IRS Updates And Modernizes Rules Governing Utility Securitizations

Highlights

• Revenue Procedure (Rev. Proc.) 2024-15 updates and modifies Rev. Proc. 2005-62 to reflect the evolution of securitization transactions undertaken by regulated public utilities.
• The latest Revenue Procedure expands the eligibility of securitizations to financing entities authorized by state law to securitize public utility rights even where the financing entities are not owned directly or indirectly by a public utility.
• Whereas Rev. Proc 2005-62 allowed debt repayments to be made quarterly or semiannually, Rev. Proc. 2024-15 allows for payments that are made at least annually.

Since the issuance of Revenue Procedure (Rev. Proc.) 2005-62, many utilities have used securitizations authorized by state law to secure collections of stranded costs upon the retirement of certain generation plants or costs attributable to major storms. The state would authorize the issuance by a public utility commission or other state agency via a financing order for the