The Arizona Revised Statutes have been updated to include the revised sections from the 57th Legislature, 1st Regular Session. Please note that the next update of this compilation will not take place until after the conclusion of the 57th Legislature, 2nd Regular Session, which convenes in January 2026.
This online version of the Arizona Revised Statutes is primarily maintained for legislative drafting purposes and reflects the version of law that is effective on January 1st of the year following the most recent legislative session. The official version of the Arizona Revised Statutes is published by Thomson Reuters.
40-601. Definitions
In this chapter, unless the context otherwise requires:
1. "Ancillary agreement" means any of the following:
(a) A bond.
(b) An insurance policy.
(c) A letter of credit.
(d) A reserve account.
(e) An interest rate lock or swap arrangement.
(f) A hedging arrangement.
(g) A liquidity or credit support arrangement.
(h) Any other similar agreement, instrument or arrangement that is entered into in connection with the issuance of transition bonds and that is designed to promote the credit quality and marketability of the transition bonds or to reduce or mitigate the risk of an increase in any financing cost.
2. "Applicant" means any of the following in each case that files an application for a financing order with the commission:
(a) A public service corporation that provides electric service, including a member-owned cooperative corporation.
(b) A group of two or more member-owned cooperatives seeking approval of a combined cooperative securitization. For the purposes of this subdivision, each participating cooperative may be referred to individually as the applicant or the group of cooperatives may be referred to collectively as the applicant as the context indicates.
3. "Combined cooperative securitization" means a securitization transaction under this chapter that involves two or more member-owned cooperatives acting together including a generation and transmission cooperative and one or more of its member distribution cooperatives even if all applicable transition costs are incurred or will be passed down to the distribution cooperatives.
4. "Commission" means the corporation commission.
5. "Customer" means any person or entity within this state to whom one of the following applies:
(a) Regardless of the identity of the person's or entity's electric generation supplier and without regard to whether the person or entity also receives service from other electric service providers, the person or entity receives retail electric service, whether directly or indirectly, whether bundled or unbundled and whether supply or delivery, or both, from any of the following:
(i) An applicant.
(ii) A successor to an applicant.
(iii) Any other person, public service corporation or municipal entity that assumes the responsibility to provide electric service in an applicant's service territory as the service territory exists on the date the commission issues a financing order.
(b) Regardless of the identity of the person's or entity's electric generation supplier and without regard to whether the person or entity also receives service from other electric service providers, the person or entity maintains an interconnection with the electric distribution facilities of an applicant that allows that person or entity to receive retail electric service, whether bundled or unbundled and whether supply or delivery, or both, from any of the following:
(i) An applicant.
(ii) A successor to an applicant.
(iii) Any other person, public service corporation or municipal entity that assumes the responsibility to provide electric service in an applicant's service territory as the service territory exists on the date the commission issues a financing order.
(c) Without regard to whether the person or entity also receives service from other electric service providers, the person or entity is a cooperative that provides retail electric service to members and that receives electricity from an applicant that provides wholesale electric generation and transmission services.
6. "Financing charges" mean nonbypassable charges that are paid or payable by all customers to a qualified special purpose entity to recover ongoing financing costs in accordance with this chapter. Financing charges can be adjusted from time to time in accordance with the true-up mechanism.
7. "Financing cost" means all costs that are incurred by a qualified special purpose entity, including in connection with a combined cooperative securitization, to issue, rate, market, place, authorize, support, repay, refinance, service, administer or refund transition bonds, whether incurred at, before or after issuance or before or after the date of maturity including any of the following:
(a) The principal and interest and any acquisition, defeasance or redemption premiums that are payable on transition bonds.
(b) The costs, fees and expenses that are related to issuing, rating, marketing, placing, authorizing, supporting, repaying, refinancing, servicing, administering or refunding transition bonds that include any costs incurred for implementing the true-up mechanism.
(c) The costs, fees and expenses of trustees or similar fiduciaries, attorneys, accountants, servicers, rating agencies, depository and other agents or other professionals.
(d) The costs, fees and expenses that are associated with hiring expert consultants that are necessary to aid the commission in reviewing and approving an application for a financing order in accordance with this chapter.
(e) The costs that are incurred under an ancillary agreement and any amount that is required to refund or replenish a reserve account or other account established under an ancillary agreement or other document relating to transition bonds.
(f) The costs of forming, operating, administering and dissolving a qualified special purpose entity.
(g) The costs, fees and expenses that are incurred to obtain any consent, release, waiver or approval from any holder of an existing obligation of an applicant that is necessary to permit the issuance of transition bonds or the retirement, abandonment or reduction in the undepreciated book value of a transition asset in connection with a transaction under this chapter.
(h) The costs that are incurred to protect the status of transition property, the right to impose and collect financing charges or the right to receive financing revenues, including costs related to any judicial or other proceedings that are necessary to protect the transition property or collect financing revenues.
(i) Federal, state and other taxes that are imposed on the applicant or the qualified special purpose entity, with respect to the financing charges or financing revenues without duplication, and adjusted to reflect any unrecovered deferred income tax balance associated with the transition costs, and any other fees, charges or other assessments that are imposed on transition bonds.
8. "Financing order" means an order of the commission that is issued as prescribed in section 40-603, subsection B.
9. "Financing party" means a holder of transition bonds and any trustee, collateral agent or other person acting for the benefit of the holder.
10. "Financing revenues" means any money and other property received or to be received, directly or indirectly, in payment of or on account of the financing charges, including all of the proceeds of the investment thereof.
11. "Nonbypassable" means that the payment of the financing charges may not be avoided and shall be paid by a customer if, at the time invoices or bills are rendered, transition bonds are outstanding or the financing costs have not been recovered in full. Financing charges shall be paid regardless of whether:
(a) The customer is liable to a public service corporation or the applicant for any rate or other charges for electric service.
(b) The system assets serving the customer continue to be owned by the applicable applicant or other public service corporation.
12. "Ongoing financing costs":
(a) Means all financing costs, including the principal and interest that are payable on the transition bonds.
(b) Does not include up-front financing costs that are paid by the qualified special purpose entity directly or indirectly from the proceeds of the issuance of transition bonds.
13. "Qualified special purpose entity":
(a) Means a legal entity that:
(i) Is established by and wholly owned, directly or indirectly, by an applicant in which an interest in transition property is created pursuant to this chapter and which issues transition bonds that are secured by transition property.
(ii) Does not provide electric service.
(iii) Is not a public service corporation.
(b) May not conduct any business that is unrelated to owning, protecting, and administering the transition property or issuing, marketing, placing, authorizing, supporting, repaying, refinancing, servicing, administering or refunding transition bonds.
(c) Includes any successor to or assignee, other than as security, of the legal entity.
(d) For a combined cooperative securitization, the ownership interests in a qualified special purpose entity may be allocated to the relevant cooperative applicants in proportion to the transition costs that are allocated to each of them or in any other manner approved by the financing order.
14. "Servicer":
(a) Means a person or entity that is authorized and required by a contract, tariff or otherwise, to do all of the following:
(i) Calculate, bill or collect financing charges on behalf of a qualified special purpose entity.
(ii) Prepare periodic reports on the billing of financing charges and the collection of financing revenues.
(iii) Render other services related to financing charges and the transition property, including administering the true-up mechanism.
(b) Includes:
(i) A public service corporation, including an applicant.
(ii) A third-party servicer that collects finance charges under a transition billing services tariff.
15. "Significant event recovery costs":
(a) Means costs, fees and expenses that are significant, as determined by the commission, that are incurred or to be incurred through the date of issuance of a financing order and that are associated with or that arise from incidents of severe or extreme weather, natural disasters, civil disturbance, wildfire, criminal acts or acts of war or terrorism that result in any of the applicant's assets, facilities or infrastructure that are in operation providing service for customers becoming destroyed, damaged or otherwise rendered inoperable, in whole or in part.
(b) For a combined cooperative securitization, may include costs that have been incurred by a generation and transmission cooperative applicant that would otherwise be passed on to distribution cooperative applicants in wholesale power or similar charges, regardless of whether the costs have been passed through to distribution cooperative applicants at any given time.
16. "Third-party servicer" means a person, other than an applicant, that is engaged to act as a servicer for transition bonds in the event an applicant is unable to act as a servicer.
17. "Transition asset" means any electric power generation, transmission or distribution facilities, including other property or equipment that is used by the applicant and that is identified in an application for a financing order, and that either:
(a) Has been retired and no longer provides service, in whole or in part.
(b) As of the date of the application, is planned to be retired, sold, disposed of, abandoned or otherwise removed from service by the applicant, in whole or in part, within ten years after the date of the application.
(c) Has otherwise been destroyed, damaged or rendered inoperable, in whole or in part, by forces or action outside of the applicant's reasonable control.
18. "Transition asset retirement costs":
(a) Means the undepreciated value, unrecovered balance or portion thereof as to any transition asset that is included in the applicant's rate base or that is recovered through rates that will be permanently reduced when the transition bonds are issued and the applicant receives the transfer of funds as described in section 40-606, subsection A in connection with a transaction authorized by this chapter and any costs, fees and expenses incurred to retire, abandon or reduce the undepreciated book value of such transition asset in connection with a transaction under this chapter, including without limitation decommissioning, remediation or restoration costs associated with the transition asset.
(b) For a combined cooperative securitization, may include costs that have been incurred by a generation and transmission cooperative applicant that would otherwise be passed on to distribution cooperative applicants in wholesale power or similar charges, regardless of whether such costs have been passed through to distribution cooperative applicants at any given time.
19. "Transition benefit test" means the assessment described in section 40-603, subsection B, paragraph 2.
20. "Transition billing services tariff":
(a) Means a tariff of a public service corporation, including an applicant, that authorizes the public service corporation, applicant or other person to act as a servicer.
(b) May not specify or alter the amount of any financing charges nor grant the servicer any right, title or interest in financing revenues.
21. "Transition bonds" means bonds, notes or other evidences of indebtedness that are issued by a qualified special purpose entity and that are described in an application for a financing order, the proceeds of which are used, directly or indirectly, to recover, finance, refinance or refund transition costs and up-front financing costs and that are directly or indirectly payable from, or secured by, transition property, financing charges or financing revenues.
22. "Transition costs" includes any of the following:
(a) Transition asset retirement costs.
(b) Significant event recovery costs.
23. "Transition property":
(a) Means the property rights and property interests of a qualified special purpose entity, any holders of transition bonds when issued or any transferee or assignee thereof that are created or recognized as a result of a transaction authorized by this chapter and is not an asset of the applicant or any other public service corporation.
(b) Includes any of the following:
(i) All rights and interests of a qualified special purpose entity under a financing order.
(ii) The right to impose, charge, collect and receive financing charges, including the right to calculate, impose, charge, collect and receive adjustments to the financing charges pursuant to the true-up mechanism.
(iii) All right and title to, and all interest in, financing revenues, regardless of whether the revenues are billed, received, collected or maintained separately from or commingled with other revenues or monies of any type and regardless of whether the revenues are billed or collected by a servicer.
(iv) All reserves that are established in connection with the transition bonds or the transition property.
(v) All rights of a qualified special purpose entity under any ancillary agreement.
24. "True-up mechanism":
(a) Means a formula, described in the application for a financing order and established before or concurrent with the issuance of transition bonds, that adjusts financing charges over time to correct for any overcollection or undercollection of financing revenues so that both a qualified special purpose entity timely and completely recovers not more than all ongoing financing costs and any impacts to the applicant's customers from any overcollection are addressed in a timely and complete manner.
(b) For a combined cooperative securitization and in addition to the mechanism described in subdivision (a) of this paragraph, means a mechanism that may also be used to allocate or reallocate financing costs to the customers of the cooperative applicants.
25. "Unit financing charge" means the share or portion of the financing charges that are imposed on, paid by and collected from a particular customer or from every customer in a particular group of customers and may differ between customers and groups of customers, but if they do, each customer group and how it is defined shall also be described in the application. Unit financing charges are determined, and imposed, without regard to whether, or to what extent, a customer uses the services of any public service corporation during the period in which a particular unit financing charge will apply.
26. "Up-front financing costs":
(a) Means those financing costs that are paid directly or indirectly from the proceeds of transition bonds, by the qualified special purpose entity.
(b) Includes all or a portion of the costs of obtaining a financing order and designing, marketing, obtaining ratings for and issuing transition bonds.