Sec. 16-245k. Security interest in transition property described; creation; perfection. Transferring transition property. Duration of department's authority to issue financing orders.
Sec. 16-245k. Security interest in transition property described; creation; perfection. Transferring transition property. Duration of department's authority to
issue financing orders. (a) A security interest in transition property is valid, is enforceable against the pledgor and third parties, subject to the rights of any third parties holding
security interests in the transition property perfected in the manner described in this
section, and attaches when all of the following have taken place:
(1) The department has issued the financing order authorizing the competitive transition assessment included in the transition property.
(2) Value has been given by the pledgees of the transition property.
(3) The pledgor has signed a security agreement covering the transition property.
(b) A valid and enforceable security interest in transition property is perfected when
it has attached and when a financing statement has been filed in accordance with part
5 of article 9 of title 42a naming the pledgor of the transition property as "debtor" and
identifying the transition property. In such case, the financing statement shall be filed
as if the debtor were located in this state. Any description of the transition property shall
be sufficient if it refers to the financing order creating the transition property. A copy
of the financing statement shall be filed with the department by the electric company
or electric distribution company or the financing entity that is the pledgor or transferor of
the transition property, and the department may require the electric company or electric
distribution company or the financing entity 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 transition property is a continuously perfected
security interest in all 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. Transition property shall constitute property
for all purposes, including for contracts securing rate reduction bonds, whether or not
the revenues and proceeds arising with respect thereto have accrued.
(d) Subject to the terms of the security agreement covering the transition property
and the rights of any third parties holding security interests in the transition property
perfected in the manner described in this section, the validity and relative priority of a
security interest created under this section are not defeated or adversely affected by the
commingling of revenues arising with respect to the transition property with other funds
of the electric company or electric distribution company that is the pledgor or transferor
of, or the collection agent with respect to, the transition property, or by any security
interest in a deposit account of that electric company or electric distribution company
into which the revenues are deposited or in such revenues themselves perfected under
article 9 of title 42a or otherwise. Subject to the terms of the security agreement, the
pledgees of the transition property shall have a perfected security interest in all cash
and deposit accounts of the electric company or electric distribution company in which
revenues arising with respect to the transition 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 transition property received by the
electric company or electric distribution company within twelve months before (1) any
default under the security agreement, or (2) the institution of insolvency proceedings
by or against the electric company or electric distribution company, less payments from
the revenues to the pledgees during that twelve-month period.
(e) If an event of default occurs under the security agreement covering the transition
property, the pledgees of the transition property, subject to the terms of the security
agreement, shall have all rights and remedies of a secured party upon default under
article 9 of title 42a, and shall be entitled to foreclose or otherwise enforce their security
interest in the transition property, subject to the rights of any third parties holding prior
security interests in the transition property perfected in the manner provided in this
section. In addition, the department may require, in the financing order creating the
transition property, that, in the event of default by the electric company or electric distribution company in payment of revenues arising with respect to the transition property,
the department and any successor thereto, upon the application by the pledgees or transferees, including transferees under this section, of the transition 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 transition property. 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 transition property. Any
surplus in excess of amounts necessary to pay principal, premium, if any, interest, costs,
and arrearages on the rate reduction bonds, and other costs arising under the security
agreement, shall be remitted to the debtor or to the pledgor or transferor.
(f) Sections 42a-9-204 and 42a-9-205 shall apply to a pledge of transition property
by an electric company or electric distribution company, an affiliate of an electric company or electric distribution company, or a financing entity.
(g) This section sets forth the terms by which a consensual security interest can
be created and perfected in the transition property. Unless otherwise ordered by the
department with respect to any series of rate reduction bonds on or prior to the issuance
of the series, there shall exist a statutory lien as provided in this subsection. Upon the
effective date of the financing order, there shall exist a first priority lien on all transition
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 electric company or electric distribution company, 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 rate reduction 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 article 9 of title 42a, and shall be
entitled to foreclose or otherwise enforce this statutory lien in the transition property.
This lien shall attach to the transition property regardless of who shall own, or shall
subsequently be determined to own, the transition property including any electric company or electric distribution company, any affiliate thereof, the financing entity, or any
other person. This lien shall be valid, perfected, and enforceable against the owner of
the transition 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 subsection (b) of this
section. Financing statements so filed may be "protective filings" and shall not be evidence of the ownership of the transition property. A perfected statutory lien in transition
property is a continuously perfected lien in all revenues and proceeds arising with respect
thereto, whether or not the revenues or proceeds have accrued. Conflicting liens shall
rank according to priority in time of perfection. Transition property shall constitute
property for all purposes, including for contracts securing rate reduction bonds, whether
or not the revenues and proceeds arising with respect thereto have accrued. In addition,
the department may require, in the financing order creating the transition property, that,
in the event of default by the electric company or electric distribution company in payment of revenues arising with respect to transition property, the department and any
successor thereto, upon the application by the beneficiaries of the statutory lien, and
without limiting any other remedies available to the beneficiaries by reason of the default, shall order the sequestration and payment to the beneficiaries of revenues arising
with respect to the transition property. 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 transition property. Any surplus in
excess of amounts necessary to pay principal, premium, if any, interest, costs, and arrearages on the rate reduction bonds, and other costs arising in connection with the documents governing the rate reduction bonds, shall be remitted to the debtor or to the pledgor
or transferor.
(h) A transfer of transition property by an electric company or electric distribution
company to an affiliate or to a financing entity, or by an affiliate of an electric company
or electric distribution company or a financing entity to another financing entity, which
the parties have in the governing documentation 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 transition property, in each case notwithstanding
any contrary treatment of such transfer for accounting, tax, or other purposes. Granting
to holders of rate reduction bonds a preferred right to revenues of the electric company
or electric distribution company or the financing entity, or the provision by the company
of other credit enhancement with respect to rate reduction bonds, shall not impair or
negate the characterization of any transfer as a true sale, in each case notwithstanding
any contrary treatment of such transfer for accounting, tax or other purposes.
(i) A transfer of transition property shall be deemed perfected as against third persons when both of the following have taken place:
(1) The department has issued the financing order authorizing the competitive transition assessment included in the transition property.
(2) An assignment of the transition property in writing has been executed and delivered to the transferee.
(j) As between bona fide assignees of the same right for value without notice, the
assignee first filing a financing statement in accordance with part 5 of article 9 of title
42a naming the assignor of the transition property as debtor and identifying the transition
property has priority. In such case, the financing statement shall be filed as if the debtor
were located in this state. Any description of the transition property shall be sufficient
if it refers to the financing order creating the transition property. A copy of the financing
statement shall be filed by the assignee or the financing entity with the department, and
the department may require the assignor or the assignee or the financing entity 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.
(k) Any successor to the electric company or electric distribution company, 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 electric company or electric distribution company pursuant
to sections 16-245e to 16-245k, inclusive, in the same manner and to the same extent
as the electric company or electric distribution company, including, but not limited to,
collecting and paying to the holders of rate reduction bonds or their representatives or
the applicable financing entity revenues arising with respect to the transition property
sold to the applicable financing entity or pledged to secure rate reduction bonds.
(l) The authority of the department to issue financing orders pursuant to sections
16-245e to 16-245k, inclusive, shall expire on December 31, 2008. The expiration of
the authority shall have no effect upon financing orders adopted by the department
pursuant to sections 16-245e to 16-245k, inclusive, or any transition property arising
therefrom, or upon the charges authorized to be levied thereunder, or the rights, interests,
and obligations of the electric company or electric distribution company or a financing
entity or holders of rate reduction bonds pursuant to the financing order, or the authority
of the department to monitor, supervise, or take further action with respect to the financing order in accordance with the terms of sections 16-245e to 16-245k, inclusive, and
of the financing order.
(P.A. 98-28, S. 14, 117; P.A. 01-132, S. 166, 167; P.A. 03-62, S. 19, 20; Sept. 8 Sp. Sess. P.A. 03-1, S. 7; P.A. 04-180,
S. 4.)
History: P.A. 98-28 effective July 1, 1998; P.A. 01-132 amended Subsecs. (b) and (j) to replace "part 4" with "part 5"
of article 9 of title 42a and add provision that in each case the financing statement shall be filed as if the debtor were located
in this state; P.A. 03-62 amended Subsec. (b) to rephrase and reposition provision requiring the financing statement to be
filed as if the debtor were located in this state and amended Subsec. (j) to make a technical change; Sept. 8 Sp. Sess. P.A.
03-1 amended Subsecs. (b), (h) and (j) to add references to the financing entity and amended Subsec. (d) to add reference
to the collection agent with respect to the transition property and make a technical change, effective September 10, 2003;
P.A. 04-180 amended Subsec. (b) to provide that the department may require the financing entity to make other filings
with respect to the security interest, effective June 1, 2004.