Allows rate reduction bonds for public electric utilities

Existing law, the Marks-Roos Local Bond Pooling Act of 1985, authorizes joint powers authorities, among other powers, to issue bonds and loan the proceeds to local agencies to finance specified types of projects and programs.

The act authorizes certain joint powers authorities, upon application by a local agency that owns and operates a publicly owned utility, defined to mean certain utilities furnishing water or wastewater service to not less than 25,000 retail customers, to issue rate reduction bonds to finance utility projects, as defined, subject to certain requirements. Under the act, these rate reduction bonds are secured by a pledge of utility project property, and the joint powers authority issuing the bonds may impose on, and collect from, customers of the publicly owned utility a utility project charge to finance the bonds, as provided. The act requires the California Pollution Control Financing Authority, among other things, to review each issuance of rate reduction bonds issued under these provisions.

This bill would expand the definition of a publicly owned utility for these purposes to include certain utilities furnishing generation, transmission, or distribution electrical service to retail customers, and would authorize an authority to issue rate reduction bonds to finance or refinance utility projects for the provision of generation, transmission, or distribution electrical service. The bill would include in the allowable costs of a public capital improvement, a utility project, or portion of the improvement or utility project financed with rate reduction bonds all or any part of the cost of financing or refinancing specified charges imposed upon the customers of the electrical corporation from which all or part of the improvement or utility project was acquired.

The act prohibits a local agency from applying to an authority for financing or refinancing of a utility project pursuant to these provisions unless the legislative body of the local agency has determined, among other things, that the rates of the publicly owned utility plus the utility project charge resulting from the financing or refinancing of the utility project with rate reduction bonds are expected to be lower than the rates of the publicly owned utility if the utility project was financed or refinanced with bonds payable from revenues of the publicly owned utility. The act authorizes a local agency with a publicly owned utility having 500,000 or more retail customers, in lieu of making that determination, to alternatively determine that the use of rate reduction bonds to finance or refinance utility projects provides substantial benefits to the publicly owned utility.

This bill would additionally authorize a local agency that has a population of 800,000 or more with a publicly owned utility that provides, or that will provide upon the acquisition of the utility project, electrical service anywhere within the service area of the local agency, to make that alternative substantial benefit determination.

The bill would also make clarifying changes to the act.