H.B. No. 1510
AN ACT
relating to the response and resilience of certain electricity
service providers to major weather-related events or other natural
disasters; granting authority to issue bonds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 36.402(a), Utilities Code, is amended to
read as follows:
(a) In this subchapter, "system restoration costs" means
reasonable and necessary costs, including costs expensed, charged
to self-insurance reserves, deferred, capitalized, or otherwise
financed, that are incurred by an electric utility due to any
activity or activities conducted by or on behalf of the electric
utility in connection with the restoration of service and
infrastructure associated with electric power outages affecting
customers of the electric utility as the result of any tropical
storm or hurricane, ice or snow storm, flood, or other
weather-related event or natural disaster that occurred in calendar
year 2008 or thereafter. System restoration costs include
mobilization, staging, and construction, reconstruction,
replacement, or repair of electric generation, transmission,
distribution, or general plant facilities. System restoration
costs shall include reasonable estimates of the costs of an
activity or activities conducted or expected to be conducted by or
on behalf of the electric utility in connection with the
restoration of service or infrastructure associated with electric
power outages, but such estimates shall be subject to true-up and
reconciliation after the actual costs are known. System restoration
costs include reasonable and necessary weatherization and
storm-hardening costs incurred, as well as reasonable estimates of
costs to be incurred, by the electric utility, but such estimates
shall be subject to true-up and reconciliation after the actual
costs are known.
SECTION 2. Chapter 36, Utilities Code, is amended by adding
Subchapter J to read as follows:
SUBCHAPTER J. LOWER-COST FINANCING MECHANISM FOR SECURITIZATION
FOR RECOVERY OF SYSTEM RESTORATION COSTS
Sec. 36.451. PURPOSE AND APPLICABILITY. (a) Except as
otherwise specifically provided by this subchapter, the same
procedures, standards, and protections for securitization
authorized by Subchapter I of this chapter and, to the extent made
applicable to Subchapter I of this chapter, by Subchapter G,
Chapter 39, apply to the lower-cost financing mechanism for
securitization of transition costs or system restoration costs as
provided by Subchapter I. To the extent of any conflict between the
provisions of this subchapter and Subchapter I of this chapter or,
to the extent made applicable by Subchapter I of this chapter,
Subchapter G, Chapter 39, in cases involving the securitization of
system restoration costs under this subchapter, the provisions of
this subchapter control.
(b) The purpose of this subchapter is to make available a
lower-cost, supplemental financing mechanism to allow an electric
utility operating solely outside of ERCOT to obtain timely recovery
of system restoration costs under Subchapter I through
securitization and the issuance of transition bonds or system
restoration bonds by an issuer other than the electric utility or an
affiliated special purpose entity. Financing of system restoration
costs under this subchapter is a valid and essential public
purpose.
(c) The Texas Electric Utility System Restoration
Corporation is created under this subchapter as a special purpose
public corporation and instrumentality of the state for the
essential public purpose of providing a lower-cost, supplemental
financing mechanism available to the commission and an electric
utility to attract low-cost capital to finance system restoration
costs.
(d) In approving securitization under this subchapter, the
commission shall ensure that customers are not harmed as a result of
any financing through the Texas Electric Utility System Restoration
Corporation and that any financial savings or other benefits are
appropriately reflected in customer rates.
(e) System restoration bonds issued under this subchapter
will be solely the obligation of the issuer and the corporation as
borrower, if applicable, and will not be a debt of or a pledge of the
faith and credit of the state.
(f) System restoration bonds issued under this subchapter
shall be nonrecourse to the credit or any assets of the state and
the commission.
(g) This subchapter does not limit or impair the
commission's jurisdiction under this title to regulate the rates
charged and the services rendered by electric utilities in this
state.
(h) An electric utility receiving the proceeds of
securitization financing under this subchapter is not required to
provide utility services to the corporation or the state as a result
of receiving such proceeds except in the role of the corporation or
the state as a customer of the electric utility. This subchapter
does not create an obligation of the corporation or an issuer to
provide electric services to the electric utility or its customers.
Sec. 36.452. DEFINITIONS. (a) In this subchapter:
(1) "Corporation" means the Texas Electric Utility
System Restoration Corporation.
(2) "Issuer" means the corporation or any other
corporation, public trust, public instrumentality, or entity that
issues system restoration bonds approved by a financing order.
(b) For the purposes of this subchapter, "qualified costs,"
as defined by Section 39.302 and as used in Subchapter G, Chapter
39, also includes all costs of establishing, maintaining, and
operating the corporation and all costs of the corporation and an
issuer in connection with the issuance and servicing of the system
restoration bonds, all as approved in the financing order.
(c) Except as otherwise specifically provided by this
subchapter, any defined terms provided by Subchapter I of this
chapter and, if made applicable by Subchapter I of this chapter,
Subchapter G, Chapter 39, have the same meaning in this subchapter.
Sec. 36.453. CREATION OF CORPORATION. (a) The corporation
is a nonprofit corporation and instrumentality of the state, and
shall perform the essential governmental function of financing
system restoration costs in accordance with this subchapter. The
corporation:
(1) shall perform only functions consistent with this
subchapter;
(2) shall exercise its powers through a governing
board;
(3) is subject to the regulation of the commission;
and
(4) has a legal existence as a public corporate body
and instrumentality of the state separate and distinct from the
state.
(b) Assets of the corporation may not be considered part of
any state fund. The state may not budget for or provide any state
money to the corporation. The debts, claims, obligations, and
liabilities of the corporation may not be considered to be a debt of
the state or a pledge of its credit.
(c) The corporation must be self-funded. Before the
imposition of transition charges or system restoration charges, the
corporation may accept and expend for its operating expenses money
that may be received from any source, including financing
agreements with the state, a commercial bank, or another entity to:
(1) finance the corporation's obligations until the
corporation receives sufficient transition property to cover its
operating expenses as financing costs; and
(2) repay any short-term borrowing under any such
financing agreements.
(d) The corporation has the powers, rights, and privileges
provided for a corporation organized under Chapter 22, Business
Organizations Code, subject to the express exceptions and
limitations provided by this subchapter.
(e) An organizer selected by the executive director of the
commission shall prepare the certificate of formation of the
corporation under Chapters 3 and 22, Business Organizations Code.
The certificate of formation must be consistent with the provisions
of this subchapter.
(f) State officers and agencies are authorized to render
services to the corporation, within their respective functions, as
may be requested by the commission or the corporation.
(g) The corporation or an issuer may:
(1) retain professionals, financial advisors, and
accountants the corporation or issuer considers necessary to
fulfill the corporation's or issuer's duties under this subchapter;
and
(2) determine the duties and compensation of a person
retained under Subdivision (1), subject to the approval of the
commission.
(h) The corporation is governed by a board of five directors
appointed by the commission for two-year terms.
(i) An official action of the board requires the favorable
vote of a majority of the directors present and voting at a meeting
of the board.
Sec. 36.454. POWERS AND DUTIES OF CORPORATION. (a) The
corporation, in each instance subject to the prior authorization of
the commission, shall participate in the financial transactions
authorized by this subchapter. The corporation may not engage in
business activities except those activities provided for in this
subchapter and those ancillary and incidental thereto. The
corporation or an issuer may not apply proceeds of system
restoration bonds or system restoration charges to a purpose not
specified in a financing order, to a purpose in an amount that
exceeds the amount allowed for such purpose in the order, or to a
purpose in contravention of the order.
(b) The board of the corporation, under the provisions of
this subchapter, may employ or retain persons as are necessary to
perform the duties of the corporation.
(c) The corporation may:
(1) acquire, sell, pledge, or transfer transition
property as necessary to effect the purposes of this subchapter
and, in connection with the action, agree to such terms and
conditions as the corporation deems necessary and proper,
consistent with the terms of a financing order:
(A) to acquire transition property and to pledge
such transition property, and any other collateral:
(i) to secure payment of system restoration
bonds issued by the corporation, together with payment of any other
qualified costs; or
(ii) to secure repayment of any borrowing
from any other issuer of system restoration bonds; or
(B) to sell the transition property to another
issuer, which may in turn pledge that transition property, together
with any other collateral, to the repayment of system restoration
bonds issued by the issuer together with any other qualified costs;
(2) issue system restoration bonds on terms and
conditions consistent with a financing order;
(3) borrow funds from an issuer of system restoration
bonds to acquire transition property, and pledge that transition
property to the repayment of any borrowing from an issuer, together
with any related qualified costs, all on terms and conditions
consistent with a financing order;
(4) sue or be sued in its corporate name;
(5) intervene as a party before the commission or any
court in this state in any matter involving the corporation's
powers and duties;
(6) negotiate and become a party to contracts as
necessary, convenient, or desirable to carry out the purposes of
this subchapter; and
(7) engage in corporate actions or undertakings that
are permitted for nonprofit corporations in this state and that are
not prohibited by, or contrary to, this subchapter.
(d) The corporation shall maintain separate accounts and
records relating to each electric utility that collects system
restoration charges for all charges, revenues, assets,
liabilities, and expenses relating to that utility's related system
restoration bond issuances.
(e) The board of the corporation may not authorize any
rehabilitation, liquidation, or dissolution of the corporation and
a rehabilitation, liquidation, or dissolution of the corporation
may not take effect as long as any system restoration bonds are
outstanding unless adequate protection and provision have been made
for the payment of the bonds pursuant to the documents authorizing
the issuance of the bonds. In the event of any rehabilitation,
liquidation, or dissolution, the assets of the corporation must be
applied first to pay all debts, liabilities, and obligations of the
corporation, including the establishment of reasonable reserves
for any contingent liabilities or obligations, and all remaining
funds of the corporation must be applied and distributed as
provided by an order of the commission.
(f) Before the date that is two years and one day after the
date that the corporation no longer has any payment obligation with
respect to any system restoration bonds, including any obligation
to an issuer of any system restoration bonds outstanding, the
corporation may not file a voluntary petition under federal
bankruptcy law and neither any public official nor any
organization, entity, or other person may authorize the corporation
to be or to become a debtor under federal bankruptcy law during that
period. The state covenants that it will not limit or alter the
denial of authority under this subsection or Subsection (e), and
the provisions of this subsection and Subsection (e) are hereby
made a part of the contractual obligation that is subject to the
state pledge set forth in Section 39.310.
(g) The corporation shall prepare and submit to the
commission for approval an annual operating budget. If requested by
the commission, the corporation shall prepare and submit an annual
report containing the annual operating and financial statements of
the corporation and any other appropriate information.
Sec. 36.455. COMMISSION REGULATION OF CORPORATION. The
commission shall regulate the corporation as provided by this
subchapter and consistent with the manner in which it regulates
public utilities. Notwithstanding the regulation authorized by
this section, the corporation is not a public utility.
Sec. 36.456. FINANCING ORDER. (a) This section applies to
the commission's issuance of a financing order under this
subchapter.
(b) Except as otherwise specifically provided by this
subchapter, the provisions of Subchapter I of this chapter and, to
the extent made applicable to Subchapter I of this chapter,
Subchapter G, Chapter 39, that address the commission's issuance of
a financing order apply to the commission's issuance of a financing
order under this subchapter.
(c) The corporation and any issuer must be a party to the
commission's proceedings that address the issuance of a financing
order along with the relevant electric utility.
(d) In addition to the requirements of Subchapter I, as
applicable, a financing order issued under this subchapter must:
(1) require the sale, assignment, or other transfer to
the corporation of certain specified transition property created by
the financing order in the manner contemplated by Section 39.308,
and, following that sale, assignment, or transfer, require that
system restoration charges paid under any financing order be
created, assessed, and collected as the property of the
corporation, subject to subsequent sale, assignment, or transfer by
the corporation as authorized under this subchapter;
(2) authorize:
(A) the issuance of system restoration bonds by
the corporation secured by a pledge of specified transition
property, and the application of the proceeds of those system
restoration bonds, net of issuance costs, to the acquisition of the
transition property from the electric utility; or
(B) the acquisition of specified transition
property from the electric utility by the corporation financed:
(i) by a loan by an issuer to the
corporation of the proceeds of system restoration bonds, net of
issuance costs, secured by a pledge of the specified transition
property; or
(ii) by the acquisition by an issuer from
the corporation of the transition property financed from the net
proceeds of transition bonds issued by the issuer; and
(3) authorize the electric utility to serve as
collection agent to collect the system restoration charges and
transfer the collected charges to the corporation, the issuer, or a
financing party, as appropriate.
(e) After issuance of the financing order, the corporation
shall arrange for the issuance of system restoration bonds as
specified in the financing order by it or another issuer selected by
the corporation and approved by the commission.
(f) System restoration bonds issued pursuant to a financing
order under this section are secured only by the related transition
property and any other funds pledged under the bond documents. No
assets of the state or electric utility are subject to claims by
such bondholders. Notwithstanding the provisions of Subchapter G,
Chapter 39, following assignment of the transition property, the
electric utility does not have any beneficial interest or claim of
right in such system restoration charges or in any transition
property.
Sec. 36.457. SEVERABILITY. Effective on the date the first
system restoration bonds associated with system restoration costs
are issued under this subchapter, if any provision in this title or
portion of this title is held to be invalid or is invalidated,
superseded, replaced, repealed, or expires for any reason, that
occurrence does not affect the validity or continuation of this
subchapter, Subchapter I of this chapter, as that subchapter
applies to this subchapter, Subchapter G, Chapter 39, as that
subchapter applies to this subchapter, or any part of those
provisions, or any other provision of this title that is relevant to
the issuance, administration, payment, retirement, or refunding of
system restoration bonds or to any actions of the electric utility,
its successors, an assignee, a collection agent, the corporation,
an issuer, or a financing party, and those provisions shall remain
in full force and effect.
SECTION 3. Section 37.056(c), Utilities Code, is amended to
read as follows:
(c) The commission shall grant each certificate on a
nondiscriminatory basis after considering:
(1) the adequacy of existing service;
(2) the need for additional service;
(3) the effect of granting the certificate on the
recipient of the certificate and any electric utility serving the
proximate area; and
(4) other factors, such as:
(A) community values;
(B) recreational and park areas;
(C) historical and aesthetic values;
(D) environmental integrity;
(E) the probable improvement of service or
lowering of cost to consumers in the area if the certificate is
granted, including any potential economic or reliability benefits
associated with dual fuel and fuel storage capabilities in areas
outside the ERCOT power region; and
(F) to the extent applicable, the effect of
granting the certificate on the ability of this state to meet the
goal established by Section 39.904(a) of this title.
SECTION 4. Section 37.058, Utilities Code, is amended by
adding Subsection (e) to read as follows:
(e) Notwithstanding any other provision of this title, an
electric utility operating solely outside of the ERCOT power region
may, but shall not be required to, obtain a certificate to install,
own, or operate a generation facility with a capacity of 10
megawatts or less.
SECTION 5. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2021.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1510 was passed by the House on April
20, 2021, by the following vote: Yeas 145, Nays 0, 1 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1510 was passed by the Senate on May
19, 2021, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor