843
. (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 commission has issued the financing order authorizing the
fixed transition amounts 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 Chapter 5 (commencing
with Section 9501) of Division 9 of the Commercial Code naming the
pledgor of the transition property as "debtor" and identifying the
transition property. 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 commission by the electrical corporation that is the
pledgor or transferor of the transition property, and the commission
may require the electrical corporation 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 is not defeated or
adversely affected by the commingling of revenues arising with
respect to the transition property with other funds of the electrical
corporation that is the pledgor or transferor of the transition
property, or by any security interest in a deposit account of that
electrical corporation perfected under Division 9 (commencing with
Section 9101) of the Commercial Code into which the revenues are
deposited. Subject to the terms of the security agreement, upon
compliance with the requirements of Section 9311 of the Commercial
Code, the pledgees of the transition property shall have a perfected
security interest in all cash and deposit accounts of the electrical
corporation 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 electrical corporation within 12 months before (1)
any default under the security agreement or (2) the institution of
insolvency proceedings by or against the electrical corporation, less
payments from the revenues to the pledgees during that 12-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
Division 9 (commencing with Section 9101) of the Commercial Code, 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 commission may require, in the financing order creating
the transition property, that, in the event of default by the
electrical corporation in payment of revenues arising with respect to
the transition property, the commission and any successor thereto,
upon the application by the pledgees or transferees, including
transferees under Section 844, 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) Section 5451 of the Government Code shall not apply to any
pledge of transition property by a financing entity. Sections 9204
and 9205 of the Commercial Code shall apply to a pledge of transition
property by an electrical corporation, an affiliate of an electrical
corporation, 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 commission 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
subdivision. 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 electrical
corporation, 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
Division 9 (commencing with Section 9101) of the Commercial Code, 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 electrical corporation, 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 subdivision (b). 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 commission may require, in the financing order
creating the transition property, that, in the event of default by
the electrical corporation in payment of revenues arising with
respect to transition property, the commission 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.