HF 4567

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/23/2022 10:40am

A bill for an act
relating to energy; creating a process regulated by the Public Utilities Commission
allowing natural gas utilities to sell bonds as a way to reduce economic impacts
on customers when extraordinary events damage utility infrastructure or impose
significant costs; establishing an account; appropriating money; proposing coding
for new law in Minnesota Statutes, chapter 216B.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [216B.491] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For the purposes of sections 216B.491 to 216B.499, the terms
defined in this subdivision have the meanings given.
new text end

new text begin Subd. 2. new text end

new text begin Ancillary agreement. new text end

new text begin "Ancillary agreement" means any bond, insurance policy,
letter of credit, reserve account, surety bond, interest rate lock or swap arrangement, liquidity
or credit support arrangement, or other financial arrangement entered into in connection
with extraordinary event bonds that is designed to promote the credit quality and
marketability of extraordinary event bonds or to mitigate the risk of an increase in interest
rates.
new text end

new text begin Subd. 3. new text end

new text begin Assignee. new text end

new text begin "Assignee" means any person to which an interest in extraordinary
event property is sold, assigned, transferred, or conveyed, other than as security, and any
successor to or subsequent assignee of the person.
new text end

new text begin Subd. 4. new text end

new text begin Bondholder. new text end

new text begin "Bondholder" means any holder or owner of extraordinary event
bonds.
new text end

new text begin Subd. 5. new text end

new text begin Customer. new text end

new text begin "Customer" means a person who takes natural gas service from a
natural gas utility for consumption of natural gas in Minnesota.
new text end

new text begin Subd. 6. new text end

new text begin Extraordinary event. new text end

new text begin (a) "Extraordinary event" means an event arising from
unforeseen circumstances and of sufficient magnitude as determined by the commission:
new text end

new text begin (1) to permanently prevent or impair a utility from providing natural gas service to a
significant proportion of customers or to otherwise impose significant costs on customers;
and
new text end

new text begin (2) for which the issuance of extraordinary event bonds in response to the event meets
the conditions of section 216B.492, subdivision 2, as determined by the commission.
new text end

new text begin (b) Extraordinary event includes but is not limited to a storm event or other natural
disaster, an act of God, war, terrorism, sabotage or vandalism, a cybersecurity attack, or a
temporary significant increase in the wholesale price of natural gas.
new text end

new text begin Subd. 7. new text end

new text begin Extraordinary event activity. new text end

new text begin "Extraordinary event activity" means an activity
undertaken by or on behalf of a utility to restore the utility's ability to provide natural gas
service following damage to or destruction of the utility's infrastructure by one or more
extraordinary events, including activities related to mobilization, staging, construction,
reconstruction, replacement, or repair of natural gas transmission, distribution, storage, or
general facilities.
new text end

new text begin Subd. 8. new text end

new text begin Extraordinary event bonds. new text end

new text begin "Extraordinary event bonds" means low-cost
corporate securities, including but not limited to senior secured bonds, debentures, notes,
certificates of participation, certificates of beneficial interest, certificates of ownership, or
other evidences of indebtedness or ownership that have a scheduled maturity of no longer
than 30 years and a final legal maturity date that is not later than 32 years from the issue
date, that are rated AA or Aa2 or better by a major independent credit rating agency at the
time of issuance, and that are issued by a utility or an assignee under a financing order.
new text end

new text begin Subd. 9. new text end

new text begin Extraordinary event charge. new text end

new text begin "Extraordinary event charge" means a
nonbypassable charge that:
new text end

new text begin (1) is imposed on all customer bills by a utility that is the subject of a financing order
or the utility's successors or assignees;
new text end

new text begin (2) is separate from the utility's base rates; and
new text end

new text begin (3) provides a source of revenue solely to repay, finance, or refinance extraordinary
event costs.
new text end

new text begin Subd. 10. new text end

new text begin Extraordinary event costs. new text end

new text begin "Extraordinary event costs":
new text end

new text begin (1) means all incremental costs of extraordinary event activities that are approved by
the commission in a financing order issued under section 216B.492 as being:
new text end

new text begin (i) necessary to enable the utility to restore natural gas service to customers whose service
was affected by an extraordinary event; and
new text end

new text begin (ii) prudent and reasonable;
new text end

new text begin (2) includes costs to repurchase equity or retire any indebtedness relating to extraordinary
event activities;
new text end

new text begin (3) shall be net of applicable insurance proceeds, tax benefits, and any other amounts
intended to reimburse the utility for extraordinary event activities, including government
grants or aid of any kind;
new text end

new text begin (4) do not include any monetary penalty, fine, or forfeiture assessed against a utility by
a government agency or court under a federal or state environmental statute, rule, or
regulation; and
new text end

new text begin (5) must be adjusted to reflect:
new text end

new text begin (i) the difference, as determined by the commission, between extraordinary event costs
that the utility expects to incur and actual, reasonable, and prudent costs incurred; or
new text end

new text begin (ii) a more fair or reasonable allocation of extraordinary event costs to customers over
time, as expressed in a commission order.
new text end

new text begin Subd. 11. new text end

new text begin Extraordinary event property. new text end

new text begin "Extraordinary event property" means:
new text end

new text begin (1) all rights and interests of a utility or the utility's successor or assignee under a
financing order for the right to impose, bill, collect, receive, and obtain periodic adjustments
to extraordinary event charges authorized under a financing order issued by the commission;
and
new text end

new text begin (2) all revenue, collections, claims, rights to payments, payments, money, or proceeds
arising from the rights and interests specified in clause (1), regardless of whether any are
commingled with other revenue, collections, rights to payment, payments, money, or
proceeds.
new text end

new text begin Subd. 12. new text end

new text begin Extraordinary event revenue. new text end

new text begin "Extraordinary event revenue" means revenue,
receipts, collections, payments, money, claims, or other proceeds arising from extraordinary
event property.
new text end

new text begin Subd. 13. new text end

new text begin Financing costs. new text end

new text begin "Financing costs" means:
new text end

new text begin (1) principal, interest, and redemption premiums that are payable on extraordinary event
bonds;
new text end

new text begin (2) payments required under an ancillary agreement and amounts required to fund or
replenish a reserve account or other accounts established under the terms of any indenture,
ancillary agreement, or other financing document pertaining to the bonds;
new text end

new text begin (3) other demonstrable costs related to issuing, supporting, repaying, refunding, and
servicing the bonds, including but not limited to servicing fees, accounting and auditing
fees, trustee fees, legal fees, consulting fees, financial advisor fees, administrative fees,
placement and underwriting fees, capitalized interest, rating agency fees, stock exchange
listing and compliance fees, security registration fees, filing fees, information technology
programming costs, and any other demonstrable costs necessary to otherwise ensure and
guarantee the timely payment of the bonds or other amounts or charges payable in connection
with the bonds;
new text end

new text begin (4) taxes and license fees imposed on the revenue generated from collecting an
extraordinary event charge;
new text end

new text begin (5) state and local taxes, including franchise, sales and use, and other taxes or similar
charges, including but not limited to regulatory assessment fees, whether paid, payable, or
accrued; and
new text end

new text begin (6) costs incurred by the commission to hire and compensate additional temporary staff
needed to perform the commission's responsibilities under this section and, in accordance
with section 216B.494, to engage specialized counsel and expert consultants experienced
in securitized utility ratepayer-backed bond financing similar to extraordinary event bonds.
new text end

new text begin Subd. 14. new text end

new text begin Financing order. new text end

new text begin "Financing order" means an order issued by the commission
under section 216B.492 that authorizes an applicant to:
new text end

new text begin (1) issue extraordinary event bonds in one or more series;
new text end

new text begin (2) impose, charge, and collect extraordinary event charges; and
new text end

new text begin (3) create extraordinary event property.
new text end

new text begin Subd. 15. new text end

new text begin Financing party. new text end

new text begin "Financing party" means a holder of extraordinary event
bonds and a trustee, a collateral agent, a party under an ancillary agreement, or any other
person acting for the benefit of extraordinary event bondholders.
new text end

new text begin Subd. 16. new text end

new text begin Natural gas facility. new text end

new text begin "Natural gas facility" means natural gas pipelines,
including distribution lines, underground storage areas, liquefied natural gas facilities,
propane storage tanks, and other facilities the commission determines are used and useful
to provide natural gas service to retail and transportation customers in Minnesota.
new text end

new text begin Subd. 17. new text end

new text begin Nonbypassable. new text end

new text begin "Nonbypassable" means that the payment of an extraordinary
event charge required to repay bonds and related costs may not be avoided by any retail
customer located within a utility service area.
new text end

new text begin Subd. 18. new text end

new text begin Pretax costs. new text end

new text begin "Pretax costs" means costs incurred by a utility and approved
by the commission, including but not limited to:
new text end

new text begin (1) unrecovered capitalized costs of replaced natural gas facilities damaged or destroyed
by a storm event;
new text end

new text begin (2) costs to decommission and restore the site of a natural gas facility damaged or
destroyed by an extraordinary event;
new text end

new text begin (3) other applicable capital and operating costs, accrued carrying charges, deferred
expenses, reductions for applicable insurance, and salvage proceeds; and
new text end

new text begin (4) costs to retire any existing indebtedness, fees, costs, and expenses to modify existing
debt agreements, or for waivers or consents related to existing debt agreements.
new text end

new text begin Subd. 19. new text end

new text begin Storm event. new text end

new text begin "Storm event" means a tornado, derecho, ice or snow storm,
flood, earthquake, or other significant weather or natural disaster that causes substantial
damage to a utility's infrastructure.
new text end

new text begin Subd. 20. new text end

new text begin Successor. new text end

new text begin "Successor" means a legal entity that succeeds by operation of law
to the rights and obligations of another legal entity as a result of bankruptcy, reorganization,
restructuring, other insolvency proceeding, merger, acquisition, consolidation, or sale or
transfer of assets.
new text end

new text begin Subd. 21. new text end

new text begin Utility. new text end

new text begin "Utility" means a public utility, as defined in section 216B.02,
subdivision 4, that provides natural gas service to Minnesota customers. Utility includes
the utility's successors or assignees.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

new text begin [216B.492] FINANCING ORDER.
new text end

new text begin Subdivision 1. new text end

new text begin Application. new text end

new text begin (a) A utility may file an application with the commission
for the issuance of a financing order to enable the utility to recover extraordinary event costs
through the issuance of extraordinary event bonds under this section.
new text end

new text begin (b) The application must include the following information, as applicable:
new text end

new text begin (1) a description of each natural gas facility to be repaired or replaced;
new text end

new text begin (2) the undepreciated value remaining in the natural gas facility whose repair or
replacement is proposed to be financed through the issuance of bonds under sections
216B.491 to 216B.499, and the method used to calculate the amount;
new text end

new text begin (3) the estimated amount of costs imposed on customers resulting from an extraordinary
event that involves no physical damage to natural gas facilities;
new text end

new text begin (4) the estimated savings or estimated mitigation of rate impacts to utility customers if
the financing order is issued as requested in the application, calculated by comparing the
costs to customers that are expected to result from implementing the financing order and
the estimated costs associated with implementing traditional utility financing mechanisms
with respect to the same undepreciated balance, expressed in net present value terms;
new text end

new text begin (5) a description of the nonbypassable extraordinary event charge utility customers
would be required to pay in order to fully recover financing costs and the method and
assumptions used to calculate the amount;
new text end

new text begin (6) a proposed methodology to allocate the revenue requirement for the extraordinary
event charge among the utility's customer classes;
new text end

new text begin (7) a description of a proposed adjustment mechanism to be implemented when necessary
to correct any overcollection or undercollection of extraordinary event charges, in order to
complete payment of scheduled principal and interest on extraordinary event bonds and
other financing costs in a timely fashion;
new text end

new text begin (8) a memorandum with supporting exhibits, from a securities firm that is experienced
in the marketing of bonds and that is approved by the commissioner of management and
budget, indicating the proposed issuance satisfies the current published AA or Aa2 or higher
rating or equivalent rating criteria of at least one nationally recognized securities rating
organization for issuances similar to the proposed extraordinary event bonds;
new text end

new text begin (9) an estimate of the timing of the issuance and the term of the extraordinary event
bonds, or series of bonds, provided that the scheduled final maturity for each bond issuance
does not exceed 30 years;
new text end

new text begin (10) identification of plans to sell, assign, transfer, or convey, other than as a security,
interest in extraordinary event property, including identification of an assignee, and
demonstration that the assignee is a financing entity wholly owned, directly or indirectly,
by the utility;
new text end

new text begin (11) identification of ancillary agreements that may be necessary or appropriate;
new text end

new text begin (12) one or more alternative financing scenarios in addition to the preferred scenario
contained in the application;
new text end

new text begin (13) the extent of damage to the utility's infrastructure caused by an extraordinary event
and the estimated costs to repair or replace the damaged infrastructure;
new text end

new text begin (14) a schedule of proposed repairs to and replacement of damaged infrastructure;
new text end

new text begin (15) a description of steps taken to provide customers interim natural gas service while
the damaged infrastructure is being repaired or replaced; and
new text end

new text begin (16) a description of impacts on the utility's current workforce resulting from
implementing an infrastructure repair or replacement plan following an extraordinary event.
new text end

new text begin Subd. 2. new text end

new text begin Findings. new text end

new text begin After providing notice and holding a public hearing on an application
filed under subdivision 1, the commission may issue a financing order if the commission
finds that:
new text end

new text begin (1) the extraordinary event costs described in the application are reasonable;
new text end

new text begin (2) the proposed issuance of extraordinary event bonds and the imposition and collection
of extraordinary event charges:
new text end

new text begin (i) are just and reasonable;
new text end

new text begin (ii) are consistent with the public interest;
new text end

new text begin (iii) constitute a prudent and reasonable mechanism to finance the extraordinary event
costs; and
new text end

new text begin (iv) provide tangible and quantifiable benefits to customers that exceed the benefits that
would have been achieved absent the issuance of extraordinary event bonds; and
new text end

new text begin (3) the proposed structuring, marketing, and pricing of the extraordinary event bonds:
new text end

new text begin (i) significantly lower overall costs to customers or significantly mitigate rate impacts
to customers relative to traditional methods of financing; and
new text end

new text begin (ii) achieve significant customer savings or significant mitigation of rate impacts to
customers, as determined by the commission in a financing order, consistent with market
conditions at the time of sale and the terms of the financing order.
new text end

new text begin Subd. 3. new text end

new text begin Contents. new text end

new text begin (a) A financing order issued under this section must:
new text end

new text begin (1) determine the maximum amount of extraordinary event costs that may be financed
from proceeds of extraordinary event bonds issued pursuant to the financing order;
new text end

new text begin (2) describe the proposed customer billing mechanism for extraordinary event charges
and include a finding that the mechanism is just and reasonable;
new text end

new text begin (3) describe the financing costs that may be recovered through extraordinary event
charges and the period over which the costs may be recovered, which must end no earlier
than the date of final legal maturity of the extraordinary event bonds;
new text end

new text begin (4) describe the extraordinary event property that is created and that may be used to pay,
and secure the payment of, the extraordinary event bonds and financing costs authorized in
the financing order;
new text end

new text begin (5) authorize the utility to finance extraordinary event costs through the issuance of one
or more series of extraordinary event bonds. A utility is not required to secure a separate
financing order for each issuance of extraordinary event bonds or for each scheduled phase
of the replacement of natural gas facilities approved in the financing order;
new text end

new text begin (6) include a formula-based mechanism that must be used to make expeditious periodic
adjustments to the extraordinary event charge authorized by the financing order that are
necessary to correct for any overcollection or undercollection, or to otherwise guarantee
the timely payment of extraordinary event bonds, financing costs, and other required amounts
and charges payable in connection with extraordinary event bonds;
new text end

new text begin (7) specify the degree of flexibility afforded to the utility in establishing the terms and
conditions of the extraordinary event bonds, including but not limited to repayment schedules,
expected interest rates, and other financing costs;
new text end

new text begin (8) specify that the extraordinary event bonds must be issued as soon as feasible following
issuance of the financing order;
new text end

new text begin (9) require the utility, at the same time as extraordinary event charges are initially
collected and independent of the schedule to close and decommission the natural gas facility
replaced as the result of an extraordinary event, to remove the natural gas facility from the
utility's rate base and commensurately reduce the utility's base rates;
new text end

new text begin (10) specify a future ratemaking process to reconcile any difference between the projected
pretax costs included in the amount financed by extraordinary event bonds and the final
actual pretax costs incurred by the utility to retire or replace the natural gas facility;
new text end

new text begin (11) specify information regarding bond issuance and repayments, financing costs,
energy transaction charges, extraordinary event property, and related matters that the natural
gas utility is required to provide to the commission on a schedule determined by the
commission;
new text end

new text begin (12) allow and may require the creation of a utility's extraordinary event property to be
conditioned on, and occur simultaneously with, the sale or other transfer of the extraordinary
event property to an assignee and the pledge of the extraordinary event property to secure
the extraordinary event bonds;
new text end

new text begin (13) ensure that the structuring, marketing, and pricing of extraordinary event bonds
result in reasonable securitization bond charges and significant customer savings or rate
impact mitigation, consistent with market conditions and the terms of the financing order;
and
new text end

new text begin (14) specify that a utility financing the replacement of one or more natural gas facilities
after the natural gas facilities subject to the finance order are removed from the utility's rate
base is prohibited from:
new text end

new text begin (i) operating the natural gas facilities; or
new text end

new text begin (ii) selling the natural gas facilities to another entity to be operated as natural gas facilities.
new text end

new text begin (b) A financing order issued under this section may:
new text end

new text begin (1) include conditions different from those requested in the application that the
commission determines are necessary to:
new text end

new text begin (i) promote the public interest; and
new text end

new text begin (ii) maximize the financial benefits or minimize the financial risks of the transaction to
customers and to directly impacted Minnesota workers and communities; and
new text end

new text begin (2) specify the selection of one or more underwriters of the extraordinary event bonds.
new text end

new text begin Subd. 4. new text end

new text begin Duration; irrevocability; subsequent order. new text end

new text begin (a) A financing order remains
in effect until the extraordinary event bonds issued under the financing order and all financing
costs related to the bonds have been paid in full.
new text end

new text begin (b) A financing order remains in effect and unabated notwithstanding the bankruptcy,
reorganization, or insolvency of the utility to which the financing order applies or any
affiliate, successor, or assignee of the utility to which the financing order applies.
new text end

new text begin (c) Subject to judicial review under section 216B.52, a financing order is irrevocable
and is not reviewable by a future commission. The commission may not reduce, impair,
postpone, or terminate extraordinary event charges approved in a financing order, or impair
extraordinary event property or the collection or recovery of extraordinary event revenue.
new text end

new text begin (d) Notwithstanding paragraph (c), the commission may, on the commission's own
motion or at the request of a utility or any other person, commence a proceeding and issue
a subsequent financing order that provides for refinancing, retiring, or refunding extraordinary
event bonds issued under the original financing order if:
new text end

new text begin (1) the commission makes all of the findings specified in subdivision 2 with respect to
the subsequent financing order; and
new text end

new text begin (2) the modification contained in the subsequent financing order does not in any way
impair the covenants and terms of the extraordinary event bonds being refinanced, retired,
or refunded.
new text end

new text begin Subd. 5. new text end

new text begin Effect on commission jurisdiction. new text end

new text begin (a) Except as provided in paragraph (b),
the commission, in exercising the powers and carrying out the duties under this section, is
prohibited from:
new text end

new text begin (1) considering extraordinary event bonds issued under this section to be debt of the
utility other than for income tax purposes, unless it is necessary to consider the extraordinary
event bonds to be debt in order to achieve consistency with prevailing utility debt rating
methodologies;
new text end

new text begin (2) considering the extraordinary event charges paid under the financing order to be
revenue of the utility;
new text end

new text begin (3) considering the extraordinary event or financing costs specified in the financing
order to be the regulated costs or assets of the utility; or
new text end

new text begin (4) determining any prudent action taken by a utility that is consistent with the financing
order to be unjust or unreasonable.
new text end

new text begin (b) Nothing in this subdivision:
new text end

new text begin (1) affects the authority of the commission to apply or modify any billing mechanism
designed to recover extraordinary event charges;
new text end

new text begin (2) prevents or precludes the commission from investigating a utility's compliance with
the terms and conditions of a financing order and requiring compliance with the financing
order; or
new text end

new text begin (3) prevents or precludes the commission from imposing regulatory sanctions against a
utility for failure to comply with the terms and conditions of a financing order or the
requirements of this section.
new text end

new text begin (c) The commission is prohibited from refusing to allow a utility to recover any costs
associated with the replacement of natural gas facilities solely because the utility has elected
to finance the natural gas facility replacement through a financing mechanism other than
extraordinary event bonds.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

new text begin [216B.493] POSTORDER COMMISSION DUTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Financing cost review. new text end

new text begin Within 120 days after the date extraordinary
event bonds are issued, a utility subject to a financing order must file with the commission
the actual initial and ongoing financing costs, the final structure and pricing of the
extraordinary event bonds, and the actual extraordinary event charge. The commission must
review the prudence of the natural gas utility's actions to determine whether the actual
financing costs were the lowest that could reasonably be achieved given the terms of the
financing order and market conditions prevailing at the time of the bond's issuance.
new text end

new text begin Subd. 2. new text end

new text begin Enforcement. new text end

new text begin If the commission determines that a utility's actions under this
section are not prudent or are inconsistent with the financing order, the commission may
apply any remedies available, provided that any remedy applied may not directly or indirectly
impair the security for the extraordinary event bonds.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

new text begin [216B.494] USE OF OUTSIDE EXPERTS.
new text end

new text begin (a) In carrying out the duties under this section, the commission may:
new text end

new text begin (1) contract with outside consultants and counsel experienced in securitized utility
customer-backed bond financing similar to extraordinary event bonds; and
new text end

new text begin (2) hire and compensate additional temporary staff as needed.
new text end

new text begin Expenses incurred by the commission under this paragraph must be treated as financing
costs and included in the extraordinary event charge. The costs incurred under clause (1)
are not an obligation of the state and are assigned solely to the transaction.
new text end

new text begin (b) If a utility's application for a financing order is denied or withdrawn for any reason
and extraordinary event bonds are not issued, the commission's costs to retain expert
consultants under this section must be paid by the applicant utility and are deemed to be
prudent deferred expenses eligible for recovery in the utility's future rates.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

new text begin [216B.495] EXTRAORDINARY EVENT CHARGE; BILLING TREATMENT.
new text end

new text begin (a) A utility that obtains a financing order and causes extraordinary event bonds to be
issued must:
new text end

new text begin (1) include on each customer's monthly natural gas bill:
new text end

new text begin (i) a statement that a portion of the charges represents extraordinary event charges
approved in a financing order;
new text end

new text begin (ii) the amount and rate of the extraordinary event charge as a separate line item titled
"extraordinary event charge"; and
new text end

new text begin (iii) if extraordinary event property has been transferred to an assignee, a statement that
the assignee is the owner of the rights to extraordinary event charges and that the utility or
other entity, if applicable, is acting as a collection agent or servicer for the assignee; and
new text end

new text begin (2) file annually with the commission:
new text end

new text begin (i) a calculation of the impact of financing the retirement or replacement of natural gas
facilities on customer rates, itemized by customer class; and
new text end

new text begin (ii) evidence demonstrating that extraordinary event revenues are applied solely to the
repayment of extraordinary event bonds and other financing costs.
new text end

new text begin (b) Extraordinary event charges are nonbypassable and must be paid by all existing and
future customers receiving service from the utility or the utility's successors or assignees
under commission-approved rate schedules or special contracts.
new text end

new text begin (c) A utility's failure to comply with this section does not invalidate, impair, or affect
any financing order, extraordinary event property, extraordinary event charge, or
extraordinary event bonds, but does subject the utility to penalties under applicable
commission rules.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

new text begin [216B.496] EXTRAORDINARY EVENT PROPERTY.
new text end

new text begin Subdivision 1. new text end

new text begin General. new text end

new text begin (a) Extraordinary event property is an existing present property
right or interest in a property right, even though the imposition and collection of extraordinary
event charges depend on the utility collecting extraordinary event charges and on future
natural gas consumption. The property right or interest exists regardless of whether the
revenues or proceeds arising from the extraordinary event property have been billed, have
accrued, or have been collected.
new text end

new text begin (b) Extraordinary event property exists until all extraordinary event bonds issued under
a financing order are paid in full and all financing costs and other costs of the extraordinary
event bonds have been recovered in full.
new text end

new text begin (c) All or any portion of extraordinary event property described in a financing order
issued to a utility may be transferred, sold, conveyed, or assigned to a successor or assignee
that is wholly owned, directly or indirectly, by the utility and is created for the limited
purpose of acquiring, owning, or administering extraordinary event property or issuing
extraordinary event bonds authorized by the financing order. All or any portion of
extraordinary event property may be pledged to secure extraordinary event bonds issued
under a financing order, amounts payable to financing parties and to counterparties under
any ancillary agreements, and other financing costs. Each transfer, sale, conveyance,
assignment, or pledge by a utility or an affiliate of extraordinary event property is a
transaction in the ordinary course of business.
new text end

new text begin (d) If a utility defaults on any required payment of charges arising from extraordinary
event property described in a financing order, a court, upon petition by an interested party
and without limiting any other remedies available to the petitioner, must order the
sequestration and payment of the revenues arising from the extraordinary event property to
the financing parties.
new text end

new text begin (e) The interest of a transferee, purchaser, acquirer, assignee, or pledgee in extraordinary
event property specified in a financing order issued to a utility, and in the revenue and
collections arising from the property, is not subject to setoff, counterclaim, surcharge, or
defense by the utility or any other person, or in connection with the reorganization,
bankruptcy, or other insolvency of the utility or any other entity.
new text end

new text begin (f) A successor to a utility, whether resulting from a reorganization, bankruptcy, or other
insolvency proceeding; merger or acquisition; sale; other business combination; transfer by
operation of law; utility restructuring; or otherwise, must perform and satisfy all obligations
of, and has the same duties and rights under, a financing order as the utility to which the
financing order applies. A successor to a utility must perform the duties and exercise the
rights in the same manner and to the same extent as the utility, including collecting and
paying to any person entitled to receive revenues, collections, payments, or proceeds of
extraordinary event property.
new text end

new text begin Subd. 2. new text end

new text begin Security interests in extraordinary event property. new text end

new text begin (a) The creation,
perfection, and enforcement of any security interest in extraordinary event property to secure
the repayment of the principal and interest on extraordinary event bonds, amounts payable
under any ancillary agreement, and other financing costs are governed solely by this section.
new text end

new text begin (b) A security interest in extraordinary event property is created, valid, and binding
when:
new text end

new text begin (1) the financing order that describes the extraordinary event property is issued;
new text end

new text begin (2) a security agreement is executed and delivered; and
new text end

new text begin (3) value is received for the extraordinary event bonds.
new text end

new text begin (c) Once a security interest in extraordinary event property is created, the security interest
attaches without any physical delivery of collateral or any other act. The lien of the security
interest is 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, upon the filing of a financing statement with the secretary
of state.
new text end

new text begin (d) The description or indication of extraordinary event property in a transfer or security
agreement and a financing statement is sufficient only if the description or indication refers
to this section and the financing order creating the extraordinary event property.
new text end

new text begin (e) A security interest in extraordinary event property is a continuously perfected security
interest and has priority over any other lien, created by operation of law or otherwise, which
may subsequently attach to the extraordinary event property unless the holder of the security
interest has agreed otherwise in writing.
new text end

new text begin (f) The priority of a security interest in extraordinary event property is not affected by
the commingling of extraordinary event property or extraordinary event revenue with other
money. An assignee, bondholder, or financing party has a perfected security interest in the
amount of all extraordinary event property or extraordinary event revenue that is pledged
to pay extraordinary event bonds, even if the extraordinary event property or extraordinary
event revenue is deposited in a cash or deposit account of the utility in which the
extraordinary event revenue is commingled with other money. Any other security interest
that applies to the other money does not apply to the extraordinary event revenue.
new text end

new text begin (g) Neither a subsequent commission order amending a financing order under section
216B.492, subdivision 4, nor application of an adjustment mechanism authorized by a
financing order under section 216B.492, subdivision 3, affects the validity, perfection, or
priority of a security interest in or transfer of extraordinary event property.
new text end

new text begin (h) A valid and enforceable security interest in extraordinary event property is perfected
only when the security interest has attached and when a financing order has been filed with
the secretary of state in accordance with procedures established by the secretary of state.
The financing order must name the pledgor of the extraordinary event property as debtor
and identify the property.
new text end

new text begin Subd. 3. new text end

new text begin Sales of extraordinary event property. new text end

new text begin (a) A sale, assignment, or transfer of
extraordinary event property is 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
extraordinary event property if the documents governing the transaction expressly state that
the transaction is a sale or other absolute transfer. A transfer of an interest in extraordinary
event property may be created when:
new text end

new text begin (1) the financing order creating and describing the extraordinary event property is
effective;
new text end

new text begin (2) the documents evidencing the transfer of the extraordinary event property are executed
and delivered to the assignee; and
new text end

new text begin (3) value is received.
new text end

new text begin (b) A transfer of an interest in extraordinary event property must be filed with the
secretary of state against all third persons and perfected under sections 336.3-301 to
336.3-312, including any judicial lien or other lien creditors or any claims of the seller or
creditors of the seller, other than creditors holding a prior security interest, ownership
interest, or assignment in the extraordinary event property previously perfected under this
subdivision or subdivision 2.
new text end

new text begin (c) The characterization of a sale, assignment, or transfer as an absolute transfer and
true sale, and the corresponding characterization of the property interest of the assignee, is
not affected or impaired by:
new text end

new text begin (1) commingling of extraordinary event revenue with other money;
new text end

new text begin (2) the retention by the seller of:
new text end

new text begin (i) a partial or residual interest, including an equity interest, in the extraordinary event
property, whether direct or indirect, or whether subordinate or otherwise; or
new text end

new text begin (ii) the right to recover costs associated with taxes, franchise fees, or license fees imposed
on the collection of extraordinary event revenue;
new text end

new text begin (3) any recourse that the purchaser may have against the seller;
new text end

new text begin (4) any indemnification rights, obligations, or repurchase rights made or provided by
the seller;
new text end

new text begin (5) an obligation of the seller to collect extraordinary event revenues on behalf of an
assignee;
new text end

new text begin (6) the treatment of the sale, assignment, or transfer for tax, financial reporting, or other
purposes;
new text end

new text begin (7) any subsequent financing order amending a financing order under section 216B.492,
subdivision 4, paragraph (d); or
new text end

new text begin (8) any application of an adjustment mechanism under section 216B.492, subdivision
3, paragraph (a), clause (6).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

new text begin [216B.497] EXTRAORDINARY EVENT BONDS.
new text end

new text begin (a) Banks, trust companies, savings and loan associations, insurance companies, executors,
administrators, guardians, trustees, and other fiduciaries may legally invest any money
within the individual's or entity's control in extraordinary event bonds.
new text end

new text begin (b) Extraordinary event bonds issued under a financing order are not debt of or a pledge
of the faith and credit or taxing power of the state, any agency of the state, or any political
subdivision. Holders of extraordinary event bonds may not have taxes levied by the state
or a political subdivision in order to pay the principal or interest on extraordinary event
bonds. The issuance of extraordinary event bonds does not directly, indirectly, or contingently
obligate the state or a political subdivision to levy any tax or make any appropriation to pay
principal or interest on the extraordinary event bonds.
new text end

new text begin (c) The state pledges to and agrees with holders of extraordinary event bonds, any
assignee, and any financing parties that the state will not:
new text end

new text begin (1) take or permit any action that impairs the value of extraordinary event property; or
new text end

new text begin (2) reduce, alter, or impair extraordinary event charges that are imposed, collected, and
remitted for the benefit of holders of extraordinary event bonds, any assignee, and any
financing parties until any principal, interest, and redemption premium payable on
extraordinary event bonds, all financing costs, and all amounts to be paid to an assignee or
financing party under an ancillary agreement are paid in full.
new text end

new text begin (d) A person who issues extraordinary event bonds may include the pledge specified in
paragraph (c) in the extraordinary event bonds, ancillary agreements, and documentation
related to the issuance and marketing of the extraordinary event bonds.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 8.

new text begin [216B.498] ASSIGNEE OF FINANCING PARTY NOT SUBJECT TO
COMMISSION REGULATION.
new text end

new text begin An assignee or financing party that is not already regulated by the commission does not
become subject to commission regulation solely as a result of engaging in any transaction
authorized by or described in sections 216B.491 to 216B.499.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 9.

new text begin [216B.499] EFFECT ON OTHER LAWS.
new text end

new text begin (a) If any provision of sections 216B.491 to 216B.499 conflicts with any other law
regarding the attachment, assignment, perfection, effect of perfection, or priority of any
security interest in or transfer of extraordinary event property, sections 216B.491 to 216B.499
govern.
new text end

new text begin (b) Nothing in this section precludes a utility for which the commission has initially
issued a financing order from applying to the commission for:
new text end

new text begin (1) a subsequent financing order amending the financing order under section 216B.492,
subdivision 4, paragraph (d); or
new text end

new text begin (2) approval to issue extraordinary event bonds to refund all or a portion of an outstanding
series of extraordinary event bonds.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 10. new text begin APPROPRIATION.
new text end

new text begin $....... in fiscal year 2023 is appropriated from the general fund to the Public Utilities
Commission to contract with experts outside the commission under Minnesota Statutes,
section 216B.494, to assist the commission carry out the commission's duties under
Minnesota Statutes, sections 216B.491 to 216B.499.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end