Exhibit 10.2
EXECUTION COPY
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TRANSITION PROPERTY SERVICING AGREEMENT
between
PG&E FUNDING LLC
Note Issuer
and
PACIFIC GAS AND ELECTRIC COMPANY
Servicer
Dated as of December 8, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I Definitions
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SECTION 1.01. Definitions.....................................................2
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SECTION 1.02. Other Definitional Provisions..................................17
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ARTICLE II Appointment and Authorization
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SECTION 2.01. Appointment of Servicer; Acceptance of
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Appointment...................................................................18
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SECTION 2.02. Authorization..................................................18
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SECTION 2.03. Dominion and Control Over the Transition
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Property......................................................................19
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ARTICLE III Billing Services
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SECTION 3.01. Duties of Servicer.............................................20
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SECTION 3.02. Servicing and Maintenance Standards............................23
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SECTION 3.03. Certificate of Compliance......................................24
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SECTION 3.04. Annual Report by Independent Public
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Accountants...................................................................25
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ARTICLE IV Services Related to True-Up Adjustments
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SECTION 4.01. Periodic True-Up Adjustments...................................27
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SECTION 4.02. Limitation of Liability........................................37
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ARTICLE V The Transition Property
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SECTION 5.01. Custody of Transition Property Records.........................39
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SECTION 5.02. Duties of Servicer as Custodian................................39
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SECTION 5.03. Instructions; Authority to Act.................................43
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SECTION 5.04. Custodian's Indemnification....................................43
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SECTION 5.05. Effective Period and Termination...............................44
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SECTION 5.06. General Indemnification of Note Trustee,
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Certificate Trustee...........................................................45
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ARTICLE VI The Servicer
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SECTION 6.01. Representations and Warranties of Servicer.....................46
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SECTION 6.02. Indemnities of Servicer; Release of Claims.....................51
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SECTION 6.03. Merger or Consolidation of, or Assumption of
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the Obligations of, Servicer..................................................53
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SECTION 6.04. Limitation on Liability of Servicer and
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Others........................................................................55
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SECTION 6.05. Pacific Gas and Electric Company Not to
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Resign as Servicer............................................................56
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SECTION 6.06. Servicing Compensation.........................................57
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SECTION 6.07. Compliance with Applicable Law.................................59
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SECTION 6.08. Access to Certain Records and Information
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Regarding Transition Property.................................................59
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SECTION 6.09. Appointments...................................................60
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SECTION 6.10. No Servicer Advances...........................................61
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SECTION 6.11. Remittances....................................................61
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ARTICLE VII Default
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SECTION 7.01. Servicer Default...............................................64
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SECTION 7.02. Appointment of Successor.......................................67
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SECTION 7.03. Waiver of Past Defaults........................................69
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SECTION 7.04. Notice of Servicer Default.....................................69
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ARTICLE VIII Miscellaneous Provisions
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SECTION 8.01. Amendment......................................................70
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SECTION 8.02. Protection of Title to Trust...................................72
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SECTION 8.03. Notices........................................................73
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SECTION 8.04. Assignment.....................................................75
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SECTION 8.05. Limitations on Rights of Others................................75
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SECTION 8.06. Severability...................................................75
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SECTION 8.07. Separate Counterparts..........................................76
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SECTION 8.08. Headings.......................................................76
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SECTION 8.09. Governing Law..................................................76
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SECTION 8.10. Assignment to Note Trustee.....................................76
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SECTION 8.11. Nonpetition Covenants..........................................76
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SECTION 8.12. Limitation of Liability........................................77
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Exhibits and Schedules
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Exhibit A Form of Monthly Servicer's Certificate
Exhibit B Form of Certificate of Compliance
Exhibit C Form of Routine Annual True-Up Mechanism Advice Letter
Exhibit D Form of Anniversary True-Up Mechanism Advice Letter
Exhibit E Form of Quarterly Servicer's Certificate
Schedule 4.01(a) Expected Amortization Schedule
Schedule 6.01(f) No Proceedings
Annexes
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Annex I Servicing Procedures
Schedule 6 to
Annex I Calculation of Aggregate Remittance Amount
Annex II Routine Quarterly True-Up Mechanism Advice Letters
TRANSITION PROPERTY SERVICING AGREEMENT dated as of December
8, 1997, between PG&E FUNDING LLC, a Delaware limited liability
company (the "Note Issuer"), and PACIFIC GAS AND ELECTRIC
COMPANY, a California corporation, as Servicer (the "Servicer").
RECITALS
A. Pursuant to the Statute and the Financing Order, the Seller and
the Note Issuer are concurrently entering into the Sale Agreement pursuant to
which the Seller is selling to the Note Issuer the Transition Property created
pursuant to the PU Code, the Financing Order and the Issuance Advice Letter
described in such agreement, and the Seller may sell other Transition Property
to the Note Issuer pursuant to Subsequent Sale Agreements.
B. In connection with its ownership of the Transition Property and in
order to collect the associated FTA Charges, the Note Issuer desires to engage
the Servicer to carry out the functions described herein. The Servicer
currently performs similar functions for itself with respect to its own charges
to its customers and may in the future perform for others. In addition, the
Note Issuer desires to engage the Servicer to act on its behalf in obtaining
True-
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Up Adjustments from the CPUC. The Servicer desires to perform all of these
activities on behalf of the Note Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
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SECTION 1.01. Definitions. Whenever used in this Agreement, the
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following words and phrases shall have the following meanings:
"Actual FTA Payments" means the actual FTA Payments received by the
Servicer attributable to a particular Billing Period.
"Advice Letter" means any filing made to the CPUC by the Servicer on
behalf of the Note Issuer with respect to the FTA Charges or any True-Up
Adjustment in the form of an advice letter, including an Issuance Advice Letter,
a Routine Annual True-Up Mechanism Advice Letter, an Anniversary True-Up
Mechanism Advice Letter, a Routine Quarterly True-Up Mechanism Advice Letter or
a Non-Routine True-Up Mechanism Advice Letter.
"Aggregate Remittance Amount" has the meaning set
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forth in Annex I hereto.
"Agreement" means this Transition Property Servicing Agreement,
together with all Exhibits, Schedules, Annexes and Attachments hereto, as the
same may be amended and supplemented from time to time.
"Anniversary True-Up Mechanism Advice Letter" means an Advice Letter
filed with the CPUC at least fifteen days prior to the Financing Order
Anniversary Date in respect of a True-Up Adjustment, substantially in the form
of Exhibit D hereto. Any True-Up Adjustment required as a result of the
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Anniversary True-Up Mechanism Advice Letter will become effective on the date
specified by the CPUC in accordance with the Financing Order.
"Annual Accountant's Report" has the meaning set forth in Section
3.04.
"Annual Adjustment Filing Date" means each December 15, from and
including December 15, 1998 to and including the last December 15 preceding the
Retirement of the Notes; provided, however, that if any such day is not a
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Servicer Business Day, "Annual Adjustment Filing Date" shall mean the Servicer
Business Day immediately preceding such day.
"Applicable ESP" means, with respect to each Customer, the ESP, if
any, providing "direct access" service
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to that Customer.
"Billing Period" means a calendar month.
"Bills" means each of the regular monthly bills, the summary bills,
the opening bills and the closing bills issued to Customers or ESPs by Pacific
Gas and Electric Company on its own behalf and in its capacity as Servicer.
"Capital Subaccount" has the meaning set forth in the Indenture.
"Certificate of Compliance" has the meaning set forth in Section 3.03.
"Certificate Trustee" means the Person acting as certificate trustee
under the Trust Agreement.
"Collection Period" means the calendar month immediately preceding the
respective Remittance Date.
"Collections Curves" means the Daily Collections Curve together with
the Monthly Collections Curve.
"Consolidated ESP Billing" has the meaning set forth in Annex I
hereto.
"CPUC" means the California Public Utilities Commission or any
successor governmental agency that has regulatory authority over the True-Up
Adjustments contemplated by the Statute.
"CPUC Regulations" means all regulations, rules, tariffs and laws
applicable to public utilities or ESPs, as
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the case may be, and promulgated by, enforced by or otherwise within the
jurisdiction of the CPUC.
"Customers" means existing and future Residential Customers and Small
Commercial Customers.
"Daily Collections Curve" has the meaning set forth on Schedule 6 to
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Annex I hereto.
"Daily Remittance" has the meaning set forth in Section 6.11(b).
"Delaware Trustee" means the Person acting as Delaware trustee under
the Trust Agreement.
"ESP" means an alternative energy service provider who has entered
into an ESP Service Agreement with the Seller.
"ESP Service Agreement" means an agreement between an ESP and the
Seller for the provision of "direct access" service to customers in accordance
with CPUC Decision 00-00-000.
"Estimated FTA Payments" means the sum of the amounts remitted with
respect to a Billing Period during the six months following such Billing Period
based on the Collections Curves.
"Excess Remittance" means the amount, if any, calculated for a
particular Remittance Date, by which all Estimated FTA Payments remitted to the
Collection Account on
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and prior to such Remittance Date with respect to the FTA Charges billed to
Customers during the sixth preceding Billing Period exceed Actual FTA Payments
received by the Servicer attributable to such Billing Period.
"Expected Amortization Schedule" means Schedule 4.01(a) hereto, as the
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same may be amended from time to time pursuant to Section 4.01(a).
"Financing Order" means the order of the CPUC, Decision 00-00-000,
issued as of September 3, 1997, which became effective on October 8, 1997.
"Financing Order Anniversary Date" means September 3 of each year.
"FTA Charges" means the charges permitted to be levied upon the
Customers pursuant to the Financing Order.
"FTA Collections" means FTA Payments received by the Servicer which
are remitted to the Collection Account.
"FTA Effective Date" means the date on which the initial FTA Charges
go into effect pursuant to the terms of the Financing Order and the first
Issuance Advice Letter.
"FTA End Date" means, depending on the context in which used, either:
(i) the date on which specific FTA Charges end because such FTA Charges have
been replaced with revised FTA Charges; or (ii) the FTA Termination Date.
"FTA Payments" means the payments made by
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Customers based on the FTA Charges.
"FTA Start Date" means, depending on the context in which used,
either: (i) the FTA Effective Date; or (ii) the date on which specific revised
FTA Charges go into effect to replace previously existing FTA Charges.
"FTA Termination Date" means the date on which the FTA Charges will
cease to be billed pursuant to the terms of the Financing Order, provided that
the Notes and the Certificates shall have been paid in full.
"Infrastructure Bank" means the California Infrastructure and Economic
Development Bank or any successor in interest.
"Indenture" means the Indenture dated as of December 8, 1997, between
the Note Issuer and the Note Trustee, as the same may be amended and
supplemented from time to time.
"Initial Transition Property" means the Transition Property described
in the Sale Agreement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or
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hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
"Issuance Advice Letter" means an Advice Letter submitted to the CPUC
in connection with and immediately prior to the issuance of a Series of Notes,
which Advice Letter becomes effective five Business Days after filing pursuant
to the terms of the Financing Order. The first
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Issuance Advice Letter will establish the initial FTA Charges, and subsequent
Issuance Advice Letters will modify the FTA Charges to support the issuance of
additional Series of Notes.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.
"Losses" has the meaning assigned to that term in Section 5.04.
"Monthly Collections Curve" has the meaning set forth on Schedule 6 to
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Annex I hereto.
"Monthly Servicer's Certificate" means a certificate, substantially in
the form of Exhibit A hereto, completed and executed by a Responsible Officer of
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the Servicer pursuant to Section 3.01(b)(i).
"Non-Routine True-Up Adjustment" has the meaning set forth in Section
4.01(c)(i).
"Non-Routine True-Up Mechanism Advice Letter" means an Advice Letter
filed with the CPUC in accordance with the Financing Order with respect to any
Non-Routine True-Up Adjustment, pursuant to which the related Non-Routine True-
Up Adjustment generally will become effective at the beginning of the first
Quarter that is at least 90 days after filing.
"Note Issuer" means PG&E Funding LLC, a Delaware
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limited liability company.
"Note Trustee" means the Person acting as trustee under the Indenture,
its successors in interest and any successor trustee under the Indenture.
"Officer's Certificate" means a certificate signed by a Responsible
Officer.
"Opinion of Counsel" means one or more written opinions of counsel who
may be employees of or counsel to the party providing such opinion(s) of
counsel, which counsel shall be acceptable to the party receiving such
opinion(s) of counsel.
"Overcollateralization Subaccount" has the meaning set forth in the
Indenture.
"Payment Date" means, with respect to any Series or Class, each March
25, June 25, September 25 and December 26 of each year, provided that if any
such date is not a Business Day, the Payment Date shall be the Business Day
immediately succeeding such date.
"Principal Balance" means, as of any Payment Date, the sum of the
outstanding principal amount of each Series of Notes.
"Projected Principal Balance" means, as of any Payment Date, the sum
of the projected outstanding principal amount of each Series of Notes for such
Payment Date set
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forth in the Expected Amortization Schedule.
"PU Code" means the California Public Utilities Code, as amended from
time to time.
"Quarter" means each calendar quarter, specifically:
January 1 to and including March 31;
April 1 to and including June 30;
July 1 to and including September 30; and
October 1 to and including December 31.
"Quarterly Servicer's Certificate" means a certificate, substantially
in the form of Exhibit E hereto, completed and executed by a Responsible Officer
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of the Servicer pursuant to Section 4.01(d)(ii).
"Remittance Date" means the twentieth day of each calendar month or,
if such day is not a Business Day, the next succeeding Business Day, commencing
on January 20, 1998.
"Remittance Shortfall" means the amount, if any, calculated for a
particular Remittance Date, by which Actual FTA Payments received by the
Servicer attributable to FTA Charges billed to Customers during the sixth
preceding Billing Period exceed all Estimated FTA Payments remitted to the
Collection Account on and prior to such Remittance Date with respect to such
Billing Period.
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"Required Capital Level" means, as of any Payment Date, the sum of 0.5
percent of the initial principal amount of each then-outstanding Series of Notes
issued pursuant to the Indenture prior to that Payment Date, less $100,000 in
the aggregate for all Series of Notes.
"Required Overcollateralization Level" means, as of any Payment Date,
the amount required to be on deposit in the Overcollateralization Subaccount as
specified in each Series Supplement.
"Reserve Subaccount" has the meaning set forth in the Indenture.
"Residential Customers" means the existing and future residential
consumers of electricity, as identified in the Financing Order, located in the
service territory in which the Seller provided electricity services as of
December 20, 1995.
"Responsible Officer" means the chairman of the board, the chief
executive officer, the president, the vice chairman of the board, any vice
president, the treasurer, any assistant treasurer, the secretary, any assistant
secretary or the controller of the Servicer.
"Retirement of the Notes" means the day on which the final
distribution is made to the Note Trustee in respect of the last outstanding
Note.
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"Routine Annual True-Up Mechanism Advice Letter" means an Advice
Letter filed with the CPUC at least fifteen days prior to the end of each
calendar year in respect of an annual True-Up Adjustment, substantially in the
form of Exhibit C hereto. The Routine Annual True-Up Mechanism Advice Letter
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will become effective on the first calendar day of the next calendar year.
"Routine Quarterly True-Up Mechanism Advice Letter" means an Advice
Letter filed with the CPUC at least fifteen days prior to the end of each of the
first three Quarters of each calendar year in respect of a quarterly True-Up
Adjustment as specified in Annex II hereto. The Routine Quarterly True-Up
Mechanism Advice Letter will become effective on the first calendar day of the
next Quarter. The Servicer shall file Routine Quarterly True-Up Mechanism
Advice Letters with respect to a Series of Notes only if so specified on Annex
II hereto.
"Sale Agreement" means the Transition Property Purchase and Sale
Agreement dated as of the date hereof between Pacific Gas and Electric Company
and the Note Issuer, as amended and supplemented from time to time.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Seller" means Pacific Gas and Electric Company
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and its successors in interest to the extent permitted under the Sale Agreement.
"Series Supplement" has the meaning set forth in the Indenture.
"Servicer" means Pacific Gas and Electric Company, as the servicer of
the Transition Property, and each successor to Pacific Gas and Electric Company
(in the same capacity) pursuant to Section 6.03 or 7.02.
"Servicer Business Day" means any Business Day on which the Servicer's
offices in the State of California are open for business.
"Servicer Default" means an event specified in Section 7.01.
"Servicing Fee" means the fee payable on each Payment Date to the
Servicer for services rendered during the period from, but not including, the
preceding Payment Date to and including the current Payment Date, determined
pursuant to Section 6.06.
"Small Commercial Customers" means the existing and future small
commercial consumers of electricity, as identified in the Financing Order,
located in the service territory in which the Seller provided electricity
services as of December 20, 1995.
"Statute" means Chapter 854, California Statutes
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of 1996 and Chapter 275, California Statutes of 1997, as further amended from
time to time.
"STO" means the California State Treasurer's Office, as agent for sale
of the Certificates.
"Subsequent Sale Agreement" has the meaning assigned to that term in
the definition of Subsequent Transition Property.
"Subsequent Sale Date" means any date on which Subsequent Transition
Property is to be sold to the Note Issuer pursuant to a Subsequent Sale
Agreement.
"Subsequent Transition Property" means any transition property (as
defined in Section 840 of the PU Code) created under the PU Code and the
Financing Order and specifically described in the related Issuance Advice Letter
and sold to the Note Issuer by the Seller pursuant to an agreement substantially
similar to the Sale Agreement (a "Subsequent Sale Agreement").
"Termination Notice" has the meaning assigned to that term in Section
7.01.
"Transition Costs" has the meaning assigned to that term in Section
840(f) of the PU Code.
"Transition Property" means the Initial Transition Property and, from
and after the applicable Subsequent Sale Date therefor, any Subsequent
Transition Property.
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"Transition Property Records" has the meaning assigned to that term in
Section 5.01.
"True-Up Adjustment" means each adjustment to the FTA Charges made
pursuant to the terms of the Financing Order and in accordance with Section 4.01
hereof or in connection with the conveyance to the Note Issuer of Subsequent
Transition Property.
"Trust Agreement" means the Amended and Restated Declaration and
Agreement of Trust dated as of December 8, 1997, among the Infrastructure Bank,
the Delaware Trustee and the Certificate Trustee, as the same may be further
amended and supplemented from time to time.
"Trust Officer" means any officer assigned to the Corporate Trust
Office, including any managing director, vice president, assistant vice
president, assistant treasurer, assistant secretary or any other officer of the
Note Trustee customarily performing functions similar to those performed by any
of the above designated officers and having direct responsibility for the
administration of this Agreement, and also, with respect to a particular matter,
any other officer, to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
SECTION 1.02. Other Definitional Provisions.
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(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) The words "hereof," "herein," "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Schedule,
Exhibit, Annex and Attachment references contained in this Agreement are
references to Sections, Schedules, Exhibits, Annexes and Attachments in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter forms of such terms.
ARTICLE II
Appointment and Authorization
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SECTION 2.01. Appointment of Servicer; Acceptance of Appointment.
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Subject to Section 6.05 and Article 7, the Note Issuer hereby appoints the
Servicer, and the Servicer
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hereby accepts such appointment, to perform the Servicer's obligations pursuant
to this Agreement on behalf of and for the benefit of the Note Issuer in
accordance with the terms of this Agreement and applicable law. This appointment
and the Servicer's acceptance thereof may not be revoked except in accordance
with the express terms of this Agreement.
SECTION 2.02. Authorization. With respect to all or any portion of
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the Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
governmental authorities, including with the CPUC. The Note Issuer shall
furnish the Servicer with such documents as have been prepared by the Servicer
for execution by the Note Issuer, and with such other documents as may be in the
Note Issuer's possession, as necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder. Upon the written
request of the Servicer, the Note Issuer shall furnish the Servicer with any
powers of attorney or other documents necessary or appropriate to enable the
Servicer to carry out its duties hereunder.
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SECTION 2.03. Dominion and Control Over the Transition Property.
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Notwithstanding any other provision herein, the Servicer and the Note Issuer
agree that the Note Issuer shall have dominion and control over the Transition
Property, and the Servicer, in accordance with the terms hereof, is acting
solely as the servicing agent and custodian for the Note Issuer with respect to
the Transition Property and the Transition Property Records. The Servicer
hereby agrees that it shall not take any action that is not authorized by this
Agreement, that is not consistent with its customary procedures and practices,
or that shall impair the rights of the Note Issuer in the Transition Property,
in each case unless such action is required by law or court or regulatory order.
ARTICLE III
Billing Services
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SECTION 3.01. Duties of Servicer. The Servicer, as agent for the
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Note Issuer, shall have the following duties:
(a) Duties of Servicer Generally. The Servicer's duties in general
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shall include management, servicing and administration of the Transition
Property; obtaining meter reads, calculating usage, billing, collections
and posting of all payments in respect of
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the Transition Property; responding to inquiries by Customers, the CPUC, or
any federal, local or other state governmental authorities with respect to
the Transition Property; delivering Bills to Customers and ESPs, processing
and depositing collections and making periodic remittances; furnishing
periodic reports to the Note Issuer, the Note Trustee, the Certificate
Trustee, the Infrastructure Bank and the Rating Agencies; and taking action
in connection with True-Up Adjustments as set forth herein. Certain of the
duties set forth above may be performed by ESPs pursuant to ESP Service
Agreements. Anything to the contrary notwithstanding, the duties of the
Servicer set forth in this Agreement shall be qualified in their entirety
by any CPUC Regulations as in effect at the time such duties are to be
performed. Without limiting the generality of this Section 3.01(a), in
furtherance of the foregoing, the Servicer hereby agrees that it shall also
have, and shall comply with, the duties and responsibilities relating to
data acquisition, usage and xxxx calculation, billing, customer service
functions, collections, payment processing and remittance set forth in
Annex I hereto.
(b) Reporting Functions.
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(i) Monthly Servicer's Certificate. On or before each
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Remittance Date, the Servicer shall prepare and deliver to the Note
Issuer, the Note Trustee, the Certificate Trustee, the Infrastructure
Bank and the Rating Agencies a written report substantially in the
form of Exhibit A hereto (a "Monthly Servicer's Certificate") setting
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forth certain information relating to FTA Payments received by the
Servicer during the Collection Period preceding such Remittance Date.
(ii) Notification of Laws and Regulations. The Servicer shall
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immediately notify the Note Issuer, the Note Trustee, the Certificate
Trustee, the Infrastructure Bank and the Rating Agencies in writing of
any laws or CPUC Regulations hereafter promulgated that have a
material adverse effect on the Servicer's ability to perform its
duties under this Agreement.
(iii) Other Information. Upon the reasonable request of the
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Note Issuer, the Note Trustee, the Certificate Trustee, the
Infrastructure Bank or the Rating Agencies, the Servicer shall provide
to such Note Issuer, Note Trustee, Certificate
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Trustee, Infrastructure Bank or the Rating Agencies, as the case may
be, any public financial information in respect of the Servicer, or
any material information regarding the Transition Property to the
extent it is reasonably available to the Servicer, as may be
reasonably necessary and permitted by law for the Note Issuer, the
Note Trustee, the Certificate
Trustee, the Infrastructure Bank or the Rating Agencies to monitor the
performance by the Servicer hereunder. In addition, so long as any of
the Notes of any Series are outstanding, the Servicer shall provide
the Note Issuer, the Note Trustee and the Certificate Trustee, within
a reasonable time after written request therefor, any information
available to the Servicer or reasonably obtainable by it that is
necessary to calculate the FTA Charges applicable to each class of
Customer.
(iv) Preparation of Reports to be Filed with the SEC. The
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Servicer shall prepare any reports required to be filed by the Note
Issuer under the securities laws, including a copy of each Quarterly
Servicer's Certificate described in Section 4.01(d)(ii), the annual
Certificate of
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Compliance described in Section 3.03, and the Annual Accountant's
Report described in Section 3.04.
SECTION 3.02. Servicing and Maintenance Standards. On behalf of the
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Note Issuer, the Servicer shall (a) manage, service, administer and make
collections in respect of the Transition Property with reasonable care and in
accordance with applicable law, including all applicable CPUC Regulations and
guidelines, using the same degree of care and diligence that the Servicer
exercises with respect to similar assets for its own account and, if applicable,
for others; (b) follow customary standards, policies and procedures for the
industry in performing its duties as Servicer; (c) use all reasonable efforts,
consistent with its customary servicing procedures, to enforce, and maintain
rights in respect of, the Transition Property; and (d) comply with all laws and
regulations applicable to and binding on it relating to the Transition Property.
The Servicer shall follow such customary and usual practices and procedures as
it shall deem necessary or advisable in its servicing of all or any portion of
the Transition Property, which, in the Servicer's judgment, may include the
taking of legal action.
SECTION 3.03. Certificate of Compliance. The
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Servicer shall deliver to the Note Issuer, the Note Trustee, the Certificate
Trustee, the Infrastructure Bank and the Rating Agencies on or before September
30 of each year, commencing September 30, 1998 to and including the September 30
succeeding the Retirement of the Notes, an Officer's Certificate substantially
in the form of Exhibit B hereto (a "Certificate of Compliance"), stating that:
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(i) a review of the activities of the Servicer during the twelve months ended
the preceding June 30 (or, in the case of the first Certificate of Compliance to
be delivered on or before September 30, 1998, the period of time from the date
of this Agreement until June 30, 1998) and of its performance under this
Agreement has been made under such officer's supervision, and (ii) to the best
of such officer's knowledge, based on such review, the Servicer has fulfilled
all of its obligations in all material respects under this Agreement throughout
such twelve months (or, in the case of the Certificate of Compliance to be
delivered on or before September 30, 1998, the period of time from the date of
this Agreement until June 30, 1998), or, if there has been a default in the
fulfillment of any such material obligation, specifying each such material
default known to such officer and the nature and status thereof.
SECTION 3.04. Annual Report by Independent Public
-----------------------------------
25
Accountants. (a) The Servicer shall cause a firm of independent certified public
-----------
accountants (which may provide other services to the Servicer or the Seller) to
prepare, and the Servicer shall deliver to the Note Issuer, the Note Trustee,
the Certificate Trustee, the Infrastructure Bank and the Rating Agencies, a
report addressed to the Servicer (the "Annual Accountant's Report"), which may
be included as part of the Servicer's customary auditing activities, for the
information and use of the Note Issuer, the Note Trustee, the Certificate
Trustee and the Infrastructure Bank on or before September 30 of each year,
beginning September 30, 1998 to and including the September 30 succeeding the
Retirement of the Notes, to the effect that such firm has performed certain
procedures in connection with the Servicer's compliance with its obligations
under this Agreement during the preceding twelve months ended June 30 (or, in
the case of the first Annual Accountant's Report to be delivered on or before
September 30, 1998, the period of time from the date of this Agreement until
June 30, 1998), identifying the results of such procedures and including any
exceptions noted. In the event such accounting firm requires the Note Trustee or
the Certificate Trustee to agree or consent to the procedures performed by such
firm, the Note Issuer shall direct the Note Trustee or
26
the Certificate Trustee in writing to so agree; it being understood and agreed
that the Note Trustee or the Certificate Trustee, as the case may be, will
deliver such letter of agreement or consent in conclusive reliance upon the
direction of the Note Issuer, and neither the Note Trustee nor the Certificate
Trustee will make any independent inquiry or investigation as to, and shall have
no obligation or liability in respect of the sufficiency, validity or
correctness of such procedures.
(b) The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within the
meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.
ARTICLE IV
Services Related to True-Up Adjustments
---------------------------------------
SECTION 4.01. Periodic True-Up Adjustments. From time to time, until
-----------------------------
the Retirement of the Notes, the Servicer shall identify the need for True-Up
Adjustments and shall take all reasonable action to obtain and implement such
True-Up Adjustments, all in accordance with the following:
(a) Expected Amortization Schedule. The initial Expected
-------------------------------
Amortization Schedule is attached hereto as
27
Schedule 4.01(a). In connection with the issuance by the Note Issuer of any
----------------
additional Series of Notes after the Closing Date, the Servicer, on or prior to
the Series Issuance Date therefor, shall revise the Expected Amortization
Schedule to add the requisite information for each new Series of Notes and set
forth, as of each Payment Date through the scheduled Retirement of the Notes,
the aggregate principal amounts of the Notes of all Series, including such
additional Series, expected to be outstanding on such Payment Date. If the
Expected Amortization Schedule is revised as set forth above, the Servicer shall
send a copy of such revised Expected Amortization Schedule to the Note Issuer,
the Note Trustee, the Certificate Trustee, the Infrastructure Bank and the
Rating Agencies promptly thereafter.
(b) Routine True-Up Adjustments and Yearly Filings.
-----------------------------------------------
(i) Routine Yearly True-Up Adjustments and Filings.
-----------------------------------------------
(1) Each year on or immediately before the Annual Adjustment
Filing Date, the Servicer shall: (A) estimate collections through the
December 31 immediately following
28
such Annual Adjustment Filing Date and through December 31 of the year
following the year of such Annual Adjustment Filing Date; (B) update
the assumptions underlying the FTA Charges, including energy usage
volume, the rate of delinquencies and write-offs, estimated expenses
and fees of the Note Issuer, the Trust and the Infrastructure Bank to
the extent not fixed, and the Collections Curves; (C) determine the
revised FTA Charges that, together with the funds on deposit in the
Reserve Subaccount, would restore: (1) the Principal Balance to the
Projected Principal Balance, (2) the balance in the
Overcollateralization Subaccount to the Required Overcollateralization
Level and (3) the balance in the Capital Subaccount to the Required
Capital Level, in each case within twelve months after such revised
FTA Charges go into effect (and with respect to any True-Up
Adjustments occurring after the last Scheduled Maturity Date for any
Class of a Series, determine the revised FTA Charges that would be
sufficient to retire the unpaid
29
Principal Balance within the earlier of (x) a date which is not more than
twelve months after the Scheduled Maturity Date and (y) the last Final
Maturity Date for any Class of such Series); (D) file a Routine Annual
True-Up Mechanism Advice Letter with the CPUC, substantially in the form
attached hereto as Exhibit C, to notify the CPUC of the FTA Charges for the
---------
coming year; and (E) take all reasonable actions and make all reasonable
efforts to secure such True-Up Adjustment and to enforce the provisions of
the Statute which obligate the CPUC to approve rates at levels sufficient
to recover the FTA Payments in accordance with the Expected Amortization
Schedule.
(2) Each year on or immediately before August 19, which is the date
that is fifteen days before the Financing Order Anniversary Date (or if
such date is not a Servicer Business Day, on the Servicer Business Day
immediately preceding such date), the Servicer shall: (A) if required by
the Servicer in its judgment or found to be necessary by the CPUC, estimate
collections through the end of the Quarter in which the Financing Order
Anniversary Date occurs; (B) if required by the Servicer in its judgment or
found to be
30
necessary by the CPUC, update the assumptions underlying the FTA Charges,
including energy usage volume, the rate of delinquencies and write-offs,
and estimated expenses and fees of the Note Issuer, the Trust and the
Infrastructure Bank to the extent not fixed; (C) if required by the
Servicer in its judgment or found to be necessary by the CPUC, determine
the revised FTA Charges that, together with the funds on deposit in the
Reserve Subaccount, would restore: (1) the Principal Balance to the
Projected Principal Balance, (2) the balance in the Overcollateralization
Subaccount to the Required Overcollateralization Level and (3) the balance
in the Capital Subaccount to the Required Capital Level, in each case
within twelve months after such revised FTA Charges go into effect (and
with respect to any True-Up Adjustments occurring after the
31
last Scheduled Maturity Date for any Class of a Series, determine the
revised FTA Charges that would be sufficient to retire the unpaid Principal
Balance within the earlier of (x) a date which is not more than twelve
months after the Scheduled Maturity Date and (y) the last Final Maturity
Date for any Class of such Series); (D) file an Anniversary True-Up
Mechanism Advice Letter with the CPUC, substantially in the form attached
hereto as Exhibit D; and (E) take all reasonable actions and make all
---------
reasonable efforts to secure the resulting True-Up Adjustment (if such an
adjustment is sought by the Servicer or found to be necessary by the CPUC)
and to enforce the provisions of the Statute which obligate the CPUC to
approve rates at levels sufficient to recover the FTA Payments in
accordance with the Expected Amortization Schedule.
(3) In the case of a True-Up Adjustment pursuant to a Routine Annual
True-Up Mechanism Advice Letter, the Servicer shall implement the revised
FTA Charges, if any, as
32
of the first day of the following calendar year.
(4) In the case of a True-Up Adjustment required by the Servicer in
its judgment or found to be necessary by the CPUC pursuant to an
Anniversary True-Up Mechanism Advice Letter, the Servicer shall implement
the revised FTA Charges, if any, on the date specified by the CPUC in
accordance with the Financing Order.
(ii) Routine Quarterly True-Up Adjustments. If the Issuance Advice Letter
-------------------------------------
with respect to a Series of Notes provides that the Servicer will file Routine
Quarterly True-Up Mechanism Advice Letters, then the Servicer shall make such
filings in accordance with the procedures set forth in Annex II hereto. On each
Series Issuance Date, the Servicer and the Note Issuer shall amend Annex II to
specify in detail the Servicer's obligations to perform routine quarterly True-
Up Adjustments, if any, with respect to the new Series of Notes issued on such
Series Issuance Date.
(c) Non-Routine True-Up Adjustments.
--------------------------------
33
(i) Whenever the Servicer determines that the existing model
for calculating the FTA Charges should be amended or revised, subject
to the consent of the Note Issuer under the conditions set forth in
Section 3.17 of the Indenture, the Servicer shall file a Non-Routine
True-Up Mechanism Advice Letter with the CPUC designating the
adjustments to the model and any corresponding adjustments to the FTA
Charges (collectively, a "Non-Routine True-Up Adjustment").
(ii) The Servicer shall take all reasonable actions and make
all reasonable efforts to secure any Non-Routine True-Up Adjustments.
(iii) The Servicer shall implement any resulting adjustments to
the model and any resulting revised FTA Charges as of the first day of
the Quarter which begins at least 90 days after the Non-Routine True-
Up Mechanism Advice Letter is filed.
(d) Reports.
--------
(i) Notification of Advice Letter Filings
-------------------------------------
34
and True-Up Adjustments. Whenever the Servicer files an Advice Letter with
-----------------------
the CPUC, the Servicer shall send a copy of such filing (together with a
copy of all notices and documents which, in the Servicer's reasonable
judgment, are material to the adjustments effected by such Advice Letter)
to the Note Issuer, the Note Trustee, the Certificate Trustee, the
Infrastructure Bank and the Rating Agencies concurrently therewith. If any
True-Up Adjustment requested in any such Advice Letter filing does not
become effective on the applicable date as provided by the Financing Order,
the Servicer shall notify the Note Issuer, the Note Trustee, the
Certificate Trustee, the Infrastructure Bank and the Rating Agencies by the
end of the second Servicer Business Day after such applicable date.
(ii) Quarterly Servicer's Certificate. Not later than the Remittance
--------------------------------
Date immediately prior to each Payment Date, the Servicer shall deliver a
written report substantially in the form of Exhibit E hereto (the
---------
"Quarterly Servicer's Certificate") to the Note Issuer, the Note Trustee,
the
35
Certificate Trustee, the Infrastructure Bank and the Rating Agencies.
(iii) Reports to Customers. (A) After each revised FTA Charge has
--------------------
gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to
the extent and in the manner and timeframe required by applicable CPUC
Regulations, if any, cause to be prepared and delivered to Customers a
notice announcing such revised FTA Charges.
(B) In addition, at least once each year, to the extent permitted
by CPUC Regulations, the Servicer shall cause to be prepared and delivered
to Customers a notice stating, in effect, that the Transition Property and
the FTA Charges are owned by the Note Issuer and not the Seller. Such
notice shall be included either as an insert to or in the text of the Bills
delivered to such Customers or shall be delivered to Customers by
electronic means or such other means as the Servicer or the Applicable ESP
may from time to time use to communicate with their respective customers.
(C) Except to the extent that applicable CPUC Regulations make the
Applicable ESP responsible for such costs, the Servicer shall pay
36
from its own funds all costs of preparation and delivery incurred in
connection with clauses (A) and (B) above, including but not limited
to printing and postage costs as the same may increase or decrease
from time to time.
(iv) ESP Reports. The Servicer shall provide to the Rating
------------
Agencies any publicly available reports filed by the Servicer with the
CPUC (or otherwise made publicly available by the Servicer) relating
to ESPs and any other non-confidential and non-proprietary information
relating to ESPs reasonably requested by the Rating Agencies.
SECTION 4.02. Limitation of Liability. (a) The Note Issuer and
------------------------
the Servicer expressly agree and acknowledge that:
(i) In connection with any True-Up Adjustment, the Servicer is
acting solely in its capacity as the servicing agent hereunder.
(ii) Neither the Servicer nor the Note Issuer is responsible in any
manner for, and shall have no liability whatsoever as a result of any
action, decision, ruling or other determination made or not made, or any
delay (other than any delay resulting from the Servicer's failure to file
the applications
37
required by Section 4.01 in a timely and correct manner or other breach by
the Servicer of its duties under this Agreement), by the CPUC in any way
related to the Transition Property or in connection with any True-Up
Adjustment, the subject of any filings under Section 4.01, any proposed
True-Up Adjustment, or the approval of any revised FTA Charges and the
scheduled adjustments thereto.
(iii) The Servicer shall have no liability whatsoever relating to the
calculation of any revised FTA Charges and the scheduled adjustments
thereto, including as a result of any inaccuracy of any of the assumptions
made in such calculation regarding expected energy usage volume and the
rate of delinquencies and write-offs, so long as the Servicer has acted in
good faith and has not acted in a grossly negligent manner in connection
therewith, nor shall the Servicer have any liability whatsoever as a result
of any Person, including the Noteholders or the Certificateholders, not
receiving any payment, amount or return anticipated or expected or in
respect of any Note or Certificate generally, except only to the extent
that the same is caused by the Servicer's gross negligence, willful
misconduct or bad faith.
38
(b) Notwithstanding the foregoing, the Servicer hereby acknowledges
that the terms of this Section 4.02 are not intended to, and shall not, relieve
the Servicer of liability for any misrepresentation by the Servicer under
Section 6.01 or for any breach by the Servicer of its other obligations under
this Agreement.
ARTICLE V
The Transition Property
-----------------------
SECTION 5.01. Custody of Transition Property Records. To assure
---------------------------------------
uniform quality in servicing the Transition Property and to reduce
administrative costs, the Note Issuer hereby revocably appoints the Servicer,
and the Servicer hereby accepts such appointment, to act as the agent of the
Note Issuer and the Note Trustee as custodian of any and all documents and
records that the Seller shall keep on file, in accordance with its customary
procedures, relating to the Transition Property, including copies of the
Financing Order and Advice Letters relating thereto and all documents filed with
the CPUC in connection with any True-Up Adjustment (collectively, the
"Transition Property Records"), which are hereby constructively delivered
39
to the Note Trustee, as pledgee of the Note Issuer (or, in the case of the
Subsequent Transition Property, will as of the applicable Subsequent Sale Date
be constructively delivered to the Note Trustee, as pledgee of the Note Issuer)
with respect to all Transition Property.
SECTION 5.02. Duties of Servicer as Custodian. (a) Safekeeping. The
-------------------------------- ------------
Servicer shall hold the Transition Property Records on behalf of the Note Issuer
and maintain such accurate and complete accounts, records and computer systems
pertaining to the Transition Property Records as shall enable the Note Issuer to
comply with this Agreement and the Indenture. In performing its duties as
custodian the Servicer shall act with reasonable care, using that degree of care
and diligence that the Servicer exercises with respect to comparable assets that
the Servicer services for itself or, if applicable, for others. The Servicer
shall promptly report to the Note Issuer and the Note Trustee any failure on its
part to hold the Transition Property Records and maintain its accounts, records
and computer systems as herein provided and promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by the Note Issuer or the Note Trustee of the
Transition Property Records. The Servicer's duties to hold the Transition
Property Records on behalf of the Note Issuer set forth in this Section 5.02, to
the extent such Transition Property Records have not been previously
40
transferred to a successor Servicer pursuant to Article VII, shall terminate
three years after the earlier of the date on which (i) the Servicer is succeeded
by a successor Servicer in accordance with Article VII hereof and (ii) no Notes
of any Series are outstanding.
(b) Maintenance of and Access to Records. The Servicer shall
-------------------------------------
maintain the Transition Property Records at 00 Xxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx or at such other office as shall be specified to the Note Issuer and
the Note Trustee by written notice at least 30 days prior to any change in
location. The Servicer shall make available for inspection to the Note Issuer
and the Note Trustee or their respective duly authorized representatives,
attorneys or auditors the Transition Property Records at such times during
normal business hours as the Note Issuer or the Note Trustee shall reasonably
request and which do not unreasonably interfere with the Servicer's normal
operations. Nothing in this Section 5.02(b) shall affect the obligation of the
Servicer to observe any applicable law (including any CPUC Regulations)
prohibiting disclosure of information regarding the Customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section 5.02(b).
41
(c) Release of Documents. Upon instruction from the Note Trustee,
---------------------
the Servicer shall release any Transition Property Records to the Note Trustee,
the Note Trustee's agent or the Note Trustee's designee, as the case may be, at
such place or places as the Note Trustee may designate, as soon as practicable.
(d) Defending Transition Property Against Claims. The Servicer shall
---------------------------------------------
institute any action or proceeding necessary to compel performance by the CPUC
or the State of California of any of their obligations or duties under the PU
Code, the Financing Order or any Advice Letter, and the Servicer agrees to take
such legal or administrative actions, including defending against or instituting
and pursuing legal actions and appearing or testifying at hearings or similar
proceedings, as may be reasonably necessary to block or overturn any attempts to
cause a repeal of, modification of or supplement to the Statute or the Financing
Order or the rights of holders of Transition Property by legislative enactment,
voter initiative or constitutional amendment that would be adverse to
Certificateholders. The costs of any such action shall be payable from FTA
Collections as an Operating Expense in accordance with the priorities set forth
in Section 8.02(d) of the Indenture. The Servicer's obligations pursuant to
42
this Section 5.02 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to Section 8.02(d) of the Indenture may
be delayed (it being understood that the Servicer may be required to advance its
own funds to satisfy its obligations hereunder).
SECTION 5.03. Instructions; Authority to Act. For so long as any
-------------------------------
Notes remain outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Transition Property Records upon its receipt of
written instructions signed by a Trust Officer of the Note Trustee.
SECTION 5.04. Custodian's Indemnification. The Servicer as custodian
----------------------------
shall indemnify the Note Issuer, the Trust, the Certificate Trustee, the
Delaware Trustee, the Note Trustee, the Infrastructure Bank, the STO, the
Noteholders and the Certificateholders and each of their respective officers,
directors, employees and agents for, and defend and hold harmless each such
Person from and against, any and all liabilities, obligations, losses, damages,
payments, claims, costs or expenses of any kind whatsoever (collectively,
"Losses") that may be imposed on, incurred by or asserted against any such
Person as the result of any improper act or omission in any way relating to the
maintenance and custody by the Servicer, as
43
custodian, of the Transition Property Records; provided, however, that the
-------- -------
Servicer shall not be liable for any portion of any such amount resulting from
the willful misconduct, bad faith or gross negligence of the Note Issuer, the
Trust, the Certificate Trustee, the Delaware Trustee, the Note Trustee, the
Infrastructure Bank, the STO, the Noteholders or the Certificateholders, as the
case may be.
Indemnification under this Section shall survive resignation or
removal of the Note Trustee, the Delaware Trustee or the Certificate Trustee and
shall include reasonable fees and expenses of investigation and litigation.
SECTION 5.05. Effective Period and Termination. The Servicer's
---------------------------------
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section. If
any Servicer shall resign as Servicer in accordance with the provisions of this
Agreement or if all of the rights and obligations of any Servicer shall have
been terminated under Section 7.01, the appointment of such Servicer as
custodian shall be terminated by the Note Trustee or by the Holders of Notes
evidencing not less than 25 percent of the Outstanding Amount of the Notes of
all Series in the same manner as the
44
Note Trustee or such Holders may terminate the rights and obligations of the
Servicer under Section 7.01.
SECTION 5.06. General Indemnification of Note Trustee, Certificate
----------------------------------------------------
Trustee and the Delaware Trustee. The Servicer hereby agrees to indemnify and
---------------------------------
hold harmless the Note Trustee, the Certificate Trustee and the Delaware Trustee
and their respective directors, officers, employees and agents from and against
any and all Losses incurred by or asserted against any such Person as a result
of or in connection with the transactions contemplated by this Agreement or any
Basic Document, other than any Loss incurred by reason or result of the gross
negligence or willful misconduct of the Note Trustee, the Certificate Trustee or
the Delaware Trustee, as the case may be; provided, however, that the foregoing
-------- -------
indemnity is extended to the Note Trustee, the Certificate Trustee and the
Delaware Trustee solely in their respective capacities as trustees and not for
the benefit of the Noteholders or the Certificateholders. The obligations of
the Servicer set forth herein shall survive the termination of this Agreement or
the earlier resignation or removal of the Note Trustee under the Indenture or
the Certificate Trustee or the Delaware Trustee under the Trust Agreement.
ARTICLE VI
45
The Servicer
------------
SECTION 6.01. Representations and Warranties of Servicer. The
-------------------------------------------
Servicer makes the following representations and warranties, as of the Closing
Date, as of each Subsequent Sale Date relating to the sale of Subsequent
Transition Property pursuant to a Subsequent Sale Agreement, and as of such
other dates as expressly provided in this Section 6.01, on which the Note Issuer
and the Note Trustee are deemed to have relied in entering into this Agreement
relating to the servicing of the Transition Property. The representations and
warranties shall survive the execution and delivery of this Agreement and the
pledge thereof to the Note Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized
-------------------------------
and validly existing as a corporation in good standing under the laws of
the state of its incorporation, with the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the requisite power, authority and legal right to service
the Transition Property and to hold the Transition Property Records as
custodian.
46
(b) Due Qualification. The Servicer is duly qualified to do business
------------------
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in, all jurisdictions in which the owner ship or
lease of property or the conduct of its business (including the servicing
of the Transition Property as required by this Agreement) shall require
such qualifications, licenses or approvals (except where the failure to so
qualify would not be reasonably likely to have a material adverse effect on
the Servicer's business, operations, assets, revenues, properties or
prospects or adversely affect the servicing of the Transition Property).
(c) Power and Authority. The Servicer has the requisite power and
--------------------
authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been
duly authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
-------------------
and binding obligation of the Servicer enforceable in accordance with its
terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws
47
relating to or affecting creditors' rights generally from time to time in
effect and to general principles of equity (including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing),
regardless of whether considered in a proceeding in equity or at law.
(e) No Violation. After giving effect to the release of the lien of
-------------
the First and Refunding Mortgage dated as of December 1, 1920, executed by
Pacific Gas and Electric Company, as supplemented and amended to the date
hereof, in favor of BNY Western Trust Company, successor by acquisition to
Xxxxx Fargo Bank, N.A., successor by merger to First Interstate Bank of
California, as trustee, the consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of,
nor constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Servicer, or any indenture,
agreement or other instrument to which the Servicer is a party or by which
it shall be bound; nor result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such
48
indenture, agreement or other instrument; nor violate any law or any order,
rule or regulation applicable to the Servicer of any court or of any
Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties.
(f) No Proceedings. Except as set forth on Schedule 6.01(f), there
---------------
are no proceedings or investigations pending or, to the Servicer's best
knowledge, threatened before any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties involving or relating to
the Servicer or the Note Issuer or, to the Servicer's knowledge, any other
Person: (i) asserting (A) the invalidity of this Agreement, or (B) the
invalidity of the Indenture, the Trust Agreement, any of the other Basic
Documents or the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Indenture, the Trust
Agreement or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
49
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, the Trust Agreement, any
of the other Basic Documents or the Notes or the Certificates or (iv)
relating to the Servicer and which might adversely affect the Federal or
state income tax attributes of the Notes or the Certificates.
(g) Approvals. No approval, authorization, consent, order or other
----------
action of, or filing with, any court, Federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Servicer of this
Agreement, the performance by the Servicer of the transactions contemplated
hereby or the fulfillment by the Servicer of the terms hereof, except those
that have been obtained or made and those that the Servicer is required to
make in the future pursuant to Article IV hereof.
(h) Collections Curves. Each Collections Curve used in connection
-------------------
with Schedule 6 to Annex I hereto is accurate in all material respects, and
----------
the future delivery of each revised Collections Curve shall constitute a
representation and warranty that each such revised Collections Curve is
accurate in all material
50
respects.
(i) Premises. The premises set forth in Schedule 6 to Annex I hereto
--------- ----------
are reasonable based upon historical performance and will be reasonable as
they change from time to time.
(j) Reports and Certificates. Each report and certificate delivered
-------------------------
in connection with an Advice Letter will constitute a representation and
warranty by the Servicer that each such report or certificate, as the case
may be, is true and correct; provided, however, that to the extent any such
-------- -------
report or certificate is based in part upon or contains assumptions,
forecasts or other predictions of future events, the representation and
warranty of the Servicer with respect thereto will be limited to the
representation and warranty that such assumptions, forecasts or other
predictions of future events are reasonable based upon historical
performance.
SECTION 6.02. Indemnities of Servicer; Release of Claims. (a) The
-------------------------------------------
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Servicer under this Agreement.
(b) The Servicer shall indemnify the Note Issuer, the Trust, the Note
Trustee, the Certificate Trustee, the
51
Delaware Trustee, the Infrastructure Bank, the STO, the Seller, the Noteholders
and the Certificateholders and each of their respective officers, directors,
employees and agents for, and defend and hold harmless each such Person from and
against, any and all Losses that may be imposed on, incurred by or asserted
against any such Person as a result of (i) the Servicer's willful misconduct,
bad faith or gross negligence in the performance of its duties or observance of
its covenants under this Agreement or the Servicer's reckless disregard of its
obligations and duties under this Agreement or (ii) the Servicer's breach of any
of its representations or warranties in this Agreement.
(c) For purposes of Section 6.02(b), in the event of the termination
of the rights and obligations of Pacific Gas and Electric Company (or any
successor thereto pursuant to Section 6.03) as Servicer pursuant to Section
7.01, or a resignation by such Servicer pursuant to this Agreement, such
Servicer shall be deemed to be the Servicer pending appointment of a successor
Servicer pursuant to Section 7.02.
(d) Indemnification under Sections 6.02(b) and 6.02(c) shall survive
the resignation or removal of the Note Trustee, the Delaware Trustee or the
Certificate Trustee or the termination of this Agreement and shall include
52
reasonable fees and expenses of investigation and litigation (including
reasonable attorneys fees and expenses).
(e) Except to the extent expressly provided for in this Agreement or
the other Basic Documents (including, without limitation, the Servicer's claims
with respect to the Servicing Fee, reimbursement for any Excess Remittance,
reimbursement for costs incurred pursuant to Section 5.02(d) and the payment of
the purchase price of Transition Property), the Servicer hereby releases and
discharges the Note Issuer and the Trust and each of their respective officers,
directors and agents (collectively, the "Released Parties") from any and all
actions, claims and demands whatsoever, whenever arising, which the Servicer, in
its capacity as Servicer or Seller, shall or may have against any such Person
relating to the Transition Property or the Servicer's activities with respect
thereto other than any actions, claims and demands arising out of the willful
misconduct, bad faith or gross negligence of the Released Parties.
SECTION 6.03. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
-------------------------
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party or (c) which may succeed
53
to the properties and assets of the Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Servicer hereunder, shall be the successor to
the Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (i) immediately after giving
-------- -------
effect to such transaction, no Servicer Default and no event which, after notice
or lapse of time, or both, would become a Servicer Default shall have occurred
and be continuing, (ii) the Servicer shall have delivered to the Note Issuer,
the Note Trustee and the Rating Agencies an Officers' Certificate and an Opinion
of Counsel each stating that such consolidation, merger or succession and such
agreement of assumption complies with this Section and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with and (iii) the Servicer shall have delivered to the Note Issuer,
the Note Trustee and the Rating Agencies an Opinion of Counsel either (A)
stating that, in the opinion of such counsel, all filings to be made by the
Servicer, including filings with the CPUC pursuant to the PU Code, have been
executed and filed that are necessary to preserve and protect fully the
interests of the Note Issuer in the Transition Property and reciting the details
54
of such filings or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii) and (iii) above
shall be conditions to the consummation of the transactions referred to in
clauses (a), (b) or (c) above.
SECTION 6.04. Limitation on Liability of Servicer and Others.
-----------------------------------------------
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be liable to the Note Issuer, the Note Trustee, the
Infrastructure Bank, the Noteholders, the Trust, the Certificate Trustee, the
Delaware Trustee, the Certificateholders or any other Person, except as provided
under this Agreement, for any action taken or for refraining from the taking of
any action pursuant to this Agreement or for errors in judgment; provided,
--------
however, that this provision shall not protect the Servicer or any such person
-------
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director or officer or employee or agent of the Servicer may
rely in good faith on the advice
55
of counsel reasonably acceptable to the Note Trustee or on any document of any
kind, prima facie properly executed and submitted by any Person, respecting any
matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be related to or incidental to its duties to service the Transition Property in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 6.05. Pacific Gas and Electric Company Not to Resign as
-------------------------------------------------
Servicer. Subject to the provisions of Section 6.03, Pacific Gas and Electric
---------
Company shall not resign from the obligations and duties hereby imposed on it as
Servicer under this Agreement except upon either (a) a determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law or (b) satisfaction of the following: (i) the Rating Agency
Condition shall have been satisfied, (ii) the CPUC shall have approved such
resignation and (iii) notice of such resignation shall have been given to the
Infrastructure Bank. Notice of any such determination permitting the
resignation of Pacific Gas and Electric Company shall be communicated to the
Note Issuer, the Note Trustee, the
56
Certificate Trustee, the Infrastructure Bank and the Rating Agencies at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Note Issuer, the Note Trustee and the Certificate Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until a successor Servicer shall have assumed the
responsibilities and obligations of Pacific Gas and Electric Company in
accordance with Section 7.02.
SECTION 6.06. Servicing Compensation. (a) In consideration for its
-----------------------
services hereunder, until the Retirement of the Notes, the Servicer shall
receive a fee (the "Servicing Fee") quarterly on each Payment Date in an amount
equal to (i) one-fourth of 0.25 percent of the outstanding Principal Balance
(before giving effect to payments made on such date) for so long as FTA Charges
are included as a line item on Bills otherwise sent to Customers or (ii) one-
fourth of 1.50 percent of the outstanding Principal Balance (before giving
effect to payments made on such date) if FTA Charges are not included as a line
item on Bills otherwise sent to Customers but, instead, are billed separately to
Customers. The Servicer also shall be
57
entitled to retain as additional compensation (i) any interest earnings on FTA
Payments received by the Servicer and invested by the Servicer pursuant to
Section 6(d) of Annex I hereto during each Collection Period prior to remittance
to the Collection Account and (ii) all late payment charges, if any, collected
from Customers or ESPs.
(b) The Servicing Fee set forth in Section 6.06(a) above shall be
paid to the Servicer by the Note Trustee, on each Payment Date in accordance
with the priorities set forth in Section 8.02(d) of the Indenture, by wire
transfer of immediately available funds from the Collection Account to an
account designated by the Servicer. Any portion of the Servicing Fee not paid on
such date shall be added to the Servicing Fee payable on the subsequent Payment
Date.
(c) Except as provided in Section 5.02(d), the Servicer shall be
required to pay from its own account all expenses incurred by it in connection
with its activities hereunder (including any fees to and disbursements by
accountants, counsel, or any other Person, any taxes imposed on the Servicer and
any expenses incurred in connection with reports to Noteholders and
Certificateholders) out of the compensation retained by or paid to it pursuant
to this Section 6.06, and shall not be entitled to any extra payment
58
or reimbursement therefor.
SECTION 6.07. Compliance with Applicable Law. The Servicer covenants
-------------------------------
and agrees, in servicing the Transition Property, to comply with all laws
applicable to, and binding upon, the Servicer and relating to such Transition
Property the noncompliance with which would have a material adverse effect on
the value of the Transition Property; provided, however, that the foregoing is
-------- -------
not intended to, and shall not, impose any liability on the Servicer for
noncompliance with any law that the Servicer is contesting in good faith in
accordance with its customary standards and procedures.
SECTION 6.08. Access to Certain Records and Information Regarding
---------------------------------------------------
Transition Property. The Servicer shall provide to the Noteholders, the Note
--------------------
Trustee, the Certificate Trustee, the Infrastructure Bank and the STO access to
the Transition Property Records in such cases where the Noteholders, the Note
Trustee, the Certificate Trustee and the Infrastructure Bank shall be required
by applicable law to be provided access to such records. Access shall be
afforded without charge, but only upon reasonable request and during normal
business hours at the respective offices of the Servicer. Nothing in this
Section shall affect the obligation of the Servicer to observe any
59
applicable law (including any CPUC Regulation) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to provide
access to such information as a result of such obligation shall not constitute a
breach of this Section.
SECTION 6.09. Appointments. The Servicer may at any time appoint any
-------------
Person to perform all or any portion of its obligations as Servicer hereunder;
provided, however, that the Rating Agency Condition shall have been satisfied in
-------- -------
connection therewith; provided further that the Servicer shall remain obligated
-------- -------
and be liable to the Note Issuer, the Note Trustee, the Certificate Trustee and
the Noteholders for the servicing and administering of the Transition Property
in accordance with the provisions hereof without diminution of such obligation
and liability by virtue of the appointment of such Person and to the same extent
and under the same terms and conditions as if the Servicer alone were servicing
and administering the Transition Property; and provided further, however, that
---------------- -------
nothing herein shall preclude the execution by the Servicer of an ESP Service
Agreement with ESPs. The fees and expenses of such Person shall be as agreed
between the Servicer and such Person from time to time and none of the Note
Issuer, the Note Trustee, the Noteholders or any other Person shall have any
60
responsibility therefor or right or claim thereto. Any such appointment shall
not constitute a Servicer resignation under Section 6.05.
SECTION 6.10. No Servicer Advances. The Servicer shall not make any
---------------------
advances of interest or principal on the Notes or the Certificates.
SECTION 6.11. Remittances. (a) Subject to clause (b) below, on each
------------
Remittance Date, the Servicer shall cause to be made a wire transfer of
immediately available funds equal to the Aggregate Remittance Amount for the
applicable Collection Period to the General Subaccount of the Collection
Account. Prior to each remittance to the General Subaccount of the Collection
Account pursuant to this Section, the Servicer shall provide written notice to
the Note Trustee of each such remittance (including the exact dollar amount to
be remitted).
(b) Notwithstanding the foregoing clause (a), during any period in
which there exists the occurrence and continuance of a Servicer Default, the
failure to satisfy the Rating Agency Condition or the failure of the Servicer to
maintain a short-term rating of A-1 or better by Standard & Poor's and P-1 or
better by Moody's, the Servicer shall remit to the General Subaccount of the
Collection Account the total FTA Payments estimated to have been received by
61
the Servicer from or on behalf of Customers on a given Servicer Business Day in
respect of all previously Billed FTA Charges within two Servicer Business Days
of receipt thereof by the Servicer (the "Daily Remittance"). On or before each
Remittance Date during any period described in this clause (b), the Servicer
shall calculate the amount of any Remittance Shortfall or Excess Remittance
attributable to the prior Collection Period and (A) if a Remittance Shortfall
exists, the Servicer shall make a supplemental remittance to the General
Subaccount of the Collection Account on such Remittance Date in the amount of
such Remittance Shortfall, or (B) if an Excess Remittance exists, the Servicer
shall reduce the amount of each Daily Remittance (beginning with the Daily
Remittance occurring on the Remittance Date) by the outstanding amount of such
Excess Remittance until the balance of the Excess Remittance has been reduced to
zero.
(c) The Servicer agrees and acknowledges that it holds all FTA
Payments collected by it for the benefit of the Note Issuer and that all such
amounts will be remitted by the Servicer in accordance with this Section without
any surcharge, fee, offset, charge or other deduction except (i) as set forth in
clause (b) above or clause (d) below and (ii) for late fees permitted by Section
6.06. The Servicer
62
further agrees not to make any claim to reduce its obligation to remit all FTA
Payments collected by it in accordance with this Agreement except (i) as set
forth in clause (b) above or clause (d) below and (ii) for late fees permitted
by Section 6.06.
(d) If there is an Excess Remittance, the Servicer shall be entitled
either (i) to reduce the amount which the Servicer remits to the General
Subaccount of the Collection Account on such Remittance Date by the amount of
such Excess Remittance, the amount of such reduction becoming the property of
the Servicer or (ii) immediately to be paid from the Collection Account or any
subaccount therein the amount of such Excess Remittance, such payment becoming
the property of the Servicer. If there is a Remittance Shortfall, the amount
which the Servicer remits to the General Subaccount of the Collection Account on
such Remittance Date will be increased by the amount of such Remittance
Shortfall, such increase coming from the Servicer's own funds.
ARTICLE VII
Default
-------
SECTION 7.01. Servicer Default. If any one of the following events
-----------------
(a "Servicer Default") shall occur and be continuing:
63
(a) any failure by the Servicer to deposit in the Collection Account
on behalf of the Note Issuer any required remittance that shall continue
unremedied for a period of three Business Days after written notice of such
failure is received by the Servicer from the Note Issuer or the Note
Trustee or after discovery of such failure by an officer of the Servicer;
or
(b) any failure on the part of the Servicer or the Seller, as the case
may be, duly to observe or to perform in any material respect any other
covenants or agreements of the Servicer or the Seller (as the case may be)
set forth in this Agreement (including Section 4.01) or any other Basic
Document to which it is a party, which failure shall (i) materially and
adversely affect the rights of Noteholders or Certificateholders and (ii)
continue unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given (A) to the Servicer or the Seller (as the case may be) by the Note
Issuer or (B) to the Servicer or the Seller (as the case may be) by the
Note Trustee or by the Holders of Notes evidencing not less than 25 percent
of the Outstanding Amount of the Notes of all Series; or
64
(c) any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect when made, which has a
material adverse effect on the Note Issuer or the Certificateholders and
which material adverse effect continues unremedied for a period of 60 days
after the date on which written notice thereof, requiring the same to be
remedied, shall have been delivered to the Servicer by the Note Issuer or
the Note Trustee; or
(d) an Insolvency Event occurs with respect to the Servicer or the
Seller;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Note Trustee, or the Holders of Notes evidencing not
less than 25 percent of the Outstanding Amount of the Notes of all Series, by
notice then given in writing to the Servicer (and to the Note Trustee if given
by the Noteholders) (a "Termination Notice") may terminate all the rights and
obligations (other than the obligations set forth in Section 6.02 hereof) of the
Servicer under this Agreement. In addition, upon a Servicer Default described in
Section 7.01(a), each of the following shall be entitled to apply to the CPUC
for sequestration and payment of revenues arising with respect to the Transition
Property: (1) the
65
Certificateholders and the Certificate Trustee as beneficiary of any statutory
lien permitted by the PU Code; (2) the Note Issuer or its assignees; or (3)
pledgees or transferees, including transferees under Section 844 of the PU Code,
of the Transition Property. On or after the receipt by the Servicer of a
Termination Notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Transition Property, the FTA
Charges or otherwise, shall, without further action, pass to and be vested in
such successor Servicer as may be appointed under Section 7.02; and, without
limitation, the Note Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
Termination Notice, whether to complete the transfer of the Transition Property
Records and related documents, or otherwise. The predecessor Servicer shall
cooperate with the successor Servicer, the Note Issuer and the Note Trustee in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including the transfer to the successor Servicer
for administration by it of all cash amounts that shall at the
66
time be held by the predecessor Servicer for remittance, or shall thereafter be
received by it with respect to the Transition Property or the FTA Charges. All
reasonable costs and expenses (including attorneys fees and expenses) incurred
in connection with transferring the Transition Property Records to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses.
SECTION 7.02. Appointment of Successor. (a) Upon the Servicer's
-------------------------
receipt of a Termination Notice pursuant to Section 7.01 or the Servicer's
resignation or removal in accordance with the terms of this Agreement, the
predecessor Servicer shall continue to perform its functions as Servicer under
this Agreement, and shall be entitled to receive the requisite portion of the
Servicing Fee, until a successor Servicer shall have assumed in writing the
obligations of the Servicer hereunder as described below. In the event of the
Servicer's termination hereunder, the Note Issuer shall appoint a successor
Servicer with the Note Trustee's prior written consent thereto (which consent
shall not be unreasonably withheld), and the successor Servicer shall accept its
appointment by a written assumption in form
67
acceptable to the Note Issuer and the Note Trustee. If within 30 days after the
delivery of the Termination Notice, the Note Issuer shall not have obtained such
a new Servicer, the Note Trustee may petition the CPUC or a court of competent
jurisdiction to appoint a successor Servicer under this Agreement. A Person
shall qualify as a successor Servicer only if (i) such Person is permitted under
CPUC Regulations to perform the duties of the Servicer, (ii) the Rating Agency
Condition shall have been satisfied and (iii) such Person enters into a
servicing agreement with the Note Issuer having substantially the same
provisions as this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Servicing Fee
and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.
SECTION 7.03. Waiver of Past Defaults. The Holders of Notes
------------------------
evidencing not less than a majority of the Outstanding Amount of the Notes of
all Series may, on behalf of all Noteholders, waive in writing any default by
the
68
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to the Collection Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
SECTION 7.04. Notice of Servicer Default. The Servicer shall deliver
---------------------------
to the Note Issuer, the Note Trustee, the Certificate Trustee, the
Infrastructure Bank, the STO and the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer Default
under Section 7.01(a) or (b).
ARTICLE VIII
Miscellaneous Provisions
------------------------
SECTION 8.01. Amendment. (a) This Agreement may be amended in
----------
writing by the Servicer and the Note Issuer with five Business Days' prior
written notice given to the Rating Agencies and the prior written consent of the
Note
69
Trustee, but without the consent of any of the Noteholders or
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
-------- -------
by an Officer's Certificate delivered to the Note Issuer and the Note Trustee,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended in writing from time to time by the
Servicer and the Note Issuer with prior written notice given to the Rating
Agencies and the prior written consent of the Note Trustee and the prior written
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes of all Series, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
-------- -------
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, FTA Collections or (b) reduce the aforesaid
70
percentage of the Outstanding Amount of the Notes, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes.
Promptly after the execution of any such amendment and the requisite
consents, the Note Issuer shall furnish written notification of the substance of
such amendment to the Note Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Noteholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to its consent to any amendment to this Agreement, the Note
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Note Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Note Trustee's own rights, duties or immunities
under this Agreement or otherwise.
(b) Notwithstanding Section 8.01(a) or anything to the contrary in
this Agreement, the Servicer and the Note Issuer may amend Annex I to this
Agreement in writing with
71
prior written notice given to the Note Trustee and the Rating Agencies, but
without the consent of the Note Trustee, any Rating Agency or any Noteholder or
Certificateholder, solely to address changes to the Servicer's method of
calculating FTA Payments received as a result of changes to the Servicer's
current computerized customer information system, as contemplated by Section
6(e)(iii) of Annex I hereto; provided that any such amendment shall not have or
--------
cause a material adverse effect on the Certificateholders.
SECTION 8.02. Protection of Title to Trust. (a) The Servicer shall
-----------------------------
maintain accounts and records as to the Transition Property accurately and in
accordance with its standard accounting procedures and in sufficient detail to
permit reconciliation between FTA Payments received by the Servicer and FTA
Collections from time to time deposited in the Collection Account.
(b) The Servicer shall permit the Note Trustee and its agents at any
time during normal business hours, upon reasonable notice to the Servicer and to
the extent it does not unreasonably interfere with the Servicer's normal
operations, to inspect, audit and make copies of and abstracts from the
Servicer's records regarding the Transition Property and the FTA Charges.
Nothing in this
72
Section 8.02(b) shall affect the obligation of the Servicer to observe any
applicable law (including any CPUC Regulation) prohibiting disclosure of
information regarding the Customers, and the failure of the Servicer to provide
access to such information as a result of such obligation shall not constitute a
breach of this Section 8.02(b).
SECTION 8.03. Notices. All demands, notices and communications upon
--------
or to the Servicer, the Note Issuer, the Note Trustee, the Infrastructure Bank,
the STO, the Certificate Trustee or the Rating Agencies under this Agreement
shall be in writing and personally delivered, sent by overnight mail or sent by
telecopy or other similar form of rapid transmission, and shall be deemed to
have been duly given upon receipt (a) in the case of the Servicer, to Pacific
Gas and Electric Company, at 00 Xxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000,
Attention: Treasurer, (b) in the case of the Note Issuer, to PG&E Funding LLC,
at 000 Xxxxxx Xxxxxx, Xxxx 000, Xxx Xxxxxxxxx, XX 00000, Attention: President,
(c) in the case of the Note Trustee, at the Corporate Trust Office, (d) in the
case of the Infrastructure Bank, to California Infrastructure and Economic
Development Bank, c/o California Trade and Commerce Agency, at 000 X Xxxxxx,
Xxxxx 0000, Xxxxxxxxxx, XX 00000, Attention: Executive Director, (e) in the
case of the
73
Certificate Trustee, to Bankers Trust Company of California, N.A., c/o Bankers
Trust Company, Corporate Trust and Agency Services, at Four Xxxxxx Xxxxxx, Xxx
Xxxx, XX 00000, Attention of Structured Finance Group, (f) in the case of the
STO, to the California State Treasurer's Office, 000 Xxxxxxx Xxxx, Xxxx 000,
Xxxxxxxxxx, XX 00000, Attention of Deputy Treasurer, (g) in the case of Moody's,
to Xxxxx'x Investors Service, Inc., ABS Monitoring Department, 00 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, (h) in the case of Standard & Poor's, to Standard &
Poor's Corporation, 00 Xxxxxxxx (00xx Xxxxx), Xxx Xxxx, Xxx Xxxx 00000,
Attention of Asset Backed Surveillance Department, (i) in the case of Fitch, to
Fitch Investors Service, L.P., Xxx Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, XX 00000,
Attention of Commercial Asset-Backed Securities, or (j) as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
SECTION 8.04. Assignment. Notwithstanding anything to the contrary
-----------
contained herein, except as pro vided in Section 6.03 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.
SECTION 8.05. Limitations on Rights of Others. The provisions of this
--------------------------------
Agreement are solely for the benefit
74
of the Servicer and the Note Issuer and, to the extent provided herein or in the
Basic Documents, the Trust, the Note Trustee, the Certificate Trustee, the
Noteholders, the Certificateholders, the Infrastructure Bank and the STO, and
nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Transition Property or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 8.06. Severability. Any provision of this Agreement that is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 8.07. Separate Counterparts. This Agreement may be executed
----------------------
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 8.08. Headings. The headings of the various Articles and
---------
Sections herein are for convenience of
75
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 8.09. Governing Law. This Agreement shall be construed in
--------------
accordance with the laws of the State of California, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 8.10. Assignment to Note Trustee. The Servicer hereby
---------------------------
acknowledges and consents to the collateral assignment of any or all of the Note
Issuer's rights and obligations hereunder to the Note Trustee and to the further
assignment of the Note Trustee's rights and obligations under the Indenture to
the Certificate Trustee.
SECTION 8.11. Nonpetition Covenants. Notwithstanding any prior
----------------------
termination of this Agreement or the Indenture, but subject to the CPUC's right
to order the sequestration and payment of revenues arising with respect to the
Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the debtor, pledgor or transferor of the
Transition Property pursuant to Section 843(e) and (g) of the PU Code, the
Servicer shall not, prior to the date which is one year and one day after the
termination of the Indenture with
76
respect to the Note Issuer, acquiesce, petition or otherwise invoke or cause the
Note Issuer or the Trust to invoke the process of any court or governmental
authority for the purpose of commencing or sustaining a case against the Note
Issuer or the Trust under any Federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Note Issuer or the Trust or any
substantial part of the property of the Note Issuer or the Trust, or ordering
the winding up or liquidation of the affairs of the Note Issuer or the Trust.
SECTION 8.12. Limitation of Liability. It is expressly understood
------------------------
and agreed by the parties hereto that (a) this Agreement is executed and
delivered by Bankers Trust Company of California, N.A., not individually or
personally but solely as Note Trustee on behalf of the holders of the Notes, in
the exercise of the powers and authority conferred and vested in it, (b) the
representations, undertakings and agreements herein made by the Note Trustee on
behalf of the holders of the Notes are made and intended not as personal
representations, undertakings and agreements by Bankers Trust Company of
California, N.A., but are made and intended for the purpose of binding only the
holders of the Notes, (c) nothing herein
77
contained shall be construed as creating any liability on Bankers Trust Company
of California, N.A., individually or personally, to perform any covenant either
expressed or implied contained herein, except in its capacity as Note Trustee,
all such liability, if any, being expressly waived by the parties who are
signatories to this Agreement and by any Person claiming by, through or under
such parties and (d) under no circumstances shall Bankers Trust Company of
California, N.A., be personally liable for the payment of any indebtedness or
expenses of the holders of the Notes or be personally liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Note Trustee under this Agreement; provided, however, that
-------- -------
this provision shall not protect Bankers Trust Company of California, N.A.
against any liability that would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement.
78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
PG&E FUNDING LLC,
by
---------------------------
Title:
PACIFIC GAS AND ELECTRIC COMPANY,
by
---------------------------
Title:
Acknowledged and Accepted:
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A., not in
its individual capacity
but solely as Note Trustee,
by
------------------------
ANNEX I
TO
SERVICING AGREEMENT
The Servicer agrees to comply with the following servicing procedures:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Agreement.
(b) Whenever used in this Annex I, the following words and phrases shall
have the following meanings:
"Aggregate Remittance Amount" has the meaning set forth in Section
---------------------------
6(e)(i) of this Annex I.
"Balanced Payment Plan" means a level payment plan offered by the
---------------------
Seller, which, if elected by a Residential Customer, provides for level monthly
Xxxx charges.
"Billed FTA Revenues" means the amounts billed to Customers pursuant
-------------------
to the FTA Charges, whether billed directly to such Customers by the Servicer or
indirectly through an ESP pursuant to Consolidated ESP Billing.
"Closing Xxxx" means the final xxxx issued to a Customer at the time
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service is terminated.
"Consolidated ESP Billing" means the billing option available to
------------------------
Customers served by an ESP pursuant to which the Applicable ESP will be
responsible for billing and collecting all charges to Customers electing such
billing option, including the FTA Charges, and will become obligated to the
Servicer for such Billed FTA Revenues, all in accordance with applicable CPUC
Regulations. Unless the context indicates otherwise, the term Consolidated ESP
Billing includes the Full Consolidated ESP Billing option.
"Daily Collections Curve" means the tally for the number of customer
-----------------------
accounts specified in Schedule 6 to this Annex I, resulting from counting the
number of days between when a particular xxxx is generated and when payment is
received, as described in Schedule 6 to this Annex I.
"Estimation Template" means the template shown on Schedule 6 to this
------------------- ----------
Annex I, which template is used to calculate the FTA Payments estimated to have
been received by the Servicer during any Collection Period.
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"Full Consolidated ESP Billing" means the billing option available to
-----------------------------
Customers served by an ESP, if such option is approved by the utility with
respect to such ESP, pursuant to which such ESP performs the same tasks it would
perform under Consolidated ESP Billing and, in addition, calculates all utility
charges to Customers, including the FTA Charges, from billing factors provided
by the utility and the Servicer.
"Monthly Collections Curve" means the cumulative summation of the
-------------------------
Daily Collections Curve to derive monthly percentages of revenue collected, as
described in Schedule 6 to this Annex I.
"Net Write-Off Percent" means the number (expressed as a percent)
---------------------
allocable to a particular Billing Period equal to: (i) the amount by which
Write-Offs in the current Billing Period exceed Write-Off recoveries in the
current Billing Period, divided by (ii) the total billed revenue in the current
Billing Period.
"Servicer Policies and Practices" means, with respect to the
-------------------------------
Servicer's duties under this Annex I, the policies and practices of the Servicer
applicable to such duties that the Servicer follows with respect to comparable
assets that it services for itself or others.
"Variables" means the following variables underlying the Daily
---------
Collections Curves:
(i) sample sizes for Residential and Small Commercial Customers;
(ii) tallied number of days recorded between when bills are generated
and when xxxx payments are received; and
(iii) the actual Write-Off percentage, calculated in the same manner
as Net Write-Off Percent except that it is calculated for the applicable
calendar year, for Residential and Small Commercial Customers for the most
recent year.
"Write-Offs" means net amounts written off (including amounts written
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off that are subsequently recovered) of Billed FTA Revenues that remain unpaid
by Customers and ESPs as of 180 days after the issuance of the Closing Bills
containing such charges.
SECTION 2. DATA ACQUISITION.
----------------
(a) Installation and Maintenance of Meters. Except to the extent that an
--------------------------------------
ESP is responsible for such services pursuant to an ESP Service Agreement, the
Servicer shall cause to be installed, replaced and maintained meters in such
places and in such condition as will enable the Servicer to obtain usage
measurements for each Customer every 27-33 days.
(b) Meter Reading. At least once each 27-33 days, the Servicer shall
-------------
obtain usage measurements for each Customer; provided, however, that the
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Servicer may determine any Customer's usage on the basis of estimates in
accordance with applicable CPUC Regulations; and provided further that the
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Servicer may obtain usage measurements from the Applicable ESP
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for Customers receiving meter reading services from such ESP if the respective
ESP Service Agreement so provides.
(c) Cost of Metering. The Note Issuer shall not be obligated to pay any
----------------
costs associated with the metering duties set forth in this Section 2,
including, but not limited to, the costs of installing, replacing and
maintaining meters, nor shall the Note Issuer be entitled to any credit against
the Servicing Fee for any cost savings realized by the Servicer or any ESP as a
result of new metering and/or billing technologies.
SECTION 3. USAGE AND XXXX CALCULATION.
--------------------------
The Servicer shall obtain a calculation of each Customer's usage (which may
be based on data obtained from such Customer's meter read or on usage estimates
determined in accordance with applicable CPUC Regulations) once every 27 to 33
days and shall determine therefrom each Customer's individual FTA Charge to be
included on such Customer's Xxxx; provided, however, that in the case of
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Customers served by an ESP under the Full Consolidated ESP Billing option, the
Applicable ESP, rather than the Servicer, shall determine such Customers'
individual FTA Charges to be included on such Customers' Bills based on billing
factors provided by the Servicer, and the Servicer shall deliver to the
Applicable ESPs such billing factors as are necessary for the Applicable ESPs to
calculate such Customers' respective FTA Charges as such charges may change from
time to time pursuant to the True-Up Adjustments.
SECTION 4. BILLING.
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The Servicer shall implement the FTA Charges as of the FTA Effective Date
and shall thereafter xxxx each Customer or the Applicable ESP for the respective
Customer's outstanding current and past due FTA Charges accruing through the FTA
Termination Date, all in accordance with the following:
(a) Frequency of Bills; Billing Practices. In accordance with the
-------------------------------------
Servicer's then-existing Servicer Policies and Practices for its own charges, as
such Servicer Policies and Practices may be modified from time to time, the
Servicer shall generate and issue a Xxxx to each Customer, or, in the case of a
Customer who has elected Consolidated ESP Billing, to the Applicable ESP, with
respect to such Customer's respective FTA Charge once every 27 to 33 days, at
the same time, with the same frequency and on the same Xxxx as that containing
the Servicer's own charges to such Customer or ESP, as the case may be. In the
event that the Servicer makes any material modification to its Servicer Policies
and Practices for its own charges, it shall notify the Note Issuer, the Note
Trustee, the Certificate Trustee, the Infrastructure Bank and the Rating
Agencies as soon as practicable, and in no event later than 60 Business Days
after such modification goes into effect; provided, however, that the Servicer
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may not make any modification that will materially adversely affect the
Certificateholders.
(b) Format.
------
(i) Each Xxxx to a Customer shall contain the charge corresponding to
the respective FTA Charge owed by such Customer for the applicable Billing
Period. Unless it is not
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practicable for the Servicer's billing system to do so, the FTA Charge shall
appear as a separate line-item on each Xxxx.
(ii) In the case of each Customer that has elected Consolidated ESP
Billing, the Servicer shall deliver to the Applicable ESP itemized charges for
such Customer setting forth such Customer's FTA Charge as a separate line-item.
(iii) The Servicer shall conform to such requirements in respect of
the format, structure and text of Bills delivered to Customers and ESPs as
applicable CPUC Regulations shall from time to time prescribe. To the extent
that Xxxx format, structure and text are not prescribed by the PU Code or by
applicable CPUC Regulations, the Servicer shall, subject to clauses (i) and (ii)
above, determine the format, structure and text of all Bills in accordance with
its reasonable business judgment, its Servicer Policies and Practices with
respect to its own charges and prevailing industry standards.
(c) Delivery. The Servicer shall deliver all Bills to Customers (i) by
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United States Mail in such class or classes as are consistent with the Servicer
Policies and Practices followed by the Servicer with respect to its own charges
to its customers or (ii) by any other means, whether electronic or otherwise,
that the Servicer may from time to time use to present its own charges to its
customers. In the case of Customers that have elected Consolidated ESP Billing,
the Servicer shall deliver all Bills or charges to the Applicable ESPs by such
means as are mutually agreed upon by the Servicer and the Applicable ESP and are
consistent with CPUC Regulations. The Servicer or an ESP, as applicable, shall
pay from its own funds all costs of issuance and delivery of all Bills,
including but not limited to printing and postage costs as the same may increase
or decrease from time to time.
SECTION 5. CUSTOMER SERVICE FUNCTIONS.
--------------------------
The Servicer shall handle all Customer inquiries and other Customer service
matters according to the same procedures it uses to service Customers with
respect to its own charges.
SECTION 6. COLLECTIONS; PAYMENT PROCESSING; REMITTANCE.
-------------------------------------------
(a) Collection Efforts, Policies, Procedures.
----------------------------------------
(i) The Servicer shall use reasonable efforts to collect all Billed
FTA Revenues from Customers and ESPs as and when the same become due and shall
follow such collection procedures as it follows with respect to comparable
assets that it services for itself or others, including with respect to the
following:
(A) The Servicer shall prepare and deliver overdue notices to
Customers and ESPs in accordance with applicable CPUC
Regulations and Servicer Policies and Practices.
(B) The Servicer shall apply late payment charges, if any, to
outstanding ESP balances in accordance with applicable CPUC
I-4
Regulations. All late payment charges and interest
collected shall be payable to and retained by the Servicer
as a component of its compensation under the Agreement, and
the Note Issuer shall have no right to share in the same.
(C) The Servicer shall deliver oral and written past-due and
shut-off notices in accordance with applicable CPUC
Regulations and Servicer Policies and Practices.
(D) The Servicer shall adhere to and carry out disconnection
policies and termination of Consolidated ESP Billing in
accordance with PU Code (S) 779.2, CPUC Decision 00-00-000
and applicable CPUC Regulations and Servicer Policies and
Practices.
(E) The Servicer may employ the assistance of collection agents
in accordance with applicable CPUC Regulations and Servicer
Policies and Practices.
(F) The Servicer shall apply Customer and ESP deposits to the
payment of delinquent accounts in accordance with applicable
CPUC Regulations and Servicer Polices and Practices and
according to the priorities set forth in Section 6(b)(ii),
(iii) and (iv) of this Annex I.
(ii) The Servicer shall not waive any late payment charge or any other
fee or charge relating to delinquent payments, if any, or waive, vary or modify
any terms of payment of any amounts payable by a Customer, in each case unless
such waiver or action: (A) would be in accordance with the Servicer's customary
practices or those of any successor Servicer with respect to comparable assets
that it services for itself and for others; (B) would not materially adversely
affect the rights of the Certificateholders; and (C) would comply with
applicable law; provided, however, that notwithstanding anything in the
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Agreement or this Annex I to the contrary, the Servicer is authorized to write
off any Billed FTA Revenues, in accordance with its Servicer Policies and
Practices, that remain outstanding for 180 days after issuance of a Closing
Xxxx.
(iii) The Servicer shall accept payment from Customers in respect of
Billed FTA Revenues in such forms and methods and at such times and places as it
accepts for payment of its own charges. The Servicer shall accept payment from
ESPs in respect of Billed FTA Revenues in such forms and methods and at such
times and places as the Servicer and each ESP shall mutually agree in accordance
with applicable CPUC Regulations.
(b) Payment Processing; Allocation; Priority of Payments.
----------------------------------------------------
(i) The Servicer shall post all payments received to Customer or ESP
accounts as promptly as practicable, and, in any event, substantially all
payments shall be posted no later than two Servicer Business Days after
receipt.
I-5
(ii) Subject to clause (iii) below, the Servicer shall apply payments
received to each Customer's or ESP's account in proportion to the charges
contained on the outstanding Xxxx to such Customer or ESP.
(iii) Any amounts collected by the Servicer that represent partial
payments of the total Xxxx to a Customer shall be allocated as follows: (A)
first to amounts owed to the Note Issuer, the Seller and the applicable
ESP, regardless of age, in proportion to their respective percentages of
the total amount of their combined outstanding charges on such Xxxx; then
(B) to all other outstanding amounts owed to parties other than the Note
Issuer, the Seller and the applicable ESP.
(iv) The Servicer shall hold all over-payments for the benefit of the
Note Issuer and the Seller and shall apply such funds to future Xxxx
charges in accordance with clauses (ii) and (iii) above as such charges
become due.
(c) Accounts; Records.
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The Servicer shall maintain accounts and records as to the Transition
Property accurately and in accordance with its standard accounting procedures
and in sufficient detail to permit reconciliation between payments or recoveries
with respect to the Transition Property and the amounts from time to time
remitted to the Collection Account in respect of the Transition Property.
(d) Investment of FTA Payments Received.
-----------------------------------
Prior to remittance on the applicable Remittance Date, the Servicer
may invest FTA Payments received at its own risk and for its own benefit, and
such investments and funds shall not be required to be segregated from the other
investments and funds of the Servicer.
(e) Calculation of Collections; Determination of Aggregate Remittance
-----------------------------------------------------------------
Amount.
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(i) On or before each Remittance Date, the Servicer shall calculate,
in accordance with Schedule 6, the total FTA Payments estimated to have been
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received by the Servicer from or on behalf of Customers during the prior
Collection Period in respect of all previously Billed FTA Revenues, increased or
decreased, as applicable, by (A) the amount of any Remittance Shortfall
calculated for such Remittance Date or (B) the amount of any Excess Remittance
calculated for such Remittance Date and (C) Billed FTA Revenues not accounted
for or erroneously accounted for in prior periods (collectively, the "Aggregate
Remittance Amount").
(ii) At the end of each year, on or before the Annual Adjustment Date
in accordance with Section 4.01(b)(i)(1) of the Agreement, the Servicer shall
update the Variables underlying the Daily Collections Curve in Schedule 6 and
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shall revise such curve to reflect the updated Variables. The Servicer shall
use the revised Daily Collections Curve to update the Monthly Collections Curve.
I-6
(iii) The Servicer and the Note Issuer acknowledge that the Servicer
has undertaken to make certain changes to its current computerized customer
information system, which changes, when functional, would affect the Servicer's
method of calculating the FTA Payments estimated to have been received by the
Servicer during each Collection Period as set forth in Schedule 6 hereto.
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Should these changes to the computerized customer information system become
functional during the term of the Agreement, the Servicer and the Note Issuer
agree that they shall review the procedures used to calculate the FTA Payments
estimated to have been received, as set forth on Schedule 6, in light of the
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capabilities of such new system and shall make such modifications and/or
substitutions to such procedures and to clause (ii) above as may be appropriate
in the interests of efficiency, accuracy, cost and/or system capabilities;
provided, however, that the Servicer may not make any modification or
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substitution that will materially adversely affect the Certificateholders. As
soon as practicable, and in no event later than 60 Business Days after the date
on which all Customer accounts have been converted for billing under such new
system, the Servicer shall notify the Note Trustee, the Certificate Trustee, the
Infrastructure Bank and the Rating Agencies of the same.
(iv) All calculations of collections, each update of the Variables and
any changes in procedures used to calculate the FTA Payments pursuant to this
Section 6(e) shall be made in good faith and in the case of any update pursuant
to clause (ii) or any change in procedures pursuant to clause (iii) in a manner
reasonably intended to provide estimates and calculations that are at least as
accurate as those that would be provided on the Closing Date utilizing the
initial Variables and procedures.
(f) Remittances.
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(i) The Note Issuer shall cause to be established the Collection
Account in the name of the Note Trustee in accordance with the Indenture.
(ii) The Servicer shall make or cause to be made remittances to the
Collection Account in accordance with Section 6.11 of the Agreement.
(iii) In the event of any change of account or change of institution
affecting the Collection Account, the Note Issuer shall provide written notice
thereof to the Servicer by the earlier of: (A) five Business Days from the
effective date of such change, or (B) five Business Days prior to the next
Remittance Date.
I-7
SCHEDULE 6
TO
ANNEX I
CALCULATION OF AGGREGATE REMITTANCE AMOUNT
I. MONTHLY COLLECTIONS CURVE UNDERLYING ESTIMATION TEMPLATE DESCRIBED IN
SECTION II OF THIS SCHEDULE 6.
The following model shall be used to determine the Monthly Collections
Curve for each Collection Period.
ASSUMPTIONS
-----------
1. Customer billing is conducted on a daily basis, and each month contains 30
days.
2. The Monthly Collections Curve has not varied materially over the course of
the year.
3. The Monthly Collections Curve is composed of a summation of historical
daily collections receipts curves ("Daily Collections Curves").
4. The historical daily collections receipts curve was derived from a sample
of customer accounts spanning from August 1996 to March 1997.
5. The sampled accounts include 1,700 residential accounts (representing
approximately .038% of all residential accounts) and 400 small commercial
accounts (representing approximately .12% of all small commercial
accounts.)
6. Each billing month has an estimated collection percentage as shown below:
METHODOLOGY
-----------
In order to determine the Monthly Collections Curve, the Servicer must
first determine the Daily Collections Curve. To derive the Daily Collections
Curve, the Servicer recorded the number of days between when a particular xxxx
was generated and when full payment was received. A tally was developed to
record each payment experience for the sample (residential and small commercial
accounts were tallied separately). Once the tally was complete, the Servicer
expressed each day's tally sum as a percentage of the total number of bills
generated in the sample (i.e., 1,700 for residential and 400 for small
commercial). Attachments A and B to this Schedule 6 show the resulting
percentages from the above calculation.
To derive the Monthly Collections Curve, the Servicer assumed that the
daily collection payment pattern was the same for bills sent on each day of the
month and that the billed amounts for a given month are spread evenly over each
day of the month, thus the daily payments received as a percent of the monthly
billed can be determined for each day's billing. Each daily percentage shown in
Attachments A and B, was multiplied by 1/30 to simulate one day's worth of
collections. Then, the Servicer took the cumulative sum for each day (Day 1,
Day 1 + Day 2, Day 1 + Day 2 + Day 3, etc.) to produce the Monthly Collections
curves shown in Attachments C and D to this Schedule 6.
I-8
[Graph showing Residential Collections Curve]
[Graph showing Commercial Monthly Collections Curve]
II. ESTIMATION TEMPLATE (USING MONTHLY COLLECTIONS CURVE DESCRIBED IN SECTION I
OF THIS SCHEDULE)
Where:
M\\n\\ = a Collection Period
A = percentage collected of the total Billed FTA Revenues
billed during the Current Billing Period
B = percentage collected of the total Billed FTA Revenues
billed during the Billing Period prior to the Current
Billing Period
C = percentage collected of the total Billed FTA Revenues
billed during the Billing Period two periods prior to the
Current Billing Period
D = percentage collected of the total Billed FTA Revenues
billed during the Billing Period three periods prior to the
Current Billing Period
E = percentage collected of the total Billed FTA Revenues
billed during the Billing Period four periods prior to the
Current Billing Period
F = percentage collected of the total Billed FTA Revenues
billed during the Billing Period five periods prior to the
Current Billing Period
R = Billed FTA Revenues for a Billing Period
S = Estimated Collections for a Collection Period
Then:
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FTA Payments estimated to have been received (prior to any adjustment for
any Remittance Shortfall or Excess Remittance, or FTA Revenues Not
Accounted For in Prior Periods) equal S, as shown in the Estimation
Template below. An amount of FTA Payments estimated to have been received
(S) is calculated separately for Residential Customers and Small Commercial
Customers.
COLLECTION PERIOD COLLECTION BILLED FTA ESTIMATED
PERCENT REVENUES COLLECTIONS
------------------------------------------------------------------------------
M\\n-5\\ F\\n-5\\ R\\ n-5\\ (F\\n-5\\)(R\\n-5\\)
+
M\\n-4\\ E\\n-4\\ R\\n-4\\ (E\\n-4\\)(R\\n-4\\)
+
M\\n-3\\ D\\n-3\\ R\\n-3\\ (D\\n-3\\)(R\\n-3\\)
+
M\\n-2\\ C\\n-2\\ R\\n-2\\ (C\\n-2\\)(R\\n-2\\)
+
M\\n-1\\ B\\n-1\\ R\\n-1\\ (B\\n-1\\)(R\\n-1\\)
+
M\\n\\ A\\n\\ R\\n\\ (A\\n\\)(R\\n\\)
=
--------------------
Total S\\n\\
====================
Notes:
1. The Billed FTA Revenues (R) for multiple prior Billing Periods will be zero
during the phase-in of the FTA Charges following the FTA Effective Date.
Similarly, the Billed FTA Revenues for multiple succeeding Billing Periods
will be zero during the phase-out of the FTA Charges following the FTA
Termination Date.
2. The Collection Percent (either A, B, C, D, E, or F) is the collection percent
in effect at the time the FTA Charges were billed based on the Monthly
Collections Curve then in effect.
III. AGGREGATE REMITTANCE AMOUNT CALCULATION (USING ESTIMATION TEMPLATE
DESCRIBED IN SECTION II OF THIS SCHEDULE)
Where:
X = Excess Remittance or Remittance Shortfall for a Collection Period
Y = FTA Revenue Not Accounted For in Prior Periods or a Collection
Period
Z = Aggregate Remittance Amount
Then, the Aggregate Remittance Amount to be remitted in month n+1 (M\\n+1\\)
equals Z:
S\\n\\ for Residential Customers
+ or -
X\\n\\ for Residential Customers
I-10
+
S\\n\\ for Small Commercial Customers
+ or -
X\\n\\ for Small Commercial Customers
+ or -
Y\\n\\
=
-------------------------------------
Z to be remitted at M\\n+1\\
=====================================
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ANNEX II
to
SERVICING AGREEMENT
SECTION 1. Routine Quarterly True-Up Adjustments. (a) The Servicer
--------------------------------------
shall not perform any routine quarterly True-Up Adjustments for the PG&E Funding
LLC Notes, Series 1997-1.
SCHEDULE 6.01(f)
No Proceedings
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1. Petition for writ of review filed with the California Supreme Court by The
Utility Reform Network on November 24, 1997.
EXHIBIT B
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly elected and
acting ___________ of Pacific Gas and Electric Company, as servicer (the
"Servicer") under the Transition Property Servicing Agreement dated as of
December 8, 1997 (the Servicing Agreement") between the Servicer and PG&E
Funding LLC (the "Note Issuer") and further that:
1. A review of the activities of the Servicer and of its performance
under the Servicing Agreement during the twelve months ended June 30, ___ has
been made under the supervision of the undersigned pursuant to Section 3.03 of
the Servicing Agreement; and
2. To the best of the undersigned's knowledge, based on such review,
the Servicer has fulfilled all of its material obligations in all material
respects under the Servicing Agreement throughout the twelve months ended June
30, ___, except for those material defaults in the fulfillment of material
obligations listed on Annex A hereto.
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Executed as of this ___ day of ______________.
PACIFIC GAS AND ELECTRIC COMPANY
By:
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Name:
Title:
ANNEX A
TO
CERTIFICATE OF COMPLIANCE
LIST OF SERVICER DEFAULTS
The following material defaults known to the undersigned occurred during the
year ended June 30, ___:
Nature of Default Status
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