§1320. Sale of property

The sale and assignment of system restoration property is governed by this Section. All of the following shall apply to a sale and assignment under this Section:

(1) The sale of system restoration property by the corporation to an issuer that the parties have in the governing contract expressly stated to be a sale is an absolute transfer and true sale of, and not a security interest in, the transferor's right, title, and interest in, to, and under the system restoration property. For all purposes, the parties' characterization of a transaction as a sale of an interest in system restoration property shall be conclusive that the transaction is a true sale and that ownership has passed to the issuer characterized as the purchaser, regardless of whether the issuer has possession of any documents evidencing or pertaining to the interest. After such a transaction, such system restoration property is not subject to any claims of the corporation or the corporation's creditors, other than creditors holding a prior security interest in that system restoration property perfected in accordance with this Part.

(2) The characterization of the sale and assignment as a true sale or other absolute transfer under Paragraph (1) of this Section and the corresponding characterization of the issuer's property interest shall be determinative and conclusive irrespective of, and is not affected or impaired by, the existence of any of the following circumstances:

(a) Commingling of amounts arising with respect to the system restoration property with other amounts.

(b) The retention by the corporation of an entitlement to any surplus in the system restoration property.

(c) The utility acting as the collector of the system restoration charges.

(d) The contrary or other treatment of the sale and assignment, for tax, financial reporting, or other purposes.

(e) The granting or providing to holders of the system restoration bonds of a preferred right to the system restoration property, or credit enhancement with respect to the system restoration bonds.

(3) The ownership of an interest in system restoration property is voluntarily transferred by a contract between the owner and the assignee that purports to transfer the ownership of that interest. Unless otherwise provided, the transfer of ownership takes place between the parties as soon as there is written agreement on the interest, the purchase price is fixed, and the financing order has been issued. Such transfer shall be perfected and take effect against all third parties, including without limitation subsequent lien creditors when the transfer has become effective between the parties and when the pertinent utility collecting the system restoration charge has been given notice of the sale or assignment. Delivery of such an interest in system restoration property shall take place by operation of law upon such notice.

(4) The giving of notice to the pertinent utility shall be the only method of perfecting a sale or assignment of system restoration property. The sale or assignment of an interest in system restoration property perfected by such notice is effective against the customers owing payment of the system restoration charges, creditors of the transferor, subsequent transferees, and all other third persons, notwithstanding the absence of actual knowledge of or notice to the customers of the utility of the sale or assignment.

(5) The priority of the conflicting ownership interests of assignees in the same interest or rights in any system restoration property is determined as follows:

(a) Conflicting perfected interests or rights of assignees rank according to priority in time of perfection by notice.

(b) A perfected interest or right of an assignee has priority over a conflicting unperfected interest or right of an assignee.

(c) A perfected interest or right of an assignee has priority over a person who becomes a lien creditor after the perfection of such assignee's interest or right.

(6) The priority of a sale or assignment perfected under this Section is not impaired by any later modification of the financing order or system restoration property or by the commingling of funds arising from system restoration property with other funds. Any other security interest that may apply to those commingled funds shall be terminated when those funds are transferred to a segregated account for the assignee or a financing party. If system restoration property has been transferred to an assignee or financing party, the utility or other person serving as collection agent shall hold any proceeds of that property as a mandatary and fiduciary and deliver such proceeds to the assignee or financing party.

(7) No customer of a utility owing payment of a system restoration charge may, by agreement with the utility or otherwise, prohibit, restrict, or require the consent of such customer to the assignment, pledge, or transfer of the system restoration charge.

Acts 2007, No. 55, §3, eff. June 18, 2007.