Bonds - - CA Water

Section § 80840

If the department responsible for energy resource procurement decides it needs financial backing to secure these resources, it can issue bonds. The amount of these bonds needs to be supported by expected payments from a specific fund. Before issuing bonds to the public, they must have a good credit rating from a recognized firm and be structured for repayment with future revenues.

Additionally, any agreement related to these bonds is reviewed by the commission to ensure alignment with financial agreements. Bonds can also be used for specific financial strategies like refinancing at lower rates, converting variable interest rates to fixed, responding to changes in credit ratings, or securing federal tax advantages.

(a)

(1) If the department elects to exercise its central procurement function to conduct one or more competitive solicitations or enter into contracts to procure eligible energy resources pursuant to this division, as authorized by paragraph (4) of subdivision (a) of Section 454.52 of the Public Utilities Code, due to the timing of cost recovery processes, the department may determine that it is necessary or desirable to issue bonds to support activities for the procurement of eligible energy resources pursuant to this division.

(2) Upon making the determination described in paragraph (1), the department may issue bonds for purposes of financing the procurement of eligible energy resources in support of the fund and other related expenses incurred by the department pursuant to this division, and subsequent to the department having entered into an agreement with the commission regarding a revenue requirement. Bonds shall not be issued in an amount the debt service on which, to the extent payable from the fund, is estimated by the department to exceed the amounts estimated to be available in the fund for the payment of the bonds.

(b) Before the issuance of bonds in a public offering, the department shall ensure the bonds have an investment grade rating from at least one nationally recognized investment ratings firm and the document authorizing the issuance of the bonds shall provide for repayment from pledged revenues.

(c) The commission shall have an opportunity to review the trust agreement or other documents pursuant to which the bonds are issued and revenues are pledged, and shall consult with the department regarding the trust agreement or other documents regarding any relevant considerations of the commission and to ensure its consistency with the revenue requirement agreement between the department and commission.

(d) In addition to any other purposes for which bonds may be issued pursuant to this division, bonds may be issued for the following purposes:

(1) Refunding bonds to obtain a lower interest rate.

(2) Refunding bonds bearing a variable interest rate with bonds bearing interest at a fixed rate.

(3) Refunding bonds if a nationally recognized investment ratings firm reduces or withdraws, or proposes to reduce or withdraw, the rating assigned to securities that are secured by bond insurance policies, credit, or liquidity facilities issued by the provider of a bond insurance policy, or a credit or liquidity facility securing the bonds being refunded.

(4) Refunding bonds issued to preserve a federal income tax exemption or to qualify or maintain other federal income tax benefits.

energy procurement financing bond issuance central procurement cost recovery eligible energy resources commission agreement revenue requirement investment grade rating trust agreement refund bonds variable interest rate fixed interest rate credit rating federal tax exemption

(Added by Stats. 2023, Ch. 367, Sec. 15. (AB 1373) Effective October 7, 2023.)

Section § 80841

This law allows the director to decide when it’s necessary to issue bonds to help fund energy projects. The director must inform certain legislative chairs about the decision, and the bonds can have various features like different maturity dates and interest rates. Issuing these bonds won’t personally hold the decision-makers accountable. Bonds can be backed by agreements with trust companies or banks, and they are considered safe investments for many kinds of funds.

These bonds are not a debt of the state itself, meaning the state isn’t obligated to pay them through taxes. However, they can be paid from certain revenues collected by the department. The funds from the bonds are tax-free, and once pledged for repayment, these funds are protected legally even if others have claims against the department.

(a) Whenever the director determines that the issuance of bonds is necessary or desirable to accomplish the goals set forth in this division, including financing the procurement of eligible energy resources, the director shall issue a written determination authorizing the issuance of bonds by the department. The department, in consultation with the Department of Finance, shall notify the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the fiscal committees of each house of the Legislature of its written determination. The bonds shall be sold in the manner, and on the terms and conditions, specified in that determination, and the determination may contain or authorize any other provision, condition, or limitation not inconsistent with this division and those provisions as may be deemed reasonable and proper for the security of the bondholders. Bonds may mature at the time or times, and bear interest at the rate or rates, which may be fixed or variable and be determined by reference to an index or such other method, and may be federally tax exempt, as specified in the determination. Neither the person executing the determination to issue bonds nor any person executing bonds shall be personally liable therefor or be subject to any personal liability or accountability by reason of the issuance of the bonds.

(b) In the discretion of the department, bonds may be secured by a trust agreement by and between the department and a trustee, which may be any trust company or bank having trust powers within or outside the state, or the Treasurer. Notwithstanding any other law, the Treasurer shall not be deemed to have a conflict of interest by reason of acting as the trustee. The department may enter into contracts or arrangements in connection with the issuance and sale of bonds, or with respect to any outstanding bonds for so long as those bonds remain outstanding, as it shall deem to be necessary or desirable for the issuance and further security of the bonds, including, but not limited to, credit enhancement agreements, dealer agreements, purchase contracts, escrow agreements, and similar arrangements.

(c) Bonds shall be legal investments for all trust funds, the funds of all insurance companies, savings and commercial banks, trust companies, executors, administrators, trustees, and other fiduciaries, for state school funds, pension funds, and for any funds that may be invested in county, school, or municipal bonds.

(d) Notwithstanding that bonds may be payable from a special fund, the bonds shall be deemed to be negotiable instruments for all purposes.

(e) Any bonds, and the transfer of and income derived from those bonds, shall at all times be free from taxation of every kind by the state and by the political subdivisions of the state.

(f) Bonds shall not be deemed to constitute a debt or liability of the state or of any political subdivision thereof, other than the department, or a pledge of the full faith and credit of the state or of any such political subdivision, but shall be payable solely from the revenues described in paragraph (1) of subdivision (g). All bonds shall contain a statement to the following effect: “Neither the 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.” The issuance of bonds shall not directly or indirectly or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment.

(g)

(1) The department may pledge and apply all or any part of revenues of any nature whatever accruing to the department, from orders issued, charges imposed, or contracts entered into pursuant to or in furtherance of this division, or the right to receive the same, to the payment or security of any or all of the principal of the bonds or the interest thereon, in the manner and upon terms that the department deems advisable.

(2)

(A) It is the intent of the Legislature that any pledge of moneys, revenues, or property made by the department shall be valid and binding from the time when the pledge is made if the commission finds the pledge was just and reasonable, and that the moneys, revenues, or property so pledged and thereafter collected from retail end-use customers, or paid directly or indirectly to or for the account of the department, is hereby made, and shall immediately be, subject to the lien of that pledge without any physical delivery thereof or further act.

(B) It is the intent of the Legislature that the lien of any such pledge shall be valid and binding against all parties having claims of any kind in tort, contract, or otherwise against the department irrespective of whether those parties have notice thereof, and that no resolution or instrument by which the pledge or lien created pursuant to this subdivision is expressed, confirmed, or approved need be filed or recorded in order to perfect the pledge or lien.

(C) It is the intent of the Legislature that this paragraph, in all respects, govern the creation, perfection, priority, and enforcement of any lien created pursuant to this division.

bonds issuance eligible energy resources trust agreement negotiable instruments tax-exempt bonds revenue pledge credit enhancement agreements secure investment tax power non-pledge lien enforcement department revenues special fund fiscal committees pledge validity funding energy projects

(Added by Stats. 2023, Ch. 367, Sec. 15. (AB 1373) Effective October 7, 2023.)

Section § 80842

This law requires a department to regularly review and adjust the money it needs to cover its expenses. They must ensure there's enough to pay off bonds (debts), buy electricity, cover any required reserves, and manage administrative costs. They must also account for the cost of borrowing money upfront to buy electricity before getting paid by customers. The department will raise needed funds through a charge that can't be avoided, which it must let the commission know about.

(a) The department shall, and in any obligation entered into pursuant to this division may covenant to, at least annually, and more frequently as required, establish and revise revenue requirements sufficient, together with any moneys deposited into the fund, to provide all of the following:

(1) The amounts necessary to pay the principal of, and premium, if any, and interest on, all bonds as and when the same shall become due.

(2) The amounts necessary to pay for electricity purchased by it and to deliver it to purchasers, including the cost of electricity, transmission, scheduling, and other related expenses incurred by the department, or to make payments under any other contracts, agreements, or obligations entered into by it pursuant to this division, in the amounts and at the times the same shall become due.

(3) Reserves in amount as may be determined by the department from time to time to be necessary or desirable.

(4) The pooled money investment rate on funds advanced for electricity purchases before the receipt of payment for those purchases by the purchasing entity.

(5) The administrative costs of the department and other state agencies, including the costs and fees for professional services, bond issuance and sale, and other miscellaneous costs, incurred in connection with the issuance of bonds or the administration of this division.

(b) The department shall notify the commission of its revenue requirement pursuant to the agreement required pursuant to Section 80821 and that revenue requirement shall be satisfied by the recovery of its costs through a nonbypassable charge.

annual revenue requirements bond payments electricity purchase costs nonbypassable charge transmission expenses department administrative costs contract payments reserves for expenses pooled money investment rate scheduling expenses energy delivery costs obligation management charge recovery professional service fees fund deposit management

(Added by Stats. 2023, Ch. 367, Sec. 15. (AB 1373) Effective October 7, 2023.)