(a) A sale, assignment, or transfer of water supply property by a qualifying water utility to an affiliate or to a financing entity, or by an affiliate of a qualifying water utility or a financing entity to another financing entity, which the parties, in the governing documentation, have expressly stated to be a sale or other absolute transfer, in a transaction approved in a financing order, shall be treated as an absolute transfer of all of the transferor’s right, title, and interest, as in a true sale, and not as a pledge or other financing order of the water supply property, other than for federal and state income and franchise tax purposes.

(b) The characterization of the sale, assignment, or transfer as an absolute transfer and true sale and the corresponding characterization of the property interest of the purchaser shall not be affected or impaired by, among other things, the occurrence of any of the following:

Terms Used In California Public Utilities Code 849.5

  • Commission: means the Public Utilities Commission created by §. See California Public Utilities Code 20
  • Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
  • State: means the State of California, unless applied to the different parts of the United States. See California Public Utilities Code 17

(1) Commingling of water supply charge revenues with other amounts.

(2) The retention by the seller of either of the following:

(A) A partial or residual interest, including an equity interest, in the water supply property, whether direct or indirect, subordinate or otherwise.

(B) The right to recover costs associated with taxes, franchise fees, or license fees imposed on the collection of water supply charge revenues.

(3) Any recourse that the purchaser may have against the seller.

(4) Any indemnification rights, obligations, or repurchase rights made or provided by the seller.

(5) The obligation of the seller to collect water supply charge revenues on behalf of an assignee.

(6) The treatment of the sale, assignment, or transfer for tax, financial reporting, or other purposes.

(7) Any true-up adjustment of the water supply charges as provided in the financing order.

(c) A sale, assignment, or transfer of water supply property shall be deemed perfected against third persons when both of the following occur:

(1) The commission issues the financing order authorizing the water supply charges included in the water supply property.

(2) An assignment of the water supply property in writing has been executed and delivered to the transferee.

(d) As between bona fide assignees of the same right for value without notice, the assignee first filing a financing statement in accordance with Chapter 5 (commencing with Section 9501) of Division 9 of the Commercial Code naming the assignor of the water supply property as debtor and identifying the water supply property has priority. Any description of the water supply property shall be sufficient if it refers to the financing order creating the water supply property. A copy of the financing statement shall be filed by the assignee with the commission, and the commission may require the assignor or the assignee to make other filings with respect to the transfer in accordance with procedures it may establish, but these filings shall not affect the perfection of the transfer.

(Added by Stats. 2014, Ch. 482, Sec. 6. (SB 936) Effective January 1, 2015.)

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