The Colorado Public Utilities Commission (Colorado PUC) has chosen Saber Partners, LLC ( Saber) to assist in assessing the advantages and drawbacks of electric utility securitization. Saber also is currently advising the Kentucky Public Service Commission on utility securitization. State regulators in Texas, Florida, New Jersey, Wisconsin, Vermont, West Virginia, the District of Columbia, North Carolina, South Carolina, and Indiana have also retained Saber for advice on over $13 billion in utility securitization financings.
Eric Blank, Chairman of the Colorado PUC said, “Saber Partners is a nationally recognized authority in electric utility securitization and ratepayer-backed bond financing. The individuals available to the PUC bring decades of experience in utility securitization matters for regulators, utility financial management, and capital market issues.”
“With Saber’s support,” Chairman Blank continued “the Commission aims to gain a comprehensive understanding of the financial, legal, regulatory, and market aspects of securitization methodologies. Our focus is on exploring potential applications of investor-owned utility securitization and its implications for Colorado ratepayers and utilities.”
According to Saber Partners’ CEO, Joseph S. Fichera, “Utility securitization is a complex Wall Street financial tool that creates a unique and simple ratepayer-backed bond. Ratepayer-backed bonds can safeguard electricity consumers during this period of energy transition. When done correctly, they can generate significant savings for consumers. As a private firm dedicated to serving the public interest, we are honored to have the CPUC choose us for this important assignment.”
Fichera said the Saber Partners’ project team will include Brian Maher, a former senior executive at Exxon Mobil overseeing external finance; Hyman Schoenblum, former Treasurer of Con Ed of New York; Paul Sutherland, former finance officer at Florida Power & Light.; and Barry Abramson, former top-ranked utility equity analyst. The firm’s Advisory Board has been chaired by Alan Blinder, former vice chair of the Federal Reserve, since its establishment in 2000. The Advisory Board also includes Becky Klein, former Chair of the Public Utility Commission of Texas who will be on the Colorado team directly.
What Is Utility Securitization?
Utility securitization creates of unique type of investment known as a “ratepayer-backed bond.” These bonds can be sold to investors at a low cost to pay for special utility projects. Unlike other utility bonds, all of the electricity utility’s consumers share direct and collective responsibility for repayment. These bonds are supported by specific state laws and an irrevocable commitment from state utility regulators.
Ratepayer-backed bonds allow utilities to recover immediately prudently incurred expenses while lessening the financial burden on ratepayers compared to traditional utility financing methods. Utilities can seek approval from the CPUC to employ these bonds for covering costs related to the retirement of electric generating facilities and “projects to mitigate the effects of extreme weather, wildfires, climate change, or other hazards.”
Colorado’s Model Securitization Legislation Enacted in 2019
The Colorado PUC’s engagement follows the enactment of SB19-236 by the Colorado legislature. This legislation included provisions pertaining to Colorado Energy Impact Bonds (CO-EI Bonds) as part of the PUC Reauthorization Act in 2019. Colorado’s securitization legislation is regarded as a national model and forward-thinking. Christopher Hansen was the state legislator who sponsored the bill.
Saber Partners will help the Colorado PUC in navigating the intricacies of securitization and its implications for Colorado’s energy landscape. This effort includes identifying and discussing best practices for utility securitization and educating staff and commissioners on addressing Colorado’s economic, financial, rate, and policy matters related to CO-EI Bonds.