87R16129 CXP-F
By: Paddie H.B. No. 1520
Substitute the following for H.B. No. 1520:
By: Darby C.S.H.B. No. 1520
A BILL TO BE ENTITLED
AN ACT
relating to the recovery and securitization of certain
extraordinary costs incurred by certain gas utilities; providing
authority to issue bonds and impose fees and assessments.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 1232.002, Government Code, is amended to
read as follows:
Sec. 1232.002. PURPOSE. The purpose of this chapter is to
provide a method of financing for:
(1) the acquisition or construction of buildings;
[and]
(2) the purchase or lease of equipment by executive or
judicial branch state agencies; and
(3) customer rate relief bonds authorized by the
Railroad Commission of Texas.
SECTION 2. Section 1232.066(a), Government Code, is amended
to read as follows:
(a) The board's authority under this chapter is limited to
the financing of:
(1) the acquisition or construction of a building;
(2) the purchase or lease of equipment; [or]
(3) stranded costs of a municipal power agency; or
(4) customer rate relief bonds approved by the
Railroad Commission of Texas.
SECTION 3. Subchapter C, Chapter 1232, Government Code, is
amended by adding Section 1232.1072 to read as follows:
Sec. 1232.1072. ISSUANCE OF OBLIGATIONS FOR FINANCING
CUSTOMER RATE RELIEF BONDS. (a) The authority, either directly or
by means of a trust established by the authority, may issue
obligations or other evidences of indebtedness for financing
customer rate relief bonds approved under Subchapter I, Chapter
104, Utilities Code.
(b) On a request to the authority from the Railroad
Commission of Texas, the authority shall:
(1) issue obligations or other evidences of
indebtedness in the amount of the requested customer rate relief
bonds, plus the issuance costs; and
(2) grant to the Railroad Commission of Texas the
proceeds of the obligations or evidences of indebtedness described
by Subdivision (1).
(c) The request from the Railroad Commission of Texas
described by Subsection (b) must include a statement of the payment
terms for recovering customer rate relief costs.
(d) Obligations or evidences of indebtedness the authority
issues under this section must be created under financing orders
issued by the Railroad Commission of Texas. The financing orders
must authorize the authority to create legally isolated,
bankruptcy-remote financing entities to hold customer rate relief
property. The authority may establish a financing entity
authorized by a financing order.
(e) Obligations or evidences of indebtedness the authority
issues under this section for each approved customer rate relief
financing must include, as part of the financing costs of the
financing, the administrative costs related to the financing.
(f) Obligations or evidences of indebtedness the authority
issues under this section must be secured by:
(1) customer rate relief property, as defined by
Section 104.362, Utilities Code; and
(2) customer rate relief charges, as defined by
Section 104.362, Utilities Code, that are nonbypassable, as defined
by that section, imposed by the authority on customers receiving
natural gas services provided by the gas utility, as defined by that
section, that is making the request to recover a regulatory asset
under Section 104.365, Utilities Code.
(g) The customer rate relief property and customer rate
relief charges described by Subsection (f) must be consistent with
the customer rate relief recovery terms stated in the gas utility's
request to recover a regulatory asset under Section 104.365,
Utilities Code, unless otherwise approved by the Railroad
Commission of Texas.
(h) An obligation or evidence of indebtedness the authority
issues under this section is not a debt of this state, the Railroad
Commission of Texas, or a gas utility.
(i) The Railroad Commission of Texas shall provide to the
authority assistance necessary to ensure that the customer rate
relief charges described by Subsection (f) are collected and
enforced, either directly or by using the assistance and powers of
the gas utility requesting to recover a regulatory asset under
Section 104.365, Utilities Code, as servicer.
(j) The authority and the Railroad Commission of Texas have
all the powers necessary to perform the duties and responsibilities
described by this section. This section shall be interpreted
broadly in a manner consistent with the most cost-effective
financing of customer rate relief related costs.
(k) Obligations or evidences of indebtedness issued by the
authority under this section may be structured so that any interest
on the obligations or evidences of indebtedness is excluded from
gross income for federal income tax purposes. Any interest on the
obligations or evidences of indebtedness is not subject to taxation
by and may not be included as part of the measurement of a tax by
this state or a political subdivision of this state.
(l) The authority shall make periodic reports to the
Railroad Commission of Texas and the public regarding each
financing made under this section.
SECTION 4. Section 1232.108, Government Code, is amended to
read as follows:
Sec. 1232.108. LEGISLATIVE AUTHORIZATION REQUIRED. Except
as permitted by Section 1232.1072, 1232.109, 2166.452, or 2166.453,
before the board may issue and sell bonds, the legislature by the
General Appropriations Act or other law must have authorized:
(1) the specific project for which the bonds are to be
issued and sold; and
(2) the estimated cost of the project or the maximum
amount of bonded indebtedness that may be incurred by the issuance
and sale of bonds for the project.
SECTION 5. Chapter 104, Utilities Code, is amended by
adding Subchapter I to read as follows:
SUBCHAPTER I. CUSTOMER RATE RELIEF BONDS
Sec. 104.361. PURPOSE; RAILROAD COMMISSION DUTY. (a) The
purpose of this subchapter is to reduce the cost that customers
would otherwise experience because of extraordinary costs that gas
utilities incur to secure gas supply and provide service during
natural and man-made disasters, system failures, or other
catastrophic events, and to restore gas utility systems after those
types of events, by providing securitization financing for gas
utilities to recover those costs. The securitization financing
mechanism authorized by this subchapter will:
(1) provide rate relief to customers by extending the
period during which the extraordinary costs described by Subsection
(a) are recovered from customers; and
(2) support the financial strength and stability of
gas utility companies.
(b) The railroad commission shall ensure that:
(1) securitization provides tangible and quantifiable
benefits to customers, greater than would have been achieved absent
the issuance of customer rate relief bonds; and
(2) the structuring and pricing of the customer rate
relief bonds result in customer rate relief bond charges consistent
with the terms of the applicable financing order and market
conditions at the time of the pricing of the customer rate relief
bonds.
Sec. 104.362. DEFINITIONS. In this subchapter:
(1) "Ancillary agreement" means a financial
arrangement entered into in connection with the issuance or payment
of customer rate relief bonds that enhances the marketability,
security, or creditworthiness of customer rate relief bonds,
including a bond, insurance policy, letter of credit, reserve
account, surety bond, interest rate or currency swap arrangement,
interest rate lock agreement, forward payment conversion
agreement, other hedging arrangement, or liquidity or credit
support arrangement.
(2) "Assignee" means any legally recognized entity to
which an interest in customer rate relief property is transferred,
other than as security. The term includes a corporation, limited
liability company, public authority, trust, general partnership,
limited partnership, or other financing entity.
(3) "Authority" means the Texas Public Finance
Authority.
(4) "Bond administrative expenses" means expenses
incurred to administer customer rate relief bonds issued under this
subchapter, including fees for paying agents, trustees, and
attorneys, and for paying for other professional services necessary
to ensure compliance with applicable state or federal law.
(5) "Bond obligations" means the principal of a
customer rate relief bond and any premium and interest on a customer
rate relief bond issued under this subchapter, together with any
amount owed under a related ancillary agreement or credit
agreement.
(6) "Credit agreement" means a loan agreement,
revolving credit agreement, agreement establishing a line of
credit, or similar financing arrangement.
(7) "Customer rate relief bonds" means bonds, notes,
certificates, or other evidences of indebtedness or ownership the
proceeds of which are used directly or indirectly to recover,
finance, or refinance regulatory assets approved by the railroad
commission, including extraordinary costs and related financing
costs, and that are:
(A) issued by an assignee under a financing
order; and
(B) payable from and secured by customer rate
relief property and amounts on deposit in the obligation trust fund
to the extent provided by the applicable financing order.
(8) "Customer rate relief charges" means the amounts
authorized by the railroad commission as nonbypassable charges to
repay, finance, or refinance regulatory assets, including
extraordinary costs, financing costs, and other costs authorized by
the financing order:
(A) imposed on and included in customer bills of
a gas utility that has received a regulatory asset determination
under Section 104.365;
(B) collected in full by a gas utility that has
received a regulatory asset determination under Section 104.365, or
its successors or assignees, or a collection agent, as servicer,
separate and apart from the gas utility's base rates; and
(C) paid by all existing or future customers
receiving service from a gas utility that has received a regulatory
asset determination under Section 104.365 or its successors or
assignees, even if a customer elects to purchase gas from an
alternative gas supplier.
(9) "Customer rate relief property" means property
described by Section 104.367.
(10) "Financing costs" means any of the following:
(A) interest and acquisition, defeasance, or
redemption premiums that are payable on customer rate relief bonds;
(B) a payment required under an ancillary
agreement and an amount required to fund or replenish reserve or
other accounts established under the terms of an indenture,
ancillary agreement, or other financing document pertaining to
customer rate relief bonds;
(C) issuance costs and ongoing costs related to
supporting, repaying, servicing, or refunding customer rate relief
bonds, including servicing fees, accounting and auditing fees,
trustee fees, legal fees and expenses, consulting fees,
administrative fees, printing fees, financial advisor fees and
expenses, Securities and Exchange Commission registration fees,
issuer fees, placement and underwriting fees, capitalized
interest, overcollateralization funding requirements, rating
agency fees, stock exchange listing and compliance fees, filing
fees, and any other bond administration expenses; and
(D) the costs to the railroad commission of
acquiring professional services for the purpose of evaluating
extraordinary costs under this subchapter.
(11) "Financing order" means an order adopted under
Section 104.366 approving the issuance of customer rate relief
bonds and the creation of customer rate relief property and
associated customer rate relief charges for the recovery of
regulatory assets, including extraordinary costs, related
financing costs, and other costs authorized by the financing order.
(12) "Financing party" means a holder of customer rate
relief bonds, including a trustee, collateral agent, any party
under an ancillary agreement, or other person acting for the
holder's benefit.
(13) "Gas utility" means:
(A) an operator of natural gas distribution
pipelines that delivers and sells natural gas to the public and that
is subject to the railroad commission's jurisdiction under Section
102.001; or
(B) an operator that transmits, transports,
delivers, or sells natural gas or synthetic natural gas to
operators of natural gas distribution pipelines and whose rates for
those services are established by the railroad commission in a rate
proceeding filed under this chapter.
(14) "Nonbypassable" means a charge that may not be
offset by any credit.
(15) "Normalized market pricing" means the average
monthly pricing at the Henry Hub for the three months immediately
preceding the month during which extraordinary costs were incurred,
plus contractual adders to the index price and other non-indexed
gas procurement costs.
(16) "Regulatory asset" includes extraordinary costs:
(A) recorded by a gas utility in the utility's
books and records in accordance with the uniform system of accounts
prescribed for natural gas companies subject to the provisions of
the Natural Gas Act (15 U.S.C. Section 717 et seq.) by the Federal
Energy Regulatory Commission and generally accepted accounting
principles; or
(B) classified as a receivable or financial asset
under international financial reporting standards under the
railroad commission's authorization in the Notice of Authorization
for Regulatory Asset Accounting for Local Distribution Companies
Affected by the February 2021 Winter Weather Event issued February
13, 2021, or any later notice or order issued by the railroad
commission for other similarly authorized natural or man-made
disasters or system failure events.
Sec. 104.363. EXTRAORDINARY COSTS. (a) For the purposes of
this subchapter, extraordinary costs are the reasonable and
necessary costs placed in a regulatory asset and approved by the
railroad commission in a regulatory asset determination under
Section 104.365.
(b) Extraordinary costs include any costs of acquiring,
retiring, and refunding a gas utility's existing debt and equity
securities or credit facilities in connection with the issuance of
customer rate relief bonds.
(c) Extraordinary costs may include costs incurred to serve
customers, including capital costs and other costs expensed,
charged to self-insurance reserves, deferred, capitalized, or
otherwise financed, that are incurred by a gas utility or on behalf
of the gas utility for gas procurement, supply and system
restoration and infrastructure, operations and administration in
response to:
(1) a tropical storm or hurricane, ice or snow storm,
flood, or other weather-related event;
(2) a natural or man-made disaster;
(3) a system failure; or
(4) another catastrophic event.
(d) Extraordinary costs may include:
(1) natural gas procurement costs above normalized
market pricing, mobilization, staging, construction,
reconstruction, replacement, or repair of system facilities; and
(2) reasonable estimates of the costs of natural gas
procurement above normalized market pricing and any activity
conducted or expected to be conducted by or on behalf of the gas
utility in connection with the restoration of service or
infrastructure associated with natural gas outages.
(e) Cost estimates described by Subsection (d)(2) may be
subject to reconciliation after the actual costs become known
before the railroad commission makes a determination as to the
utility's regulatory asset in accordance with Section 104.365.
(f) A carrying charge interest rate at the gas utility's
cost of long-term debt as last approved by the railroad commission
in a general rate proceeding may be considered an extraordinary
cost if the railroad commission's final order approving the cost of
long-term debt was filed not more than three years before the date
the application for regulatory asset recovery was filed. The
railroad commission's final order may be an order on rehearing.
(g) If the railroad commission's final order approving the
gas utility's current cost of long-term debt does not meet the
requirements of Subsection (f), an alternative cost of long-term
debt must be used that reflects the average cost of long-term debt
established by the railroad commission for all gas utilities based
on final orders issued in the most recent three-year period
preceding the date the application for regulatory asset recovery is
filed.
(h) The carrying charge interest rate set at the applicable
cost of long-term debt described by Subsection (f) or (g) must be
applied from the date on which the extraordinary costs were
incurred until the date that:
(1) customer rate relief bonds are issued; or
(2) extraordinary costs are otherwise recovered by the
gas utility under this subchapter.
Sec. 104.364. JURISDICTION AND POWERS OF RAILROAD
COMMISSION AND OTHER REGULATORY AUTHORITIES. (a) The railroad
commission may authorize the issuance of customer rate relief bonds
if the requirements of Section 104.366 are met.
(b) The railroad commission may assess to a gas utility
costs associated with administering this subchapter. Assessments
must be recovered from rate-regulated customers as part of gas
cost.
(c) The railroad commission has exclusive, original
jurisdiction to issue financing orders that authorize the creation
of customer rate relief property, customer rate relief charges to
service customer rate relief bonds, and financing costs. Customer
rate relief charges, if authorized by the railroad commission
through a financing order in that commission's sole discretion,
must be imposed pursuant to customer rate relief property and not by
a gas utility.
(d) Except as provided by Subsection (c), this subchapter
does not limit or impair a regulatory authority's plenary
jurisdiction over the rates, charges, and services rendered by gas
utilities in this state under Chapter 102.
Sec. 104.365. REGULATORY ASSET DETERMINATION. (a) The
railroad commission, on application of a gas utility to recover a
regulatory asset, shall determine the regulatory asset amount to be
recovered by the gas utility.
(b) A gas utility desiring to participate in the customer
rate relief bond process under a financing order must file an
application with the railroad commission not later than the 90th
day after the date of the conclusion of the event for which
regulatory asset recovery is requested. The railroad commission
shall determine an application date deadline consistent with this
subsection.
(c) Notwithstanding the deadline provided by Subsection
(b), a gas utility desiring to participate in the customer rate
relief bond process under a financing order by requesting recovery
of a regulatory asset relating to the February 2021 winter storm may
file an application with the railroad commission on or before the
60th day after the effective date of the Act enacting this
subchapter.
(d) If the railroad commission does not make a final
determination regarding the regulatory asset amount to be recovered
by a gas utility before the 91st day after the gas utility files the
application, the railroad commission is considered to have approved
the regulatory asset amount requested by the gas utility.
(e) The regulatory asset determination is not subject to
reduction, impairment, or adjustment by further action of the
railroad commission, except as authorized by Section 104.370.
(f) The regulatory asset determination is not subject to
rehearing by the railroad commission and may be appealed only to a
Travis County district court by a party to the proceeding. The
appeal must be filed not later than the 15th day after the date the
order is signed by the railroad commission.
(g) The judgment of the district court may be reviewed only
by direct appeal to the Supreme Court of Texas. The appeal must be
filed not later than the 15th day after the date of entry of
judgment.
(h) All appeals shall be heard and determined by the
district court and the Supreme Court of Texas as expeditiously as
possible with lawful precedence over other matters. Review on
appeal shall be based solely on the record before the railroad
commission and briefs to the court and limited to whether the
financing order:
(1) complies with the constitution and laws of this
state and the United States; and
(2) is within the authority of the railroad commission
to issue under this subchapter.
(i) The railroad commission by order shall establish a
schedule, filing requirements, and a procedure for determining the
prudence of the costs included in a gas utility's regulatory asset.
(j) To the extent a gas utility subject to this subchapter
receives insurance proceeds, governmental grants, or other sources
of funding that compensate or otherwise reimburse or indemnify the
gas utility for extraordinary costs following the issuance of
customer rate relief bonds, the gas utility may record the amount in
a regulatory liability account and that amount shall be reviewed in
a future proceeding. If an audit conducted under a valid gas
purchase agreement identifies a change of greater than five percent
to the total amount of the gas supply costs incurred during the
event described by Section 104.363(c), the gas utility may record
the amount in a regulatory asset or regulatory liability account
and that amount shall be reviewed for recovery in a future
proceeding.
Sec. 104.366. FINANCING ORDERS AND ISSUANCE OF CUSTOMER
RATE RELIEF BONDS. (a) If the railroad commission determines that
customer rate relief bond financing for extraordinary costs is the
most cost-effective method of funding regulatory asset
reimbursements to be made to gas utilities, the railroad
commission, after the final resolution of all applications filed
under Section 104.365, may request the authority to issue customer
rate relief bonds on the railroad commission's behalf. Before
making the request, the railroad commission must issue a financing
order that complies with this section.
(b) To make the determination described by Subsection (a),
the railroad commission must find that the proposed structuring,
expected pricing, and proposed financing costs of the customer rate
relief bonds are reasonably expected to provide benefits to
customers by comparing:
(1) the net present value of the costs to customers
resulting from the issuance of customer rate relief bonds; and
(2) the costs that would result from the application
of conventional methods of financing or recovering gas utility
extraordinary costs and other costs authorized by a financing
order.
(c) The financing order must:
(1) include a finding that the use of the
securitization financing mechanism is in the public interest and
consistent with the purposes of this subchapter;
(2) detail the total amount of the regulatory asset
determinations to be included in the customer rate relief bond
issuance;
(3) authorize the recovery of any tax obligation of
the gas utilities arising or resulting from:
(A) receipt of customer rate relief bond
proceeds; or
(B) collection or remittance of customer rate
relief charges through the gas utilities' gas cost recovery
mechanism or other means that the railroad commission determines
reasonable;
(4) authorize the authority's issuance of customer
rate relief bonds through one or more legally isolated,
bankruptcy-remote financing entities established by the authority;
(5) include a statement of:
(A) the aggregated regulatory asset
determination to be included in the principal amount of the
customer rate relief bonds, not to exceed $10 billion for any
separate bond issue; and
(B) the maximum scheduled final maturity of the
customer rate relief bonds, not to exceed 30 years, except that the
legal final maturity may be longer based on rating agency and market
considerations;
(6) provide for the imposition, collection, and
mandatory periodic formulaic adjustment of customer rate relief
charges in accordance with Section 104.370 by all gas utilities for
which a regulatory asset determination has been made under Section
104.365 to guarantee that the bonds will be paid in full;
(7) authorize the creation of customer rate relief
property in favor of the authority and the authority's transfer of
the property;
(8) direct the authority to disperse the proceeds of
customer rate relief bonds to gas utilities for which a regulatory
asset determination has been made under Section 104.365 and include
the amounts to be distributed;
(9) provide that customer rate relief charges be
collected and allocated among customers of each utility for which a
regulatory determination has been made under Section 104.365
through uniform monthly volumetric charges to be paid by customers
as a component of the gas utility's gas cost or in another manner
that the railroad commission determines reasonable; and
(10) reflect the commitment made by each gas utility
receiving proceeds that the proceeds are in lieu of recovery of
those costs through the regular ratemaking process or other
mechanism to the extent the costs are reimbursed to the gas utility
by customer rate relief bond financing proceeds.
(d) The principal amount determined by the railroad
commission may be increased to include an amount sufficient to:
(1) pay the financing costs for issuance;
(2) reimburse the authority for any costs incurred for
the issuance;
(3) provide a bond reserve fund; and
(4) capitalize interest for the period determined
necessary by the railroad commission.
(e) The authority, consistent with this subchapter and the
terms of the financing order, shall:
(1) issue customer rate relief bonds at the railroad
commission's request, in accordance with the requirements of
Chapter 1232, Government Code, and other provisions of Title 9,
Government Code, that apply to bond issuance by a state agency; and
(2) determine the methods of sale, types of bonds,
bond forms, maximum interest rates, and other terms of the customer
rate relief bonds that in the authority's judgment best achieve the
economic goals of the financing order and effect the financings at
the lowest practicable cost.
(f) The authority shall establish legally isolated,
bankruptcy-remote financing entities and may enter into credit
agreements or ancillary agreements in connection with the issuance
of customer rate relief bonds.
(g) The financing order becomes effective in accordance
with its terms. The financing order, together with the customer
rate relief property and the customer rate relief charges
authorized by the financing order, are irrevocable and not subject
to reduction, impairment, or adjustment by further action of the
railroad commission, except as provided under Subsection (i) and
authorized by Section 104.370.
(h) The railroad commission shall issue a financing order
under this section not later than the 90th day following the date of
the conclusion of all proceedings filed under Section 104.365.
(i) A financing order is not subject to rehearing by the
railroad commission. A financing order may be appealed only to a
Travis County district court by a party to the proceeding. The
appeal must be filed not later than the 15th day after the date the
financing order is signed by the railroad commission.
(j) The judgment of the district court may be reviewed only
by direct appeal to the Supreme Court of Texas. The appeal must be
filed not later than the 15th day after the date of entry of
judgment.
(k) All appeals shall be heard and determined by the
district court and the Supreme Court of Texas as expeditiously as
possible with lawful precedence over other matters. Review on
appeal shall be based solely on the record before the railroad
commission and briefs to the court and is limited to whether the
financing order:
(1) complies with the constitution and laws of this
state and the United States; and
(2) is within the authority of the railroad commission
to issue under this subchapter.
(l) The authority shall issue customer rate relief bonds not
later than the 45th day after receipt of a financing order issued
under this section.
(m) The authority shall deliver customer rate relief bond
proceeds net of upfront financing costs to each gas utility
sufficient to reimburse the gas utility the regulatory asset amount
determined to be reasonable under Section 104.365 not later than
the 15th day after the date of issuance of the customer rate relief
bonds.
(n) For the weather-related event that occurred in February
2021, the authority shall deliver customer rate relief bond
proceeds net of upfront financing costs to each gas utility no later
than December 31, 2021. This subsection expires September 1, 2023.
Sec. 104.367. PROPERTY RIGHTS. (a) Customer rate relief
bonds are solely the obligation of the assignee or issuing
financing entity and are not a debt of a gas utility or a debt or a
pledge of the faith and credit of this state or any political
subdivision of this state.
(b) Customer rate relief bonds are nonrecourse to the credit
or any assets of this state or the authority.
(c) The rights and interests of the authority or the
authority's successor under a financing order, including the right
to impose and receive customer rate relief charges authorized in
the financing order, are only contract rights until first
transferred to an assignee or pledged in connection with the
issuance of the customer rate relief bonds, at which time the rights
and interests become customer rate relief property.
(d) Customer rate relief property constitutes a present
property right for purposes of contracts concerning the sale or
pledge of property, notwithstanding that the imposition and
collection of customer rate relief charges depends on further acts
of the gas utility or others that have not yet occurred. The
financing order remains in effect, and the customer rate relief
property continues to exist, for the same period as the pledge of
the state described by Section 104.374.
(e) All revenue and collections resulting from customer
rate relief charges constitute proceeds only of a property right
arising from the financing order.
(f) An amount owed by the authority or an issuer under a
credit agreement is payable from and secured by the customer rate
relief property, including customer rate relief charges and amounts
to the extent provided in the proceedings authorizing the credit
agreement.
Sec. 104.368. PROPERTY INTEREST NOT SUBJECT TO SETOFF,
COUNTERCLAIM, SURCHARGE, OR DEFENSE. The interest of an assignee
or pledgee in customer rate relief property, including the revenue
and collections arising from customer rate relief charges, are not
subject to setoff, counterclaim, surcharge, or defense by the gas
utility or any other person or in connection with the bankruptcy of
the gas utility, the authority, or any other entity. A financing
order remains in effect and unabated notwithstanding the bankruptcy
of the gas utility or authority, or any successor or assignee of the
gas utility or authority.
Sec. 104.369. CUSTOMER RATE RELIEF CHARGES NONBYPASSABLE.
A financing order must include terms ensuring that the imposition
and collection of the customer rate relief charges authorized in
the order are nonbypassable.
Sec. 104.370. TRUE-UP MECHANISM. (a) A financing order
must include a formulaic true-up charge adjustment mechanism that
requires that the customer rate relief charges be reviewed and
adjusted at least annually, at time periods and frequencies
provided in the financing order, to:
(1) correct any overcollections or undercollections
of the preceding 12 months; and
(2) ensure the expected recovery of amounts sufficient
to provide for the timely payment of upcoming scheduled customer
rate relief bond payments and financing costs.
(b) True-up charge adjustments must become effective not
later than the 30th day after the date the railroad commission
receives a true-up charge adjustment letter from the gas utility or
replacement servicer notifying the railroad commission of the
pending adjustment.
(c) Any administrative review of true-up charge adjustments
must be limited to notifying the servicer of mathematical or
clerical errors in the calculation. The servicer may correct the
error and refile a true-up charge adjustment letter, with the
adjustment becoming effective as soon as practicable but not later
than the 30th day after the date the railroad commission receives
the refiled letter.
Sec. 104.371. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;
DEFAULT. (a) Customer rate relief property does not constitute an
account or general intangible under Section 9.106, Business &
Commerce Code. The creation, granting, perfection, and enforcement
of liens and security interests in customer rate relief property
are governed by this section and not by the Business & Commerce
Code.
(b) A valid and enforceable lien and security interest in
customer rate relief property may be created only by a financing
order and the execution and delivery of a security agreement with a
financing party in connection with the issuance of customer rate
relief bonds. The lien and security interest attach automatically
from the time that value is received for the customer rate relief
bonds and, on perfection through the filing of notice with the
secretary of state in accordance with the rules prescribed under
Subsection (d), are a continuously perfected lien and security
interest in the customer rate relief property and all proceeds of
the property, whether accrued or not, have priority in the order of
filing and take precedence over any subsequent judicial or other
lien creditor. The security interest is perfected as of the date of
the filing, except that if notice is filed before the 11th day after
value is received for the customer rate relief bonds, the security
interest is perfected retroactive to the date value was received.
(c) Transfer of an interest in customer rate relief property
to an assignee is perfected against all third parties, including
subsequent judicial or other lien creditors, when the financing
order becomes effective, transfer documents have been delivered to
the assignee, and a notice of that transfer has been filed in
accordance with the rules prescribed under Subsection (d). If
notice of the transfer is not filed in accordance with this
subsection before the 11th day after the delivery of transfer
documentation, the transfer of the interest is not perfected
against third parties until the notice is filed.
(d) The secretary of state shall:
(1) establish and maintain a separate system of
records for the filing of notices under this section; and
(2) adopt rules governing filing notices under this
section that are based on Chapter 9, Business & Commerce Code,
adapted to this subchapter, and use the terms as defined by this
subchapter.
(e) The priority of a lien and security interest perfected
under this section is not impaired by any later modification of the
financing order under a mechanism adopted under Section 104.370 or
by the commingling of funds arising from customer rate relief
charges with other funds. Any other security interest that may
apply to those funds is terminated when the funds are transferred to
a segregated account for the assignee or a financing party. If
customer rate relief property has been transferred to an assignee,
any proceeds of that property must be held in trust for the
assignee.
(f) If a default or termination occurs under the customer
rate relief bonds, a district court of Travis County, on
application by or on behalf of the financing parties, shall order
the sequestration and payment to the financing parties of revenue
arising from the customer rate relief charges.
Sec. 104.372. BOND PROCEEDS IN TRUST. (a) The authority
may deposit proceeds of customer rate relief bonds issued by or on
behalf of the authority under this subchapter with a trustee
selected by the authority or the proceeds may be held by the
comptroller in a dedicated trust fund outside the state treasury in
the custody of the comptroller.
(b) Bond proceeds, including investment income, must be
held in trust for the exclusive benefit of the railroad
commission's policy of reimbursing gas utility costs. The
authority shall use the proceeds to:
(1) reimburse each gas utility the regulatory asset
amount determined to be reasonable for that gas utility in the
financing order;
(2) pay the financing costs of issuing the bonds; and
(3) provide bond reserves, as applicable.
(c) If there are no outstanding bonds or bond interest to be
paid, the remaining proceeds must be used to provide credits to gas
utility customers.
Sec. 104.373. REPAYMENT OF CUSTOMER RATE RELIEF BONDS. (a)
If any customer rate relief bonds or related financing costs remain
outstanding, uniform monthly volumetric customer rate relief
charges must be paid by all current and future customers that
receive service from a gas utility for which a regulatory asset
determination has been made under Section 104.365. A gas utility
and its successors, assignees, or replacements, shall continue to
bill and collect, as servicer, customer rate relief charges from
the gas utility's current and future customers until all customer
rate relief bonds and financing costs are paid in full.
(b) The authority shall report to the railroad commission
the amount of the outstanding customer rate relief bonds issued by
the authority under this subchapter and the estimated amount of
annual bond administrative expenses.
(c) All revenue collected from the customer rate relief
charges shall be remitted promptly by the applicable servicers to
the authority to pay bond obligations, ongoing financing costs, and
bond administrative expenses to ensure timely payment of bond
obligations and financing costs.
(d) Revenue received from the customer rate relief charges
may be applied only as provided by this subchapter.
(e) Bond obligations are payable only from sources provided
for payment by this subchapter.
Sec. 104.374. PLEDGE OF STATE. (a) Customer rate relief
bonds issued under this subchapter and any related ancillary
agreements or credit agreements are not a debt or pledge of the
faith and credit of this state or a state agency or political
subdivision of this state. A customer rate relief bond, ancillary
agreement, or credit agreement is payable solely from customer rate
relief charges as provided by this subchapter.
(b) Notwithstanding Subsection (a), this state, including
the railroad commission and the authority, pledges for the benefit
and protection of the financing parties and the gas utility that
this state will not take or permit any action that would impair the
value of customer rate relief property, or, except as permitted by
Section 104.370, reduce, alter, or impair the customer rate relief
charges to be imposed, collected, and remitted to financing parties
until the principal, interest and premium, and contracts to be
performed in connection with the related customer rate relief bonds
and financing costs have been paid and performed in full. The
authority or any other entity issuing customer rate relief bonds
may include this pledge in any documentation relating to those
bonds.
Sec. 104.375. TAX EXEMPTION. (a) Customer rate relief
bonds issued under this subchapter, transactions relating to
customer rate relief bonds, and profits made from the sale of
customer rate relief bonds are exempt from taxation by this state or
a political subdivision of this state.
(b) A gas utility's receipt or collection of customer rate
relief charges is exempt from state and local income, sales,
franchise, gross receipts, and other taxes or similar assessments.
(c) A tax obligation of the gas utility arising from receipt
of customer rate relief bond proceeds or from the collection or
remittance of customer rate relief charges is an expense that may be
recovered by the gas utility.
Sec. 104.376. ASSIGNEE OR FINANCING PARTY NOT PUBLIC
UTILITY. An assignee or financing party may not be considered to be
a public utility or person providing natural gas service solely by
virtue of the transactions described by this subchapter.
Sec. 104.377. NO PERSONAL LIABILITY. A commissioner of the
railroad commission, a railroad commission employee, a member of
the board of directors of the authority, or an employee of the
authority is not personally liable for a result of an exercise of a
duty or responsibility established under this subchapter.
Sec. 104.378. SEVERABILITY. After the date customer rate
relief bonds 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 or any other provision of this
title that is relevant to the issuance, administration, payment,
retirement, or refunding of customer rate relief bonds or to any
actions of a gas utility, its successors, an assignee, a collection
agent, or a financing party, which shall remain in full force and
effect.
SECTION 6. 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.