The Long Island Power Authority (LIPA) plans to issue $381.73 million of tax-exempt bonds backed by restructuring charges imposed on its retail electricity customers, according to Moody’s Investors Service.

Proceeds will enable the utility to retire a portion of its outstanding debt.

This will be the third utility cost recovery charge securitization that LIPA has sponsored since 2013. These bonds are backed by restructuring property which consists of, among other things, the right to impose usage-based restructuring charges on all current and future retail electric customers in LIPA’s service area.

The restructuring charge is mandatory and is adjusted annually through a “true up” mechanism to ensure that collections are sufficient to pay interest and principal on the bonds, as well as fund the debt service and operating reserve accounts, regardless of the amount of electricity that customers use.

The latest offering consists of a single series of fixed-rate bonds with legal final maturity of December 2028 secured by the collateral on a pari passu basis. Moody’s expects to assign an ‘AAA’ rating to the notes. Some of the Series 2016A bonds will be serial bonds, while others will be term bonds, with the term bonds subject to mandatory sinking fund payments.

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