Texas House Bill HB71 Introduced / Bill

                    82S10180 JXC-D
 By: Larson H.B. No. 71


 A BILL TO BE ENTITLED
 AN ACT
 relating to the establishment of certain water and sewer utility
 rates and the transfer of certain functions from the Texas
 Commission on Environmental Quality to the Public Utility
 Commission of Texas.
 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 ARTICLE 1.  AUTHORITY TO ESTABLISH INTERIM RATES
 SECTION 1.01.  Subsection (h), Section 13.043, Water Code,
 is amended to read as follows:
 (h)  The utility commission or the executive director of the
 utility commission may[, on a motion by the executive director or by
 the appellant under Subsection (a), (b), or (f) of this section,]
 establish interim rates to be in effect until a final decision is
 made in an appeal filed under Subsection (a), (b), or (f).
 SECTION 1.02.  Subsections (b) and (l), Section 13.187,
 Water Code, are amended to read as follows:
 (b)  A copy of the statement of intent shall be mailed, sent
 by e-mail, or delivered to the appropriate offices of each affected
 municipality, to the executive director of the utility commission,
 and to any [other] affected persons as required by the regulatory
 authority's rules.
 (l)  At any time during the pendency of the rate proceeding
 the regulatory authority or, if the regulatory authority is the
 utility commission, the executive director of the utility
 commission may fix interim rates to remain in effect until a final
 determination is made on the proposed rate.
 ARTICLE 2. WATER AND SEWER UTILITIES
 SECTION 2.01.  Section 13.002, Water Code, is amended by
 amending Subdivisions (2) and (18) and adding Subdivision (22-a) to
 read as follows:
 (2)  "Affiliated interest" or "affiliate" means:
 (A)  any person or corporation owning or holding
 directly or indirectly five percent or more of the voting
 securities of a utility;
 (B)  any person or corporation in any chain of
 successive ownership of five percent or more of the voting
 securities of a utility;
 (C)  any corporation five percent or more of the
 voting securities of which is owned or controlled directly or
 indirectly by a utility;
 (D)  any corporation five percent or more of the
 voting securities of which is owned or controlled directly or
 indirectly by any person or corporation that owns or controls
 directly or indirectly five percent or more of the voting
 securities of any utility or by any person or corporation in any
 chain of successive ownership of five percent of those utility
 securities;
 (E)  any person who is an officer or director of a
 utility or of any corporation in any chain of successive ownership
 of five percent or more of voting securities of a public utility;
 (F)  any person or corporation that the utility
 commission, after notice and hearing, determines actually
 exercises any substantial influence or control over the policies
 and actions of a utility or over which a utility exercises such
 control or that is under common control with a utility, such control
 being the possession directly or indirectly of the power to direct
 or cause the direction of the management and policies of another,
 whether that power is established through ownership or voting of
 securities or by any other direct or indirect means; or
 (G)  any person or corporation that the utility
 commission, after notice and hearing, determines is exercising
 substantial influence over the policies and actions of the utility
 in conjunction with one or more persons or corporations with which
 they are related by ownership or blood relationship, or by action in
 concert, that together they are affiliated within the meaning of
 this section, even though no one of them alone is so affiliated.
 (18)  "Regulatory authority" means, in accordance with
 the context in which it is found, either the commission, the utility
 commission, or the governing body of a municipality.
 (22-a)  "Utility commission" means the Public Utility
 Commission of Texas.
 SECTION 2.02.  Section 13.004, Water Code, is amended to
 read as follows:
 Sec. 13.004.  JURISDICTION OF UTILITY COMMISSION OVER
 CERTAIN WATER SUPPLY OR SEWER SERVICE CORPORATIONS.
 (a)  Notwithstanding any other law, the utility commission has the
 same jurisdiction over a water supply or sewer service corporation
 that the utility commission has under this chapter over a water and
 sewer utility if the utility commission finds that the water supply
 or sewer service corporation:
 (1)  is failing to conduct annual or special meetings
 in compliance with Section 67.007; or
 (2)  is operating in a manner that does not comply with
 the requirements for classifications as a nonprofit water supply or
 sewer service corporation prescribed by Sections 13.002(11) and
 (24).
 (b)  If the water supply or sewer service corporation
 voluntarily converts to a special utility district operating under
 Chapter 65, the utility commission's jurisdiction provided by this
 section ends.
 SECTION 2.03.  Section 13.011, Water Code, is amended to
 read as follows:
 Sec. 13.011.  EMPLOYEES. (a)  The executive director of the
 utility commission and the executive director of the commission,
 subject to approval, as applicable, by the utility commission or
 the commission, shall employ any engineering, accounting, and
 administrative personnel necessary to carry out each agency's
 powers and duties under this chapter.
 (b)  The executive director and the commission's staff are
 responsible for the gathering of information relating to all
 matters within the jurisdiction of the commission under this
 subchapter. The executive director of the utility commission and
 the utility commission's staff are responsible for the gathering of
 information relating to all matters within the jurisdiction of the
 utility commission under this subchapter. The duties of the
 respective executive directors and staffs [director and the staff]
 include:
 (1)  accumulation of evidence and other information
 from water and sewer utilities, [and] from the agency and governing
 body, [commission and the board] and from other sources for the
 purposes specified by this chapter;
 (2)  preparation and presentation of evidence before
 the agency [commission] or its appointed examiner in proceedings;
 (3)  conducting investigations of water and sewer
 utilities under the jurisdiction of the agency [commission];
 (4)  preparation of recommendations that the agency
 [commission] undertake an investigation of any matter within its
 jurisdiction;
 (5)  preparation of recommendations and a report for
 inclusion in the annual report of the agency [commission];
 (6)  protection and representation of the public
 interest[, together with the public interest advocate,] before the
 agency [commission]; and
 (7)  other activities that are reasonably necessary to
 enable the executive director and the staff to perform their
 duties.
 SECTION 2.04.  Section 13.014, Water Code, is amended to
 read as follows:
 Sec. 13.014.  ATTORNEY GENERAL TO REPRESENT COMMISSION OR
 UTILITY COMMISSION. The attorney general shall represent the
 commission or the utility commission under this chapter in all
 matters before the state courts and any court of the United States.
 SECTION 2.05.  Subchapter B, Chapter 13, Water Code, is
 amended by adding Section 13.017 to read as follows:
 Sec. 13.017.  OFFICE OF PUBLIC UTILITY COUNSEL; POWERS AND
 DUTIES.  (a)  In this section, "counsellor" and "office" have the
 meanings assigned by Section 11.003, Utilities Code.
 (b)  The office represents the interests of residential and
 small commercial consumers under this chapter. The office:
 (1)  shall assess the effect of utility rate changes
 and other regulatory actions on residential consumers in this
 state;
 (2)  shall advocate in the office's own name a position
 determined by the counsellor to be most advantageous to a
 substantial number of residential consumers;
 (3)  may appear or intervene, as a party or otherwise,
 as a matter of right on behalf of:
 (A)  residential consumers, as a class, in any
 proceeding before the utility commission, including an alternative
 dispute resolution proceeding; and
 (B)  small commercial consumers, as a class, in
 any proceeding in which the counsellor determines that small
 commercial consumers are in need of representation, including an
 alternative dispute resolution proceeding;
 (4)  may initiate or intervene as a matter of right or
 otherwise appear in a judicial proceeding:
 (A)  that involves an action taken by an
 administrative agency in a proceeding, including an alternative
 dispute resolution proceeding, in which the counsellor is
 authorized to appear; or
 (B)  in which the counsellor determines that
 residential consumers or small commercial consumers are in need of
 representation;
 (5)  is entitled to the same access as a party, other
 than utility commission staff, to records gathered by the utility
 commission under Section 13.133;
 (6)  is entitled to discovery of any nonprivileged
 matter that is relevant to the subject matter of a proceeding or
 petition before the utility commission;
 (7)  may represent an individual residential or small
 commercial consumer with respect to the consumer's disputed
 complaint concerning retail utility services that is unresolved
 before the utility commission; and
 (8)  may recommend legislation to the legislature that
 the office determines would positively affect the interests of
 residential and small commercial consumers.
 (c)  This section does not limit the authority of the utility
 commission to represent residential or small commercial consumers.
 (d)  The appearance of the counsellor in a proceeding does
 not preclude the appearance of other parties on behalf of
 residential or small commercial consumers. The counsellor may not
 be grouped with any other party.
 SECTION 2.06.  Section 13.041, Water Code, is amended to
 read as follows:
 Sec. 13.041.  GENERAL POWERS OF UTILITY COMMISSION AND
 COMMISSION [POWER]; RULES; HEARINGS. (a)  The utility commission
 may regulate and supervise the business of each [every] water and
 sewer utility within its jurisdiction, including ratemaking and
 other economic regulation.  The commission shall regulate water and
 sewer utilities within its jurisdiction to ensure safe drinking
 water and environmental protection.  The utility commission and the
 commission [and] may do all things, whether specifically designated
 in this chapter or implied in this chapter, necessary and
 convenient to the exercise of these powers [this power] and
 jurisdiction.  The utility commission may consult with the
 commission as necessary in carrying out its duties related to the
 regulation of water and sewer utilities.
 (b)  The commission and the utility commission shall adopt
 and enforce rules reasonably required in the exercise of [its]
 powers and jurisdiction of each agency, including rules governing
 practice and procedure before the commission and the utility
 commission.
 (c)  The commission and the utility commission may call and
 hold hearings, administer oaths, receive evidence at hearings,
 issue subpoenas to compel the attendance of witnesses and the
 production of papers and documents, and make findings of fact and
 decisions with respect to administering this chapter or the rules,
 orders, or other actions of the commission or the utility
 commission.
 (d)  The utility commission may issue emergency orders, with
 or without a hearing:
 (1)  to compel a water or sewer service provider that
 has obtained or is required to obtain a certificate of public
 convenience and necessity to provide continuous and adequate water
 service, sewer service, or both, if the discontinuance of the
 service is imminent or has occurred because of the service
 provider's actions or failure to act; and
 (2)  to compel a retail public utility to provide an
 emergency interconnection with a neighboring retail public utility
 for the provision of temporary water or sewer service, or both, for
 not more than 90 days if service discontinuance or serious
 impairment in service is imminent or has occurred.
 (e)  The utility commission may establish reasonable
 compensation for the temporary service required under Subsection
 (d)(2) [of this section] and may allow the retail public utility
 receiving the service to make a temporary adjustment to its rate
 structure to ensure proper payment.
 (f)  If an order is issued under Subsection (d) without a
 hearing, the order shall fix a time, as soon after the emergency
 order is issued as is practicable, and place for a hearing to be
 held before the utility commission.
 (g)  The regulatory assessment required by Section 5.701(n)
 [5.235(n) of this code] is not a rate and is not reviewable by the
 utility commission under Section 13.043 [of this code]. The
 commission has the authority to enforce payment and collection of
 the regulatory assessment.
 SECTION 2.07.  Section 13.042, Water Code, is amended to
 read as follows:
 Sec. 13.042.  JURISDICTION OF MUNICIPALITY; ORIGINAL AND
 APPELLATE JURISDICTION OF UTILITY COMMISSION. (a)  Subject to the
 limitations imposed in this chapter and for the purpose of
 regulating rates and services so that those rates may be fair, just,
 and reasonable and the services adequate and efficient, the
 governing body of each municipality has exclusive original
 jurisdiction over all water and sewer utility rates, operations,
 and services provided by a water and sewer utility within its
 corporate limits.
 (b)  The governing body of a municipality by ordinance may
 elect to have the utility commission exercise exclusive original
 jurisdiction over the utility rates, operation, and services of
 utilities, within the incorporated limits of the municipality.
 (c)  The governing body of a municipality that surrenders its
 jurisdiction to the utility commission may reinstate its
 jurisdiction by ordinance at any time after the second anniversary
 of the date on which the municipality surrendered its jurisdiction
 to the utility commission, except that the municipality may not
 reinstate its jurisdiction during the pendency of a rate proceeding
 before the utility commission. The municipality may not surrender
 its jurisdiction again until the second anniversary of the date on
 which the municipality reinstates jurisdiction.
 (d)  The utility commission shall have exclusive appellate
 jurisdiction to review orders or ordinances of those municipalities
 as provided in this chapter.
 (e)  The utility commission shall have exclusive original
 jurisdiction over water and sewer utility rates, operations, and
 services not within the incorporated limits of a municipality
 exercising exclusive original jurisdiction over those rates,
 operations, and services as provided in this chapter.
 (f)  This subchapter does not give the utility commission
 power or jurisdiction to regulate or supervise the rates or service
 of a utility owned and operated by a municipality, directly or
 through a municipally owned corporation, within its corporate
 limits or to affect or limit the power, jurisdiction, or duties of a
 municipality that regulates land and supervises water and sewer
 utilities within its corporate limits, except as provided by this
 code.
 SECTION 2.08.  Subsections (a), (b), (c), (e), (f), (g), and
 (j), Section 13.043, Water Code, are amended to read as follows:
 (a)  Any party to a rate proceeding before the governing body
 of a municipality may appeal the decision of the governing body to
 the utility commission. This subsection does not apply to a
 municipally owned utility. An appeal under this subsection must be
 initiated within 90 days after the date of notice of the final
 decision by the governing body by filing a petition for review with
 the utility commission and by serving copies on all parties to the
 original rate proceeding. The utility commission shall hear the
 appeal de novo and shall fix in its final order the rates the
 governing body should have fixed in the action from which the appeal
 was taken and may include reasonable expenses incurred in the
 appeal proceedings. The utility commission may establish the
 effective date for the utility commission's rates at the original
 effective date as proposed by the utility provider and may order
 refunds or allow a surcharge to recover lost revenues. The utility
 commission may consider only the information that was available to
 the governing body at the time the governing body made its decision
 and evidence of reasonable expenses incurred in the appeal
 proceedings.
 (b)  Ratepayers of the following entities may appeal the
 decision of the governing body of the entity affecting their water,
 drainage, or sewer rates to the utility commission:
 (1)  a nonprofit water supply or sewer service
 corporation created and operating under Chapter 67;
 (2)  a utility under the jurisdiction of a municipality
 inside the corporate limits of the municipality;
 (3)  a municipally owned utility, if the ratepayers
 reside outside the corporate limits of the municipality;
 (4)  a district or authority created under Article III,
 Section 52, or Article XVI, Section 59, of the Texas Constitution
 that provides water or sewer service to household users; and
 (5)  a utility owned by an affected county, if the
 ratepayer's rates are actually or may be adversely affected. For
 the purposes of this section ratepayers who reside outside the
 boundaries of the district or authority shall be considered a
 separate class from ratepayers who reside inside those boundaries.
 (c)  An appeal under Subsection (b) [of this section] must be
 initiated by filing a petition for review with the utility
 commission and the entity providing service within 90 days after
 the effective day of the rate change or, if appealing under
 Subdivision (b)(2) or (5) [of this section], within 90 days after
 the date on which the governing body of the municipality or affected
 county makes a final decision. The petition must be signed by the
 lesser of 10,000 or 10 percent of those ratepayers whose rates have
 been changed and who are eligible to appeal under Subsection (b) [of
 this section].
 (e)  In an appeal under Subsection (b) [of this section], the
 utility commission shall hear the appeal de novo and shall fix in
 its final order the rates the governing body should have fixed in
 the action from which the appeal was taken. The utility commission
 may establish the effective date for the utility commission's rates
 at the original effective date as proposed by the service provider,
 may order refunds or allow a surcharge to recover lost revenues, and
 may allow recovery of reasonable expenses incurred by the retail
 public utility in the appeal proceedings. The utility commission
 may consider only the information that was available to the
 governing body at the time the governing body made its decision and
 evidence of reasonable expenses incurred by the retail public
 utility in the appeal proceedings. The rates established by the
 utility commission in an appeal under Subsection (b) [of this
 section] remain in effect until the first anniversary of the
 effective date proposed by the retail public utility for the rates
 being appealed or until changed by the service provider, whichever
 date is later, unless the utility commission determines that a
 financial hardship exists.
 (f)  A retail public utility that receives water or sewer
 service from another retail public utility or political subdivision
 of the state, including an affected county, may appeal to the
 utility commission a decision of the provider of water or sewer
 service affecting the amount paid for water or sewer service. An
 appeal under this subsection must be initiated within 90 days after
 the date of notice of the decision is received from the provider of
 water or sewer service by the filing of a petition by the retail
 public utility.
 (g)  An applicant for service from an affected county or a
 water supply or sewer service corporation may appeal to the utility
 commission a decision of the county or water supply or sewer service
 corporation affecting the amount to be paid to obtain service other
 than the regular membership or tap fees. In addition to the factors
 specified under Subsection (j), in an appeal brought under this
 subsection the utility commission shall determine whether the
 amount paid by the applicant is consistent with the tariff of the
 water supply or sewer service corporation and is reasonably related
 to the cost of installing on-site and off-site facilities to
 provide service to that applicant. If the utility commission finds
 the amount charged to be clearly unreasonable, it shall establish
 the fee to be paid for that applicant. An appeal under this
 subsection must be initiated within 90 days after the date written
 notice is provided to the applicant or member of the decision of an
 affected county or water supply or sewer service corporation
 relating to the applicant's initial request for that service. A
 determination made by the utility commission on an appeal under
 this subsection is binding on all similarly situated applicants for
 service, and the utility commission may not consider other appeals
 on the same issue until the applicable provisions of the tariff of
 the water supply or sewer service corporation are amended.
 (j)  In an appeal under this section, the utility commission
 shall ensure that every rate made, demanded, or received by any
 retail public utility or by any two or more retail public utilities
 jointly shall be just and reasonable. Rates shall not be
 unreasonably preferential, prejudicial, or discriminatory but
 shall be sufficient, equitable, and consistent in application to
 each class of customers. The utility commission shall use a
 methodology that preserves the financial integrity of the retail
 public utility. For agreements between municipalities the utility
 commission shall consider the terms of any wholesale water or sewer
 service agreement in an appellate rate proceeding.
 SECTION 2.09.  Subsection (b), Section 13.044, Water Code,
 is amended to read as follows:
 (b)  Notwithstanding the provisions of any resolution,
 ordinance, or agreement, a district may appeal the rates imposed by
 the municipality by filing a petition with the utility commission.
 The utility commission shall hear the appeal de novo and the
 municipality shall have the burden of proof to establish that the
 rates are just and reasonable. The utility commission shall fix the
 rates to be charged by the municipality and the municipality may not
 increase such rates without the approval of the utility commission.
 SECTION 2.10.  Section 13.046, Water Code, is amended to
 read as follows:
 Sec. 13.046.  TEMPORARY RATES FOR SERVICES PROVIDED FOR
 NONFUNCTIONING SYSTEM; SANCTIONS FOR NONCOMPLIANCE. (a)  The
 utility commission by rule shall establish a procedure that allows
 a retail public utility that takes over the provision of services
 for a nonfunctioning retail water or sewer utility service provider
 to charge a reasonable rate for the services provided to the
 customers of the nonfunctioning system and to bill the customers
 for the services at that rate immediately to recover service costs.
 (b)  The rules must provide a streamlined process that the
 retail public utility that takes over the nonfunctioning system may
 use to apply to the utility commission for a ruling on the
 reasonableness of the rates the utility is charging under
 Subsection (a).  The process must allow for adequate consideration
 of costs for interconnection or other costs incurred in making
 services available and of the costs that may necessarily be
 incurred to bring the nonfunctioning system into compliance with
 utility commission and commission rules.
 (c)  The utility commission shall provide a reasonable
 period for the retail public utility that takes over the
 nonfunctioning system to bring the nonfunctioning system into
 compliance with utility commission and commission rules during
 which the utility commission or the commission may not impose a
 penalty for any deficiency in the system that is present at the time
 the utility takes over the nonfunctioning system.  The utility
 commission must consult with the utility before determining the
 period and may grant an extension of the period for good cause.
 SECTION 2.11.  Section 13.081, Water Code, is amended to
 read as follows:
 Sec. 13.081.  FRANCHISES. This chapter may not be construed
 as in any way limiting the rights and powers of a municipality to
 grant or refuse franchises to use the streets and alleys within its
 limits and to make the statutory charges for their use, but no
 provision of any franchise agreement may limit or interfere with
 any power conferred on the utility commission by this chapter. If a
 municipality performs regulatory functions under this chapter, it
 may make such other charges as may be provided in the applicable
 franchise agreement, together with any other charges permitted by
 this chapter.
 SECTION 2.12.  Section 13.082, Water Code, is amended to
 read as follows:
 Sec. 13.082.  LOCAL UTILITY SERVICE; EXEMPT AND NONEXEMPT
 AREAS. (a)  Notwithstanding any other provision of this section,
 municipalities shall continue to regulate each kind of local
 utility service inside their boundaries until the utility
 commission has assumed jurisdiction over the respective utility
 pursuant to this chapter.
 (b)  If a municipality does not surrender its jurisdiction,
 local utility service within the boundaries of the municipality
 shall be exempt from regulation by the utility commission under
 this chapter to the extent that this chapter applies to local
 service, and the municipality shall have, regarding service within
 its boundaries, the right to exercise the same regulatory powers
 under the same standards and rules as the utility commission or
 other standards and rules not inconsistent with them.  The utility
 commission's rules relating to service and response to requests for
 service for utilities operating within a municipality's corporate
 limits apply unless the municipality adopts its own rules.
 (c)  Notwithstanding any election, the utility commission
 may consider water and sewer utilities' revenues and return on
 investment in exempt areas in fixing rates and charges in nonexempt
 areas and may also exercise the powers conferred necessary to give
 effect to orders under this chapter for the benefit of nonexempt
 areas. Likewise, in fixing rates and charges in the exempt area,
 the governing body may consider water and sewer utilities' revenues
 and return on investment in nonexempt areas.
 (d)  Utilities serving exempt areas are subject to the
 reporting requirements of this chapter. Those reports and tariffs
 shall be filed with the governing body of the municipality as well
 as with the utility commission.
 (e)  This section does not limit the duty and power of the
 utility commission to regulate service and rates of municipally
 regulated water and sewer utilities for service provided to other
 areas in Texas.
 SECTION 2.13.  Section 13.085, Water Code, is amended to
 read as follows:
 Sec. 13.085.  ASSISTANCE BY UTILITY COMMISSION. On request,
 the utility commission may advise and assist municipalities and
 affected counties in connection with questions and proceedings
 arising under this chapter. This assistance may include aid to
 municipalities or an affected county in connection with matters
 pending before the utility commission, the courts, the governing
 body of any municipality, or the commissioners court of an affected
 county, including making members of the staff available to them as
 witnesses and otherwise providing evidence.
 SECTION 2.14.  Subsection (c), Section 13.087, Water Code,
 is amended to read as follows:
 (c)  Notwithstanding any other provision of this chapter,
 the utility commission has jurisdiction to enforce this section.
 SECTION 2.15.  Subsections (a), (b), (c), and (e), Section
 13.131, Water Code, are amended to read as follows:
 (a)  Every water and sewer utility shall keep and render to
 the regulatory authority in the manner and form prescribed by the
 utility commission uniform accounts of all business transacted.
 The utility commission may also prescribe forms of books, accounts,
 records, and memoranda to be kept by those utilities, including the
 books, accounts, records, and memoranda of the rendition of and
 capacity for service as well as the receipts and expenditures of
 money, and any other forms, records, and memoranda that in the
 judgment of the utility commission may be necessary to carry out
 this chapter.
 (b)  In the case of a utility subject to regulation by a
 federal regulatory agency, compliance with the system of accounts
 prescribed for the particular class of utilities by that agency may
 be considered a sufficient compliance with the system prescribed by
 the utility commission. However, the utility commission may
 prescribe forms of books, accounts, records, and memoranda covering
 information in addition to that required by the federal agency. The
 system of accounts and the forms of books, accounts, records, and
 memoranda prescribed by the utility commission for a utility or
 class of utilities may not conflict or be inconsistent with the
 systems and forms established by a federal agency for that utility
 or class of utilities.
 (c)  The utility commission shall fix proper and adequate
 rates and methods of depreciation, amortization, or depletion of
 the several classes of property of each utility and shall require
 every utility to carry a proper and adequate depreciation account
 in accordance with those rates and methods and with any other rules
 the utility commission prescribes.  Rules adopted under this
 subsection must require the book cost less net salvage of
 depreciable utility plant retired to be charged in its entirety to
 the accumulated depreciation account in a manner consistent with
 accounting treatment of regulated electric and gas utilities in
 this state.  Those rates, methods, and accounts shall be utilized
 uniformly and consistently throughout the rate-setting and appeal
 proceedings.
 (e)  Every utility is required to keep and render its books,
 accounts, records, and memoranda accurately and faithfully in the
 manner and form prescribed by the utility commission and to comply
 with all directions of the regulatory authority relating to those
 books, accounts, records, and memoranda. The regulatory authority
 may require the examination and audit of all accounts.
 SECTION 2.16.  Section 13.132, Water Code, is amended to
 read as follows:
 Sec. 13.132.  POWERS OF UTILITY COMMISSION. (a)  The
 utility commission may:
 (1)  require that water and sewer utilities report to
 it any information relating to themselves and affiliated interests
 both inside and outside this state that it considers useful in the
 administration of this chapter;
 (2)  establish forms for all reports;
 (3)  determine the time for reports and the frequency
 with which any reports are to be made;
 (4)  require that any reports be made under oath;
 (5)  require that a copy of any contract or arrangement
 between any utility and any affiliated interest be filed with it and
 require that such a contract or arrangement that is not in writing
 be reduced to writing;
 (6)  require that a copy of any report filed with any
 federal agency or any governmental agency or body of any other state
 be filed with it; and
 (7)  require that a copy of annual reports showing all
 payments of compensation, other than salary or wages subject to the
 withholding of federal income tax, made to residents of Texas, or
 with respect to legal, administrative, or legislative matters in
 Texas, or for representation before the Texas Legislature or any
 governmental agency or body be filed with it.
 (b)  On the request of the governing body of any
 municipality, the utility commission may provide sufficient staff
 members to advise and consult with the municipality on any pending
 matter.
 SECTION 2.17.  Subsection (b), Section 13.133, Water Code,
 is amended to read as follows:
 (b)  The regulatory authority may require, by order or
 subpoena served on any utility, the production within this state at
 the time and place it may designate of any books, accounts, papers,
 or records kept by that utility outside the state or verified copies
 of them if the regulatory authority [commission] so orders. A
 utility failing or refusing to comply with such an order or subpoena
 violates this chapter.
 SECTION 2.18.  Subsections (b) and (c), Section 13.136,
 Water Code, are amended to read as follows:
 (b)  Each utility annually shall file a service and financial
 report in a form and at times specified by utility commission rule.
 (c)  Every water supply or sewer service corporation shall
 file with the utility commission tariffs showing all rates that are
 subject to the appellate jurisdiction of the utility commission and
 that are in force at the time for any utility service, product, or
 commodity offered. Every water supply or sewer service corporation
 shall file with and as a part of those tariffs all rules and
 regulations relating to or affecting the rates, utility service,
 product, or commodity furnished. The filing required under this
 subsection shall be for informational purposes only.
 SECTION 2.19.  Section 13.137, Water Code, is amended to
 read as follows:
 Sec. 13.137.  OFFICE AND OTHER BUSINESS LOCATIONS OF
 UTILITY; RECORDS; REMOVAL FROM STATE. (a)  Every utility shall:
 (1)  make available and notify its customers of a
 business location where its customers may make payments to prevent
 disconnection of or to restore service:
 (A)  in each county in which the utility provides
 service; or
 (B)  not more than 20 miles from the residence of
 any residential customer if there is no location to receive
 payments in the county; and
 (2)  have an office in a county of this state or in the
 immediate area in which its property or some part of its property is
 located in which it shall keep all books, accounts, records, and
 memoranda required by the utility commission to be kept in this
 state.
 (b)  The utility commission by rule may provide for waiving
 the requirements of Subsection (a)(1) for a utility for which
 meeting those requirements would cause a rate increase or otherwise
 harm or inconvenience customers. The rules must provide for an
 additional 14 days to be given for a customer to pay before a
 utility that is granted a waiver may disconnect service for late
 payment.
 (c)  Books, accounts, records, or memoranda required by the
 regulatory authority to be kept in the state may not be removed from
 the state, except on conditions prescribed by the utility
 commission.
 SECTION 2.20.  Subsection (b), Section 13.139, Water Code,
 is amended to read as follows:
 (b)  The governing body of a municipality, as the regulatory
 authority for public utilities operating within its corporate
 limits, and the utility commission or the commission as the
 regulatory authority for public utilities operating outside the
 corporate limits of any municipality, after reasonable notice and
 hearing on its own motion, may:
 (1)  ascertain and fix just and reasonable standards,
 classifications, regulations, service rules, minimum service
 standards or practices to be observed and followed with respect to
 the service to be furnished;
 (2)  ascertain and fix adequate and reasonable
 standards for the measurement of the quantity, quality, pressure,
 or other condition pertaining to the supply of the service;
 (3)  prescribe reasonable regulations for the
 examination and testing of the service and for the measurement of
 service; and
 (4)  establish or approve reasonable rules,
 regulations, specifications, and standards to secure the accuracy
 of all meters, instruments, and equipment used for the measurement
 of any utility service.
 SECTION 2.21.  Section 13.1395, Water Code, is amended by
 adding Subsection (m) to read as follows:
 (m)  The commission shall coordinate with the utility
 commission in the administration of this section.
 SECTION 2.22.  Subsection (b), Section 13.142, Water Code,
 is amended to read as follows:
 (b)  The utility commission shall adopt rules concerning
 payment of utility bills that are consistent with Chapter 2251,
 Government Code.
 SECTION 2.23.  Section 13.144, Water Code, is amended to
 read as follows:
 Sec. 13.144.  NOTICE OF WHOLESALE WATER SUPPLY CONTRACT. A
 district or authority created under Section 52, Article III, or
 Section 59, Article XVI, Texas Constitution, a retail public
 utility, a wholesale water service, or other person providing a
 retail public utility with a wholesale water supply shall provide
 the utility commission and the commission with a certified copy of
 any wholesale water supply contract with a retail public utility
 within 30 days after the date of the execution of the contract. The
 submission must include the amount of water being supplied, term of
 the contract, consideration being given for the water, purpose of
 use, location of use, source of supply, point of delivery,
 limitations on the reuse of water, a disclosure of any affiliated
 interest between the parties to the contract, and any other
 condition or agreement relating to the contract.
 SECTION 2.24.  Subsection (a), Section 13.147, Water Code,
 is amended to read as follows:
 (a)  A retail public utility providing water service may
 contract with a retail public utility providing sewer service to
 bill and collect the sewer service provider's fees and payments as
 part of a consolidated process with the billing and collection of
 the water service provider's fees and payments.  The water service
 provider may provide that service only for customers who are served
 by both providers in an area covered by both providers'
 certificates of public convenience and necessity.  If the water
 service provider refuses to enter into a contract under this
 section or if the water service provider and sewer service provider
 cannot agree on the terms of a contract, the sewer service provider
 may petition the utility commission to issue an order requiring the
 water service provider to provide that service.
 SECTION 2.25.  Subsection (b), Section 13.181, Water Code,
 is amended to read as follows:
 (b)  Subject to this chapter, the utility commission has all
 authority and power of the state to ensure compliance with the
 obligations of utilities under this chapter. For this purpose the
 regulatory authority may fix and regulate rates of utilities,
 including rules and regulations for determining the classification
 of customers and services and for determining the applicability of
 rates. A rule or order of the regulatory authority may not conflict
 with the rulings of any federal regulatory body. The utility
 commission may adopt rules which authorize a utility which is
 permitted under Section 13.242(c) to provide service without a
 certificate of public convenience and necessity to request or
 implement a rate increase and operate according to rules,
 regulations, and standards of service other than those otherwise
 required under this chapter provided that rates are just and
 reasonable for customers and the utility and that service is safe,
 adequate, efficient, and reasonable.
 SECTION 2.26.  Subsections (c) and (d), Section 13.182,
 Water Code, are amended to read as follows:
 (c)  For ratemaking purposes, the utility commission may
 treat two or more municipalities served by a utility as a single
 class wherever the utility commission considers that treatment to
 be appropriate.
 (d)  The utility commission by rule shall establish a
 preference that rates under a consolidated tariff be consolidated
 by region. The regions under consolidated tariffs must be
 determined on a case-by-case basis.
 SECTION 2.27.  Subsection (d), Section 13.183, Water Code,
 is amended to read as follows:
 (d)  A regulatory authority other than the utility
 commission may not approve an acquisition adjustment for a system
 purchased before the effective date of an ordinance authorizing
 acquisition adjustments.
 SECTION 2.28.  Subsection (a), Section 13.184, Water Code,
 is amended to read as follows:
 (a)  Unless the utility commission establishes alternate
 rate methodologies in accordance with Section 13.183(c), the
 utility commission may not prescribe any rate that will yield more
 than a fair return on the invested capital used and useful in
 rendering service to the public. The governing body of a
 municipality exercising its original jurisdiction over rates and
 services may use alternate ratemaking methodologies established by
 ordinance or by utility commission rule in accordance with Section
 13.183(c). Unless the municipal regulatory authority uses
 alternate ratemaking methodologies established by ordinance or by
 utility commission rule in accordance with Section 13.183(c), it
 may not prescribe any rate that will yield more than a fair return
 on the invested capital used and useful in rendering service to the
 public.
 SECTION 2.29.  Subsections (d), (k), and (o), Section
 13.187, Water Code, are amended to read as follows:
 (d)  Except as provided by Subsection (d-1), if the
 application or the statement of intent is not substantially
 complete or does not comply with the regulatory authority's rules,
 it may be rejected and the effective date of the rate change may be
 suspended until a properly completed application is accepted by the
 regulatory authority and a proper statement of intent is provided.
 The utility commission may also suspend the effective date of any
 rate change if the utility does not have a certificate of public
 convenience and necessity or a completed application for a
 certificate or to transfer a certificate pending before the utility
 commission or if the utility is delinquent in paying the assessment
 and any applicable penalties or interest required by Section
 5.701(n) [of this code].
 (k)  If the regulatory authority receives at least the number
 of complaints from ratepayers required for the regulatory authority
 to set a hearing under Subsection (e), the regulatory authority
 may, pending the hearing and a decision, suspend the date the rate
 change would otherwise be effective.  Except as provided by
 Subsection (d-1), the proposed rate may not be suspended for longer
 than:
 (1)  90 days by a local regulatory authority; or
 (2)  150 days by the utility commission.
 (o)  If a regulatory authority other than the utility
 commission establishes interim rates or an escrow account, the
 regulatory authority must make a final determination on the rates
 not later than the first anniversary of the effective date of the
 interim rates or escrowed rates or the rates are automatically
 approved as requested by the utility.
 SECTION 2.30.  Subsection (a), Section 13.188, Water Code,
 is amended to read as follows:
 (a)  Notwithstanding any other provision in this chapter,
 the utility commission by rule shall adopt a procedure allowing a
 utility to file with the utility commission an application to
 timely adjust the utility's rates to reflect an increase or
 decrease in documented energy costs in a pass through clause.  The
 utility commission, by rule, shall require the pass through of
 documented decreases in energy costs within a reasonable time.  The
 pass through, whether a decrease or increase, shall be implemented
 on no later than an annual basis, unless the utility commission
 determines a special circumstance applies.
 SECTION 2.31.  Subsections (a) and (d), Section 13.241,
 Water Code, are amended to read as follows:
 (a)  In determining whether to grant or amend a certificate
 of public convenience and necessity, the utility commission shall
 ensure that the applicant possesses the financial, managerial, and
 technical capability to provide continuous and adequate service.
 (d)  Before the utility commission grants a new certificate
 of convenience and necessity for an area which would require
 construction of a physically separate water or sewer system, the
 applicant must demonstrate to the utility commission that
 regionalization or consolidation with another retail public
 utility is not economically feasible.
 SECTION 2.32.  Subsections (a) and (c), Section 13.242,
 Water Code, are amended to read as follows:
 (a)  Unless otherwise specified, a utility, a utility
 operated by an affected county, or a water supply or sewer service
 corporation may not in any way render retail water or sewer utility
 service directly or indirectly to the public without first having
 obtained from the utility commission a certificate that the present
 or future public convenience and necessity will require that
 installation, operation, or extension, and except as otherwise
 provided by this subchapter, a retail public utility may not
 furnish, make available, render, or extend retail water or sewer
 utility service to any area to which retail water or sewer utility
 service is being lawfully furnished by another retail public
 utility without first having obtained a certificate of public
 convenience and necessity that includes the area in which the
 consuming facility is located.
 (c)  The utility commission may by rule allow a municipality
 or utility or water supply corporation to render retail water
 service without a certificate of public convenience and necessity
 if the municipality has given notice under Section 13.255 [of this
 code] that it intends to provide retail water service to an area or
 if the utility or water supply corporation has less than 15
 potential connections and is not within the certificated area of
 another retail public utility.
 SECTION 2.33.  Section 13.244, Water Code, is amended to
 read as follows:
 Sec. 13.244.  APPLICATION; MAPS AND OTHER INFORMATION;
 EVIDENCE AND CONSENT. (a)  To obtain a certificate of public
 convenience and necessity or an amendment to a certificate, a
 public utility or water supply or sewer service corporation shall
 submit to the utility commission an application for a certificate
 or for an amendment as provided by this section.
 (b)  Each public utility and water supply or sewer service
 corporation shall file with the utility commission a map or maps
 showing all its facilities and illustrating separately facilities
 for production, transmission, and distribution of its services, and
 each certificated retail public utility shall file with the utility
 commission a map or maps showing any facilities, customers, or area
 currently being served outside its certificated areas.
 (c)  Each applicant for a certificate or for an amendment
 shall file with the utility commission evidence required by the
 commission to show that the applicant has received the required
 consent, franchise, or permit of the proper municipality or other
 public authority.
 (d)  An application for a certificate of public convenience
 and necessity or for an amendment to a certificate must contain:
 (1)  a description of the proposed service area by:
 (A)  a metes and bounds survey certified by a
 licensed state land surveyor or a registered professional land
 surveyor;
 (B)  the Texas State Plane Coordinate System;
 (C)  verifiable landmarks, including a road,
 creek, or railroad line; or
 (D)  if a recorded plat of the area exists, lot and
 block number;
 (2)  a description of any requests for service in the
 proposed service area;
 (3)  a capital improvements plan, including a budget
 and estimated timeline for construction of all facilities necessary
 to provide full service to the entire proposed service area;
 (4)  a description of the sources of funding for all
 facilities;
 (5)  to the extent known, a description of current and
 projected land uses, including densities;
 (6)  a current financial statement of the applicant;
 (7)  according to the tax roll of the central appraisal
 district for each county in which the proposed service area is
 located, a list of the owners of each tract of land that is:
 (A)  at least 50 acres; and
 (B)  wholly or partially located within the
 proposed service area; and
 (8)  any other item required by the utility commission.
 SECTION 2.34.  (a) If S.B. No. 573, Acts of the 82nd
 Legislature, Regular Session, 2011, does not become law,
 Subsections (b), (c), and (e), Section 13.245, Water Code, are
 amended to read as follows:
 (b)  Except as provided by Subsection (c), the utility
 commission may not grant to a retail public utility a certificate of
 public convenience and necessity for a service area within the
 boundaries or extraterritorial jurisdiction of a municipality
 without the consent of the municipality.  The municipality may not
 unreasonably withhold the consent.  As a condition of the consent, a
 municipality may require that all water and sewer facilities be
 designed and constructed in accordance with the municipality's
 standards for facilities.
 (c)  If a municipality has not consented under Subsection (b)
 before the 180th day after the date the municipality receives the
 retail public utility's application, the utility commission shall
 grant the certificate of public convenience and necessity without
 the consent of the municipality if the utility commission finds
 that the municipality:
 (1)  does not have the ability to provide service; or
 (2)  has failed to make a good faith effort to provide
 service on reasonable terms and conditions.
 (e)  If the utility commission makes a decision under
 Subsection (d) regarding the grant of a certificate of public
 convenience and necessity without the consent of the municipality,
 the municipality or the retail public utility may appeal the
 decision to the appropriate state district court.  The court shall
 hear the petition within 120 days after the date the petition is
 filed.  On final disposition, the court may award reasonable fees to
 the prevailing party.
 (b)  If S.B. No. 573, Acts of the 82nd Legislature, Regular
 Session, 2011, becomes law, Subsections (b), (c), (c-1), (c-2),
 (c-3), and (e), Section 13.245, Water Code, as effective September
 1, 2011, are amended to read as follows:
 (b)  Except as provided by Subsections (c), (c-1), and (c-2),
 the utility commission may not grant to a retail public utility a
 certificate of public convenience and necessity for a service area
 within the boundaries or extraterritorial jurisdiction of a
 municipality without the consent of the municipality.  The
 municipality may not unreasonably withhold the consent.  As a
 condition of the consent, a municipality may require that all water
 and sewer facilities be designed and constructed in accordance with
 the municipality's standards for facilities.
 (c)  If a municipality has not consented under Subsection (b)
 before the 180th day after the date the municipality receives the
 retail public utility's application, the utility commission shall
 grant the certificate of public convenience and necessity without
 the consent of the municipality if the utility commission finds
 that the municipality:
 (1)  does not have the ability to provide service; or
 (2)  has failed to make a good faith effort to provide
 service on reasonable terms and conditions.
 (c-1)  If a municipality has not consented under Subsection
 (b) before the 180th day after the date a landowner or a retail
 public utility submits to the municipality a formal request for
 service according to the municipality's application requirements
 and standards for facilities on the same or substantially similar
 terms as provided by the retail public utility's application to the
 utility commission, including a capital improvements plan required
 by Section 13.244(d)(3) or a subdivision plat, the utility
 commission may grant the certificate of public convenience and
 necessity without the consent of the municipality if:
 (1)  the utility commission makes the findings required
 by Subsection (c);
 (2)  the municipality has not entered into a binding
 commitment to serve the area that is the subject of the retail
 public utility's application to the utility commission before the
 180th day after the date the formal request was made; and
 (3)  the landowner or retail public utility that
 submitted the formal request has not unreasonably refused to:
 (A)  comply with the municipality's service
 extension and development process; or
 (B)  enter into a contract for water or sewer
 services with the municipality.
 (c-2)  If a municipality refuses to provide service in the
 proposed service area, as evidenced by a formal vote of the
 municipality's governing body or an official notification from the
 municipality, the utility commission is not required to make the
 findings otherwise required by this section and may grant the
 certificate of public convenience and necessity to the retail
 public utility at any time after the date of the formal vote or
 receipt of the official notification.
 (c-3)  The utility commission must include as a condition of
 a certificate of public convenience and necessity granted under
 Subsection (c-1) or (c-2) that all water and sewer facilities be
 designed and constructed in accordance with the municipality's
 standards for water and sewer facilities.
 (e)  If the utility commission makes a decision under
 Subsection (d) regarding the grant of a certificate of public
 convenience and necessity without the consent of the municipality,
 the municipality or the retail public utility may appeal the
 decision to the appropriate state district court.  The court shall
 hear the petition within 120 days after the date the petition is
 filed.  On final disposition, the court may award reasonable fees to
 the prevailing party.
 SECTION 2.35.  If S.B. No. 573, Acts of the 82nd Legislature,
 Regular Session, 2011, becomes law, Subsection (b), Section
 13.2451, Water Code, as effective September 1, 2011, is amended to
 read as follows:
 (b)  The utility commission may not extend a municipality's
 certificate of public convenience and necessity beyond its
 extraterritorial jurisdiction if an owner of land that is located
 wholly or partly outside the extraterritorial jurisdiction elects
 to exclude some or all of the landowner's property within a proposed
 service area in accordance with Section 13.246(h).  This subsection
 does not apply to a transfer of a certificate as approved by the
 utility commission.
 SECTION 2.36.  Subsection (c), Section 13.2451, Water Code,
 is amended to read as follows:
 (c)  The utility commission, after notice to the
 municipality and an opportunity for a hearing, may decertify an
 area outside a municipality's extraterritorial jurisdiction if the
 municipality does not provide service to the area on or before the
 fifth anniversary of the date the certificate of public convenience
 and necessity was granted for the area.  This subsection does not
 apply to a certificate of public convenience and necessity for an
 area:
 (1)  that was transferred to a municipality on approval
 of the utility commission; and
 (2)  in relation to which the municipality has spent
 public funds.
 SECTION 2.37.  Subsections (a), (a-1), (b), (c), (d), (f),
 and (i), Section 13.246, Water Code, are amended to read as follows:
 (a)  If an application for a certificate of public
 convenience and necessity or for an amendment to a certificate is
 filed, the utility commission shall cause notice of the application
 to be given to affected parties and to each county and groundwater
 conservation district that is wholly or partly included in the area
 proposed to be certified.  If requested, the utility commission
 shall fix a time and place for a hearing and give notice of the
 hearing.  Any person affected by the application may intervene at
 the hearing.
 (a-1)  Except as otherwise provided by this subsection, in
 addition to the notice required by Subsection (a), the utility
 commission shall require notice to be mailed to each owner of a
 tract of land that is at least 25 acres and is wholly or partially
 included in the area proposed to be certified.  Notice required
 under this subsection must be mailed by first class mail to the
 owner of the tract according to the most current tax appraisal rolls
 of the applicable central appraisal district at the time the
 utility commission received the application for the certificate or
 amendment.  Good faith efforts to comply with the requirements of
 this subsection shall be considered adequate notice to landowners.
 Notice under this subsection is not required for a matter filed with
 the utility commission or the commission under:
 (1)  Section 13.248 or 13.255; or
 (2)  Chapter 65.
 (b)  The utility commission may grant applications and issue
 certificates and amendments to certificates only if the utility
 commission finds that a certificate or amendment is necessary for
 the service, accommodation, convenience, or safety of the public.
 The utility commission may issue a certificate or amendment as
 requested, or refuse to issue it, or issue it for the construction
 of only a portion of the contemplated system or facility or
 extension, or for the partial exercise only of the right or
 privilege and may impose special conditions necessary to ensure
 that continuous and adequate service is provided.
 (c)  Certificates of public convenience and necessity and
 amendments to certificates shall be granted by the utility
 commission on a nondiscriminatory basis after consideration by the
 utility commission of:
 (1)  the adequacy of service currently provided to the
 requested area;
 (2)  the need for additional service in the requested
 area, including whether any landowners, prospective landowners,
 tenants, or residents have requested service;
 (3)  the effect of the granting of a certificate or of
 an amendment on the recipient of the certificate or amendment, on
 the landowners in the area, and on any retail public utility of the
 same kind already serving the proximate area;
 (4)  the ability of the applicant to provide adequate
 service, including meeting the standards of the commission, taking
 into consideration the current and projected density and land use
 of the area;
 (5)  the feasibility of obtaining service from an
 adjacent retail public utility;
 (6)  the financial ability of the applicant to pay for
 the facilities necessary to provide continuous and adequate service
 and the financial stability of the applicant, including, if
 applicable, the adequacy of the applicant's debt-equity ratio;
 (7)  environmental integrity;
 (8)  the probable improvement of service or lowering of
 cost to consumers in that area resulting from the granting of the
 certificate or amendment; and
 (9)  the effect on the land to be included in the
 certificated area.
 (d)  The utility commission may require an applicant for a
 certificate or for an amendment to provide a bond or other financial
 assurance in a form and amount specified by the utility commission
 to ensure that continuous and adequate utility service is provided.
 (f)  If two or more retail public utilities or water supply
 or sewer service corporations apply for a certificate of public
 convenience and necessity to provide water or sewer utility service
 to an uncertificated area located in an economically distressed
 area and otherwise meet the requirements for obtaining a new
 certificate, the utility commission shall grant the certificate to
 the retail public utility or water supply or sewer service
 corporation that is more capable financially, managerially, and
 technically of providing continuous and adequate service.
 (i)  A landowner is not entitled to make an election under
 Subsection (h) but is entitled to contest the inclusion of the
 landowner's property in the proposed service area at a hearing held
 by the utility commission regarding the application if the proposed
 service area is located within the boundaries or extraterritorial
 jurisdiction of a municipality with a population of more than
 500,000 and the municipality or a utility owned by the municipality
 is the applicant.
 SECTION 2.38.  (a) If S.B. No. 573, Acts of the 82nd
 Legislature, Regular Session, 2011, does not become law, Subsection
 (h), Section 13.246, Water Code, is amended to read as follows:
 (h)  Except as provided by Subsection (i), a landowner who
 owns a tract of land that is at least 25 acres and that is wholly or
 partially located within the proposed service area may elect to
 exclude some or all of the landowner's property from the proposed
 service area by providing written notice to the utility commission
 before the 30th day after the date the landowner receives notice of
 a new application for a certificate of public convenience and
 necessity or for an amendment to an existing certificate of public
 convenience and necessity.  The landowner's election is effective
 without a further hearing or other process by the utility
 commission.  If a landowner makes an election under this
 subsection, the application shall be modified so that the electing
 landowner's property is not included in the proposed service area.
 (b)  If S.B. No. 573, Acts of the 82nd Legislature, Regular
 Session, 2011, becomes law, Subsection (h), Section 13.246, Water
 Code, as effective September 1, 2011, is amended to read as follows:
 (h)  Except as provided by Subsection (i), a landowner who
 owns a tract of land that is at least 25 acres and that is wholly or
 partially located within the proposed service area may elect to
 exclude some or all of the landowner's property from the proposed
 service area by providing written notice to the utility commission
 before the 30th day after the date the landowner receives notice of
 a new application for a certificate of public convenience and
 necessity or for an amendment to an existing certificate of public
 convenience and necessity.  The landowner's election is effective
 without a further hearing or other process by the utility
 commission.  If a landowner makes an election under this
 subsection, the application shall be modified so that the electing
 landowner's property is not included in the proposed service area.
 An applicant for a certificate of public convenience and necessity
 that has land removed from its proposed certificated service area
 because of a landowner's election under this subsection may not be
 required to provide service to the removed land for any reason,
 including the violation of law or utility commission rules by the
 water or sewer system of another person.
 SECTION 2.39.  Subsection (a), Section 13.247, Water Code,
 is amended to read as follows:
 (a)  If an area is within the boundaries of a municipality,
 all retail public utilities certified or entitled to certification
 under this chapter to provide service or operate facilities in that
 area may continue and extend service in its area of public
 convenience and necessity within the area pursuant to the rights
 granted by its certificate and this chapter, unless the
 municipality exercises its power of eminent domain to acquire the
 property of the retail public utility under Subsection (d).  Except
 as provided by Section 13.255, a municipally owned or operated
 utility may not provide retail water and sewer utility service
 within the area certificated to another retail public utility
 without first having obtained from the utility commission a
 certificate of public convenience and necessity that includes the
 areas to be served.
 SECTION 2.40.  Section 13.248, Water Code, is amended to
 read as follows:
 Sec. 13.248.  CONTRACTS VALID AND ENFORCEABLE. Contracts
 between retail public utilities designating areas to be served and
 customers to be served by those retail public utilities, when
 approved by the utility commission after public notice and hearing,
 are valid and enforceable and are incorporated into the appropriate
 areas of public convenience and necessity.
 SECTION 2.41.  Subsections (b), (c), and (e), Section
 13.250, Water Code, are amended to read as follows:
 (b)  Unless the utility commission issues a certificate that
 neither the present nor future convenience and necessity will be
 adversely affected, the holder of a certificate or a person who
 possesses facilities used to provide utility service shall not
 discontinue, reduce, or impair service to a certified service area
 or part of a certified service area except for:
 (1)  nonpayment of charges for services provided by the
 certificate holder or a person who possesses facilities used to
 provide utility service;
 (2)  nonpayment of charges for sewer service provided
 by another retail public utility under an agreement between the
 retail public utility and the certificate holder or a person who
 possesses facilities used to provide utility service or under a
 utility commission-ordered arrangement between the two service
 providers;
 (3)  nonuse; or
 (4)  other similar reasons in the usual course of
 business.
 (c)  Any discontinuance, reduction, or impairment of
 service, whether with or without approval of the utility
 commission, shall be in conformity with and subject to conditions,
 restrictions, and limitations that the utility commission
 prescribes.
 (e)  Not later than the 48th hour after the hour in which a
 utility files a bankruptcy petition, the utility shall report this
 fact to the utility commission and the commission in writing.
 SECTION 2.42.  Subsection (d), Section 13.2502, Water Code,
 is amended to read as follows:
 (d)  This section does not limit or extend the jurisdiction
 of the utility commission under Section 13.043(g).
 SECTION 2.43.  Section 13.251, Water Code, is amended to
 read as follows:
 Sec. 13.251.  SALE, ASSIGNMENT, OR LEASE OF CERTIFICATE.
 Except as provided by Section 13.255 [of this code], a utility or a
 water supply or sewer service corporation may not sell, assign, or
 lease a certificate of public convenience and necessity or any
 right obtained under a certificate unless the commission has
 determined that the purchaser, assignee, or lessee is capable of
 rendering adequate and continuous service to every consumer within
 the certified area, after considering the factors under Section
 13.246(c) [of this code]. The sale, assignment, or lease shall be
 on the conditions prescribed by the utility commission.
 SECTION 2.44.  Section 13.252, Water Code, is amended to
 read as follows:
 Sec. 13.252.  INTERFERENCE WITH OTHER RETAIL PUBLIC UTILITY.
 If a retail public utility in constructing or extending a line,
 plant, or system interferes or attempts to interfere with the
 operation of a line, plant, or system of any other retail public
 utility, or furnishes, makes available, renders, or extends retail
 water or sewer utility service to any portion of the service area of
 another retail public utility that has been granted or is not
 required to possess a certificate of public convenience and
 necessity, the utility commission may issue an order prohibiting
 the construction, extension, or provision of service or prescribing
 terms and conditions for locating the line, plant, or system
 affected or for the provision of the service.
 SECTION 2.45.  Section 13.253, Water Code, is amended to
 read as follows:
 Sec. 13.253.  IMPROVEMENTS IN SERVICE; INTERCONNECTING
 SERVICE. (a)  After notice and hearing, the utility commission or
 the commission may:
 (1)  order any retail public utility that is required
 by law to possess a certificate of public convenience and necessity
 or any retail public utility that possesses a certificate of public
 convenience and necessity and is located in an affected county as
 defined in Section 16.341 to:
 (A)  provide specified improvements in its
 service in a defined area if service in that area is inadequate or
 is substantially inferior to service in a comparable area and it is
 reasonable to require the retail public utility to provide the
 improved service; or
 (B)  develop, implement, and follow financial,
 managerial, and technical practices that are acceptable to the
 utility commission to ensure that continuous and adequate service
 is provided to any areas currently certificated to the retail
 public utility if the retail public utility has not provided
 continuous and adequate service to any of those areas and, for a
 utility, to provide financial assurance of the utility's ability to
 operate the system in accordance with applicable laws and rules, in
 the form of a bond or other financial assurance in a form and amount
 specified by the utility commission;
 (2)  order two or more public utilities or water supply
 or sewer service corporations to establish specified facilities for
 interconnecting service;
 (3)  order a public utility or water supply or sewer
 service corporation that has not demonstrated that it can provide
 continuous and adequate service from its drinking water source or
 sewer treatment facility to obtain service sufficient to meet its
 obligation to provide continuous and adequate service on at least a
 wholesale basis from another consenting utility service provider;
 or
 (4)  issue an emergency order, with or without a
 hearing, under Section 13.041.
 (b)  If the utility commission has reason to believe that
 improvements and repairs to a water or sewer service system are
 necessary to enable a retail public utility to provide continuous
 and adequate service in any portion of its service area and the
 retail public utility has provided financial assurance under
 Section 341.0355, Health and Safety Code, or under this chapter,
 the utility commission, after providing to the retail public
 utility notice and an opportunity to be heard by the commissioners
 at a [commission] meeting of the utility commission, may
 immediately order specified improvements and repairs to the water
 or sewer system, the costs of which may be paid by the bond or other
 financial assurance in an amount determined by the utility
 commission not to exceed the amount of the bond or financial
 assurance. The order requiring the improvements may be an
 emergency order if it is issued after the retail public utility has
 had an opportunity to be heard [by the commissioners] at a
 [commission] meeting of the utility commission. After notice and
 hearing, the utility commission may require a retail public utility
 to obligate additional money to replace the financial assurance
 used for the improvements.
 SECTION 2.46.  (a)  If S.B. No. 573, Acts of the 82nd
 Legislature, Regular Session, 2011, does not become law, Section
 13.254, Water Code, is amended to read as follows:
 Sec. 13.254.  REVOCATION OR AMENDMENT OF CERTIFICATE.
 (a)  The utility commission at any time after notice and hearing
 may, on its own motion or on receipt of a petition described by
 Subsection (a-1), revoke or amend any certificate of public
 convenience and necessity with the written consent of the
 certificate holder or if the utility commission [it] finds that:
 (1)  the certificate holder has never provided, is no
 longer providing, is incapable of providing, or has failed to
 provide continuous and adequate service in the area, or part of the
 area, covered by the certificate;
 (2)  in an affected county as defined in Section
 16.341, the cost of providing service by the certificate holder is
 so prohibitively expensive as to constitute denial of service,
 provided that, for commercial developments or for residential
 developments started after September 1, 1997, in an affected county
 as defined in Section 16.341, the fact that the cost of obtaining
 service from the currently certificated retail public utility makes
 the development economically unfeasible does not render such cost
 prohibitively expensive in the absence of other relevant factors;
 (3)  the certificate holder has agreed in writing to
 allow another retail public utility to provide service within its
 service area, except for an interim period, without amending its
 certificate; or
 (4)  the certificate holder has failed to file a cease
 and desist action pursuant to Section 13.252 within 180 days of the
 date that it became aware that another retail public utility was
 providing service within its service area, unless the certificate
 holder demonstrates good cause for its failure to file such action
 within the 180 days.
 (a-1)  As an alternative to decertification under Subsection
 (a), the owner of a tract of land that is at least 50 acres and that
 is not in a platted subdivision actually receiving water or sewer
 service may petition the utility commission under this subsection
 for expedited release of the area from a certificate of public
 convenience and necessity so that the area may receive service from
 another retail public utility.  The petitioner shall deliver, via
 certified mail, a copy of the petition to the certificate holder,
 who may submit information to the utility commission to controvert
 information submitted by the petitioner.  The petitioner must
 demonstrate that:
 (1)  a written request for service, other than a
 request for standard residential or commercial service, has been
 submitted to the certificate holder, identifying:
 (A)  the area for which service is sought;
 (B)  the timeframe within which service is needed
 for current and projected service demands in the area;
 (C)  the level and manner of service needed for
 current and projected service demands in the area; and
 (D)  any additional information requested by the
 certificate holder that is reasonably related to determination of
 the capacity or cost for providing the service;
 (2)  the certificate holder has been allowed at least
 90 calendar days to review and respond to the written request and
 the information it contains;
 (3)  the certificate holder:
 (A)  has refused to provide the service;
 (B)  is not capable of providing the service on a
 continuous and adequate basis within the timeframe, at the level,
 or in the manner reasonably needed or requested by current and
 projected service demands in the area; or
 (C)  conditions the provision of service on the
 payment of costs not properly allocable directly to the
 petitioner's service request, as determined by the utility
 commission; and
 (4)  the alternate retail public utility from which the
 petitioner will be requesting service is capable of providing
 continuous and adequate service within the timeframe, at the level,
 and in the manner reasonably needed or requested by current and
 projected service demands in the area.
 (a-2)  A landowner is not entitled to make the election
 described in Subsection (a-1) but is entitled to contest the
 involuntary certification of its property in a hearing held by the
 utility commission if the landowner's property is located:
 (1)  within the boundaries of any municipality or the
 extraterritorial jurisdiction of a municipality with a population
 of more than 500,000 and the municipality or retail public utility
 owned by the municipality is the holder of the certificate; or
 (2)  in a platted subdivision actually receiving water
 or sewer service.
 (a-3)  Within 90 calendar days from the date the utility
 commission determines the petition filed pursuant to Subsection
 (a-1) to be administratively complete, the utility commission shall
 grant the petition unless the utility commission makes an express
 finding that the petitioner failed to satisfy the elements required
 in Subsection (a-1) and supports its finding with separate findings
 and conclusions for each element based solely on the information
 provided by the petitioner and the certificate holder.  The utility
 commission may grant or deny a petition subject to terms and
 conditions specifically related to the service request of the
 petitioner and all relevant information submitted by the petitioner
 and the certificate holder.  In addition, the utility commission
 may require an award of compensation as otherwise provided by this
 section.
 (a-4)  Chapter 2001, Government Code, does not apply to any
 petition filed under Subsection (a-1).  The decision of the utility
 commission on the petition is final after any reconsideration
 authorized by the utility commission's rules and may not be
 appealed.
 (b)  Upon written request from the certificate holder, the
 utility commission [executive director] may cancel the certificate
 of a utility or water supply corporation authorized by rule to
 operate without a certificate of public convenience and necessity
 under Section 13.242(c).
 (c)  If the certificate of any retail public utility is
 revoked or amended, the utility commission may require one or more
 retail public utilities with their consent to provide service in
 the area in question. The order of the utility commission shall not
 be effective to transfer property.
 (d)  A retail public utility may not in any way render retail
 water or sewer service directly or indirectly to the public in an
 area that has been decertified under this section without providing
 compensation for any property that the utility commission
 determines is rendered useless or valueless to the decertified
 retail public utility as a result of the decertification.
 (e)  The determination of the monetary amount of
 compensation, if any, shall be determined at the time another
 retail public utility seeks to provide service in the previously
 decertified area and before service is actually provided.  The
 utility commission shall ensure that the monetary amount of
 compensation is determined not later than the 90th calendar day
 after the date on which a retail public utility notifies the utility
 commission of its intent to provide service to the decertified
 area.
 (f)  The monetary amount shall be determined by a qualified
 individual or firm serving as independent appraiser agreed upon by
 the decertified retail public utility and the retail public utility
 seeking to serve the area. The determination of compensation by the
 independent appraiser shall be binding on the utility commission.
 The costs of the independent appraiser shall be borne by the retail
 public utility seeking to serve the area.
 (g)  For the purpose of implementing this section, the value
 of real property owned and utilized by the retail public utility for
 its facilities shall be determined according to the standards set
 forth in Chapter 21, Property Code, governing actions in eminent
 domain and the value of personal property shall be determined
 according to the factors in this subsection.  The factors ensuring
 that the compensation to a retail public utility is just and
 adequate shall include:  the amount of the retail public utility's
 debt allocable for service to the area in question; the value of the
 service facilities of the retail public utility located within the
 area in question; the amount of any expenditures for planning,
 design, or construction of service facilities that are allocable to
 service to the area in question; the amount of the retail public
 utility's contractual obligations allocable to the area in
 question; any demonstrated impairment of service or increase of
 cost to consumers of the retail public utility remaining after the
 decertification; the impact on future revenues lost from existing
 customers; necessary and reasonable legal expenses and
 professional fees; and other relevant factors.  The utility
 commission shall adopt rules governing the evaluation of these
 factors.
 (g-1)  If the retail public utilities cannot agree on an
 independent appraiser within 10 calendar days after the date on
 which the retail public utility notifies the utility commission of
 its intent to provide service to the decertified area, each retail
 public utility shall engage its own appraiser at its own expense,
 and each appraisal shall be submitted to the utility commission
 within 60 calendar days.  After receiving the appraisals, the
 utility commission shall appoint a third appraiser who shall make a
 determination of the compensation within 30 days.  The
 determination may not be less than the lower appraisal or more than
 the higher appraisal.  Each retail public utility shall pay half the
 cost of the third appraisal.
 (b)  If S.B. No. 573, Acts of the 82nd Legislature, Regular
 Session, 2011, becomes law, Subsections (a), (a-1), (a-2), (a-3),
 (a-6), (a-8), (b), (c), (d), (e), (f), (g), (g-1), and (h), Section
 13.254, Water Code, as effective September 1, 2011, are amended to
 read as follows:
 (a)  The utility commission at any time after notice and
 hearing may revoke or amend any certificate of public convenience
 and necessity with the written consent of the certificate holder or
 if it finds that:
 (1)  the certificate holder has never provided, is no
 longer providing, is incapable of providing, or has failed to
 provide continuous and adequate service in the area, or part of the
 area, covered by the certificate;
 (2)  in an affected county as defined in Section
 16.341, the cost of providing service by the certificate holder is
 so prohibitively expensive as to constitute denial of service,
 provided that, for commercial developments or for residential
 developments started after September 1, 1997, in an affected county
 as defined in Section 16.341, the fact that the cost of obtaining
 service from the currently certificated retail public utility makes
 the development economically unfeasible does not render such cost
 prohibitively expensive in the absence of other relevant factors;
 (3)  the certificate holder has agreed in writing to
 allow another retail public utility to provide service within its
 service area, except for an interim period, without amending its
 certificate; or
 (4)  the certificate holder has failed to file a cease
 and desist action pursuant to Section 13.252 within 180 days of the
 date that it became aware that another retail public utility was
 providing service within its service area, unless the certificate
 holder demonstrates good cause for its failure to file such action
 within the 180 days.
 (a-1)  As an alternative to decertification under Subsection
 (a), the owner of a tract of land that is at least 50 acres and that
 is not in a platted subdivision actually receiving water or sewer
 service may petition the utility commission under this subsection
 for expedited release of the area from a certificate of public
 convenience and necessity so that the area may receive service from
 another retail public utility. The fact that a certificate holder
 is a borrower under a federal loan program is not a bar to a request
 under this subsection for the release of the petitioner's land and
 the receipt of services from an alternative provider.  On the day
 the petitioner submits the petition to the utility commission, the
 petitioner shall send, via certified mail, a copy of the petition to
 the certificate holder, who may submit information to the utility
 commission to controvert information submitted by the petitioner.
 The petitioner must demonstrate that:
 (1)  a written request for service, other than a
 request for standard residential or commercial service, has been
 submitted to the certificate holder, identifying:
 (A)  the area for which service is sought;
 (B)  the timeframe within which service is needed
 for current and projected service demands in the area;
 (C)  the level and manner of service needed for
 current and projected service demands in the area;
 (D)  the approximate cost for the alternative
 provider to provide the service at the same level and manner that is
 requested from the certificate holder;
 (E)  the flow and pressure requirements and
 specific infrastructure needs, including line size and system
 capacity for the required level of fire protection requested; and
 (F)  any additional information requested by the
 certificate holder that is reasonably related to determination of
 the capacity or cost for providing the service;
 (2)  the certificate holder has been allowed at least
 90 calendar days to review and respond to the written request and
 the information it contains;
 (3)  the certificate holder:
 (A)  has refused to provide the service;
 (B)  is not capable of providing the service on a
 continuous and adequate basis within the timeframe, at the level,
 at the approximate cost that the alternative provider is capable of
 providing for a comparable level of service, or in the manner
 reasonably needed or requested by current and projected service
 demands in the area; or
 (C)  conditions the provision of service on the
 payment of costs not properly allocable directly to the
 petitioner's service request, as determined by the utility
 commission; and
 (4)  the alternate retail public utility from which the
 petitioner will be requesting service possesses the financial,
 managerial, and technical capability to provide continuous and
 adequate service within the timeframe, at the level, at the cost,
 and in the manner reasonably needed or requested by current and
 projected service demands in the area.
 (a-2)  A landowner is not entitled to make the election
 described in Subsection (a-1) or (a-5) but is entitled to contest
 under Subsection (a) the involuntary certification of its property
 in a hearing held by the utility commission if the landowner's
 property is located:
 (1)  within the boundaries of any municipality or the
 extraterritorial jurisdiction of a municipality with a population
 of more than 500,000 and the municipality or retail public utility
 owned by the municipality is the holder of the certificate; or
 (2)  in a platted subdivision actually receiving water
 or sewer service.
 (a-3)  Within 60 calendar days from the date the utility
 commission determines the petition filed pursuant to Subsection
 (a-1) to be administratively complete, the utility commission shall
 grant the petition unless the utility commission makes an express
 finding that the petitioner failed to satisfy the elements required
 in Subsection (a-1) and supports its finding with separate findings
 and conclusions for each element based solely on the information
 provided by the petitioner and the certificate holder. The utility
 commission may grant or deny a petition subject to terms and
 conditions specifically related to the service request of the
 petitioner and all relevant information submitted by the petitioner
 and the certificate holder.  In addition, the utility commission
 may require an award of compensation as otherwise provided by this
 section.
 (a-6)  The utility commission shall grant a petition
 received under Subsection (a-5) not later than the 60th day after
 the date the landowner files the petition.  The utility commission
 may not deny a petition received under Subsection (a-5) based on the
 fact that a certificate holder is a borrower under a federal loan
 program.  The utility commission may require an award of
 compensation by the petitioner to a decertified retail public
 utility that is the subject of a petition filed under Subsection
 (a-5) as otherwise provided by this section.
 (a-8)  If a certificate holder has never made service
 available through planning, design, construction of facilities, or
 contractual obligations to serve the area a petitioner seeks to
 have released under Subsection (a-1), the utility commission is not
 required to find that the proposed alternative provider is capable
 of providing better service than the certificate holder, but only
 that the proposed alternative provider is capable of providing the
 requested service.
 (b)  Upon written request from the certificate holder, the
 utility commission [executive director] may cancel the certificate
 of a utility or water supply corporation authorized by rule to
 operate without a certificate of public convenience and necessity
 under Section 13.242(c).
 (c)  If the certificate of any retail public utility is
 revoked or amended, the utility commission may require one or more
 retail public utilities with their consent to provide service in
 the area in question. The order of the utility commission shall not
 be effective to transfer property.
 (d)  A retail public utility may not in any way render retail
 water or sewer service directly or indirectly to the public in an
 area that has been decertified under this section without providing
 compensation for any property that the utility commission
 determines is rendered useless or valueless to the decertified
 retail public utility as a result of the decertification.
 (e)  The determination of the monetary amount of
 compensation, if any, shall be determined at the time another
 retail public utility seeks to provide service in the previously
 decertified area and before service is actually provided.  The
 utility commission shall ensure that the monetary amount of
 compensation is determined not later than the 90th calendar day
 after the date on which a retail public utility notifies the utility
 commission of its intent to provide service to the decertified
 area.
 (f)  The monetary amount shall be determined by a qualified
 individual or firm serving as independent appraiser agreed upon by
 the decertified retail public utility and the retail public utility
 seeking to serve the area. The determination of compensation by the
 independent appraiser shall be binding on the utility commission.
 The costs of the independent appraiser shall be borne by the retail
 public utility seeking to serve the area.
 (g)  For the purpose of implementing this section, the value
 of real property owned and utilized by the retail public utility for
 its facilities shall be determined according to the standards set
 forth in Chapter 21, Property Code, governing actions in eminent
 domain and the value of personal property shall be determined
 according to the factors in this subsection.  The factors ensuring
 that the compensation to a retail public utility is just and
 adequate shall include:  the amount of the retail public utility's
 debt allocable for service to the area in question; the value of the
 service facilities of the retail public utility located within the
 area in question; the amount of any expenditures for planning,
 design, or construction of service facilities that are allocable to
 service to the area in question; the amount of the retail public
 utility's contractual obligations allocable to the area in
 question; any demonstrated impairment of service or increase of
 cost to consumers of the retail public utility remaining after the
 decertification; the impact on future revenues lost from existing
 customers; necessary and reasonable legal expenses and
 professional fees; and other relevant factors.  The utility
 commission shall adopt rules governing the evaluation of these
 factors.
 (g-1)  If the retail public utilities cannot agree on an
 independent appraiser within 10 calendar days after the date on
 which the retail public utility notifies the utility commission of
 its intent to provide service to the decertified area, each retail
 public utility shall engage its own appraiser at its own expense,
 and each appraisal shall be submitted to the utility commission
 within 60 calendar days.  After receiving the appraisals, the
 utility commission shall appoint a third appraiser who shall make a
 determination of the compensation within 30 days.  The
 determination may not be less than the lower appraisal or more than
 the higher appraisal.  Each retail public utility shall pay half the
 cost of the third appraisal.
 (h)  A certificate holder that has land removed from its
 certificated service area in accordance with this section may not
 be required, after the land is removed, to provide service to the
 removed land for any reason, including the violation of law or
 utility commission rules by a water or sewer system of another
 person.
 SECTION 2.47.  Subsections (a), (b), (c), (d), (e), (g-1),
 (k), (l), and (m), Section 13.255, Water Code, are amended to read
 as follows:
 (a)  In the event that an area is incorporated or annexed by a
 municipality, either before or after the effective date of this
 section, the municipality and a retail public utility that provides
 water or sewer service to all or part of the area pursuant to a
 certificate of convenience and necessity may agree in writing that
 all or part of the area may be served by a municipally owned
 utility, by a franchised utility, or by the retail public utility.
 In this section, the phrase "franchised utility" shall mean a
 retail public utility that has been granted a franchise by a
 municipality to provide water or sewer service inside municipal
 boundaries. The agreement may provide for single or dual
 certification of all or part of the area, for the purchase of
 facilities or property, and for such other or additional terms that
 the parties may agree on. If a franchised utility is to serve the
 area, the franchised utility shall also be a party to the agreement.
 The executed agreement shall be filed with the utility commission,
 and the utility commission, on receipt of the agreement, shall
 incorporate the terms of the agreement into the respective
 certificates of convenience and necessity of the parties to the
 agreement.
 (b)  If an agreement is not executed within 180 days after
 the municipality, in writing, notifies the retail public utility of
 its intent to provide service to the incorporated or annexed area,
 and if the municipality desires and intends to provide retail
 utility service to the area, the municipality, prior to providing
 service to the area, shall file an application with the utility
 commission to grant single certification to the municipally owned
 water or sewer utility or to a franchised utility. If an
 application for single certification is filed, the utility
 commission shall fix a time and place for a hearing and give notice
 of the hearing to the municipality and franchised utility, if any,
 and notice of the application and hearing to the retail public
 utility.
 (c)  The utility commission shall grant single certification
 to the municipality. The utility commission shall also determine
 whether single certification as requested by the municipality would
 result in property of a retail public utility being rendered
 useless or valueless to the retail public utility, and shall
 determine in its order the monetary amount that is adequate and just
 to compensate the retail public utility for such property. If the
 municipality in its application has requested the transfer of
 specified property of the retail public utility to the municipality
 or to a franchised utility, the utility commission shall also
 determine in its order the adequate and just compensation to be paid
 for such property pursuant to the provisions of this section,
 including an award for damages to property remaining in the
 ownership of the retail public utility after single certification.
 The order of the utility commission shall not be effective to
 transfer property. A transfer of property may only be obtained
 under this section by a court judgment rendered pursuant to
 Subsection (d) or (e) [of this section]. The grant of single
 certification by the utility commission shall go into effect on the
 date the municipality or franchised utility, as the case may be,
 pays adequate and just compensation pursuant to court order, or
 pays an amount into the registry of the court or to the retail
 public utility under Subsection (f). If the court judgment
 provides that the retail public utility is not entitled to any
 compensation, the grant of single certification shall go into
 effect when the court judgment becomes final. The municipality or
 franchised utility must provide to each customer of the retail
 public utility being acquired an individual written notice within
 60 days after the effective date for the transfer specified in the
 court judgment. The notice must clearly advise the customer of the
 identity of the new service provider, the reason for the transfer,
 the rates to be charged by the new service provider, and the
 effective date of those rates.
 (d)  In the event the final order of the utility commission
 is not appealed within 30 days, the municipality may request the
 district court of Travis County to enter a judgment consistent with
 the order of the utility commission. In such event, the court shall
 render a judgment that:
 (1)  transfers to the municipally owned utility or
 franchised utility title to property to be transferred to the
 municipally owned utility or franchised utility as delineated by
 the utility commission's final order and property determined by the
 utility commission to be rendered useless or valueless by the
 granting of single certification; and
 (2)  orders payment to the retail public utility of
 adequate and just compensation for the property as determined by
 the utility commission in its final order.
 (e)  Any party that is aggrieved by a final order of the
 utility commission under this section may file an appeal with the
 district court of Travis County within 30 days after the order
 becomes final. The hearing in such an appeal before the district
 court shall be by trial de novo on all issues. After the hearing, if
 the court determines that the municipally owned utility or
 franchised utility is entitled to single certification under the
 provisions of this section, the court shall enter a judgment that:
 (1)  transfers to the municipally owned utility or
 franchised utility title to property requested by the municipality
 to be transferred to the municipally owned utility or franchised
 utility and located within the singly certificated area and
 property determined by the court or jury to be rendered useless or
 valueless by the granting of single certification; and
 (2)  orders payment in accordance with Subsection (g)
 [of this section] to the retail public utility of adequate and just
 compensation for the property transferred and for the property
 damaged as determined by the court or jury.
 (g-1)  The utility commission shall adopt rules governing
 the evaluation of the factors to be considered in determining the
 monetary compensation under Subsection (g).  The utility commission
 by rule shall adopt procedures to ensure that the total
 compensation to be paid to a retail public utility under Subsection
 (g) is determined not later than the 90th calendar day after the
 date on which the utility commission determines that the
 municipality's application is administratively complete.
 (k)  The following conditions apply when a municipality or
 franchised utility makes an application to acquire the service area
 or facilities of a retail public utility described in Subsection
 (j)(2):
 (1)  the utility commission or court must determine
 that the service provided by the retail public utility is
 substandard or its rates are unreasonable in view of the reasonable
 expenses of the utility;
 (2)  if the municipality abandons its application, the
 court or the utility commission is authorized to award to the retail
 public utility its reasonable expenses related to the proceeding
 hereunder, including attorney fees; and
 (3)  unless otherwise agreed by the retail public
 utility, the municipality must take the entire utility property of
 the retail public utility in a proceeding hereunder.
 (l)  For an area incorporated by a municipality, the
 compensation provided under Subsection (g) shall be determined by a
 qualified individual or firm to serve as independent appraiser, who
 shall be selected by the affected retail public utility, and the
 costs of the appraiser shall be paid by the municipality. For an
 area annexed by a municipality, the compensation provided under
 Subsection (g) shall be determined by a qualified individual or
 firm to which the municipality and the retail public utility agree
 to serve as independent appraiser. If the retail public utility and
 the municipality are unable to agree on a single individual or firm
 to serve as the independent appraiser before the 11th day after the
 date the retail public utility or municipality notifies the other
 party of the impasse, the retail public utility and municipality
 each shall appoint a qualified individual or firm to serve as
 independent appraiser. On or before the 10th business day after the
 date of their appointment, the independent appraisers shall meet to
 reach an agreed determination of the amount of compensation. If the
 appraisers are unable to agree on a determination before the 16th
 business day after the date of their first meeting under this
 subsection, the retail public utility or municipality may petition
 the utility commission or a person the utility commission
 designates for the purpose to appoint a third qualified independent
 appraiser to reconcile the appraisals of the two originally
 appointed appraisers. The determination of the third appraiser may
 not be less than the lesser or more than the greater of the two
 original appraisals. The costs of the independent appraisers for
 an annexed area shall be shared equally by the retail public utility
 and the municipality. The determination of compensation under this
 subsection is binding on the utility commission.
 (m)  The utility commission shall deny an application for
 single certification by a municipality that fails to demonstrate
 compliance with the commission's minimum requirements for public
 drinking water systems.
 SECTION 2.48.  Section 13.2551, Water Code, is amended to
 read as follows:
 Sec. 13.2551.  COMPLETION OF DECERTIFICATION. (a)  As a
 condition to decertification or single certification under Section
 13.254 or 13.255, and on request by an affected retail public
 utility, the utility commission may order:
 (1)  the retail public utility seeking to provide
 service to a decertified area to serve the entire service area of
 the retail public utility that is being decertified; and
 (2)  the transfer of the entire certificate of public
 convenience and necessity of a partially decertified retail public
 utility to the retail public utility seeking to provide service to
 the decertified area.
 (b)  The utility commission shall order service to the entire
 area under Subsection (a) if the utility commission finds that the
 decertified retail public utility will be unable to provide
 continuous and adequate service at an affordable cost to the
 remaining customers.
 (c)  The utility commission shall require the retail public
 utility seeking to provide service to the decertified area to
 provide continuous and adequate service to the remaining customers
 at a cost comparable to the cost of that service to its other
 customers and shall establish the terms under which the service
 must be provided.  The terms may include:
 (1)  transferring debt and other contract obligations;
 (2)  transferring real and personal property;
 (3)  establishing interim service rates for affected
 customers during specified times; and
 (4)  other provisions necessary for the just and
 reasonable allocation of assets and liabilities.
 (d)  The retail public utility seeking decertification shall
 not charge the affected customers any transfer fee or other fee to
 obtain service other than the retail public utility's usual and
 customary rates for monthly service or the interim rates set by the
 utility commission, if applicable.
 (e)  The utility commission shall not order compensation to
 the decertificated retail utility if service to the entire service
 area is ordered under this section.
 SECTION 2.49.  Subsections (e), (i), (r), and (s), Section
 13.257, Water Code, are amended to read as follows:
 (e)  The notice must be given to the prospective purchaser
 before the execution of a binding contract of purchase and sale.
 The notice may be given separately or as an addendum to or paragraph
 of the contract. If the seller fails to provide the notice required
 by this section, the purchaser may terminate the contract. If the
 seller provides the notice at or before the closing of the purchase
 and sale contract and the purchaser elects to close even though the
 notice was not timely provided before the execution of the
 contract, it is conclusively presumed that the purchaser has waived
 all rights to terminate the contract and recover damages or pursue
 other remedies or rights under this section. Notwithstanding any
 provision of this section to the contrary, a seller, title
 insurance company, real estate broker, or examining attorney, or an
 agent, representative, or person acting on behalf of the seller,
 company, broker, or attorney, is not liable for damages under
 Subsection (m) or (n) or liable for any other damages to any person
 for:
 (1)  failing to provide the notice required by this
 section to a purchaser before the execution of a binding contract of
 purchase and sale or at or before the closing of the purchase and
 sale contract if:
 (A)  the utility service provider did not file the
 map of the certificated service area in the real property records of
 the county in which the service area is located and with the utility
 commission depicting the boundaries of the service area of the
 utility service provider as shown in the real property records of
 the county in which the service area is located; and
 (B)  the utility commission did not maintain an
 accurate map of the certificated service area of the utility
 service provider as required by this chapter; or
 (2)  unintentionally providing a notice required by
 this section that is incorrect under the circumstances before the
 execution of a binding contract of purchase and sale or at or before
 the closing of the purchase and sale contract.
 (i)  If the notice is given at closing as provided by
 Subsection (g), a purchaser, or the purchaser's heirs, successors,
 or assigns, may not maintain an action for damages or maintain an
 action against a seller, title insurance company, real estate
 broker, or lienholder, or any agent, representative, or person
 acting on behalf of the seller, company, broker, or lienholder, by
 reason of the seller's use of the information filed with the utility
 commission by the utility service provider or the seller's use of
 the map of the certificated service area of the utility service
 provider filed in the real property records to determine whether
 the property to be purchased is within the certificated service
 area of the utility service provider. An action may not be
 maintained against a title insurance company for the failure to
 disclose that the described real property is included within the
 certificated service area of a utility service provider if the
 utility service provider did not file in the real property records
 or with the utility commission the map of the certificated service
 area.
 (r)  A utility service provider shall:
 (1)  record in the real property records of each county
 in which the service area or a portion of the service area is
 located a certified copy of the map of the certificate of public
 convenience and necessity and of any amendment to the certificate
 as contained in the utility commission's records, and a boundary
 description of the service area by:
 (A)  a metes and bounds survey certified by a
 licensed state land surveyor or a registered professional land
 surveyor;
 (B)  the Texas State Plane Coordinate System;
 (C)  verifiable landmarks, including a road,
 creek, or railroad line; or
 (D)  if a recorded plat of the area exists, lot and
 block number; and
 (2)  submit to the executive director of the utility
 commission evidence of the recording.
 (s)  Each county shall accept and file in its real property
 records a utility service provider's map presented to the county
 clerk under this section if the map meets filing requirements, does
 not exceed 11 inches by 17 inches in size, and is accompanied by the
 appropriate fee.  The recording required by this section must be
 completed not later than the 31st day after the date a utility
 service provider receives a final order from the utility commission
 granting an application for a new certificate or for an amendment to
 a certificate that results in a change in the utility service
 provider's service area.
 SECTION 2.50.  Subsections (a) through (g), Section 13.301,
 Water Code, are amended to read as follows:
 (a)  A utility or a water supply or sewer service
 corporation, on or before the 120th day before the effective date of
 a sale, acquisition, lease, or rental of a water or sewer system
 that is required by law to possess a certificate of public
 convenience and necessity or the effective date of a merger or
 consolidation with such a utility or water supply or sewer service
 corporation, shall:
 (1)  file a written application with the utility
 commission; and
 (2)  unless public notice is waived by the executive
 director of the utility commission for good cause shown, give
 public notice of the action.
 (b)  The utility commission may require that the person
 purchasing or acquiring the water or sewer system demonstrate
 adequate financial, managerial, and technical capability for
 providing continuous and adequate service to the requested area and
 any areas currently certificated to the person.
 (c)  If the person purchasing or acquiring the water or sewer
 system cannot demonstrate adequate financial capability, the
 utility commission may require that the person provide a bond or
 other financial assurance in a form and amount specified by the
 utility commission to ensure continuous and adequate utility
 service is provided.
 (d)  The utility commission shall, with or without a public
 hearing, investigate the sale, acquisition, lease, or rental to
 determine whether the transaction will serve the public interest.
 (e)  Before the expiration of the 120-day notification
 period, the executive director of the utility commission shall
 notify all known parties to the transaction and the Office of Public
 Utility Counsel whether [of] the executive director of the utility
 commission will [director's decision whether to] request that the
 utility commission hold a public hearing to determine if the
 transaction will serve the public interest. The executive director
 of the utility commission may request a hearing if:
 (1)  the application filed with the utility commission
 or the public notice was improper;
 (2)  the person purchasing or acquiring the water or
 sewer system has not demonstrated adequate financial, managerial,
 and technical capability for providing continuous and adequate
 service to the service area being acquired and to any areas
 currently certificated to the person;
 (3)  the person or an affiliated interest of the person
 purchasing or acquiring the water or sewer system has a history of:
 (A)  noncompliance with the requirements of the
 utility commission, the commission, or the [Texas] Department of
 State Health Services; or
 (B)  continuing mismanagement or misuse of
 revenues as a utility service provider;
 (4)  the person purchasing or acquiring the water or
 sewer system cannot demonstrate the financial ability to provide
 the necessary capital investment to ensure the provision of
 continuous and adequate service to the customers of the water or
 sewer system; or
 (5)  there are concerns that the transaction may not
 serve the public interest, after the application of the
 considerations provided by Section 13.246(c) for determining
 whether to grant a certificate of convenience and necessity.
 (f)  Unless the executive director of the utility commission
 requests that a public hearing be held, the sale, acquisition,
 lease, or rental may be completed as proposed:
 (1)  at the end of the 120-day period; or
 (2)  at any time after the executive director of the
 utility commission notifies the utility or water supply or sewer
 service corporation that a hearing will not be requested.
 (g)  If a hearing is requested or if the utility or water
 supply or sewer service corporation fails to make the application
 as required or to provide public notice, the sale, acquisition,
 lease, or rental may not be completed unless the utility commission
 determines that the proposed transaction serves the public
 interest.
 SECTION 2.51.  Section 13.302, Water Code, is amended to
 read as follows:
 Sec. 13.302.  PURCHASE OF VOTING STOCK IN ANOTHER PUBLIC
 UTILITY:  REPORT.  (a)  A utility may not purchase voting stock in
 another utility doing business in this state and a person may not
 acquire a controlling interest in a utility doing business in this
 state unless the person or utility files a written application with
 the utility commission not later than the 61st day before the date
 on which the transaction is to occur.
 (b)  The utility commission may require that a person
 acquiring a controlling interest in a utility demonstrate adequate
 financial, managerial, and technical capability for providing
 continuous and adequate service to the requested area and any areas
 currently certificated to the person.
 (c)  If the person acquiring a controlling interest cannot
 demonstrate adequate financial capability, the utility commission
 may require that the person provide a bond or other financial
 assurance in a form and amount specified by the utility commission
 to ensure continuous and adequate utility service is provided.
 (d)  The executive director of the utility commission may
 request that the utility commission hold a public hearing on the
 transaction if the executive director of the utility commission
 believes that a criterion prescribed by Section 13.301(e) applies.
 (e)  Unless the executive director of the utility commission
 requests that a public hearing be held, the purchase or acquisition
 may be completed as proposed:
 (1)  at the end of the 60-day period; or
 (2)  at any time after the executive director of the
 utility commission notifies the person or utility that a hearing
 will not be requested.
 (f)  If a hearing is requested or if the person or utility
 fails to make the application to the utility commission as
 required, the purchase or acquisition may not be completed unless
 the utility commission determines that the proposed transaction
 serves the public interest. A purchase or acquisition that is not
 completed in accordance with the provisions of this section is
 void.
 SECTION 2.52.  Section 13.303, Water Code, is amended to
 read as follows:
 Sec. 13.303.  LOANS TO STOCKHOLDERS:  REPORT. A utility may
 not loan money, stocks, bonds, notes, or other evidences of
 indebtedness to any corporation or person owning or holding
 directly or indirectly any stock of the utility unless the utility
 reports the transaction to the utility commission within 60 days
 after the date of the transaction.
 SECTION 2.53.  Section 13.304, Water Code, is amended to
 read as follows:
 Sec. 13.304.  FORECLOSURE REPORT. (a)  A utility that
 receives notice that all or a portion of the utility's facilities or
 property used to provide utility service are being posted for
 foreclosure shall notify the utility commission and the commission
 in writing of that fact not later than the 10th day after the date on
 which the utility receives the notice.
 (b)  A financial institution that forecloses on a utility or
 on any part of the utility's facilities or property that are used to
 provide utility service is not required to provide the 120-day
 notice prescribed by Section 13.301, but shall provide written
 notice to the utility commission and the commission before the 30th
 day preceding the date on which the foreclosure is completed.
 (c)  The financial institution may operate the utility for an
 interim period prescribed by utility commission rule before
 transferring or otherwise obtaining a certificate of convenience
 and necessity. A financial institution that operates a utility
 during an interim period under this subsection is subject to each
 utility commission rule to which the utility was subject and in the
 same manner.
 SECTION 2.54.  Section 13.341, Water Code, is amended to
 read as follows:
 Sec. 13.341.  JURISDICTION OVER AFFILIATED INTERESTS. The
 utility commission has jurisdiction over affiliated interests
 having transactions with utilities under the jurisdiction of the
 utility commission to the extent of access to all accounts and
 records of those affiliated interests relating to such
 transactions, including but in no way limited to accounts and
 records of joint or general expenses, any portion of which may be
 applicable to those transactions.
 SECTION 2.55.  Section 13.342, Water Code, is amended to
 read as follows:
 Sec. 13.342.  DISCLOSURE OF SUBSTANTIAL INTEREST IN VOTING
 SECURITIES. The utility commission may require the disclosure of
 the identity and respective interests of every owner of any
 substantial interest in the voting securities of any utility or its
 affiliated interest. One percent or more is a substantial interest
 within the meaning of this section.
 SECTION 2.56.  Subsection (a), Section 13.343, Water Code,
 is amended to read as follows:
 (a)  The owner of a utility that supplies retail water
 service may not contract to purchase from an affiliated supplier
 wholesale water service for any of that owner's systems unless:
 (1)  the wholesale service is provided for not more
 than 90 days to remedy an emergency condition, as defined by utility
 commission or commission rule; or
 (2)  the executive director of the utility commission
 determines that the utility cannot obtain wholesale water service
 from another source at a lower cost than from the affiliate.
 SECTION 2.57.  Section 13.381, Water Code, is amended to
 read as follows:
 Sec. 13.381.  RIGHT TO JUDICIAL REVIEW; EVIDENCE. Any party
 to a proceeding before the utility commission or the commission is
 entitled to judicial review under the substantial evidence rule.
 SECTION 2.58.  Subsection (a), Section 13.382, Water Code,
 is amended to read as follows:
 (a)  Any party represented by counsel who alleges that
 existing rates are excessive or that rates prescribed by the
 utility commission are excessive and who is a prevailing party in
 proceedings for review of a utility commission order or decision
 may in the same action recover against the regulation fund
 reasonable fees for attorneys and expert witnesses and other costs
 incurred by him before the utility commission and the court. The
 amount of the attorney's fees shall be fixed by the court.
 SECTION 2.59.  Section 13.411, Water Code, is amended to
 read as follows:
 Sec. 13.411.  ACTION TO ENJOIN OR REQUIRE COMPLIANCE.
 (a)  If the utility commission or the commission has reason to
 believe that any retail public utility or any other person or
 corporation is engaged in or is about to engage in any act in
 violation of this chapter or of any order or rule of the utility
 commission or the commission entered or adopted under this chapter
 or that any retail public utility or any other person or corporation
 is failing to comply with this chapter or with any rule or order,
 the attorney general on request of the utility commission or the
 commission, in addition to any other remedies provided in this
 chapter, shall bring an action in a court of competent jurisdiction
 in the name of and on behalf of the utility commission or the
 commission against the retail public utility or other person or
 corporation to enjoin the commencement or continuation of any act
 or to require compliance with this chapter or the rule or order.
 (b)  If the executive director of the utility commission or
 the executive director of the commission has reason to believe that
 the failure of the owner or operator of a water utility to properly
 operate, maintain, or provide adequate facilities presents an
 imminent threat to human health or safety, the executive director
 of the utility commission or the executive director of the
 commission shall immediately:
 (1)  notify the utility's representative; and
 (2)  initiate enforcement action consistent with:
 (A)  this subchapter; and
 (B)  procedural rules adopted by the utility
 commission or the commission.
 SECTION 2.60.  Section 13.4115, Water Code, is amended to
 read as follows:
 Sec. 13.4115.  ACTION TO REQUIRE ADJUSTMENT TO CONSUMER
 CHARGE; PENALTY. In regard to a customer complaint arising out of a
 charge made by a public utility, if the utility commission [the
 executive director] finds that the utility has failed to make the
 proper adjustment to the customer's bill after the conclusion of
 the complaint process established by the utility commission, the
 utility commission may issue an order requiring the utility to make
 the adjustment. Failure to comply with the order within 30 days of
 receiving the order is a violation for which the utility commission
 may impose an administrative penalty under Section 13.4151.
 SECTION 2.61.  Subsections (a), (f), and (g), Section
 13.412, Water Code, are amended to read as follows:
 (a)  At the request of the utility commission or the
 commission, the attorney general shall bring suit for the
 appointment of a receiver to collect the assets and carry on the
 business of a water or sewer utility that:
 (1)  has abandoned operation of its facilities;
 (2)  informs the utility commission or the commission
 that the owner is abandoning the system;
 (3)  violates a final order of the utility commission
 or the commission; or
 (4)  allows any property owned or controlled by it to be
 used in violation of a final order of the utility commission or the
 commission.
 (f)  For purposes of this section and Section 13.4132,
 abandonment may include but is not limited to:
 (1)  failure to pay a bill or obligation owed to a
 retail public utility or to an electric or gas utility with the
 result that the utility service provider has issued a notice of
 discontinuance of necessary services;
 (2)  failure to provide appropriate water or wastewater
 treatment so that a potential health hazard results;
 (3)  failure to adequately maintain facilities,
 resulting in potential health hazards, extended outages, or
 repeated service interruptions;
 (4)  failure to provide customers adequate notice of a
 health hazard or potential health hazard;
 (5)  failure to secure an alternative available water
 supply during an outage;
 (6)  displaying a pattern of hostility toward or
 repeatedly failing to respond to the utility commission or the
 commission or the utility's customers; and
 (7)  failure to provide the utility commission or the
 commission with adequate information on how to contact the utility
 for normal business and emergency purposes.
 (g)  Notwithstanding Section 64.021, Civil Practice and
 Remedies Code, a receiver appointed under this section may seek
 [commission] approval from the utility commission and the
 commission to acquire the water or sewer utility's facilities and
 transfer the utility's certificate of convenience and necessity.
 The receiver must apply in accordance with Subchapter H.
 SECTION 2.62.  Section 13.413, Water Code, is amended to
 read as follows:
 Sec. 13.413.  PAYMENT OF COSTS OF RECEIVERSHIP. The
 receiver may, subject to the approval of the court and after giving
 notice to all interested parties, sell or otherwise dispose of all
 or part of the real or personal property of a water or sewer utility
 against which a proceeding has been brought under this subchapter
 to pay the costs incurred in the operation of the receivership. The
 costs include:
 (1)  payment of fees to the receiver for his services;
 (2)  payment of fees to attorneys, accountants,
 engineers, or any other person or entity that provides goods or
 services necessary to the operation of the receivership; and
 (3)  payment of costs incurred in ensuring that any
 property owned or controlled by a water or sewer utility is not used
 in violation of a final order of the utility commission or the
 commission.
 SECTION 2.63.  Section 13.4131, Water Code, is amended to
 read as follows:
 Sec. 13.4131.  SUPERVISION OF CERTAIN UTILITIES. (a)  The
 utility commission, after providing to the utility notice and an
 opportunity for a hearing, may place a utility under supervision
 for gross or continuing mismanagement, gross or continuing
 noncompliance with this chapter or a rule adopted under this
 chapter [commission rules], or noncompliance with an order issued
 under this chapter [commission orders].
 (b)  While supervising a utility, the utility commission may
 require the utility to abide by conditions and requirements
 prescribed by the utility commission, including:
 (1)  management requirements;
 (2)  additional reporting requirements;
 (3)  restrictions on hiring, salary or benefit
 increases, capital investment, borrowing, stock issuance or
 dividend declarations, and liquidation of assets; and
 (4)  a requirement that the utility place the utility's
 funds into an account in a financial institution approved by the
 utility commission and use of those funds shall be restricted to
 reasonable and necessary utility expenses.
 (c)  While supervising a utility, the utility commission may
 require that the utility obtain [commission] approval from the
 utility commission before taking any action that may be restricted
 under Subsection (b) [of this section]. Any action or transaction
 which occurs without [commission] approval may be voided by the
 utility commission.
 SECTION 2.64.  Subsections (a) and (c), Section 13.4133,
 Water Code, are amended to read as follows:
 (a)  Notwithstanding the requirements of Section 13.187 [of
 this code], the utility commission may authorize an emergency rate
 increase for a utility for which a person has been appointed under
 Section 13.4132 [of this code] or for which a receiver has been
 appointed under Section 13.412 [of this code] if the increase is
 necessary to ensure the provision of continuous and adequate
 services to the utility's customers.
 (c)  The utility commission shall schedule a hearing to
 establish a final rate within 15 months after the date on which an
 emergency rate increase takes effect. The utility commission shall
 require the utility to provide notice of the hearing to each
 customer and to the Office of Public Utility Counsel. The
 additional revenues collected under an emergency rate increase are
 subject to refund if the utility commission finds that the rate
 increase was larger than necessary to ensure continuous and
 adequate service.
 SECTION 2.65.  Subsections (a) and (c), Section 13.414,
 Water Code, are amended to read as follows:
 (a)  Any retail public utility or affiliated interest that
 violates this chapter, fails to perform a duty imposed on it, or
 fails, neglects, or refuses to obey an order, rule, direction, or
 requirement of the utility commission or the commission or decree
 or judgment of a court is subject to a civil penalty of not less than
 $100 nor more than $5,000 for each violation.
 (c)  The attorney general shall institute suit on his own
 initiative or at the request of, in the name of, and on behalf of the
 utility commission or the commission in a court of competent
 jurisdiction to recover the penalty under this section.
 SECTION 2.66.  (a) If H.B. No. 2694, Acts of the 82nd
 Legislature, Regular Session, 2011, does not become law, Subsection
 (a), Section 13.4151, Water Code, is amended to read as follows:
 (a)  If a person, affiliated interest, or entity subject to
 the jurisdiction of the utility commission or the commission
 violates this chapter or a rule or order adopted under this chapter,
 the utility commission or the commission, as applicable, may assess
 a penalty against that person, affiliated interest, or entity as
 provided by this section. The penalty may be in an amount not to
 exceed $500 a day. Each day a violation continues may be considered
 a separate violation.
 (b)  If H.B. No. 2694, Acts of the 82nd Legislature, Regular
 Session, 2011, becomes law, Subsection (a), Section 13.4151, Water
 Code, as effective September 1, 2011, is amended to read as follows:
 (a)  If a person, affiliated interest, or entity subject to
 the jurisdiction of the utility commission or the commission
 violates this chapter or a rule or order adopted under this chapter,
 the utility commission or the commission, as applicable, may assess
 a penalty against that person, affiliated interest, or entity as
 provided by this section. The penalty may be in an amount not to
 exceed $5,000 a day. Each day a violation continues may be
 considered a separate violation.
 SECTION 2.67.  Subsections (b) through (k) and (m), Section
 13.4151, Water Code, are amended to read as follows:
 (b)  In determining the amount of the penalty, the utility
 commission or the commission shall consider:
 (1)  the nature, circumstances, extent, duration, and
 gravity of the prohibited acts or omissions;
 (2)  with respect to the alleged violator:
 (A)  the history and extent of previous
 violations;
 (B)  the degree of culpability, including whether
 the violation was attributable to mechanical or electrical failures
 and whether the violation could have been reasonably anticipated
 and avoided;
 (C)  the demonstrated good faith, including
 actions taken by the person, affiliated interest, or entity to
 correct the cause of the violation;
 (D)  any economic benefit gained through the
 violation; and
 (E)  the amount necessary to deter future
 violations; and
 (3)  any other matters that justice requires.
 (c)  If, after examination of a possible violation and the
 facts surrounding that possible violation, the executive director
 of the utility commission or the executive director of the
 commission concludes that a violation has occurred, the executive
 director of the utility commission or the executive director of the
 commission may issue a preliminary report stating the facts on
 which that conclusion is based, recommending that a penalty under
 this section be imposed on the person, affiliated interest, or
 retail public utility charged, and recommending the amount of that
 proposed penalty. The executive director of the utility commission
 or the executive director of the commission shall base the
 recommended amount of the proposed penalty on the factors provided
 by Subsection (b) [of this section], and shall analyze each factor
 for the benefit of the agency [commission].
 (d)  Not later than the 10th day after the date on which the
 report is issued, the executive director of the utility commission
 or the executive director of the commission shall give written
 notice of the report to the person, affiliated interest, or retail
 public utility charged with the violation. The notice shall
 include a brief summary of the charges, a statement of the amount of
 the penalty recommended, and a statement of the right of the person,
 affiliated interest, or retail public utility charged to a hearing
 on the occurrence of the violation, the amount of the penalty, or
 both.
 (e)  Not later than the 20th day after the date on which
 notice is received, the person, affiliated interest, or retail
 public utility charged may give the agency [commission] written
 consent to the [executive director's] report described by
 Subsection (d), including the recommended penalty, or may make a
 written request for a hearing.
 (f)  If the person, affiliated interest, or retail public
 utility charged with the violation consents to the penalty
 recommended in the report described by Subsection (d) [by the
 executive director] or fails to timely respond to the notice, the
 utility commission or the commission by order shall assess that
 penalty or order a hearing to be held on the findings and
 recommendations in the [executive director's] report. If the
 utility commission or the commission assesses the penalty
 recommended by the report, the utility commission or the commission
 shall give written notice to the person, affiliated interest, or
 retail public utility charged of its decision.
 (g)  If the person, affiliated interest, or retail public
 utility charged requests or the utility commission or the
 commission orders a hearing, the agency [commission] shall call a
 hearing and give notice of the hearing. As a result of the hearing,
 the agency [commission] by order may find that a violation has
 occurred and may assess a civil penalty, may find that a violation
 has occurred but that no penalty should be assessed, or may find
 that no violation has occurred. All proceedings under this
 subsection are subject to Chapter 2001, Government Code. In making
 any penalty decision, the agency [commission] shall analyze each of
 the factors provided by Subsection (b) [of this section].
 (h)  The utility commission or the commission shall give
 notice of its decision to the person, affiliated interest, or
 retail public utility charged, and if the agency [commission] finds
 agency [commission] shall give written notice to the person,
 affiliated interest, or retail public utility charged of its
 findings, of the amount of the penalty, and of the person's,
 affiliated interest's, or retail public utility's right to judicial
 review of the agency's [commission's] order. If the agency
 [commission] is required to give notice of a penalty under this
 subsection or Subsection (f) [of this section], the agency
 [commission] shall file notice of the agency's [its] decision in
 the Texas Register not later than the 10th day after the date on
 which the decision is adopted.
 (i)  Within the 30-day period immediately following the day
 on which the agency's [commission's] order is final, as provided by
 Subchapter F, Chapter 2001, Government Code, the person, affiliated
 interest, or retail public utility charged with the penalty shall:
 (1)  pay the penalty in full; or
 (2)  if the person, affiliated interest, or retail
 public utility seeks judicial review of the fact of the violation,
 the amount of the penalty, or both:
 (A)  forward the amount of the penalty to the
 agency [commission] for placement in an escrow account; or
 (B)  post with the agency [commission] a
 supersedeas bond in a form approved by the agency [commission] for
 the amount of the penalty to be effective until all judicial review
 of the order or decision is final.
 (j)  Failure to forward the money to or to post the bond with
 the agency [commission] within the time provided by Subsection (i)
 [of this section] constitutes a waiver of all legal rights to
 judicial review. If the person, affiliated interest, or retail
 public utility charged fails to forward the money or post the bond
 as provided by Subsection (i) [of this section], the agency
 [commission] or the executive director of the agency may forward
 the matter to the attorney general for enforcement.
 (k)  Judicial review of the order or decision of the agency
 [commission] assessing the penalty shall be under the substantial
 evidence rule and may be instituted by filing a petition with a
 district court in Travis County, as provided by Subchapter G,
 Chapter 2001, Government Code.
 (m)  Notwithstanding any other provision of law, the agency
 [commission] may compromise, modify, extend the time for payment
 of, or remit, with or without condition, any penalty imposed under
 this section.
 SECTION 2.68.  Section 13.417, Water Code, is amended to
 read as follows:
 Sec. 13.417.  CONTEMPT PROCEEDINGS. If any person or retail
 public utility fails to comply with any lawful order of the utility
 commission or the commission or with any subpoena or subpoena duces
 tecum or if any witness refuses to testify about any matter on which
 he may be lawfully interrogated, the utility commission or the
 commission may apply to any court of competent jurisdiction to
 compel obedience by proceedings for contempt.
 SECTION 2.69.  Section 13.418, Water Code, is amended to
 read as follows:
 Sec. 13.418.  DISPOSITION OF FINES AND PENALTIES; WATER
 UTILITY IMPROVEMENT ACCOUNT.  (a)  Fines and penalties collected
 under this chapter from a retail public utility that is not a public
 utility in other than criminal proceedings shall be [paid to the
 commission and] deposited in the general revenue fund.
 (b)  Fines and penalties collected from a public utility
 under this chapter in other than criminal proceedings shall be
 [paid to the commission and] deposited in the water utility
 improvement account as provided by Section 341.0485, Health and
 Safety Code.
 SECTION 2.70.  Subdivision (7), Section 13.501, Water Code,
 is amended to read as follows:
 (7)  "Multiple use facility" means commercial or
 industrial parks, office complexes, marinas, and others
 specifically identified in utility commission rules with five or
 more units.
 SECTION 2.71.  Subsection (e), Section 13.502, Water Code,
 is amended to read as follows:
 (e)  An owner of an apartment house, manufactured home rental
 community, or multiple use facility or a manager of a condominium
 may not change from submetered billing to allocated billing unless:
 (1)  the executive director of the utility commission
 approves of the change in writing after a demonstration of good
 cause, including meter reading or billing problems that could not
 feasibly be corrected or equipment failures; and
 (2)  the property owner meets rental agreement
 requirements established by the utility commission.
 SECTION 2.72.  Subsections (a), (b), and (e), Section
 13.503, Water Code, are amended to read as follows:
 (a)  The utility commission shall encourage submetering of
 individual rental or dwelling units by master meter operators or
 building owners to enhance the conservation of water resources.
 (b)  Notwithstanding any other law, the utility commission
 shall adopt rules and standards under which an owner, operator, or
 manager of an apartment house, manufactured home rental community,
 or multiple use facility that is not individually metered for water
 for each rental or dwelling unit may install submetering equipment
 for each individual rental or dwelling unit for the purpose of
 fairly allocating the cost of each individual rental or dwelling
 unit's water consumption, including wastewater charges based on
 water consumption. In addition to other appropriate safeguards for
 the tenant, the rules shall require that, except as provided by this
 section, an apartment house owner, manufactured home rental
 community owner, multiple use facility owner, or condominium
 manager may not impose on the tenant any extra charges, over and
 above the cost per gallon and any other applicable taxes and
 surcharges that are charged by the retail public utility to the
 owner or manager, and that the rental unit or apartment house owner
 or manager shall maintain adequate records regarding submetering
 and make the records available for inspection by the tenant during
 reasonable business hours. The rules shall allow an owner or
 manager to charge a tenant a fee for late payment of a submetered
 water bill if the amount of the fee does not exceed five percent of
 the bill paid late. All submetering equipment is subject to the
 rules and standards established by the utility commission for
 accuracy, testing, and record keeping of meters installed by
 utilities and to the meter-testing requirements of Section 13.140
 [of this code].
 (e)  The utility commission may authorize a building owner to
 use submetering equipment that relies on integrated radio based
 meter reading systems and remote registration in a building
 plumbing system using submeters that comply with nationally
 recognized plumbing standards and are as accurate as utility water
 meters in single application conditions.
 SECTION 2.73.  Section 13.5031, Water Code, is amended to
 read as follows:
 Sec. 13.5031.  NONSUBMETERING RULES. Notwithstanding any
 other law, the utility commission shall adopt rules and standards
 governing billing systems or methods used by manufactured home
 rental community owners, apartment house owners, condominium
 managers, or owners of other multiple use facilities for prorating
 or allocating among tenants nonsubmetered master metered utility
 service costs. In addition to other appropriate safeguards for the
 tenant, those rules shall require that:
 (1)  the rental agreement contain a clear written
 description of the method of calculation of the allocation of
 nonsubmetered master metered utilities for the manufactured home
 rental community, apartment house, or multiple use facility;
 (2)  the rental agreement contain a statement of the
 average manufactured home, apartment, or multiple use facility unit
 monthly bill for all units for any allocation of those utilities for
 the previous calendar year;
 (3)  except as provided by this section, an owner or
 condominium manager may not impose additional charges on a tenant
 in excess of the actual charges imposed on the owner or condominium
 manager for utility consumption by the manufactured home rental
 community, apartment house, or multiple use facility;
 (4)  the owner or condominium manager shall maintain
 adequate records regarding the utility consumption of the
 manufactured home rental community, apartment house, or multiple
 use facility, the charges assessed by the retail public utility,
 and the allocation of the utility costs to the tenants;
 (5)  the owner or condominium manager shall maintain
 all necessary records concerning utility allocations, including
 the retail public utility's bills, and shall make the records
 available for inspection by the tenants during normal business
 hours; and
 (6)  the owner or condominium manager may charge a
 tenant a fee for late payment of an allocated water bill if the
 amount of the fee does not exceed five percent of the bill paid
 late.
 SECTION 2.74.  Section 13.505, Water Code, is amended to
 read as follows:
 Sec. 13.505.  ENFORCEMENT. In addition to the enforcement
 provisions contained in Subchapter K [of this chapter], if an
 apartment house owner, condominium manager, manufactured home
 rental community owner, or other multiple use facility owner
 violates a rule of the utility commission regarding submetering of
 utility service consumed exclusively within the tenant's dwelling
 unit or multiple use facility unit or nonsubmetered master metered
 utility costs, the tenant may recover three times the amount of any
 overcharge, a civil penalty equal to one month's rent, reasonable
 attorney's fees, and court costs from the owner or condominium
 manager. However, an owner of an apartment house, manufactured
 home rental community, or other multiple use facility or
 condominium manager is not liable for a civil penalty if the owner
 or condominium manager proves the violation was a good faith,
 unintentional mistake.
 SECTION 2.75.  Section 13.512, Water Code, is amended to
 read as follows:
 Sec. 13.512.  AUTHORITY TO ENTER INTO PRIVATIZATION
 CONTRACTS. Any eligible city is authorized to enter into
 privatization contracts if such action is recommended by the board
 of utility trustees and authorized by the governing body of the
 eligible city pursuant to an ordinance. Any privatization contract
 entered into prior to the effective date of this Act is validated,
 ratified, and approved. Each eligible city shall file a copy of its
 privatization contract with the utility commission, for
 information purposes only, within 60 days of execution or the
 effective date of this Act, whichever is later.
 SECTION 2.76.  Section 13.513, Water Code, is amended to
 read as follows:
 Sec. 13.513.  ELECTION BY ELIGIBLE CITY TO EXEMPT SERVICE
 PROVIDER FROM UTILITY COMMISSION JURISDICTION. A service provider
 shall not constitute a "water and sewer utility," a "public
 utility," a "utility," or a "retail public utility" within the
 meaning of Chapter 13 as a result of entering into or performing a
 privatization contract, if the governing body of the eligible city
 shall so elect by ordinance and provide notice thereof in writing to
 the utility commission; provided, however, this provision shall not
 affect the application of Chapter 13 to an eligible city itself.
 Notwithstanding anything contained in this section, any service
 provider who seeks to extend or render sewer service to any person
 or municipality other than, or in addition to, an eligible city may
 be a "public utility" for the purposes of Chapter 13 with respect to
 such other person or municipality.
 SECTION 2.77.  Subsection (a), Section 5.013, Water Code, is
 amended to read as follows:
 (a)  The commission has general jurisdiction over:
 (1)  water and water rights including the issuance of
 water rights permits, water rights adjudication, cancellation of
 water rights, and enforcement of water rights;
 (2)  continuing supervision over districts created
 under Article III, Sections 52(b)(1) and (2), and Article XVI,
 Section 59, of the Texas Constitution;
 (3)  the state's water quality program including
 issuance of permits, enforcement of water quality rules, standards,
 orders, and permits, and water quality planning;
 (4)  the determination of the feasibility of certain
 federal projects;
 (5)  the adoption and enforcement of rules and
 performance of other acts relating to the safe construction,
 maintenance, and removal of dams;
 (6)  conduct of the state's hazardous spill prevention
 and control program;
 (7)  the administration of the state's program relating
 to inactive hazardous substance, pollutant, and contaminant
 disposal facilities;
 (8)  the administration of a portion of the state's
 injection well program;
 (9)  the administration of the state's programs
 involving underground water and water wells and drilled and mined
 shafts;
 (10)  the state's responsibilities relating to regional
 waste disposal;
 (11)  the responsibilities assigned to the commission
 by Chapters 361, 363, 382, and 401, Health and Safety Code; and
 (12)  [administration of the state's water rate program
 under Chapter 13 of this code; and
 [(13)]  any other areas assigned to the commission by
 this code and other laws of this state.
 SECTION 2.78.  (a)  On June 1, 2012, the following are
 transferred from the Texas Commission on Environmental Quality to
 the Public Utility Commission of Texas:
 (1)  the powers, duties, functions, programs, and
 activities of the Texas Commission on Environmental Quality
 relating to the economic regulation of water and sewer utilities,
 including the issuance and transfer of certificates of convenience
 and necessity, the determination of rates, and the administration
 of hearings and proceedings involving those matters, under Chapter
 13, Water Code, as provided by this article;
 (2)  any obligations and contracts of the Texas
 Commission on Environmental Quality that are directly related to
 implementing a power, duty, function, program, or activity
 transferred under this article; and
 (3)  all property and records in the custody of the
 Texas Commission on Environmental Quality that are related to a
 power, duty, function, program, or activity transferred under this
 article and all funds appropriated by the legislature for that
 power, duty, function, program, or activity.
 (b)  The Texas Commission on Environmental Quality and the
 Public Utility Commission of Texas shall enter into a memorandum of
 understanding that:
 (1)  identifies in detail the applicable powers and
 duties that are transferred by this article;
 (2)  establishes a plan for the identification and
 transfer of the records, personnel, property, and unspent
 appropriations of the Texas Commission on Environmental Quality
 that are used for purposes of the commission's powers and duties
 directly related to the regulation of water and sewer utilities
 under Chapter 13, Water Code, as amended by this article; and
 (3)  establishes a plan for the transfer of all pending
 applications, hearings, rulemaking proceedings, and orders
 relating to the economic regulation of water and sewer utilities
 under Chapter 13, Water Code, as amended by this article, from the
 Texas Commission on Environmental Quality to the Public Utility
 Commission of Texas.
 (c)  The memorandum of understanding described by this
 section is not required to be adopted by rule under Section 5.104,
 Water Code.
 (d)  The executive directors of the Texas Commission on
 Environmental Quality and the Public Utility Commission of Texas
 may agree in the memorandum of understanding under this section to
 transfer to the Public Utility Commission of Texas any personnel of
 the Texas Commission on Environmental Quality whose functions
 predominantly involve powers, duties, obligations, functions, and
 activities related to the regulation of water and sewer utilities
 under Chapter 13, Water Code, as amended by this article.
 (e)  The Texas Commission on Environmental Quality and the
 Public Utility Commission of Texas shall appoint a transition team
 to accomplish the purposes of this section.  The transition team
 shall establish guidelines on how the two agencies will cooperate
 regarding:
 (1)  meeting federal drinking water standards;
 (2)  maintaining adequate supplies of water;
 (3)  meeting established design criteria for
 wastewater treatment plants;
 (4)  demonstrating the economic feasibility of
 regionalization; and
 (5)  serving the needs of economically distressed
 areas.
 (f)  A rule, form, policy, procedure, or decision of the
 Texas Commission on Environmental Quality related to a power, duty,
 function, program, or activity transferred under this article
 continues in effect as a rule, form, policy, procedure, or decision
 of the Public Utility Commission of Texas and remains in effect
 until amended or replaced by that agency.
 (g)  The memorandum required by this section must be
 completed by April 1, 2012.
 (h)  The Public Utility Commission of Texas and the Texas
 Commission on Environmental Quality shall adopt rules to implement
 the changes in law made by this article to Chapter 13, Water Code,
 not later than November 1, 2012.
 SECTION 2.79.  (a)  The Public Utility Commission of Texas
 shall conduct a comparative analysis of the ratemaking authority of
 the commission before the effective date of this Act and the
 ratemaking authority of the commission after the transition
 described in Section 2.78 of this article, to identify potential
 for procedural standardization. The Public Utility Commission of
 Texas shall issue a report of the analysis, with recommendations
 regarding rate standardization, for consideration by the 83rd
 Legislature.
 (b)  The Public Utility Commission of Texas shall prepare a
 report describing staffing changes related to the transition
 described in Section 2.78 of this article, including reductions in
 staff that the commission may realize as a result of consolidated
 functions. The Public Utility Commission of Texas shall submit the
 report to the Legislative Budget Board and the governor with the
 legislative appropriations request for the 2014-2015 biennium.
 SECTION 2.80.  (a)  On June 1, 2012, the following are
 transferred from the office of public interest counsel of the Texas
 Commission on Environmental Quality to the Office of Public Utility
 Counsel:
 (1)  the powers, duties, functions, programs, and
 activities of the office of public interest counsel of the Texas
 Commission on Environmental Quality relating to the representation
 of the public interest in matters related to the regulation of water
 and sewer utilities under Chapter 13, Water Code, as amended by this
 article;
 (2)  any obligations and contracts of the office of
 public interest counsel of the Texas Commission on Environmental
 Quality that are directly related to implementing a power, duty,
 function, program, or activity transferred under this article; and
 (3)  all property and records in the custody of the
 office of public interest counsel of the Texas Commission on
 Environmental Quality that are related to a power, duty, function,
 program, or activity transferred under this article and all funds
 appropriated by the legislature for that power, duty, function,
 program, or activity.
 (b)  The office of public interest counsel of the Texas
 Commission on Environmental Quality and the Office of Public
 Utility Counsel shall enter into a memorandum of understanding
 that:
 (1)  identifies in detail the applicable powers and
 duties that are transferred by this article; and
 (2)  establishes a plan for the identification and
 transfer of the records, personnel, property, and unspent
 appropriations of the Texas Commission on Environmental Quality
 that are used for purposes of the office of public interest
 counsel's powers and duties directly related to the representation
 of the public interest in matters relating to the regulation of
 water and sewer utilities under Chapter 13, Water Code, as amended
 by this article.
 (c)  The memorandum of understanding described by this
 section is not required to be adopted by rule under Section 5.104,
 Water Code.
 (d)  The office of public interest counsel of the Texas
 Commission on Environmental Quality and the Office of Public
 Utility Counsel may agree in the memorandum of understanding under
 this section to transfer to the Office of Public Utility Counsel any
 personnel of the office of public interest counsel whose functions
 predominantly involve powers, duties, obligations, functions, and
 activities related to the representation of the public interest in
 matters relating to the regulation of water and sewer utilities
 under Chapter 13, Water Code, as amended by this article.
 (e)  The office of public interest counsel of the Texas
 Commission on Environmental Quality and the Office of Public
 Utility Counsel shall appoint a transition team to accomplish the
 purposes of this section.
 (f)  A rule, form, policy, procedure, or decision of the
 office of public interest counsel of the Texas Commission on
 Environmental Quality related to a power, duty, function, program,
 or activity transferred under this article continues in effect as a
 rule, form, policy, procedure, or decision of the Office of Public
 Utility Counsel and remains in effect until amended or replaced by
 that agency.
 (g)  The memorandum required by this section must be
 completed by April 1, 2012.
 (h)  The Office of Public Utility Counsel and the office of
 public interest counsel of the Texas Commission on Environmental
 Quality shall adopt rules to implement the changes in law made by
 this article to Chapter 13, Water Code, not later than November 1,
 2012.
 ARTICLE 3.  OTHER WATER AND SEWER DUTIES OF PUBLIC UTILITY
 COMMISSION OF TEXAS
 SECTION 3.01.  Section 11.002, Water Code, is amended by
 adding Subdivision (21) to read as follows:
 (21)  "Utility commission" means the Public Utility
 Commission of Texas.
 SECTION 3.02.  Section 11.041, Water Code, is amended to
 read as follows:
 Sec. 11.041.  DENIAL OF WATER: COMPLAINT. (a)  Any person
 entitled to receive or use water from any canal, ditch, flume,
 lateral, dam, reservoir, or lake or from any conserved or stored
 supply may present to the utility commission a written petition
 showing:
 (1)  that the person [he] is entitled to receive or use
 the water;
 (2)  that the person [he] is willing and able to pay a
 just and reasonable price for the water;
 (3)  that the party owning or controlling the water
 supply has water not contracted to others and available for the
 petitioner's use; and
 (4)  that the party owning or controlling the water
 supply fails or refuses to supply the available water to the
 petitioner, or that the price or rental demanded for the available
 water is not reasonable and just or is discriminatory.
 (b)  If the petition is accompanied by a deposit of $25, the
 executive director of the utility commission shall have a
 preliminary investigation of the complaint made and determine
 whether or not there are probable grounds for the complaint.
 (c)  If, after preliminary investigation, the executive
 director of the utility commission determines that probable grounds
 exist for the complaint, the utility commission shall enter an
 order setting a time and place for a hearing on the petition.
 (d)  The utility commission may require the complainant to
 make an additional deposit or execute a bond satisfactory to the
 utility commission in an amount fixed by the utility commission
 conditioned on the payment of all costs of the proceeding.
 (e)  At least 20 days before the date set for the hearing, the
 utility commission shall transmit by registered mail a certified
 copy of the petition and a certified copy of the hearing order to
 the person against whom the complaint is made.
 (f)  The utility commission shall hold a hearing on the
 complaint at the time and place stated in the order. It may hear
 evidence orally or by affidavit in support of or against the
 complaint, and it may hear arguments. The commission may
 participate in the hearing for the purpose of presenting evidence
 on the availability of the water requested by the petitioner. On
 completion of the hearing, the utility commission shall render a
 written decision.
 (g)  If, after the preliminary investigation, the executive
 director of the utility commission determines that no probable
 grounds exist for the complaint, the executive director of the
 utility commission shall dismiss the complaint. The utility
 commission may either return the deposit or pay it into the State
 Treasury.
 SECTION 3.03.  Section 12.013, Water Code, is amended to
 read as follows:
 Sec. 12.013.  RATE-FIXING POWER. (a)  The utility
 commission shall fix reasonable rates for the furnishing of raw or
 treated water for any purpose mentioned in Chapter 11 or 12 of this
 code.
 (b)  In this section,  [The term] "political subdivision"
 [when used in this section] means incorporated cities, towns or
 villages, counties, river authorities, water districts, and other
 special purpose districts.
 (c)  The utility commission in reviewing and fixing
 reasonable rates for furnishing water under this section may use
 any reasonable basis for fixing rates as may be determined by the
 utility commission to be appropriate under the circumstances of the
 case being reviewed; provided, however, the utility commission may
 not fix a rate which a political subdivision may charge for
 furnishing water which is less than the amount required to meet the
 debt service and bond coverage requirements of that political
 subdivision's outstanding debt.
 (d)  The utility commission's jurisdiction under this
 section relating to incorporated cities, towns, or villages shall
 be limited to water furnished by such city, town, or village to
 another political subdivision on a wholesale basis.
 (e)  The utility commission may establish interim rates and
 compel continuing service during the pendency of any rate
 proceeding.
 (f)  The utility commission may order a refund or assess
 additional charges from the date a petition for rate review is
 received by the utility commission of the difference between the
 rate actually charged and the rate fixed by the utility commission,
 plus interest at the statutory rate.
 [(g)     No action or proceeding commenced prior to January 1,
 1977, before the Texas Water Rights Commission shall be affected by
 the enactment of this section.
 [(h)     Nothing herein contained shall affect the jurisdiction
 of the Public Utility Commission.]
 ARTICLE 4. EFFECTIVE DATE
 SECTION 4.01.  This Act takes effect on the 91st day after
 the last day of the legislative session.