(a)

1. (1) The commission may issue financing orders in accordance with this article to facilitate the recovery, financing, or refinancing of water supply costs. A financing order may be adopted only upon the application of the qualifying water utility and shall become effective in accordance with its terms.
2. (2) Commencing January 1, 2015, the qualifying water utility may apply to the commission for a determination that no more than 50 percent of the qualifying water utility’s water supply costs may be recovered through water supply charges, which would be water supply property under this article. The commission shall not approve an increase in a financing order that exceeds a total amount of 5 percent of the water supply costs.
3. (3) A public financing entity that proposes to issue water rate relief bonds pursuant to Article 8 of Chapter 3 of Part 5 of the Monterey Peninsula Water Management District Law, as added by Chapter 527 of the Statutes of 1977, or Section 6537 of the Government Code, shall provide information as requested by the commission in connection with the application and proceeding.
4. (4) In its application the qualifying water utility shall specify how customers may benefit from reduced rates on a present value basis through the issuance of water rate relief bonds as compared to the use of traditional utility financing mechanisms. If a public financing entity proposes to issue water rate relief bonds, it shall provide evidence to the commission that the issuance of water rate relief bonds by the public financing entity, due to the availability of a federal or state income tax exemption, will provide savings to water customers on the Monterey Peninsula.
5. (5) The commission shall establish procedures for the expeditious processing of financing order applications, including the approval or disapproval of the qualifying water utility’s application, within 180 days of the application submission.

(e)

1. (1) Notwithstanding Section 455.5 or 1708, or any other provision of law, and except as otherwise provided in subdivision (g), water supply property that has been made the basis for the issuance of water rate relief bonds, the financing order, and the water supply charges shall be irrevocable. The commission shall not, either by rescinding, altering, or amending the financing order or otherwise, revalue or revise for ratemaking purposes the water supply costs or the financing costs, determine that the water supply charges are unjust or unreasonable, or in any way reduce or impair the value of water supply property either directly or indirectly by taking water supply charges into account when setting other rates for the qualifying water utility. The amount of revenues arising shall not be subject to reduction, impairment, postponement, or termination.
2. (2) The State of California does hereby pledge and agree with the qualifying water utility, owners of water supply property, the financing entities, and owners of water rate relief bonds that the state shall neither limit nor alter, except as otherwise provided with respect to true-up adjustment of water supply charges pursuant to subdivision (g), the water supply charges, water supply property, financing orders, or any rights under a financing order until the water rate relief bonds, together with the interest on the bonds, and all related financing costs are fully paid and discharged, or, in the alternative, have been refinanced through an additional issue of water rate relief bonds, provided nothing contained in this section shall preclude the limitation or alteration if and when adequate provision shall be made by law for the protection of the qualifying water utility, financing entities, and owners. The financing entity is authorized to include this pledge and undertaking for the state in the water rate relief bonds.

(f)

1. (1) Neither financing orders nor water rate relief bonds issued under this article shall constitute a debt or liability of the state or of any political subdivision of the state except a public financing entity, nor shall they constitute a pledge of the full faith and credit of the state or any of its political subdivisions, but are payable solely from the funds provided therefor under this article and shall be consistent with Sections 1 and 18 of Article XVI of the California Constitution. This subdivision shall not preclude bond guarantees or enhancements pursuant to this article or pursuant to Article 8 of Chapter 3 of Part 5 of the Monterey Peninsula Water Management District Law, as added by Chapter 527 of the Statutes of 1977, or Section 6537 of the Government Code. A water rate relief bond shall contain on the face of the bond a statement to the following effect: “Neither the full faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of, or interest on, this bond.”
2. (2) The issuance of water rate relief bonds under this article shall not directly, indirectly, or contingently obligate the state or any political subdivision of the state to levy or to pledge any form of taxation therefor or to make any appropriation for their payment. Nothing in this paragraph shall prevent or be construed to prevent a public financing entity from pledging water supply property, or payments made on water rate relief bonds, together with any reserves or overcollateralization amounts approved in a financing order, to the payment of the water rate relief bonds.

(i) Any surplus water supply charges in excess of the necessary amounts to pay the principal premium, if any, and interest on the water rate relief bonds and all other financing costs shall be credited to customers through the adjustment mechanism described in subdivision (g) or used to prepay or defease water rate relief bonds, so long as this would not result in a recharacterization of the tax, accounting, and other intended characteristics of the financing, including, but not limited to, the following:

1. (1) Avoiding the recognition of debt on the qualifying water utility’s balance sheet for financial accounting and regulatory purposes.
2. (2) Treating the water rate relief bonds as debt of the qualifying water utility or its affiliates for federal income tax purposes.
3. (3) Treating the transfer of the water supply property by the qualifying water utility as a true sale for bankruptcy purposes.
4. (4) Avoiding any adverse impact of the financing on the qualifying water utility’s credit rating.