849.1
. (a) (1) The commission may issue financing orders in
accordance with this article to facilitate the recovery, financing,
or refinancing of water supply costs. A financing order may be
adopted only upon the application of the qualifying water utility and
shall become effective in accordance with its terms.
(2) Commencing January 1, 2015, the qualifying water utility may
apply to the commission for a determination that no more than 50
percent of the qualifying water utility's water supply costs may be
recovered through water supply charges, which would be water supply
property under this article. The commission shall not approve an
increase in a financing order that exceeds a total amount of 5
percent of the water supply costs.
(3) A public financing entity that proposes to issue water rate
relief bonds pursuant to Article 8 of Chapter 3 of Part 5 of the
Monterey Peninsula Water Management District Law, as added by Chapter
527 of the Statutes of 1977, or Section 6537 of the Government Code,
shall provide information as requested by the commission in
connection with the application and proceeding.
(4) In its application the qualifying water utility shall specify
how customers may benefit from reduced rates on a present value basis
through the issuance of water rate relief bonds as compared to the
use of traditional utility financing mechanisms. If a public
financing entity proposes to issue water rate relief bonds, it shall
provide evidence to the commission that the issuance of water rate
relief bonds by the public financing entity, due to the availability
of a federal or state income tax exemption, will provide savings to
water customers on the Monterey Peninsula.
(5) The commission shall establish procedures for the expeditious
processing of financing order applications, including the approval or
disapproval of the qualifying water utility's application, within
180 days of the application submission.
(b) The commission shall authorize the imposition and collection
of water supply charges in one or more financing orders if the
commission determines, as part of its findings in connection with the
financing order, that each imposition and collection of the water
supply charges, and the issuance of water rate relief bonds payable
from those charges, would reduce the rates on a present value basis
that customers within the qualifying water utility's service
territory would pay as compared to the use of traditional utility
financing mechanisms, which shall be calculated using the qualifying
water utility's corporate debt and equity in the ratio approved by
the commission at the time of the issuance of the financing order.
The commission's determination shall consider all customer payments
including rates, surcharges, taxes, water supply charges, and any
other payments made by customers for water supply activities.
(c) The commission shall establish in a financing order an
effective mechanism that ensures recovery of water supply costs and
financing costs through nonbypassable water supply charges. Water
supply charges shall be imposed only on existing and future customers
of the qualifying water utility's service territory, and those
customers shall be required to pay those charges until the water rate
relief bonds and all financing costs are paid in full by the
financing entity, at which time those charges shall be terminated.
Water supply charges shall be irrevocable, notwithstanding any
true-up adjustment pursuant to subdivision (g).
(d) A financing order may specify how amounts collected from a
customer shall be allocated between water supply charges and other
charges of the qualifying water utility, consistent with Section
779.2.
(e) (1) Notwithstanding Section 455.5 or 1708, or any other
provision of law, and except as otherwise provided in subdivision
(g), water supply property that has been made the basis for the
issuance of water rate relief bonds, the financing order, and the
water supply charges shall be irrevocable. The commission shall not,
either by rescinding, altering, or amending the financing order or
otherwise, revalue or revise for ratemaking purposes the water supply
costs or the financing costs, determine that the water supply
charges are unjust or unreasonable, or in any way reduce or impair
the value of water supply property either directly or indirectly by
taking water supply charges into account when setting other rates for
the qualifying water utility. The amount of revenues arising shall
not be subject to reduction, impairment, postponement, or
termination.
(2) The State of California does hereby pledge and agree with the
qualifying water utility, owners of water supply property, the
financing entities, and owners of water rate relief bonds that the
state shall neither limit nor alter, except as otherwise provided
with respect to true-up adjustment of water supply charges pursuant
to subdivision (g), the water supply charges, water supply property,
financing orders, or any rights under a financing order until the
water rate relief bonds, together with the interest on the bonds, and
all related financing costs are fully paid and discharged, or, in
the alternative, have been refinanced through an additional issue of
water rate relief bonds, provided nothing contained in this section
shall preclude the limitation or alteration if and when adequate
provision shall be made by law for the protection of the qualifying
water utility, financing entities, and owners. The financing entity
is authorized to include this pledge and undertaking for the state in
the water rate relief bonds.
(f) (1) Neither financing orders nor water rate relief bonds
issued under this article shall constitute a debt or liability of the
state or of any political subdivision of the state except a public
financing entity, nor shall they constitute a pledge of the full
faith and credit of the state or any of its political subdivisions,
but are payable solely from the funds provided therefor under this
article and shall be consistent with Sections 1 and 18 of Article XVI
of the California Constitution. This subdivision shall not preclude
bond guarantees or enhancements pursuant to this article or pursuant
to Article 8 of Chapter 3 of Part 5 of the Monterey Peninsula Water
Management District Law, as added by Chapter 527 of the Statutes of
1977, or Section 6537 of the Government Code. A water rate relief
bond shall contain on the face of the bond a statement to the
following effect: "Neither the full 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."
(2) The issuance of water rate relief bonds under this article
shall not directly, indirectly, or contingently obligate the state or
any political subdivision of the state to levy or to pledge any form
of taxation therefor or to make any appropriation for their payment.
Nothing in this paragraph shall prevent or be construed to prevent a
public financing entity from pledging water supply property, or
payments made on water rate relief bonds, together with any reserves
or overcollateralization amounts approved in a financing order, to
the payment of the water rate relief bonds.
(g) Any water supply charge authorized by a financing order shall
appear on customer bills as a stand-alone, line-item surcharge. The
commission shall, in any financing order, provide for a periodic
true-up adjustment to water supply charges, which shall be made at
least annually and may be made more frequently. The qualifying water
utility shall file an advice letter with the commission to implement
any true-up adjustment.
(h) Water supply charges are water supply property when, and to
the extent that, a financing order authorizing the water supply
charges has become effective in accordance with this article, and the
water supply property shall thereafter continuously exist as
property for all purposes with all of the rights and privileges of
this article for the period and to the extent provided in the
financing order, but in any event until the water rate relief bonds,
including all principal, premium, if any, and interest with respect
to the bonds and all other financing costs are paid in full. A
financing order may provide that the creation of water supply
property shall be simultaneous with the sale of the water supply
property to a transferee or assignee as provided in the application
and the pledge of the water supply property to secure water rate
relief bonds.
(i) Any surplus water supply charges in excess of the necessary
amounts to pay the principal premium, if any, and interest on the
water rate relief bonds and all other financing costs shall be
credited to customers through the adjustment mechanism described in
subdivision (g) or used to prepay or defease water rate relief bonds,
so long as this would not result in a recharacterization of the tax,
accounting, and other intended characteristics of the financing,
including, but not limited to, the following:
(1) Avoiding the recognition of debt on the qualifying water
utility's balance sheet for financial accounting and regulatory
purposes.
(2) Treating the water rate relief bonds as debt of the qualifying
water utility or its affiliates for federal income tax purposes.
(3) Treating the transfer of the water supply property by the
qualifying water utility as a true sale for bankruptcy purposes.
(4) Avoiding any adverse impact of the financing on the qualifying
water utility's credit rating.
(j) The commission shall, pursuant to its authority in Section
739.8, implement a program to exclude low-income water ratepayers
participating in commission-approved, low-income rate assistance
programs from the payment of any water supply charge imposed pursuant
to this section, if it determines that the exclusion from the charge
will have no significant impact on the ability of the financing
entity to finance the water supply activity. The commission may also
allow the adjustment of the amount of the charge, as necessary, to
cover any costs associated with implementation of the exclusion.