Texas 2019 - 86th Regular

Texas House Bill HB3542 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	H.B. No. 3542
	1	+	By: Phelan (Senate Sponsor - Lucio) H.B. No. 3542
	2	+	(In the Senate - Received from the House May 2, 2019;
	3	+	May 3, 2019, read first time and referred to Committee on Water &
	4	+	Rural Affairs; May 19, 2019, reported favorably by the following
	5	+	vote: Yeas 7, Nays 0; May 19, 2019, sent to printer.)
	6	+	Click here to see the committee vote
2	7
3	8
	9	+	A BILL TO BE ENTITLED
4	10		AN ACT
5	11		relating to the provision of water and sewer services by certain
6	12		retail public utilities.
7	13		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
8	14		SECTION 1. Subchapter E, Chapter 13, Water Code, is amended
9	15		by adding Section 13.150 to read as follows:
10	16		Sec. 13.150. REPORTS REQUIRED FOR WATER AND SEWER
11	17		UTILITIES. (a) This section applies only to a utility that
12	18		provides retail water or sewer utility service through fewer than
13	19		10,000 taps or connections.
14	20		(b) Except as provided by Subsection (c), a utility shall
15	21		deliver to the utility commission a report of the utility's
16	22		financial, managerial, and technical capacity to provide
17	23		continuous and adequate service to its customers not later than the
18	24		third anniversary of the date that the utility violates a final
19	25		order of the commission by failing to:
20	26		(1) provide system capacity that is greater than the
21	27		required raw water or groundwater production rate or the
22	28		anticipated daily demand of the system;
23	29		(2) provide a minimum pressure of 35 pounds per square
24	30		inch throughout the distribution system under normal operating
25	31		conditions; or
26	32		(3) maintain accurate or properly calibrated testing
27	33		equipment or other means of monitoring the effectiveness of a
28	34		chemical treatment or pathogen inactivation or removal process.
29	35		(c) A utility that has an existing obligation to deliver a
30	36		report under Subsection (b) is not required to deliver another
31	37		report as a result of the occurrence of an event described by
32	38		Subsection (b) if the event occurs before the date that the utility
33	39		delivers the report required by Subsection (b).
34	40		(d) On receiving notice that a utility has violated an order
35	41		described by Subsection (b), the commission shall provide written
36	42		notice of the violation to the utility commission.
37	43		(e) The utility commission shall deliver a copy of a report
38	44		received under Subsection (b) to:
39	45		(1) each state senator representing a district that
40	46		contains a portion of the service area of the utility that submitted
41	47		the report; and
42	48		(2) each state representative representing a district
43	49		that contains a portion of the service area of the utility that
44	50		submitted the report.
45	51		(f) If a utility fails to deliver a report in accordance
46	52		with Subsection (b), the utility commission shall report the
47	53		failure to:
48	54		(1) the commission;
49	55		(2) each state senator representing a district that
50	56		contains a portion of the utility's service area; and
51	57		(3) each state representative representing a district
52	58		that contains a portion of the utility's service area.
53	59		SECTION 2. Subchapter H, Chapter 13, Water Code, is amended
54	60		by adding Section 13.305 to read as follows:
55	61		Sec. 13.305. VOLUNTARY VALUATION OF ACQUIRED UTILITY OR
56	62		FACILITIES. (a) In this section:
57	63		(1) "Acquiring utility" means a Class A or Class B
58	64		utility that is acquiring a selling utility, or facilities of a
59	65		selling utility, as the result of a voluntary arm's-length
60	66		transaction.
61	67		(2) "Ratemaking rate base" means the dollar value of a
62	68		selling utility that is incorporated into the rate base of the
63	69		acquiring utility for postacquisition ratemaking purposes.
64	70		(3) "Selling utility" means a retail public utility
65	71		that is being purchased by an acquiring utility, or is selling
66	72		facilities to an acquiring utility, as the result of a voluntary
67	73		arm's-length transaction.
68	74		(b) The utility commission shall maintain a list of experts
69	75		qualified to conduct economic valuations of utilities for the
70	76		purposes of this section.
71	77		(c) An acquiring utility and a selling utility may agree to
72	78		determine by the following process the fair market value of the
73	79		selling utility or the facilities to be sold, as applicable:
74	80		(1) the acquiring utility and the selling utility
75	81		shall notify the utility commission of their intent to determine
76	82		the fair market value under this section;
77	83		(2) not later than the 30th day after the date the
78	84		utility commission receives notice under Subdivision (1), the
79	85		utility commission shall select three utility valuation experts
80	86		from the list maintained under Subsection (b);
81	87		(3) each utility valuation expert shall perform an
82	88		appraisal in compliance with Uniform Standards of Professional
83	89		Appraisal Practice, employing the cost, market, and income
84	90		approaches, to determine the fair market value; and
85	91		(4) the three utility valuation experts selected under
86	92		Subdivision (2) jointly shall retain a licensed engineer to conduct
87	93		an assessment of the tangible assets of the selling utility, or the
88	94		facilities to be sold, as applicable, and each utility valuation
89	95		expert shall:
90	96		(A) incorporate the assessment into the
91	97		appraisal under the cost approach required under Subdivision (3);
92	98		and
93	99		(B) provide the completed appraisal to the
94	100		acquiring utility and the selling utility in a reasonable and
95	101		timely manner.
96	102		(d) A utility valuation expert described by Subsection (b)
97	103		may not:
98	104		(1) derive any material financial benefit from the
99	105		sale other than fees for services rendered; or
100	106		(2) be or have been within the year preceding the date
101	107		the service contract is executed an immediate family member of a
102	108		director, officer, or employee of the acquiring utility or the
103	109		selling utility.
104	110		(e) A fee paid to a utility valuation expert may be included
105	111		in the transaction and closing costs associated with the
106	112		acquisition by the acquiring utility. A fee may not exceed the
107	113		lesser of:
108	114		(1) five percent of the fair market value; or
109	115		(2) a fee amount approved by the utility commission.
110	116		(f) For the purposes of the acquisition, the fair market
111	117		value is the average of the three utility valuation expert
112	118		appraisals conducted under Subsection (c).
113	119		(g) For an acquisition of a selling utility, the ratemaking
114	120		rate base of the selling utility is the lesser of the purchase price
115	121		negotiated by the acquiring utility and the selling utility or the
116	122		fair market value. The ratemaking rate base of the selling utility
117	123		shall be incorporated into the rate base of the acquiring utility
118	124		during the utility's next rate base case under Subchapter F.
119	125		(h) If the acquiring utility and the selling utility use the
120	126		process for establishing fair market value in Subsection (c), the
121	127		acquiring utility shall submit as attachments to an application
122	128		required under Section 13.301:
123	129		(1) copies of the three appraisals performed by the
124	130		utility valuation experts under Subsection (c);
125	131		(2) the purchase price agreed to by the acquiring
126	132		utility and the selling utility;
127	133		(3) if applicable, the ratemaking rate base determined
128	134		under Subsection (g);
129	135		(4) if applicable, the transaction and closing costs
130	136		incurred by the acquiring utility that will be included in the
131	137		utility's rate base; and
132	138		(5) if applicable, a tariff containing a rate equal to
133	139		the existing rates of the selling utility at the time of the
134	140		acquisition.
135	141		(i) If the utility commission approves the application for
136	142		acquisition under Section 13.301, the utility commission shall
137	143		issue an order that includes:
138	144		(1) the ratemaking rate base of the selling utility as
139	145		determined under Subsection (g); and
140	146		(2) any additional conditions for the acquisition the
141	147		utility commission requires.
142	148		(j) A tariff submitted under Subsection (h)(5) shall remain
143	149		in effect until the utility commission approves new rates as part of
144	150		a rate base case proceeding.
145	151		(k) The original sources of funding for any part of the
146	152		water or sewer assets of the selling utility are not relevant to
147	153		determine the value of the selling utility's assets. The selling
148	154		utility's cost of service shall be incorporated into the revenue
149	155		requirement of the acquiring utility's next rate base case
150	156		proceeding.
151	157		(l) In this subsection, "allowance of funds used during
152	158		construction" means an accounting practice that recognizes the
153	159		capital costs, including debt and equity funds, that are used to
154	160		finance the construction costs of an improvement to a selling
155	161		utility's assets by an acquiring utility. An acquiring utility's
156	162		postacquisition improvements shall accrue an allowance of funds
157	163		used during construction after the date the cost was incurred until
158	164		the earlier of:
159	165		(1) the fourth anniversary of the date the asset
160	166		entered into service; or
161	167		(2) the inclusion of the asset in the acquiring
162	168		utility's next rate base case.
163	169		(m) Depreciation on an acquiring utility's postacquisition
164	170		improvements shall be deferred for book and ratemaking purposes.
165	171		SECTION 3. Section 13.4132(a), Water Code, is amended to
166	172		read as follows:
167	173		(a) The utility commission or the commission, after
168	174		providing to the utility notice and an opportunity to be heard by
169	175		the commissioners at a utility commission or commission meeting,
170	176		may authorize a willing person to temporarily manage and operate a
171	177		utility if the utility:
172	178		(1) has discontinued or abandoned operations or the
173	179		provision of services; [or]
174	180		(2) has been or is being referred to the attorney
175	181		general for the appointment of a receiver under Section 13.412; or
176	182		(3) provides retail water or sewer utility service
177	183		through fewer than 10,000 taps or connections and violates a final
178	184		order of the commission by failing to:
179	185		(A) provide system capacity that is greater than
180	186		the required raw water or groundwater production rate or the
181	187		anticipated daily demand of the system;
182	188		(B) provide a minimum pressure of 35 pounds per
183	189		square inch throughout the distribution system under normal
184	190		operating conditions; or
185	191		(C) maintain accurate or properly calibrated
186	192		testing equipment or other means of monitoring the effectiveness of
187	193		a chemical treatment or pathogen inactivation or removal process.
188	194		SECTION 4. (a) Except as provided by Subsection (b) of this
189	195		section, a utility that provides retail water or sewer utility
190	196		service through fewer than 10,000 taps or connections and that, not
191	197		more than three years before the effective date of this Act,
192	198		violated an order described by Section 13.150(b), Water Code, as
193	199		added by this Act, shall submit a report described by Section
194	200		13.150(b), Water Code, as added by this Act, not later than the
195	201		fifth anniversary of the event.
196	202		(b) A utility that provides retail water or sewer utility
197	203		service through fewer than 10,000 taps or connections and that has
198	204		an existing obligation to deliver a report under Subsection (a) of
199	205		this section is not required to deliver another report as a result
200	206		of the occurrence of an event described by Section 13.150(b), Water
201	207		Code, as added by this Act, if the event occurs before the date that
202	208		the utility delivers the report required by Subsection (a) of this
203	209		section.
204	210		SECTION 5. This Act takes effect September 1, 2019.
205		-	______________________________ ______________________________
206		-	President of the Senate Speaker of the House
207		-	I certify that H.B. No. 3542 was passed by the House on May 2,
208		-	2019, by the following vote: Yeas 141, Nays 0, 2 present, not
209		-	voting.
210		-	______________________________
211		-	Chief Clerk of the House
212		-	I certify that H.B. No. 3542 was passed by the Senate on May
213		-	22, 2019, by the following vote: Yeas 31, Nays 0.
214		-	______________________________
215		-	Secretary of the Senate
216		-	APPROVED: _____________________
217		-	Date
218		-	_____________________
219		-	Governor
	211	+	* * * * *