849.3
. (a) Financing entities may issue water rate relief bonds
upon approval by the commission in the financing order. Water rate
relief bonds shall be nonrecourse to the credit or any assets of the
qualifying water utility, other than the water supply property as
specified in the financing order.
(b) A qualifying water utility may sell and assign all or portions
of its interest in water supply property to an affiliate. A
qualifying water utility or its affiliates may sell or assign their
interests to one or more financing entities authorized under this
article that make that property the basis for issuance of water rate
relief bonds to the extent approved in the financing order. A
qualifying water utility, its affiliates, or financing entities may
pledge and assign water supply property as collateral, directly or
indirectly, to the extent approved in the financing order providing
for a security interest in the water supply property, in the manner
set forth in Section 849.4. In addition, water supply property may be
sold or assigned by either of the following:
(1) The financing entity or a trustee for the holders of water
rate relief bonds or the holder of an ancillary agreement in
connection with the exercise of remedies upon a default.
(2) A person acquiring the water supply property after a sale or
assignment made pursuant to this article.
(c) To the extent that any interest in water supply property is
sold, assigned, or pledged as collateral, the commission shall
authorize the qualifying water utility to contract with the financing
entity or entities that it will continue to operate its system to
provide service to its customers, will collect water supply charges
for the benefit and account of the financing entities and their
pledgees, and will account for and remit these amounts to or for the
account of the financing entities and their pledgees. Contracting
with a financing entity in accordance with that authorization shall
not impair or negate the characterization of the sale, assignment, or
pledge as an absolute transfer, a true sale, or security interest,
as applicable.
(d) Water supply property that is specified in a financing order
shall constitute an existing, present property right, notwithstanding
the fact that the imposition and collection of water supply charges
depend on the qualifying water utility continuing to provide water
service or continuing to perform its servicing functions relating to
the collection of water supply charges or on the level of future
water consumption. Water supply property shall exist whether or not
the water supply charges have been billed, have accrued, or have been
collected and notwithstanding the fact that the value for a security
interest in the water supply property, or amount of the water supply
property, is dependent on the future provision of service to
customers by the qualifying water utility. All water supply property
specified in a financing order shall continue to exist until the
water supply bonds issued pursuant to a financing order and all other
financing costs are paid in full.
(e) If a qualifying water utility defaults on any required payment
of water supply charge revenues, a court, upon application by an
interested party and without limiting any other remedies available to
the applying party, shall order the sequestration and payment of the
water supply charges, and the proceeds of the water supply charges,
for the benefit of bondholders, any assignee and financing entities
or their pledgees, and the counterparties to any ancillary agreement.
The order shall remain in full force and effect notwithstanding
bankruptcy, reorganization, or other insolvency proceedings with
respect to the qualifying water utility or any affiliate of the
qualifying water utility.
(f) Water supply property, water supply charges, and the interests
of an assignee, bondholder or financing entity, or any pledgee in
water supply property and water supply charges are not subject to
setoff, counterclaim, surcharge, or defense by the qualifying utility
or any other person or in connection with the bankruptcy,
reorganization, or other insolvency proceeding of the qualifying
water utility, any affiliate of the qualifying water utility, or any
other entity.
(g) Notwithstanding Section 1708 or any other provision of law,
any requirement under this article, or a financing order, that the
commission take action with respect to the subject matter of a
financing order, shall be binding upon the commission, as it may be
constituted from time to time, and any successor agency exerting
functions similar to the commission. The commission shall not have
authority to rescind, alter, or amend that requirement in a financing
order. The approval by the commission in a financing order of the
issuance by the qualifying water utility or a financing entity of
water rate relief bonds shall include the approvals, if any, required
by Article 5 (commencing with Section 816) and Section 701.5.
Section 701.5 shall not be construed to prohibit the issuance of
water rate relief bonds upon the terms and conditions approved by the
commission in a financing order. Section 851 is not applicable to
the transfer or pledge of water supply property, the issuance of
water rate relief bonds, or related transactions approved in a
financing order.
(h) A financing entity issuing water rate relief bonds shall
include in its preliminary notice and final report for the water rate
relief bonds submitted to the California Debt and Investment
Advisory Commission pursuant to Section 8855 of the Government Code,
a statement that the water rate relief bonds are being issued
pursuant to this section. A financing entity issuing water rate
relief bonds shall include in its final report for the water rate
relief bonds submitted to the California Debt and Investment Advisory
Commission pursuant to Section 8855 of the Government Code, the
savings realized by issuing the water rate relief bonds rather than
using traditional utility financing mechanisms.