(1) Electrical, gas, and water companies, or finance subsidiaries, may, upon approval by the commission, finance or refinance bondable rate recovery expenditures as described in RCW 80.28.303 . Bonds, notes, certificates of beneficial interests in a trust, and other evidences of indebtedness or ownership issued for this purpose are rate recovery bonds for the purposes of this section.
(2)(a) An electrical, gas, or water company, finance subsidiary, or assignee may grant a security interest in rate recovery assets as collateral for rate recovery bonds. A security interest in rate recovery assets is valid and enforceable against the debtor and third parties, subject only to the rights of any third parties holding security interests in the rate recovery assets attached and perfected in the manner described in this subsection.
(b) A security interest in rate recovery assets attaches if:
(i) The secured party, or a financing party that the secured party represents, has given value; and
(ii) The debtor has signed a security agreement granting the secured party a security interest in the rate recovery assets.
(c) A valid and enforceable security interest in rate recovery assets is perfected if: (i) The security interest has attached in the manner described in (b) of this subsection; and (ii) a financing statement has been filed in accordance with the requirements of chapter 62A.9A RCW that identifies the debtor as "debtor," the secured party as "secured party," and the rate recovery assets granted as security as the "collateral," and contains a description in the financing statement that refers to the commission's financing order creating the rate recovery assets. The financing statement is deemed sufficient under chapter 62A.9A RCW and all other relevant law for identifying the rate recovery assets granted as security.
(d) A perfected security interest in rate recovery assets is a continuously perfected security interest, whether or not the related revenues have accrued or the related rate recovery charges have been charged, billed, or collected. Rate recovery assets constitute a presently existing, fully vested property right for the purposes of contracts securing the rate recovery bonds whether or not the related revenues have accrued or the related rate recovery charges have been charged, billed, or collected. Multiple security interests in the same rate recovery assets shall rank according to priority in time of perfection.
(e) Subject to the terms of the security agreement covering the rate recovery assets, the relative priority of a security interest created or perfected under this section is not adversely affected by: (i) Any later modification of the financing order or rate recovery assets; or (ii) the commingling of proceeds of rate recovery assets with other moneys.
(3)(a) A transfer of rate recovery assets to an assignee is perfected against all third parties if a notice of the transfer, by means of a financial statement:
(i) Is filed in accordance with the requirements of chapter 62A.9A RCW;
(ii) Specifies that the notice of transfer is filed to provide notice of the transfer of the rate recovery assets from the transferor to the assignee;
(iii) Identifies the transferor as "debtor," the assignee as "secured party," and the rate recovery asset as "collateral"; and
(iv) Contains a description that refers to the commission's financing order that created the rate recovery assets.
(b) A notice of transfer that is filed in accordance with the requirements under (a) of this subsection shall be deemed sufficient under chapter 62A.9A RCW and all other relevant laws for identifying the rate recovery assets and for providing notice that the rate recovery assets have been transferred to the assignee.
(c) A transfer is perfected against third parties on the date a notice of transfer is filed.
(d) A transfer of rate recovery assets to a financing subsidiary that is perfected under this subsection is free and clear of all claims, security interests, liens, and encumbrances of the transferring electrical, gas, or water company, except for any prior security interest perfected under subsection (2) of this section.
(e) The priority of a transfer that is perfected under this subsection is not adversely affected by:
(i) Any later modification of the financing order or rate recovery assets; or
(ii) The commingling of proceeds of rate recovery assets.
(4)(a) When proceeds of rate recovery assets are transferred to a segregated account for an assignee or secured party, any lien or security interest that may apply to those proceeds, other than a security interest perfected under subsection (2) of this section, is automatically terminated, without the need for further notice, act, or evidence.
(b) Proceeds from rate recovery assets shall be held in trust for an assignee or secured party until the proceeds have been transferred to the assignee or secured party.
(c) Any adjustment in rate recovery charges does not affect the validity, perfection, or priority of a security interest in or the transfer of rate recovery assets.
(5)(a) The rights and remedies of a secured party in enforcing a security interest in rate recovery assets do not include and are without recourse to any electrical, gas, or water company asset except for the rate recovery assets, even if the rate recovery assets are commingled with other assets.
(b) If an electrical, gas, or water company or finance subsidiary defaults on a required payment with respect to rate recovery bonds, a secured party or secured party's representatives may apply to the commission for relief. Upon application by a secured party or secured party's representatives, the commission shall order, without limiting other remedies of the secured party or secured party's representatives, the sequestration and payment to the secured party or secured party's representatives of the proceeds of the rate recovery assets.
(c) The interest of an assignee or financing party in rate recovery assets is not subject to setoff, counterclaim, surcharge, or defense by the electrical, gas, or water company or any other person in connection with a bankruptcy, reorganization, or insolvency proceeding. However, any surplus in excess of amounts necessary to pay principal, premium, if any, interest, and other amounts due with respect to the rate recovery bonds and associated financing costs, including enforcement costs, with respect to the security agreement shall be remitted to the debtor electrical, gas, or water company for the return of such surplus as customer refunds. A company may request authorization for the return of surplus funds by the commission in separate proceedings for this purpose. The commission shall issue an order approving or denying the petition for return of surplus funds within 90 days.
(d) The commission's financing order and any order issued under (b) of this subsection shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other insolvency proceedings with respect to an electrical, gas, or water company debtor, or transferor with respect to rate recovery assets.
(6) The granting, perfection, and enforcement of security interests in rate recovery assets to secure rate recovery bonds is subject to chapter 62A.9A RCW, except that when a provision in chapter 62A.9A RCW comes in conflict with a provision in this section, the provision in this section shall control.
(7) A transfer of rate recovery assets by an electrical, gas, or water company to a finance subsidiary or other assignee, which such parties have in the governing documentation expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as a true sale, and not as a pledge or other financing, of such rate recovery assets. According the holders of rate recovery bonds a preferred right to revenues of the electrical, gas, or water company, or the provision by such company of other credit enhancement with respect to rate recovery bonds, does not impair or negate the characterization of any such transfer as a true sale.
(8) Any successor to an electrical, gas, or water company pursuant to any bankruptcy, reorganization, or other insolvency proceeding shall perform and satisfy all obligations of the company under an approved contract governing rate recovery bonds, in the same manner and to the same extent as was required of such company before any such proceeding, including, without limitation, billing, collecting, and paying to the bondholders or their representatives revenues arising with respect to the rate recovery assets pledged to secure the rate recovery bonds.
(9) Except for enforcement permitted under the laws of another state, the laws of this state shall govern the creation, validity, enforceability, attachment, perfection, priority, and exercise of remedies with respect to the creation or transfer of a security interest in a rate recovery asset.
Purpose — Intent — Severability — Validity of actions taken pursuant to financing orders — Application — Effective date — 2025 c 310: See notes following RCW 80.28.005 .