Sec. 16-245j. Rate reduction bonds; terms.
Sec. 16-245j. Rate reduction bonds; terms. (a) A financing entity may issue rate
reduction bonds upon approval by the department in the pertinent financing order. Rate
reduction bonds shall be nonrecourse to the credit or any assets of the electric company
or electric distribution company, other than the transition property as specified in the
pertinent financing order.
(b) Except as otherwise provided in this subsection, the state of Connecticut does
hereby pledge and agree with the owners of transition property and holders of rate
reduction bonds that the state shall neither limit nor alter the competitive transition
assessment, transition property, financing orders, and all rights thereunder until the
obligations, together with the interest thereon, are fully met and discharged, provided
nothing contained in this subsection shall preclude the limitation or alteration if and
when adequate provision shall be made by law for the protection of the owners and
holders. The finance authority as agent for the state is authorized to include this pledge
and undertaking for the state in these obligations.
(c) (1) Financing orders and rate reduction bonds shall not be deemed to constitute
a debt or liability of the state or of any political subdivision thereof, other than the
financing entity, shall not constitute a pledge of the full faith and credit of the state or
any of its political subdivisions, other than the financing entity, but shall be payable
solely from the funds provided under sections 16-245e to 16-245k, inclusive, and shall
not constitute an indebtedness of the state within the meaning of any constitutional or
statutory debt limitation or restriction and, accordingly, shall not be subject to any statutory limitation on the indebtedness of the state and shall not be included in computing
the aggregate indebtedness of the state in respect to and to the extent of any such limitation. This subsection shall in no way preclude bond guarantees or enhancements pursuant
to sections 16-245e to 16-245k, inclusive. All rate reduction 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 Connecticut is pledged to the payment of the principal
of, or interest on, this bond."
(2) The issuance of rate reduction bonds under sections 16-245e to 16-245k, inclusive, 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.
(3) The exercise of the powers granted by sections 16-245e to 16-245k, inclusive,
shall be in all respects for the benefit of the people of this state, for the increase of their
commerce, welfare, and prosperity, and as the exercise of such powers shall constitute
the performance of an essential public function, neither the finance authority, any electric
company or electric distribution company, any affiliate of any electric company or electric distribution company, any financing entity, or any collection or other agent of any
of the foregoing shall be required to pay any taxes or assessments upon or in respect of
any revenues or property received, acquired, transferred, or used by the finance authority, any electric company or electric distribution company, any affiliate of any electric
company or electric distribution company, any financing entity, or any collection or
other agent of any of the foregoing under the provisions of sections 16-245e to 16-245k,
inclusive, or upon or in respect of the income therefrom, and any rate reduction bonds
shall be treated as issued by or on behalf of a public instrumentality created under the
laws of the state for purposes of chapter 229.
(4) The proceeds of any rate reduction bonds shall be used for the purposes approved
by the department in the financing order, including, but not limited to, disbursements
to the General Fund in substitution for such disbursements from the Energy Conservation
and Load Management Fund established by section 16-245m and from the Renewable
Energy Investment Fund established by section 16-245n, the costs of refinancing or
retiring of debt of the electric company or electric distribution company, and associated
federal and state tax liabilities; provided such proceeds shall not be applied to purchase
generation assets or to purchase or redeem stock or to pay dividends to shareholders or
operating expenses other than taxes resulting from the receipt of such proceeds.
(5) Rate reduction bonds are made and declared (A) securities in which all public
officers and public bodies of the state and its political subdivisions, all insurance companies, state banks and trust companies, national banking associations, savings banks,
savings and loan associations, investment companies, executors, administrators, trustees
and other fiduciaries may properly and legally invest funds, including capital in their
control or belonging to them, and (B) securities which may properly and legally be
deposited with and received by any state or municipal officer or any agency or political
subdivision of the state for any purpose for which the deposit of bonds or obligations
of the state is now or may be authorized.
(6) Rate reduction bonds shall mature at such time or times approved by the department in the financing order; provided that such maturity shall not be later than December
31, 2011.
(7) Rate reduction bonds issued and at any time outstanding may, if and to the extent
permitted under the indenture or other agreement pursuant to which they are issued, be
refunded by other rate reduction bonds.
(d) Any rate reduction bonds issued or sold pursuant to or in reliance on and in
accordance with any financing order issued by the department pursuant to sections 16-245e to 16-245k, inclusive, shall be valid and binding in accordance with their terms
notwithstanding such financing order is later vacated, modified, or otherwise held to be
wholly or partly invalid, unless operation of such financing order has been enjoined,
stayed, or suspended by the department or a court of competent jurisdiction prior to
such issuance.
(e) When the state is the authorized financing entity: (1) The Treasurer may enter
into a trust indenture for the benefit of holders of the rate reduction bonds with a corporate
trustee, which may be any trust company or commercial bank qualified to do business
within or without the state; such trust indenture shall be consistent with the financing
order and may contain such other provisions as may be appropriate including those
regulating the investment of funds and the remedies of bondholders; (2) the Treasurer
may make representations and agreements for the benefit of the holders of rate reduction
bonds to make secondary market disclosures; (3) the Treasurer may enter into interest
rate swap agreements and other agreements for the purpose of moderating interest rate
risk on rate reduction bonds as permitted elsewhere within sections 16-245e to 16-245k, inclusive, provided the obligations under such agreements are payable from the
transition property; (4) the Treasurer may enter into such other agreements and instruments to secure the rate reduction bonds as provided in sections 16-245f to 16-245k,
inclusive; and (5) the Treasurer may take such other actions as necessary or appropriate
for the issuance and distribution of the rate reduction bonds pursuant to the financing
order and the Treasurer and the Secretary of the Office of Policy and Management may
make representations and agreements for the benefit of the holders of the rate reduction
bonds which are necessary or appropriate to ensure exclusion of the interest payable on
the rate reduction bonds from gross income under the Internal Revenue Code of 1986,
or any subsequent corresponding internal revenue code of the United States, as from
time to time amended.
(P.A. 98-28, S. 13, 117; June 30 Sp. Sess. P.A. 03-6, S. 48; Sept. 8 Sp. Sess. P.A. 03-1, S. 6; P.A. 04-180, S. 3.)
History: P.A. 98-28 effective July 1, 1998; June 30 Sp. Sess. P.A. 03-6 amended Subsec. (c) to provide consistency
with a plan to avoid disbursements from the Energy Conservation and Load Management and Renewable Energy Investment
funds to the General Fund in the implementation of the budget for the biennium ending June 30, 2005, effective August
20, 2003; Sept. 8 Sp. Sess. P.A. 03-1 added Subsec. (e) re powers of Treasurer and Secretary of Office of Policy and
Management when the state is the authorized financing entity, effective September 10, 2003; P.A. 04-180 amended Subsec.
(e) to make technical changes, effective June 1, 2004.