(1)(a) If an electrical, gas, or water company applies to the commission for recovery of expenditures related to a federal or state declared disaster or emergency and the commission finds some or all of the expenditures to be reasonable and prudent, the company may petition the commission for a financing order designating all or part of such expenditures as bondable rate recovery expenditures, for the purpose of financing or refinancing the designated expenditures under RCW 80.28.306 (1). A company must request this designation by the commission in a separate proceeding.
(b) A petition filed under (a) of this subsection must include a narrative description of purpose for which the electrical, gas, or water company seeks approval of a financing order. The narrative description must:
(i) Explain the event that is the subject of a federal or state declaration of disaster or emergency that gave rise to the costs and expenses that the company seeks to recover through a financing order, including those costs and expenses owed by an electrical, gas, or water company to such company's customers or other persons as a result of the event; and
(ii) In the case such costs and expenses accrued to the electrical, gas, or water company through a legal settlement, provide the total:
(A) Legal fees and costs paid by the company;
(B) Estimated legal fees and costs the company would have incurred had it elected not to settle the matter;
(C) Amount of initial claims that had been sought against the company; and
(D) Amount of the settlement.
(c) After notice and an opportunity for a hearing, the commission may approve a petition if the commission finds that:
(i) The bondable rate recovery expenditures and financing costs included in the petition are reasonable and prudent;
(ii) Financing or refinancing the bondable rate recovery expenditures through the issuance of rate recovery bonds is likely to be more favorable to electrical, gas, or water company customers for the recovery of the bondable rate recovery expenditures than other methods of cost and expenditure recovery; and
(iii) Bonds, notes, certificates of beneficial interests in a trust, and other evidences of indebtedness or ownership issued pursuant to the approval are reasonably likely to receive a determination of, at a minimum, investment grade by credit rating agencies.
(d) The commission shall issue an order within 180 days of a petition approving or denying the petition. If the commission approves the petition, the commission shall issue a financing order.
(2)(a) A financing order issued under this section shall specify the highest amount of rate recovery expenditures that qualify as bondable rate recovery expenditures.
(b) In specifying the amount for bondable rate recovery expenditures associated with an event described in RCW 80.28.005 (3)(a), net of appropriate adjustments as determined by the commission to be reasonable, the commission may include, but is not limited to including, the following rate recovery expenditures:
(i) Capital and operating costs incurred or to be incurred as a result of the event;
(ii) Costs and expenses that may be recovered at a later time from third parties or insurers and returned to electrical, gas, or water company customers through a separate rate proceeding consistent with cost causation and rate design principles and statutory or regulatory requirements; and
(iii) Carrying costs or charges.
(3) A financing order issued under this section must include the following provisions:
(a) Confirmation of the existence of recoverable bondable rate recovery expenditures and authorization to recover bondable rate recovery expenditures and associated financing costs, including the maximum principal amount of bondable rate recovery expenditures and financing costs that may be recovered through securitization;
(b) Authorization for the creation of rate recovery assets and imposition of rate recovery charges that allow for the recovery of rate recovery expenditures and associated financing costs, as determined by the commission;
(c) A requirement that the rate recovery charges authorized by the financing order are ongoing and may not be avoided by an electrical, gas, or water company customer, as described under subsection (4) of this section, until all principal, interest, premium, if any, and other amounts due on the rate recovery bonds and financing costs have been paid in full;
(d) A methodology for:
(i) Allocating rate recovery charges between the different classes of electrical, gas, or water company customers, which may include not allocating rate recovery charges to one or more classes of such company's customers, that is consistent with cost causation and rate design principles and statutory or regulatory requirements;
(ii) Adjusting rate recovery charges as necessary to ensure timely payment on, and payment in full of, the rate recovery bonds and associated financing costs or in response to changes to applicable customers, service territories, or collection rates; and
(iii) Providing for periodic true-up adjustments of the rate recovery charges under (d)(ii) of this subsection, as determined by the commission, to correct for any overcollection or undercollection of the rate recovery charge. The true-up adjustment shall include, but not be limited to, changing economic factors, efficiency measures, and electrification, which may impact the full and timely payment of future scheduled debt service, based on updated usage forecasts. For the purposes of this subsection, "electrification" means the installation of energy efficient electric end-use equipment that replaces end-use equipment that is fueled by gas that results in the customer no longer taking service from the gas company;
(e) Authorization for the electrical, gas, or water company to issue one or more series of rate recovery bonds with flexibility for such company to establish the terms and conditions of the rate recovery bonds, including repayment schedules, initial interest rates, and initial financing costs;
(f) Authorization to assign rate recovery assets to a financing subsidiary and grant security interests in the rate recovery assets to secured parties without limiting the rights of subsequent assignees;
(g) Authorization for the bond documentation and ancillary documents related to the rate recovery bonds, including servicing arrangements for the rate recovery charges, without requiring the authorization to be on the final forms of the documents;
(h) Authorization for the electrical, gas, or water company to earn a return, at the cost of capital authorized in such company's most recent general rate case prior to the date of the financing order, on any moneys advanced by such company to fund advances, reserves, or capital accounts established under the terms of any indenture, ancillary agreement, or financing documents related to the rate recovery bonds;
(i) A finding that the proposed issuance of rate recovery bonds and the imposition of rate recovery charges is expected to provide the lowest possible, reasonable, and prudent cost on a net present value basis to electrical, gas, or water company customers for recovery of the bondable rate recovery expenditures as compared to other methods of financing and recovery;
(j) A date, not earlier than one year from the date that the financing order becomes final, on which the authority to issue rate recovery bonds granted in the financing order expires;
(k) A requirement that the electrical, gas, or water company notify the commission if such company recovers costs and expenses from a third party or insurer; and
(l) Any other conditions that the commission finds appropriate and that are consistent with this section.
(4) Rate recovery charges authorized by a financing order shall be collected through the charges or incorporated into rates paid by, and may not be avoided by, the electrical, gas, or water company customers located within such company's service territory, if applicable, as the territory existed on the date of the financing order or, if the financing order provides, as such service territory, if applicable, may be expanded, even if:
(a) Such company's customer receives electricity, natural gas, or water; electricity, natural gas, or water services; or ancillary services from a successor or assignee of such company;
(b) Such company's customer elects to receive electricity, natural gas, or water; electricity, natural gas, or water services; or ancillary services from another electrical, gas, or water company or service provider in the service territory; or
(c) After the date of issuance of the financing order, such company's customer changes customer class.
(5)(a) Rate recovery assets, including rate recovery charges, and the rights of electrical, gas, and water companies; assignees; bondholders; and financing parties, established by a financing order issued under this section, are irrevocable and unchangeable, except as provided in the financing order, until all principal, interest, premium, if any, and other amounts due on the rate recovery bonds and financing costs are paid in full.
(b) Until all principal, interest, premium, if any, and other amounts due on the rate recovery bonds and financing costs are paid in full, the commission, except as provided in the financing order, the state of Washington, and all agencies, instrumentalities, political subdivisions, and local governments thereof may not:
(i) Revalue the bondable rate recovery expenditures or financing costs for rate-making purposes;
(ii) Determine that the rates or revenues authorized under the financing order are unjust or unreasonable;
(iii) Reduce, alter, or impair the rate recovery assets, rate recovery charges or the collection of the rate recovery charges, or rate recovery bonds or the security for the rate recovery bonds;
(iv) Rescind, suspend, amend, or impair the financing order; or
(v) When setting other rates or charges for the electrical, gas, or water company or taking other actions pursuant to the commission's authority, consider the rate recovery bonds as debt of such company, the rate recovery assets to be revenue for such company, or the bondable rate recovery expenditures to be costs of such company.
(6) The commission may not require an electrical, gas, or water company to:
(a) Apply to the commission for a financing order designating all or part of rate recovery expenditures as bondable rate recovery expenditures; or
(b) Finance or refinance rate recovery expenditures that the commission has designated bondable rate recovery expenditures.
Purpose — Intent — Severability — Validity of actions taken pursuant to financing orders — Application — Effective date — 2025 c 310: See notes following RCW 80.28.005 .