2003 - 2004 LEGISLATURE
February 16, 2004 - Introduced by Representatives Jensen, Gottlieb, Friske,
Nischke, Honadel, Rhoades, Stone, Seratti, Musser, Vrakas, M. Lehman,
Grothman, Taylor, McCormick, Hahn, Jeskewitz, Johnsrud, Suder,
Huebsch, Olsen, Kaufert and Gunderson, cosponsored by Senators Cowles,
Plale, Moore, M. Meyer, Kanavas, Wirch and Roessler. Referred to
Committee on Energy and Utilities.
1An Act to renumber and amend
201.01 (3); and to create
73.13, 196.027 and 2
201.01 (3) (e) of the statutes; relating to: the issuance of debt by natural gas
3and electric public utilities to finance certain environmental activities.
Analysis by the Legislative Reference Bureau
This bill allows certain public utilities, with the approval of the Public Service
Commission (PSC), to finance the cost of certain environmental control activities
with the proceeds of "environmental trust bonds," which the bill defines as bonds that
are secured by charges paid by a public utility's customers. The bill applies to natural
gas and electric utilities, which the bill defines as "energy utilities." The bonds may
be issued by an energy utility, or an assignee of the energy utility, including an
An energy utility that applies to the PSC for an order approving the issuance
of the bonds must describe the environmental control activities that the energy
utility proposes to undertake and the reasons for undertaking the activities. An
"environmental control activity" is defined as construction, installation, or otherwise
putting in place equipment for controlling environmental pollution in connection
with an energy utility plant that has previously been used to provide service to
customers. In addition, the energy utility must estimate the costs of proposed
activities and indicate whether the energy utility proposes to finance all or only a
specified portion of such costs with the bonds. Also, the energy utility must estimate
the financing costs of issuing the proposed bonds.
No later than 90 days after the PSC receives an application, the PSC must issue
an order that rejects or approves the application. The PSC must approve the
application if the order will result in lower costs to customers than would alternative
methods of financing environmental control activities, the order is otherwise
consistent with the public interest, and the order is prudent, reasonable, and
appropriate. The bill refers to an order that approves an application as a "financing
order." If the PSC issues a financing order, the order must specify the amount of
environmental control and financing costs that the energy utility may recover
through charges that customers in the energy utility's service territory must pay over
a period specified in the order. The bill refers to such charges as "environmental
control charges." The PSC may exclude a portion of environmental control costs from
recovery as environmental control charges only if the energy utility indicates in the
application that it does not propose to finance that portion with bonds. In addition,
the order must specify the "environmental control property" that is created and that
may be used to secure the bonds. "Environmental control property" is defined as the
right, specified in the order, to impose, collect, or receive the environmental control
charges. "Environmental control property" is also defined to include all revenues
and proceeds arising from such right.
The bill also requires the PSC, without holding a hearing, to adjust the
environmental control charges that are approved in a financing order. The order
itself must include a formula that the PSC must apply for making adjustments to
environmental control charges at least annually within 45 days of the anniversary
date of the issuance of the bonds. The purpose of the formula is to make any
adjustments to the charges that are necessary based on any overcollection or
undercollection of the charges or are necessary to ensure the energy utility's or an
assignee's timely recover of the environmental control and financing costs. The bill
also allows the PSC to issue a subsequent financing order for retiring or refunding
the bonds issued pursuant to the original financing order. The PSC may issue a
subsequent order if the financing costs of bonds issued pursuant to the subsequent
order are lower than the financing costs of the bonds issued pursuant to the original
order. The PSC may also issue a subsequent order if retiring or refinancing the bonds
issued pursuant to the original order is otherwise in the public interest.
The bill prohibits the PSC from revoking a financing order, except for changes
made by a subsequent financing order described above. In addition, the bill provides
that a financing order remains in effect until environmental trust bonds issued
pursuant to the order have been paid in full and the financing costs of the bonds have
been recovered in full. Also, the bill provides that a financing order issued to an
energy utility remains in effect notwithstanding the bankruptcy of the energy utility.
The bill also creates the following limits on the PSC's jurisdiction over an energy
utility that is issued a financing order: 1) the PSC may not consider environmental
trust bonds to be the debt of the energy utility; 2) the PSC may not consider the
environmental control charges paid under the order to be the revenue of the energy
utility; and 3) the PSC may not consider the environmental control or financing costs
specified in the order to be the costs of the energy utility. In addition, the bill
prohibits the PSC from determining that any action taken by an energy utility that
is consistent with the order is unjust or unreasonable.
In addition, the bill does all of the following:
1. The bill establishes legal characteristics of environmental control property
that is created in a financing order and of any sale, assignment, or transfer of such
2. The bill provides that, with certain specified exceptions, the state's version
of article 9 of the Uniform Commercial Code governs the granting and enforcing of
security interests in environmental control property created in a financing order.
3. The bill provides that the state is not liable on environmental control bonds
and that the bonds are not public debt.
4. The bill requires an energy utility to place the proceeds of any environmental
trust bonds into a separate account and use the proceeds only for paying
environmental control and financing costs.
5. The bill requires an energy utility that is issued a financing order to provide
annual explanations of environmental control charges to its customers.
6. The bill provides that requirements under current law that apply to the
issuance of securities by energy utilities do not apply to the issuance of
environmental trust bonds under the bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB843, s. 1
73.13 of the statutes is created to read:
273.13 Environmental trust bonds.
The department of revenue shall not 3
consider the acquisition, ownership, or disposition of any direct interest in an 4
environmental trust bond, as defined in s. 196.027 (1) (j), for the purpose of 5
determining whether a person is subject to any tax imposed by this state or by a local 6
governmental unit, as defined in s. 16.97 (7).
AB843, s. 2
196.027 of the statutes is created to read:
8196.027 Environmental trust financing.
In this section:
(a) "Ancillary agreement" means any bond insurance policy or other financial 10
arrangement entered into in connection with the issuance of environmental trust 11
(b) "Assignee" means any person to which an interest in environmental control 2
property is sold, assigned, transferred, or conveyed and any successor to such a 3
(c) "Energy utility" means a public utility engaged in the transmission, 5
delivery, or furnishing of natural gas by means of pipes or mains, heat, light, or power 6
or any successor to such a public utility.
(d) "Environmental control activity" means the construction, installation, or 8
otherwise putting into place environmental control equipment in connection with an 9
energy utility plant that has been used to provide service to customers before 10
beginning the construction, installation, or otherwise putting into place 11
environmental control equipment.
(e) "Environmental control charge" means a charge paid by customers of an 13
energy utility for the energy utility to recover environmental control costs and 14
(f) "Environmental control cost" means capital cost, including capitalized cost 16
relating to regulatory assets, incurred or expected to be incurred by an energy utility 17
in undertaking an environmental control activity. "Environmental control cost" does 18
not include any monetary penalty, fine, or forfeiture assessed against an energy 19
utility by a government agency or court under a federal or state environmental 20
statute, rule, or regulation.
(g) "Environmental control equipment" means any device, equipment, 22
structure, process, facility, or technology, owned or controlled by an energy utility, 23
that is designed for the primary purpose of preventing, reducing, or remediating 24
(h) "Environmental control property" means all of the following:
1. The right specified in a financing order to impose, collect, or receive 2
environmental control charges, or to obtain adjustments to such charges as provided 3
in this section, and any interest in such right.
2. All revenues and proceeds arising from the right and interests specified in 5
(i) "Environmental pollution" means the contamination or rendering unclean 7
or impure of the air, land, or waters of the state, or the making of the same injurious 8
to public health, harmful for commercial or recreational use, or deleterious to fish, 9
bird, animal, or plant life.
(j) "Environmental trust bonds" means bonds, debentures, notes, certificates 11
of participation, certificates of beneficial interest, certificates of ownership, or other 12
evidences of indebtedness that are issued by an energy utility or an assignee, the 13
proceeds of which are used directly or indirectly to recover, finance, or refinance 14
environmental control costs and financing costs, and that are secured by or payable 15
from environmental control property.
(k) "Financing cost" means any of the following:
1. Debt service, including interest, that is payable on environmental trust 18
2. A payment required under an ancillary agreement, including any amount 20
required to fund a reserve account.
3. Any other cost related to issuing and servicing environmental trust bonds, 22
including servicing fees, trustee fees, legal fees, administrative fees, placement fees, 23
capitalized interest, and rating agency fees.
4. Any taxes and license fees imposed on the revenues generated from the 25
collection of environmental control charges.
(k) "Financing order" means an order issued by the commission under sub. (2) 2
that allows for the issuance of environmental trust bonds, the collection of 3
environmental control charges, and the creation of environmental control property.
4(2) Financing orders.
An energy utility in its sole discretion 5
may apply to the commission for a financing order. In addition to any other 6
information required by the commission, an energy utility shall do all of the following 7
in an application:
1. Describe the environmental control activities that the energy utility 9
proposes to undertake and the reasons for undertaking the activities.
2. Estimate the environmental control costs of the activities described under 11
3. Indicate whether the energy utility proposes to finance all or only a portion 13
of the costs estimated under subd. 2. with environmental trust bonds. If the energy 14
utility proposes to finance a portion of the costs, the energy utility shall identify that 15
portion in the application.
4. Estimate the financing costs of the environmental trust bonds proposed 17
under subd. 3.
5. Estimate the environmental control charges necessary to recover the 19
environmental control costs and financing costs estimated in the application.