(a) The procedures and standards of this subchapter and the provisions of Subchapter G, Chapter 39, govern an electric utility’s application for, and the commission’s issuance of, a financing order to provide for the securitization of system restoration costs, or to otherwise provide for the recovery of system restoration costs.
(b) Subject to the standards, procedures, and tests contained in this subchapter and Subchapter G, Chapter 39, the commission shall adopt a financing order on the application of the electric utility to recover its system restoration costs. If on its own motion or complaint by an affected person, the commission determines that it is likely that securitization of system restoration costs would meet the tests contained in § 36.401(b), the commission shall require the utility to file an application for a financing order. On the commission’s issuance of a financing order allowing for recovery and securitization of system restoration costs, the provisions of this subchapter and Subchapter G, Chapter 39, continue to govern the financing order and the rights and interests established in the order, and this subchapter and Subchapter G, Chapter 39, continue to govern any transition bonds issued pursuant to the financing order. To the extent any conflict exists between the provisions of this subchapter and Subchapter G, Chapter 39, in cases involving the securitization of system restoration costs, the provisions of this subchapter control.

(c) For purposes of this subchapter, “financing order,” as defined by § 39.302 and as used in Subchapter G, Chapter 39, includes a financing order authorizing the securitization of system restoration costs.
(d) For purposes of this subchapter, “qualified costs,” as defined by § 39.302 and as used in Subchapter G, Chapter 39, includes 100 percent of the electric utility’s system restoration costs, net of any insurance proceeds, governmental grants, or other source of funding that compensate the utility for system restoration costs, received by the utility at the time it files an application for a financing order. Qualified costs also include the costs of issuing, supporting, and servicing transition bonds and any costs of retiring and refunding existing debt and equity securities of an electric utility subject to this subchapter in connection with the issuance of transition bonds. For purposes of this subchapter, the term qualified costs also includes:
(1) the costs to the commission of acquiring professional services for the purpose of evaluating proposed transactions under this subchapter; and
(2) costs associated with ancillary agreements such as any bond insurance policy, letter of credit, reserve account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support arrangement, or other financial arrangement entered into in connection with the issuance or payment of transition bonds.
(e) For purposes of this subchapter, “transition bonds,” as defined by § 39.302 and as used in Subchapter G, Chapter 39, includes transition bonds issued in association with the recovery of system restoration costs. Transition bonds issued to securitize system restoration costs may be called “system restoration bonds” or may be called by any other name acceptable to the issuer and the underwriters of the transition bonds.
(f) For purposes of this subchapter, “transition charges,” as defined by § 39.302 and as used in Subchapter G, Chapter 39, includes nonbypassable amounts to be charged for the use of electric services, approved by the commission under a financing order to recover system restoration costs, that shall be collected by an electric utility, its successors, an assignee, or other collection agents as provided for in the financing order. Transition charges approved by the commission under a financing order to recover system restoration costs may be called “system restoration charges” or may be called by any other name acceptable to the issuer and the underwriters of the transition bonds.
(g) Notwithstanding § 39.303(c), system restoration costs shall be functionalized and allocated to customers in the same manner as the corresponding facilities and related expenses are functionalized and allocated in the electric utility’s current base rates. For an electric utility operating within the Electric Reliability Council of Texas, system restoration costs that are properly includable in the transmission cost of service mechanism adopted under § 35.004 and associated deferred costs not included under § 35.004 shall be recovered under the method of pricing provided for in that section and commission rules promulgated under that section; provided, however, that an electric utility operating under a rate freeze or other limitation on its ability to pass through wholesale costs to its customers may defer such costs and accrue carrying costs at its weighted average cost of capital as last approved by the commission in a general rate proceeding until such time as the freeze or limitation expires.
(h) The amount of any accumulated deferred federal income taxes offset, used to determine the securitization total, may not be considered in future rate proceedings. Any tax obligation of the electric utility arising from its receipt of securitization bond proceeds, or from the collection and remittance of transition charges, shall be recovered by the electric utility through the commission’s implementation of this subchapter.
(i) Notwithstanding a rate freeze or limitations on an electric utility’s ability to change rates authorized or imposed by any other provision of this title or by a regulatory authority, an electric utility is entitled to recover system restoration costs consistent with the provisions of this subchapter.
(j) If in the course of a proceeding to adopt a financing order the commission determines that the recovery of all or any portion of an electric utility’s system restoration costs, using securitization, is not beneficial to ratepayers of the electric utility, under one or more of the tests applied to determine those benefits, the commission shall nonetheless use the proceeding to issue an order permitting the electric utility to recover the remainder of its system restoration costs through an appropriate customer surcharge mechanism, including carrying costs at the electric utility’s weighted average cost of capital as last approved by the commission in a general rate proceeding, to the extent that the electric utility has not securitized those costs. A rate proceeding under Subchapter C or D shall not be required to determine and implement this surcharge mechanism. On the final implementation of rates resulting from the filing of a rate proceeding under Subchapter C or D that provides for the recovery of all remaining system restoration costs, a rider or surcharge mechanism adopted under this subsection shall expire. This subsection is limited to instances in which an electric utility has incurred system restoration costs of $100 million or more in any calendar year after January 1, 2008.