrical, gas, or telephone corporation organized and doing business in this state, if any entity that is a party to the proposed transaction has gross annual California revenues exceeding five hundred million dollars ($500,000,000), the commission shall consider each of the criteria listed in paragraphs (1) to (8), inclusive, and find, on balance, that the merger, acquisition, or control proposal is in the public interest.

(1) Maintain or improve the financial condition of the resulting public utility doing business in the state.

(2) Maintain or improve the quality of service to public utility ratepayers in the state.

(3) Maintain or improve the quality of management of the resulting public utility doing business in the state.

(4) Be fair and reasonable to affected public utility employees, including both union and nonunion employees.

(5) Be fair and reasonable to the majority of all affected public utility shareholders.

(6) Be beneficial on an overall basis to state and local economies and to the communities in the area served by the resulting public utility.

(7) Preserve the jurisdiction of the commission and the capacity of the commission to effectively regulate and audit public utility operations in the state.

(8) Provide mitigation measures to prevent significant adverse consequences that may result.

(d) (1) Before authorizing the merger, acquisition, or change in control of any electrical or gas corporation organized and doing business in this state, if any entity that is a party to the proposed transaction has gross annual California revenues exceeding four hundred million dollars ($400,000,000), the commission shall consider the elements in subparagraphs (A) to (G), inclusive, and find, on balance, that the proposal is in the public interest.

(A) A safety management system.

(B) A comprehensive safety plan that includes a systemwide strategic approach for the safety of both employees and the public.

(C) Plans to maintain or improve the records of the electrical corporation’s electric plant or gas corporation’s gas plant, including necessary audits to update incorrect or incomplete records of the electrical or gas corporation. For purposes of this subparagraph, “records” shall include, but not be limited to, locations, depth, age, maintenance and testing history, maps, surveys, patrols, and violation history of the electrical corporation’s electric plant or gas corporation’s gas plant.

(D) Metrics to measure safety that are complete and drive appropriate behavior.

(E) An appropriate evaluation of safety expertise in the list of qualifications used in selecting corporate leadership.

(F) Active audits for safety controls.

(G) A nonpunitive system for reporting potential safety incidents to the commission to facilitate the identification of accident precursors by persons familiar with the operations of the electrical or gas corporation, including, but not limited to, employees and contractors of the electrical or gas corporation, and the collection, analysis, and dissemination of unbiased safety information. An employee of, or the employee of a contractor performing work for, the electrical or gas corporation shall not be subject to demotion, discharge, or any other form of retaliation or discrimination for participating in the potential safety incident reporting system established pursuant to this subdivision.

(2) The commission may delay the implementation of this subdivision until July 1, 2021, or until the commission adopts rules implementing the requirements of this subdivision, whichever is earlier.

(e) When reviewing a merger, acquisition, or control proposal, the commission shall consider reasonable options to the proposal recommended by other parties, including no new merger, acquisition, or control, to determine whether comparable short-term and long-term economic savings can be achieved through other means while avoiding the possible adverse consequences of the proposal.

(f) The person or corporation seeking acquisition or control of a public utility organized and doing business in this state shall have, before the commission, the burden of proving by a preponderance of the evidence that the requirements of subdivisions (b), (c), and (d) are met.

(g) In determining whether an acquiring utility has gross annual revenues exceeding the amount specified in subdivisions (b) and (c), the revenues of an affiliate of that utility shall not be considered unless the affiliate was used to effect the merger, acquisition, or control.

(h) Paragraphs (1) and (2) of subdivision (b) do not apply to the formation of a holding company.

(i) For purposes of paragraphs (1) and (2) of subdivision (b), the Legislature does not intend to include acquisitions or changes in control that are mandated by either the commission or the Legislature as a result of, or in response to, any electric industry restructuring. However, the value of an acquisition or change in control may be used by the commission in determining the costs or benefits attributable to any electric industry restructuring and for allocating those costs or benefits for collection in rates.

history: (History: Amended by Stats. 2021, Ch. 228, Sec. 2. (AB 242) Effective January 1, 2022.)


text:
(a) The Legislature finds and declares all of the following:

(1) California’s electric and gas utilities provide essential services to California residents and businesses, which are necessary to maintaining the vitality of California’s economy.

(2) Consistent with Sections 913.4, 961, and 977, an adequately sized workforce of experienced electric and gas utility employees with the appropriate training and skills, as well as the knowledge of an electric or gas utility’s facilities and equipment, is essential to the safe, efficient, and uninterrupted provision of electrical and gas services. Safe and reliable electric and gas utility service is vital to public health, public safety, air quality, and reducing emissions of greenhouse gases.

(3) Changes in the ownership or control of an electrical corporation or gas corporation may create uncertainty regarding the safe, efficient, and continuous provision of safe and reliable electrical and gas service to California consumers, leading to economic instability.

(4) Mass displacement of electrical corporation or gas corporation workers as a result of a change in the ownership or control of an electrical corporation or gas corporation causes excessive reliance on the unemployment insurance system, and public social services and health programs, increasing costs to these vital governmental programs and placing a significant burden on the state and California taxpayers.

(5) The state has a compelling interest in ensuring that when there is a change in the ownership or control of an electrical corporation or gas corporation, the new employer maintains a qualified and knowledgeable workforce with the ability to ensure safe, efficient, reliable, and continuous service to California consumers and communities.

(6) Because of destructive and deadly wildfires and gas pipeline explosions, the electric and gas industries are in an unprecedented state of instability. One combined electrical and gas corporation has sought bankruptcy protection. All the major electrical corporations have had their credit ratings lowered to junk bond status or are at risk of downgrades to junk bond status. This jeopardizes the ability of these corporations to provide safe and reliable electric and gas service, to reduce the risk of future catastrophes, to provide service at just and reasonable rates, to meet the state’s mandates to reduce carbon emissions, and to address the risks of climate change.

(7) There is a nationwide shortage of the qualified utility line workers and qualified line clearance tree trimmers needed to prevent and respond to wildfires, storms, and other major events. Because this work is performed on and near high voltage lines and other energized electrical equipment, these jobs require substantial training and are highly dangerous. Current efforts to hire enough qualified people to perform these functions have fallen short even though exceptional compensation packages are being offered. Any reduction in the number or qualifications of these employees would increase the risk to employees and the risk of future catastrophic wildfires, and would increase the frequency and duration of outages, particularly as a result of more common and more severe major storms. It is in the interest of the state and its citizens that utilities have the qualified workforce necessary to minimize the risk of future wildfires, to minimize future outages, and to restore service as promptly as possible after storms.

(8) For the reasons provided in this subdivision, the Legislature must take action to stabilize the utility workforce so as to preserve the ability of utilities to provide safe and reliable electric and gas service. This requires that the size of the workforce be preserved or increased, and workers not be lost to other utilities offering more stable employment or better compensation.

(b) For purposes of this section, the following definitions shall apply:

(1) “Change of control” means any of the following:

(A) An event that triggers the application of Section 851 or 854.

(B) A material change in ownership of the electric corporation or gas corporation, its parent company, or its holding company.

(C) A filing seeking bankruptcy protection.

(D) The sale of all or a material portion of the assets of the electrical corporation or gas corporation, its parent company, or its holding company, or any merger, consolidation, or acquisition of the electrical corporation or gas corporation, its parent company, or its holding company with, by, or into another corporation, entity, or person.

(E) In the case of a combined electrical and gas corporation, the change in ownership of all or a substantial portion of either the gas or electric line of business of the combined corporation.

(F) A voluntary or involuntary change in ownership of assets from an electrical or gas corporation to ownership by a public entity.

(2) (A) “Covered employee” means an individual who has been employed by an electrical corporation or gas corporation for at least 90 days immediately before a change of control affecting that individual’s principal place of employment. A change of control affects a covered employee’s principal place of employment where the change of control results in the predecessor employer transferring control of the place of employment to the successor employer.

(B) “Covered employee” does not include any of the following:

(i) A managerial, supervisory, or confidential employee.

(ii) A temporary employee.

(iii) A part-time employee who has worked less than 20 hours per week for the predecessor employer for at least 90 days immediately before the change of control.

(3) “Person” means a corporation as defined in Section 204, a person as defined in Section 205, any other individual, corporation, partnership, limited partnership, limited liability partnership, limited liability company, business trust, estate, trust, association, joint venture, agency, instrumentality, or any other legal or commercial entity, whether domestic or foreign.

(4) “Predecessor employer” means the person who controls the electric or gas utility before the change of control.

(5) “Principal place of employment” of an employee means the office or other facility of the electrical corporation or gas corporation where the employee is principally assigned to work by the predecessor employer.

(6) “Successor employer” means the person who controls the electrical corporation or gas corporation after the change of control.

(7) “Total compensation” means the combined value of the covered employee’s wages and benefits immediately before the change of control. Total compensation may be paid entirely as wages or in any combination of wages and fringe benefits, to be determined by the successor employer. Total compensation includes, but is not necessarily limited to, both of the following amounts:

(A) The covered employee’s hourly wage rate or the per diem value of the covered employee’s monthly salary.

(B) Employer payments toward the covered employee’s health and welfare and pension benefits. Employer payments toward health and welfare and pension benefits shall include only those payments that are recognized as employer payments under paragraphs (1) and (2) of subdivision (b) of Section 1773.1 of the Labor Code.

(8) “Transition period” means a period of 180 days immediately following the effective date of a change of control.

(c) (1) Except as otherwise provided in this section, a successor employer shall retain all covered employees for at least the transition period following a change of control, unless the commission approves a reduction in the workforce pursuant to subdivision (i). During the transition period, the successor employer shall not reduce the total compensation of a covered employee.

(2) During the transition period, a successor employer shall not terminate a covered employee without cause.

(d) (1) No later than 15 days before the effective date of a change of control, the predecessor employer shall do both of the following:

(A) Cause to be posted, in a conspicuous place in a manner that is readily viewed by covered employees, a public notice of the change of control at each principal place of employment of any covered employee.

(B) Cause the notice to be sent to any labor organization that represents covered employees.

(2) The notice shall include the name of the predecessor employer and its contact information, the name of the successor employer and its contact information, and the effective date of the change of control. The notice shall be posted in a conspicuous place in a manner that is readily viewed by covered employees.

(e) This part shall not be construed to limit the right of covered employees to bring legal action for wrongful termination.

(f) The rights and remedies provided pursuant to this section are in addition to, and are not intended to supplant, any existing rights or remedies.

(g) No later than 15 days before the effective date of a change of control, a predecessor employer shall provide to the successor employer the name, address, date of hire, total compensation, and classification of each covered employee.

(h) A successor employer shall retain the following written or electronic records for at least three years:

(1) The list provided to the successor employer pursuant to subdivision (g).

(2) Any offer of employment made to a covered employee.

(3) Any termination of a covered employee during a transition period, including the reasons for the termination.

(4) Any written evaluation of a covered employee.

(i) For three years after the transition period and subject to the provisions of any existing collective bargaining agreement, a successor employer shall provide to employees who would have qualified as covered employees had they been employed during the 90-day period immediately before a change of control no less than the wages, hours, and other terms and conditions of employment provided before the change of control, including any previously negotiated increase in wages, and shall maintain no less than the total number of employees who would have qualified as covered employees had they been employed during the 90-day period immediately before a change of control. The successor employer may reduce the wages, hours, and other terms and conditions of employment or the total number of employees in a manner inconsistent with collective bargaining agreements only if authorized by the commission in a final, nonappealable decision. The commission shall not provide this authorization except on proof by a preponderance of the evidence in an application proceeding of all of the following:

(1) Neither the nature nor scope of the work performed by those employees proposed to be eliminated is necessary to providing safe and reliable utility service. The electrical corporation or gas corporation shall provide an independent third-party study to support its position. Other parties to the proceeding shall be provided with an opportunity to conduct their own studies.

(2) The proposed new wages, hours, and other terms and conditions of employment shall be consistent with wages, hours, and other terms for California electrical corporations and gas corporations. The electrical corporation or gas corporation shall provide an independent third-party study to support its position. Other parties to the proceeding shall be provided an opportunity to conduct their own studies.

(3) There will be no reduction in the ability of employees of the electrical or gas corporation to prevent damage from or to respond to an emergency such as a wildfire, storm, flood, mudslide, or earthquake, or to gas leaks, electric outages, interconnection requests, work requested by others, locate and mark requests, or other utility services.

(4) There will be no reduction in the ability of the electrical corporation or gas corporation to respond to mutual aid requests of other utilities.

(j) A successor employer may terminate an employee with cause consistent with any applicable selective bargaining agreement during the period specified in subdivision (i).

(k) A successor employer and a labor organization representing covered employees may, in a collective bargaining agreement, provide that the agreement supersedes the requirements of this section with respect to the represented employees.

(l) The provisions of this section are severable. If any provision of this section or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

history: (History: Amended by Stats. 2019, Ch. 396, Sec. 31. (AB 1513) Effective January 1, 2020.)


text:
(a) For purposes of this section, a “nonstate entity” means a company, corporation, partnership, firm, or other entity or group of entities, whether organized for profit or not for profit.

(b) The commission, by order, decision, motion, settlement, or other action, shall not establish a nonstate entity with any moneys other than those moneys that would otherwise belong to the public utility’s shareholders. A nonstate entity to be created with moneys from a public utility’s shareholders shall be subject to a 30-day review by the Joint Legislative Budget Committee prior to creation. This subdivision does not limit the authority of the commission to form an advisory committee or other body whose budget is subject to oversight by the commission and the Department of Finance.

(c) The commission shall not enter into a contract with a nonstate entity in which a person serves as an owner, director, or officer while serving as a commissioner. Any contract between the commission and a nonstate entity shall be void and cease to exist by operation of law, if a commissioner, who was a commissioner at the time the contract was awarded, entered into, or extended, becomes, on or after January 1, 2014, an owner, director, or officer of the nonstate entity while serving as a commissioner.

(d) Beginning June 1, 2014, a commissioner who acts as an owner, director, or officer of a nonstate entity that was established as a result of an order, decision, motion, settlement, or other action by the commission in which the commissioner participated, neglects his or her duty pursuant to Section 1 of Article XII of the California Constitution, and as a result the commissioner may be removed pursuant to that section by the Legislature, two-thirds of the membership of each house concurring.

history: (History: Amended by Stats. 2014, Ch. 546, Sec. 1. (SB 434) Effective January 1, 2015.)


citation: PUC § 856

text: Every officer, agent, or employee of a public utility, or of a subsidiary or affiliate of, or a corporation holding a controlling interest in, a public utility, and every other person subject to the requirements of this article, who violates or fails to comply with, or procures, aids, or abets any violation of, this article is guilty of a misdemeanor.

history: (History: Added by Stats. 1989, Ch. 390, Sec. 3.)


citation: PUC § 857

text:
(a) A public utility that owns real property acquired for purposes of obtaining a utility right-of-way, may lease that property to a governmental entity for purposes of a public park, if the utility retains the use of the right-of-way for public utility purposes.

(b) In determining whether a lease of real property to a governmental entity for park purposes is for fair value, the commission shall include the community benefits of parks and open space as a benefit to ratepayers.

(c) As used in this section, “community benefits” include, but are not limited to, improving public health, protecting the environment, and increasing recreational assets.

history: (History: Added by Stats. 2009, Ch. 448, Sec. 1. (AB 521) Effective January 1, 2010.)


citation: PUC § 861

text:
(a) As used in this section, “special law water district” means the Santa Clara Valley Water District and the Yuba-Bear River Basin Authority and, if created by an uncodified special law, any of the following: a county flood control district, a county flood control and water district, a county flood control and water conservation district, a county water conservation and flood control district, or a county water agency.

(b) Whenever by court order or judgment in an eminent domain proceeding or by agreement a special law water district is required to relocate any improvements of a public utility, if the special law water district and the public utility fail to agree as to the character or location of the new improvements to be relocated by the special law water district, the character and location of such new improvements and any other controversy relating thereto shall be submitted to and determined by the Public Utilities Commission in the manner prescribed in Chapter 6 (commencing with Section 1201).

history: (History: Added by Stats. 1975, Ch. 1240.)

path: 1. REGULATION OF PUBLIC UTILITIES > 1. PUBLIC UTILITIES ACT > 4. Regulation of Public Utilities > 7. Controversies Concerning Relocation of Utility Improvements


citation: PUC § 871

text: This article shall be known and may be cited as the Moore Universal Telephone Service Act.

history: (History: Added by Stats. 1987, Ch. 163, Sec. 2. Effective July 16, 1987.)

article: 8. Universal Telephone Service

path: 1. REGULATION OF PUBLIC UTILITIES > 1. PUBLIC UTILITIES ACT > 4. Regulation of Public Utilities > 8. Universal Telephone Service


text:
The Legislature finds and declares all of the following:

(a) The offering of high-quality basic telephone service at affordable rates to the greatest number of citizens has been a longstanding goal of the state.

(b) The Moore Universal Telephone Service Act has been, and continues to be, an important means for achieving universal service by making basic telephone service affordable to low-income households through the creation of a lifeline class of service.

(c) Every means should be employed by the commission and telephone corporations to ensure that every household qualified to receive lifeline telephone service is informed of and is afforded the opportunity to subscribe to that service.

(d) The furnishing of lifeline telephone service is in the public interest and should be supported fairly and equitably by every telephone corporation, and the commission, in administering the lifeline telephone service program, should implement the program in a way that is equitable, nondiscriminatory, and without competitive consequences for the telecommunications industry in California.

history: (History: Amended by Stats. 2010, Ch. 381, Sec. 2. (AB 2213) Effective January 1, 2011.)

article: 8. Universal Telephone Service


text:
The Legislature finds and declares all of the following:

(a) The Moore Universal Telephone Service Act, enacted in 1987, was intended to offer high quality basic telephone service at affordable rates to the greatest number of California residents, and has become an important means of achieving universal service by making residential service affordable to low-income citizens through the creation of a lifeline class of service.

(b) Factors such as competition and technological innovation are resulting in the convergence of a variety of telecommunications technologies offering an expanded range of telecommunications services to users that incorporate voice, video, and data. These technologies have differing regulatory regimes and jurisdictions.

(c) It is the intent of the Legislature that the commission initiate a proceeding investigating the feasibility of redefining universal telephone service by incorporating two-way voice, video, and data service as components of basic service. It is the Legislature’s further intent that, to the extent that the incorporation is feasible, that it promote equity of access to high-speed communications networks, the Internet, and other services to the extent that those services provide social benefits that include all of the following:

(1) Improving the quality of life among the residents of California.

(2) Expanding access to public and private resources for education, training, and commerce.

(3) Increasing access to public resources enhancing public health and safety.

(4) Assisting in bridging the “digital divide” through expanded access to new technologies by low-income, disabled, or otherwise disadvantaged Californians.

(5) Shifting traffic patterns by enabling telecommuting, thereby helping to improve air quality in all areas of the state and mitigating the need for highway expansion.

(d) For purposes of this section, the term “feasibility” means consistency with all of the following:

(1) Technological and competitive neutrality.

(2) Equitable distribution of the funding burden for redefined universal service as described in subdivision (c), among all affected consumers and industries, thereby ensuring that regulated utilities’ ratepayers do not bear a disproportionate share of funding responsibility.

(3) Benefits that justify the costs.

history: (History: Added by Stats. 2000, Ch. 943, Sec. 1. Effective January 1, 2001.)

article: 8. Universal Telephone Service


citation: PUC § 873

text:
(a) The commission shall annually do all of the following:

(1) Designate a class of lifeline service necessary to meet minimum communications needs.

(2) Set the rates and charges for that service.

(3) Develop eligibility criteria for that service.

(4) Assess the degree of achievement of universal service, including telephone penetration rates by income, ethnicity, and geography.

(b) Minimum communications needs include, but are not limited to, the ability to originate and receive calls and the ability to access electronic information services.

history: (History: Amended by Stats. 2016, Ch. 86, Sec. 265. (SB 1171) Effective January 1, 2017.)

article: 8. Universal Telephone Service