KRS § 278.686 — KY Code / Title XXIV / Chapter 278 / Section 278.686
278.686 Exemption from Uniform Commercial Code -- Security interest binding -- Filing of financing statement with Secretary of State -- Priority of securitized interest -- Exercise of rights and remedies upon default
Status: in_force

278.686 Exemption from Uniform Commercial Code -- Security interest binding --

Filing of financing statement with Secretary of State -- Priority of securitized

interest -- Exercise of rights and remedies upon default.

(1) The creation, perfection, priority, and enforcement of any security interest or lien in

securitized property to secure the repayment of the principal and interest and other

amounts payable in respect of securitized bonds, amounts payable under any

ancillary agreement, and other financing costs are governed by KRS 278.670 to

278.696 and 65.114 and not by the provisions of the code or other law, except as

otherwise provided in KRS 278.670 to 278.696 and 65.114.

(2) A security interest in securitized property is created, valid, and binding when the

last of all the following actions has occurred:

(a) The financing order is issued;

(b) A security agreement is executed and delivered by the debtor granting the

security interest;

(c) The debtor has rights to the securitized property or the power to transfer rights

in the securitized property; or

(d) The value is received for the grant of the security interest in the securitized

property.

(3) A description of securitized property in a security agreement shall be sufficient if

the description refers to KRS 278.670 to 278.696 and 65.114 and the financing

order creating the securitized property. A security interest shall attach as provided

in this section without any physical delivery of collateral or other act.

(4) Upon the filing of a financing statement with the Office of the Secretary of State as

provided in this section, a security interest in securitized property shall be perfected

against all parties having claims of any kind in tort, contract, or otherwise against

the person granting the security interest, and regardless of whether the parties have

notice of the security interest. Without limiting the foregoing, upon the time of

filing a security interest in securitized property shall be perfected against all claims

of lien creditors, and shall have priority over all competing security interests and

other claims other than any security interest previously perfected in accordance

with this section.

(5) The priority of a security interest in securitized property shall not be affected by the

commingling of securitized surcharges with other amounts. Any pledgee or secured

party shall have a perfected security interest in the amount of all securitized

surcharges that are deposited in any cash or deposit account of the qualifying

electric utility where securitized surcharges have been commingled with other

funds, and any other security interest that may apply to those funds shall be

terminated when the funds are transferred to a segregated account for the assignee

or a financing party.

(6) No application of the formula-based true-up mechanism as provided in KRS

278.670 to 278.696 and 65.114 shall affect the validity, perfection, or priority of a

security interest in or a transfer of securitized property.

(7) If a default occurs of the securitized bonds that are secured by a security interest in

the securitized property, the financing parties or their representatives may exercise

the rights and remedies available to a secured party under the code, including the

rights and remedies available under Article 9, Part 6 of the code. The commission

also may order amounts arising from securitized charges be transferred to a separate

account for the benefit of the financing party, to which their lien and security

interest shall apply. On application by or on behalf of the financing parties, the

Circuit Court for the county or city in which the electric utility's headquarters is

located shall order the sequestration and payment of revenues arising from the

securitized charges to the financing parties.