| implement one of the
options listed in subparagraphs (A), (B), or (C) of this paragraph. If a REP
that is in default fails to immediately select and implement one of these
options or, after so selecting one of the options, fails to adequately meet
its responsibilities thereunder, then the servicer shall immediately implement
the option in subparagraph (A) of this paragraph. Upon re-establishment of
compliance with the requirements set forth in paragraphs (2), (3), or (4)
of this subsection, and the payment of all past-due amounts and associated
penalties, the REP will no longer be required to comply with this paragraph.
(A) Allow the Provider of Last Resort ("POLR") or a qualified
REP of the customer's choosing to immediately assume the responsibility for
the billing and collection of transition charges.
(B) Immediately implement other mutually suitable and agreeable
arrangements with the servicer. It is expressly understood that the servicer's
ability to agree to any other arrangements will be limited by the terms of
the securitization Servicing Agreement and requirements of each of the rating
agencies that have rated the transition bonds necessary to avoid a suspension,
withdrawal, or downgrade of the ratings on the transition bonds.
(C) Arrange that all amounts owed by retail customers for services
rendered by the REP be timely billed and will immediately be paid directly
into a lock-box controlled by the servicer with such amounts to be applied
first to pay transition charges and other non-bypassable delivery charges
before the remaining amounts are released to the REP. All costs associated
with this mechanism will be borne solely by the REP.
(6) Billing by providers of last resort. The initial POLR appointed
by the commission, or any commission-appointed successor to the POLR, must
meet the minimum credit rating or deposit/credit support requirements described
in paragraph (1) of this subsection in addition to any other standards that
may be adopted by the commission. If the POLR defaults or is not eligible
to provide such services, responsibility for billing and collection of transition
charges will immediately be transferred to and assumed by the servicer until
a new POLR can be named by the commission or the customer requests the services
of a certified REP. If the POLR or a qualified REP assumes responsibility
for billing and collecting transition charges under paragraph (5) of this
subsection or servicer assumes such responsibility under this paragraph, the
POLR, replacement REP, or servicer, as applicable shall bill all transition
charges which have not been billed as of the date it assumes such responsibility
and shall be subject to the provisions of the financing order. (For example,
if a REP which bills on a calendar month basis goes into default and is replaced
by the POLR on April 20, the initial transition charge bill rendered by the
POLR would cover all transition charges attributable to periods since March
31, the last date for which the original REP had rendered bills). Retail customers
may never be re-billed by the successor REP, the POLR, or the servicer for
any amount of transition charges they have paid their REP (although future
transition charges shall reflect REP and other system-wide charge-offs). Additionally,
if the amount of the penalty detailed in paragraph (4) of this subsection
is the sole remaining past-due amount after the 45th calendar day, the REP
shall not be required to comply with paragraph (5)(A), (B) or (C) of this
subsection, unless the penalty is not paid within an additional 30 calendar
days.
(7) Dispute resolution. In the event that a REP disputes any
amount of billed transition charges, the REP shall pay the disputed amount
under protest according to the timelines detailed in paragraph (4) of this
subsection. The REP and servicer shall first attempt to informally resolve
the dispute, but if they fail to do so within 30 calendar days, either party
may file a complaint with the commission. If the REP is successful in the
dispute process (informal or formal), the REP shall be entitled to interest
on the disputed amount paid to the servicer at the commission-approved interest
rate. Disputes about the date of receipt of transition charge payments (and
penalties arising thereof) or the size of a required REP deposit will be handled
in a like manner. It is expressly intended that any interest paid by the servicer
on disputed amounts shall not be recovered through transition charges if it
is determined that the servicer's claim to the funds is clearly unfounded.
No interest shall be paid by the servicer if it is determined that the servicer
has received inaccurate metering data from another entity providing competitive
metering services pursuant to PURA §39.107.
(8) Metering data. If the servicer is providing the metering,
metering data will be provided to the REP at the same time as the billing.
The REP will be responsible for providing the servicer accurate metering data
(including meter identification information) for all REP's customers whose
meters are not read by the servicer at the time the data is provider to the
independent organization (as defined in PURA §39.151(b)) under the independent
organization's protocols for settlement.
(9) Charge-off allowances. The REP will be allowed to hold
back an allowance for charge-offs in its payments to the servicer. Such charge-off
rate will be recalculated each year in connection with the annual true-up
procedure. In the initial year, REPs will be allowed to remit payments based
on the same system-wide charge-off percentage then being used by the servicer
to remit payments to the indenture trustee for the holders of transition bonds;
thereafter the charge-off percentage will be calculated based upon each REP's
prior year charge-off experience. On an annual basis in connection with the
true-up process, the REP and the servicer will be responsible for reconciling
the amounts held back with amounts actually written off as uncollectible in
accordance with the terms agreed to by the REP and the servicer, provided
that:
(A) The REP's right to reconciliation for charge-offs will
be limited to customers whose service has been permanently terminated and
whose entire accounts (i.e. , all amounts
due the REP for its own account as well as the portion representing transition
charges) have been written off.
(B) If the REP's actual charge-offs are greater than the allowance
for charge-offs, the REP may collect the difference, with interest, from the
date the review was completed, in 12 equal monthly installments beginning
in the month that the transition charges are adjusted to reflect the new charge
off percentages. The REP's recourse will be limited to a credit against future
transition charge payments unless the REP and the servicer agree to alternative
arrangements, but in no event will the REP have recourse to the indenture
trustee, the "SPE" or the SPE's funds for such payments and the indenture
trustee and SPE shall not be liable for such amounts. If the REP's actual
charge-offs are less than the allowance for charge-offs, the REP shall pay
the difference, with interest, from the date the review was completed, in
12 equal monthly installments beginning in the month that the transition charges
are adjusted to reflect the new charge-off percentages. The interest rate
on amounts due to or from the REP under this paragraph shall be the interest
rate in effect pursuant to Texas Utilities Code §183.003 on the date
the annual reconciliation is made. REP and servicer shall each have the unilateral
right to prepay any amounts due hereunder and thus avoid continued accrual
of interest.
(C) The REP shall provide ' the servicer a list of all charge-offs
qualifying for reconciliation under subparagraph (A) of this paragraph, and
documentation permitting servicer to verify that service to the customer has
been terminated and all amounts due the REP from such customers have been
written off. The information shall be provided not later than 30 days prior
to the date on which the annual true-up adjustment is to be filed and shall
cover the most recent 12-month period for which data is available at the time
of submission. The information to be provided by the REP shall include data
demonstrating that the REP has not collected any amounts the REP claimed as
charge-offs in prior periods, or, if any amount previously charged-off has
been collected, quantifying the revenues. The REP's rights to credits will
not take effect until adjusted transition charges reflecting the REPs charge-off
experience have been implemented.
(10) Service termination. In the event that the servicer is
billing customers for transition charges, the servicer shall have the right
to terminate transmission and distribution service to the end-use customer
(or if the servicer is not the transmission and distribution utility to direct
the transmission and distribution utility to terminate service to the end-use
customer) for non-payment by the end-use customer pursuant to
applicable commission rules. In the event that a REP or the POLR is billing
customers for transition charges, the REP shall have the right to transfer
the customer to the POLR (or to another certified REP) or to direct the transmission
and distribution utility to terminate transmission and distribution service
to the end-use customer for non-payment by the end-use customer pursuant to
applicable commission rules. In the event that the POLR is billing customers
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