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Moody's Predicts Securitizations Will Win High Ratings

Fortnightly Magazine - May 1 1997

issue debt securities backed by revenues received from competitive transition charges that the California PUC has authorized;

Pennsylvania (em H.B. 1509 (the Electricity Generation Customer Choice and Competition Act) is similar to California's new law, except that a concurrent rate reduction is not a condition for implementation of a tariff. The Pennsylvania law anticipates securitization of the fee revenue, including the PUC's right to issue an irrevocable order, a pledge by state government not to alter or reduce the value of the transition charge (except if adequate compensation is paid), and a true-up mechanism. The maximum term for any securities issued is 10 years.

New York (em Proposed legislation, "The Electric Ratepayers Relief Act of 1996," is similar to the California bill. The act would create qualified rate orders issued at the discretion of the New York PSC. It also would allow a utility to recover all or some of its qualified intangibles expenses through application of user fees. (See, "Stranded Costs: Qualified Financing for Intangible Assets," by Anastasia M. Song and Hugh M. Dougan, PUBLIC UTILITIES FORTNIGHTLY, Oct. 1, 1996, p. 44.)

Rhode Island (em Legislation passed last year allows for stranded cost recovery.

More than 40 states are also considering electric utility deregulation, which Moody's predicts will provide further impetus for additional securitization of stranded costs.

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