I've come across the term Transition Bond Company, and I'm trying to figure out what it is – in relatively plain English, since I lack any legal background whatsoever.

The context in which I've seen the term used is in connection to regulated utility companies in the US (e.g., electric companies).

Any explanation?


"Transition bonds" are debt for which the collateral is "transition property."

Periodically U.S. states authorize utilities to levy a charge on individual consumer bills. The reasons they may do so are varied (e.g. to compensate a former monopolist during the transition to a competitive utilities market).

The right to levy this charge now and in the future is a type of (transition) property. Since this right has value in the form of a future stream of revenue, it can serve as collateral when debt it taken on (here in the form of bonds).

The utility with the property rights can form a subsidiary called a "transition bond company" that handles the bond issuance.

Here are a few examples of state laws to the above effect.



  • This is excellent; I had the general impression, but this makes it clearer. Would the SEC filings for a transition bond company refer to the particular transition property that is being issued? Or could I find that elsewhere?
    – mfsiega
    Jul 14 '15 at 1:51
  • @mfrankli Sometimes the state laws make clear what types of charges are authorized, so you might look there first. I'm not a pro on SEC filings, though. Here's another interesting point: sometimes the states use the charges as a mechanism to fund their own treasuries.
    – Pat W.
    Jul 14 '15 at 12:26

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