What is a true up provision in a securitization creating rate reduction bonds?

What will be an ideal response?

Rate reduction bonds are backed by a special charge (tariff) included in the utility bills of utility customers in. The charge, called the competitive transition charge (or CTC), is effectively a legislated asset. The CTC is initially calculated based on projections of utility usage and the ability to collect revenues. However, actual collection experience may differ from initial projections. Because of this, there is a "true-up" mechanism in these securitizations. This mechanism permits the utility to recompute the CTC on a periodic basis over the term of the securitization based on actual collection experience. The advantage of the true-up mechanism to the bond classes is that it provides cash flow stability as well as a form of credit enhancement.