South Carolina Code 58-27-1125. Storm recovery property; security interests; sale, assignment, or transfer of storm recovery property
(1) All storm recovery property that is specified in a financing order constitutes an existing, present intangible property right or interest therein, notwithstanding that the imposition and collection of recovery charges depends on the electrical utility to which the financing order is issued performing its servicing functions relating to the collection of recovery charges and on future electricity consumption. The property exists (i) regardless of whether or not the revenues or proceeds arising from the property have been billed, have accrued, or have been collected and (ii) notwithstanding the fact that the value or amount of the property is dependent on the future provision of service to customers by the electrical utility or its successors or assignees and the future consumption of electricity by customers.
Terms Used In South Carolina Code 58-27-1125
- ancillary agreement: means a bond, insurance policy, letter of credit, reserve account, surety bond, liquidity or credit support arrangement, or other financial arrangement entered into in connection with recovery bonds. See South Carolina Code 58-27-1105
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- assignee: means a legally recognized entity to which an electrical utility assigns, sells, or transfers, other than as a security, all or a portion of its interest in or right to storm recovery property. See South Carolina Code 58-27-1105
- Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
- code: means The Uniform Commercial Code, Title 36 of the South Carolina Code of Laws. See South Carolina Code 58-27-1105
- commission: means the Public Service Commission of South Carolina. See South Carolina Code 58-27-1105
- Contract: A legal written agreement that becomes binding when signed.
- Counterclaim: A claim that a defendant makes against a plaintiff.
- Dependent: A person dependent for support upon another.
- electrical utility: is a s defined in § 58-27-10(7). See South Carolina Code 58-27-1105
- financing costs: includes all of the following:
(a) interest and acquisition, defeasance, or redemption premiums payable on recovery bonds;
(b) any payment required under an ancillary agreement and any amount required to fund or replenish a storm reserve account or other accounts established under the terms of any indenture, ancillary agreement, or other financing documents pertaining to recovery bonds;
(c) any other cost related to issuing, supporting, repaying, refunding, and servicing storm recovery bonds, including servicing fees, accounting and auditing fees, trustee fees, legal fees, consulting fees, structuring adviser fees, administrative fees, placement and underwriting fees, independent director and manager fees, capitalized interest, rating agency fees, stock exchange listing and compliance fees, security registration fees, filing fees, information technology programming costs, and any other costs necessary to otherwise ensure the timely payment of recovery or other amounts or charges payable in connection with the bonds, including costs related to obtaining the financing order;
(d) any taxes and license fees or other fees imposed on the revenues generated from the collection of a storm recovery charge or otherwise resulting from the collection of storm recovery charges, in any such case whether paid, payable, or accrued;
(e) any state and local taxes, franchise, gross receipts, and other taxes or similar charges, including regulatory assessment fees, whether paid, payable, or accrued;
(f) any costs incurred by the commission or the Office of Regulatory Staff for any outside consultants, including counsel and advisors, retained in connection with the securitization of storm recovery costs. See South Carolina Code 58-27-1105 - financing order: means an order that authorizes the issuance of storm recovery bonds; the imposition, collection, and periodic adjustments of a storm recovery charge; the creation of storm recovery property; and the sale, assignment, or transfer of storm recovery property to an assignee. See South Carolina Code 58-27-1105
- financing party: means bondholders and trustees, collateral agents, any party under an ancillary agreement, or any other person acting for the benefit of bondholders. See South Carolina Code 58-27-1105
- financing statement: is a s defined in § 36-9-102. See South Carolina Code 58-27-1105
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Intangible property: Property that has no intrinsic value, but is merely the evidence of value such as stock certificates, bonds, and promissory notes.
- Lien: A claim against real or personal property in satisfaction of a debt.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- person: includes all individuals, partnerships, or associations other than corporations. See South Carolina Code 58-27-10
- pledgee: means a financing party to which an electrical utility or its successors or assignees mortgages, negotiates, pledges, or creates a security interest or lien on all or any portion of its interest in or right to storm recovery property. See South Carolina Code 58-27-1105
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
- storm: means , individually or collectively, a named tropical storm or hurricane, a tornado, ice storm or snowstorm, flood, an earthquake, or other significant weather or natural disaster. See South Carolina Code 58-27-1105
- storm recovery bonds: means bonds, debentures, notes, certificates of participation, certificates of beneficial interest, certificates of ownership, or other evidences of indebtedness or ownership that are issued by an electrical utility or an assignee pursuant to a financing order, the proceeds of which are used directly or indirectly to recover, finance, or refinance commission-approved storm recovery costs and financing costs, and that are secured by or payable from storm recovery property. See South Carolina Code 58-27-1105
- storm recovery property: means :
(a) All rights and interests of an electrical utility or successor or assignee of the electrical utility under a financing order, including the right to impose, bill, charge, collect, and receive storm recovery charges authorized under the financing order and to obtain periodic adjustments to such charges as provided in the financing order. See South Carolina Code 58-27-1105 - Tort: A civil wrong or breach of a duty to another person, as outlined by law. A very common tort is negligent operation of a motor vehicle that results in property damage and personal injury in an automobile accident.
(2) Storm recovery property specified in a financing order exists until recovery bonds issued pursuant to the financing order are paid in full and all financing costs and other costs of such recovery bonds have been recovered in full.
(3) All or any portion of storm recovery property specified in a financing order issued to an electrical utility may be transferred, sold, conveyed, or assigned to a successor or assignee, that is wholly owned, directly or indirectly, by the electrical utility and created for the limited purpose of acquiring, owning, or administering storm recovery property or issuing storm recovery bonds under the financing order. All or any portion of storm recovery property may be pledged to secure recovery bonds issued pursuant to the financing order, amounts payable to financing parties and to counterparties under any ancillary agreements, and other financing costs. Any transfer, sale, conveyance, assignment, grant of a security interest in or pledge of storm recovery property by an electrical utility or an affiliate of the electrical utility, to an assignee, to the extent previously authorized in a financing order, does not require the prior consent and approval of the commission.
(4) If an electrical utility defaults on any required payment of charges arising from storm recovery property specified in a financing order, a court, upon application by an interested party, and without limiting any other remedies available to the applying party, shall order the sequestration and payment of the revenues arising from the storm recovery property to the financing parties or their assignees. Any such financing order remains in full force and effect notwithstanding any reorganization, bankruptcy, or other insolvency proceedings with respect to the electrical utility or its successors or assignees.
(5) The interest of a transferee, purchaser, acquirer, assignee, or pledgee in storm recovery property specified in a financing order issued to an electrical utility, and in the revenue and collections arising from that property, is not subject to setoff, counterclaim, surcharge, or defense by the electrical utility or any other person or in connection with the reorganization, bankruptcy, or other insolvency of the electrical utility or any other entity.
(6) Any successor to an electrical utility, whether pursuant to any reorganization, bankruptcy, or other insolvency proceeding or whether pursuant to any merger or acquisition, sale, or other business combination, or transfer by operation of law, as a result of electrical utility restructuring or otherwise, must perform and satisfy all obligations of, and have the same rights under a financing order as, the electrical utility under the financing order in the same manner and to the same extent as the electrical utility, including collecting and paying to the person entitled to receive the revenues, collections, payments, or proceeds of the storm recovery property. Nothing in this subsection is intended to limit or impair any authority of the commission concerning the transfer or succession of interests of electrical utilities.
(7) Recovery bonds shall be nonrecourse to the credit or any assets of the electrical utility other than the storm recovery property as specified in the financing order and any rights under any ancillary agreement.
(B) Provisions applicable to security interests:
(1) The creation, perfection, and enforcement of any security interest in storm recovery property to secure the repayment of the principal and interest and other amounts payable in respect of recovery bonds, amounts payable under any ancillary agreement, and other financing costs are governed by this section and not by the provisions of the code.
(2) A security interest in storm recovery property is created, valid, and binding and perfected at the later of the times that: (i) the financing order is issued, (ii) a security agreement is executed and delivered by the debtor granting such security interest, (iii) the debtor has rights in such storm recovery property or the power to transfer rights in such storm recovery property, or (iv) value is received for the storm recovery property. The description of storm recovery property in a security agreement is sufficient if the description refers to this article and the financing order creating the storm recovery property.
(3) A security interest shall attach without any physical delivery of collateral or other act, and, upon the filing of a financing statement with the office of the Secretary of State, the lien of the security interest shall be valid, binding, and perfected against all parties having claims of any kind in tort, contract, or otherwise against the person granting the security interest, regardless of whether the parties have notice of the lien. Also upon this filing, a transfer of an interest in the storm recovery property shall be perfected against all parties having claims of any kind, including any judicial lien or other lien creditors or any claims of the seller or creditors of the seller, and shall have priority over all competing claims other than any prior security interest, ownership interest, or assignment in the property previously perfected in accordance with this section.
(4) The Secretary of State shall maintain any financing statement filed to perfect any security interest under this article in the same manner that the secretary maintains financing statements filed by transmitting utilities under the code. The filing of a financing statement under this article shall be governed by the provisions regarding the filing of financing statements in the code.
(5) The priority of a security interest in storm recovery property is not affected by the commingling of storm recovery charges with other amounts. Any pledgee or secured party shall have a perfected security interest in the amount of all storm recovery charges that are deposited in any cash or deposit account of the qualifying utility in which storm recovery charges have been commingled with other funds and any other security interest that may apply to those funds shall be terminated when they are transferred to a segregated account for the assignee or a financing party.
(6) No application of the formula-based adjustment mechanism as provided in this article will affect the validity, perfection, or priority of a security interest in or transfer of storm recovery property.
(7) If a default or termination occurs under the storm recovery bonds, the financing parties or their representatives may foreclose on or otherwise enforce their lien and security interest in any storm recovery property as if they were secured parties with a perfected and prior lien under the code, and the commission may order amounts arising from storm recovery charges be transferred to a separate account for the financing parties’ benefit, to which their lien and security interest shall apply. On application by or on behalf of the financing parties, the Circuit Court of Richland County shall order the sequestration and payment to them of revenues arising from the recovery charges.
(C) Provisions applicable to the sale, assignment, or transfer of storm recovery property:
(1) Any sale, assignment, or other transfer of storm recovery property shall be an absolute transfer and true sale of, and not a pledge of or secured transaction relating to, the seller’s right, title and interest in, to, and under the storm recovery property if the documents governing the transaction expressly state that the transaction is a sale or other absolute transfer other than for federal and state income tax purposes. For all purposes other than federal and state income tax purposes, the parties’ characterization of a transaction as a sale of an interest in storm recovery property shall be conclusive that the transaction is a true sale and that ownership has passed to the party characterized as the purchaser, regardless of whether the purchaser has possession of any documents evidencing or pertaining to the interest. A transfer of an interest in storm recovery property may be created only when all of the following have occurred: (i) the financing order creating the storm recovery property has become effective; (ii) the documents evidencing the transfer of storm recovery property have been executed by the assignor and delivered to the assignee; and (iii) value is received for the storm recovery property. After such a transaction, the storm recovery property is not subject to any claims of the transferor or the transferor’s creditors, other than creditors holding a prior security interest in the storm recovery property perfected in accordance with subsection (B) of this section.
(2) The characterization of the sale, assignment, or other 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 the occurrence of any of the following factors:
(a) commingling of storm recovery charges with other amounts;
(b) the retention by the seller of (i) a partial or residual interest, including an equity interest, in the storm recovery property, whether direct or indirect, or whether subordinate or otherwise, or (ii) the right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of storm recovery charges;
(c) any recourse that the purchaser may have against the seller;
(d) any indemnification rights, obligations, or repurchase rights made or provided by the seller;
(e) the obligation of the seller to collect storm recovery charges on behalf of an assignee;
(f) the transferor acting as the servicer of the storm recovery charges or the existence of any contract that authorizes or requires the electrical utility, to the extent that any interest in storm recovery property is sold or assigned, to contract with the assignee or any financing party that it will continue to operate its system to provide service to its customers, will collect amounts in respect of the storm recovery charges for the benefit and account of such assignee or financing party, and will account for and remit such amounts to or for the account of such assignee or financing party;
(g) the treatment of the sale, conveyance, assignment, or other transfer for tax, financial reporting, or other purposes;
(h) the granting or providing to bondholders a preferred right to the storm recovery property or credit enhancement by the electrical utility or its affiliates with respect to such storm recovery bonds; or
(i) any application of the formula-based adjustment mechanism as provided in this article.
(3) Any right that an electrical utility has in the storm recovery property before its pledge, sale, or transfer or any other right created under this article or created in the financing order and assignable under this article or assignable pursuant to a financing order is property in the form of a contract right or a chose in action. Transfer of an interest in storm recovery property to an assignee is enforceable only upon all of the following items having been attained: (i) the issuance of a financing order, (ii) the assignor having rights in such storm recovery property or the power to transfer rights in such storm recovery property to an assignee, (iii) the execution and delivery by the assignor of transfer documents in connection with the issuance of storm recovery bonds, and (iv) the receipt of value for the storm recovery property. An enforceable transfer of an interest in storm recovery property to an assignee is perfected against all third parties, including subsequent judicial or other lien creditors, when a notice of that transfer has been given by the filing of a financing statement in accordance with subsection (B)(3). The transfer is perfected against third parties as of the date of filing.
(4) The Secretary of State shall maintain any financing statement filed to perfect any sale, assignment, or transfer of storm recovery property under this section in the same manner that the secretary maintains financing statements filed by transmitting utilities under the code. The filing of any financing statement under this article shall be governed by the provisions regarding the filing of financing statements in the code. The filing of such a financing statement is the only method of perfecting a transfer of storm recovery property.
(5) The priority of a transfer perfected under this article is not impaired by any later modification of the financing order or storm recovery property or by the commingling of funds arising from storm recovery property with other funds. Any other security interest that may apply to those funds, other than a security interest perfected under subsection (B) of this section, is terminated when they are transferred to a segregated account for the assignee or a financing party. If storm recovery property has been transferred to an assignee or financing party, any proceeds of that property must be held in trust for the assignee or financing party.
(6) The priority of the conflicting interests of assignees in the same interest or rights in any storm recovery property is determined as follows:
(a) conflicting perfected interests or rights of assignees rank according to priority in time of perfection. Priority dates from the time a filing covering the transfer is made in accordance with item 3 of subsection (B) of this section;
(b) a perfected interest or right of an assignee has priority over a conflicting unperfected interest or right of an assignee;
(c) a perfected interest or right of an assignee has priority over a person who becomes a lien creditor after the perfection of such assignee’s interest or right.