"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.