Utility Recovery Bonds: Protecting Consumers from Soaring Electricity Bills

In a bold move, Governor Jared Polis of Colorado has joined forces with seven other Democratic governors to address a pressing issue that threatens to burden millions of Americans with higher utility bills. The governors have called upon the Securities and Exchange Commission (SEC) chair, Gary Gensler, to address the reclassification of utility recovery bonds, a financial instrument used to cover the costs of repairing damage to the electric grid caused by wildfires, storms, and other utility-related incidents.

Safeguarding Consumers from Unnecessary Costs

The Reclassification Dilemma

The governors' letter highlights a concerning development – the reclassification of utility recovery bonds by third-party entities, such as Bloomberg, as "asset-backed securities." This reclassification has led to higher borrowing costs for utilities, ultimately resulting in increased utility bills for consumers. The governors argue that this reclassification "defies common sense, harms millions of electricity consumers, and provides no clear investor protection benefit."

Utility Recovery Bonds: Distinct from Asset-Backed Securities

The governors emphasize that utility recovery bonds are fundamentally different from traditional asset-backed securities, such as credit card bonds or collateralized debt obligations. They argue that the similarities between the two are "superficial and not substantive for the purposes of the chosen SEC disclosure regime." The governors assert that the reclassification is unjustified and fails to account for the unique nature of utility recovery bonds.

The Potential Impact: Billions in Additional Costs

According to the letter, the reclassification of utility recovery bonds could result in up to $3 billion in additional costs for American consumers. With billions of dollars in recovery bonds expected to be issued in the near future, the governors stress that this issue is more pressing than ever, as it directly affects the electricity bills of millions of Americans.

The Call for Regulatory Clarity

The governors have called for "accurate classification and regulatory clarity" to serve the public interest. They argue that the current reclassification undermines the purpose of utility recovery bonds, which are designed to provide a cost-effective way for utilities to finance the repair and restoration of critical infrastructure after natural disasters or other emergencies.

Governors and Regulators: Advocating for Consumers

The governors' letter underscores their commitment to protecting the interests of their constituents. They emphasize that "governors and regulators do care" about this issue, and they are determined to ensure that the reclassification of utility recovery bonds does not result in undue financial burdens on American households.

The Path Forward: Collaboration and Regulatory Clarity

The governors' call for action highlights the need for collaboration between state and federal authorities to address this pressing issue. By working together with the SEC and other relevant stakeholders, the governors aim to achieve regulatory clarity and ensure that utility recovery bonds are accurately classified, ultimately safeguarding consumers from unnecessary cost increases.