H.B. No. 1520
AN ACT
relating to certain extraordinary costs incurred by certain gas
utilities relating to Winter Storm Uri and a study of measures to
mitigate similar future costs; 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 in accordance with Subchapter I,
Chapter 104, Utilities Code.
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 in accordance with Subchapter I,
Chapter 104, Utilities Code.
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 PROPERTY. (a) The definitions in Section
104.362, Utilities Code, apply to terms used in this section.
(b) The authority may create an issuing financing entity for
the purpose of issuing customer rate relief bonds approved by the
Railroad Commission of Texas in a financing order, as provided by
Subchapter I, Chapter 104, Utilities Code.
(c) An issuing financing entity created under this section
is a duly constituted public authority and instrumentality of the
state and is authorized to issue customer rate relief bonds on
behalf of the state for the purposes of Section 103, Internal
Revenue Code of 1986 (26 U.S.C. Section 103).
(d) The issuing financing entity must be governed by a
governing board of three members appointed by the authority. A
member of the governing board may be a current or former director of
the authority. A member of the governing board serves without
compensation but is entitled to reimbursement for travel expenses
incurred in attending board meetings.
(e) The issuing financing entity must be formed in
accordance with, be governed by, and have the powers, rights, and
privileges provided for a nonprofit corporation organized under the
Business Organizations Code, including Chapter 22 of that code,
subject to the express exceptions and limitations provided by this
section and Subchapter I, Chapter 104, Utilities Code. A single
organizer selected by the executive director of the authority shall
prepare the certificate of formation of the issuing financing
entity under Chapters 3 and 22, Business Organizations Code. The
certificate of formation must be consistent with the provisions of
this section.
(f) The authority shall establish the issuing financing
entity to act on behalf of the state as its duly constituted
authority and instrumentality to issue customer rate relief bonds
approved under Subchapter I, Chapter 104, Utilities Code.
(g) On a request to the authority from the Railroad
Commission of Texas, the authority shall direct an issuing
financing entity to issue customer rate relief bonds in accordance
with a financing order issued by the railroad commission as
provided in Subchapter I, Chapter 104, Utilities Code.
(h) Before the issuance of any customer rate relief bonds,
the authority and the Railroad Commission of Texas shall ensure
that adequate provision is made in any financing order for the
recovery of all issuance costs and all other fees, costs, and
expenses of the authority, the issuing financing entity, and any
advisors or counsel hired by the authority or the entity for the
purposes of this section during the life of the customer rate relief
bonds.
(i) Customer rate relief bonds are limited obligations of
the issuing financing entity payable solely from customer rate
relief property and any other money pledged by the issuing
financing entity to the payment of the bonds and are not a debt of
this state, the Railroad Commission of Texas, the authority, or a
gas utility.
(j) The Railroad Commission of Texas shall ensure that
customer rate relief charges are imposed, collected, and enforced
in an amount sufficient to pay on a timely basis all bond
obligations, financing costs, and bond administrative expenses
associated with any issuance of customer rate relief bonds.
(k) 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 property, including regulatory
assets, extraordinary costs, and related financing costs approved
by the Railroad Commission of Texas in accordance with Subchapter
I, Chapter 104, Utilities Code.
(l) Any interest on the customer rate relief bonds 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.
(m) The authority shall make periodic reports to the
Railroad Commission of Texas and the public regarding each
financing made in accordance with Section 104.373(b), Utilities
Code, and if required by the applicable financing order.
(n) The issuing financing entity shall issue customer rate
relief bonds in accordance with and subject to other provisions of
Title 9 applicable to the authority.
(o) The issuing financing entity may exercise the powers
granted to the governing body of an issuer with regard to the
issuance of obligations and the execution of credit agreements
under Chapter 1371. A purpose for which bonds, obligations, or
other evidences of indebtedness are issued under this section and
Subchapter I, Chapter 104, Utilities Code, constitutes an eligible
project for purposes of Chapter 1371 of this code.
(p) Assets of an issuing financing entity may not be
considered part of any state fund and must be held outside the state
treasury. The liabilities of the issuing financing entity may not
be considered to be a debt of the state or a pledge of the state's
credit. An issuing financing entity must be self-funded from
customer rate relief property and established in accordance with
Subchapter I, Chapter 104, Utilities Code. A state agency may
provide money appropriated for the purpose to the issuing financing
entity to provide for initial operational expenses of the issuing
financing entity.
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 incurred to secure gas supply and provide service during
Winter Storm Uri, and to restore gas utility systems after that
event, 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 costs described by this subsection are
recovered from customers; and
(2) support the financial strength and stability of
gas utility companies.
(b) The railroad commission shall ensure that
securitization provides tangible and quantifiable benefits to
customers, greater than would have been achieved absent the
issuance of 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, credit agreement, other hedging arrangement, or
liquidity or credit support arrangement.
(2) "Authority" means the Texas Public Finance
Authority.
(3) "Bond administrative expenses" means all costs and
expenses incurred by the railroad commission, the authority, or any
issuing financing entity to evaluate, issue, and administer
customer rate relief bonds issued under this subchapter, including
fees and expenses of the authority, any bond administrator, and the
issuing financing entity, fees for paying agents, trustees, and
attorneys, and fees for paying for other consulting and
professional services necessary to ensure compliance with this
subchapter, applicable state or federal law, and the terms of the
financing order.
(4) "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.
(5) "Credit agreement" has the meaning assigned by
Section 1371.001, Government Code.
(6) "Customer rate relief bonds" means bonds, notes,
certificates, or other evidence 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 issuing financing entity under a
financing order; and
(B) payable from and secured by customer rate
relief property and amounts on deposit in any trust accounts
established for the benefit of the customer rate relief bondholders
as approved by the applicable financing order.
(7) "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, bond administrative
expenses, 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.
(8) "Customer rate relief property" means:
(A) all rights and interests of an issuing
financing entity or any successor under a financing order,
including the right to impose, bill, collect, and receive customer
rate relief charges authorized in the financing order and to obtain
periodic adjustments to those customer rate relief charges as
provided in the financing order and in accordance with Section
104.370; and
(B) all revenues, collections, claims, rights to
payments, payments, money, or proceeds arising from the rights and
interests specified by Paragraph (A), regardless of whether the
revenues, collections, claims, rights to payments, payments,
money, or proceeds are imposed, billed, received, collected, or
maintained together with or commingled with other revenues,
collections, rights to payments, payments, money, or proceeds.
(9) "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 or credit agreement or 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 or ongoing costs related to
supporting, repaying, servicing, or refunding customer rate relief
bonds, including servicing fees, accounting or auditing fees,
trustee fees, legal fees or expenses, consulting fees,
administrative fees, printing fees, financial advisor fees or
expenses, Securities and Exchange Commission registration fees,
issuer fees, bond administrative expenses, placement and
underwriting fees, capitalized interest, overcollateralization
funding requirements including amounts to fund or replenish any
reserve established for a series of customer rate relief bonds,
rating agency fees, stock exchange listing and compliance fees,
filing fees, and any other bond administrative expenses; and
(D) the costs to the railroad commission of
acquiring professional or consulting services for the purpose of
evaluating extraordinary costs under this subchapter.
(10) "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.
(11) "Financing party" means a holder of customer rate
relief bonds, including a trustee, a pledgee, a collateral agent,
any party under an ancillary agreement, or other person acting for
the holder's benefit.
(12) "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.
(13) "Issuing financing entity" means a special
purpose nonmember, nonstock, nonprofit public corporation
established by the authority under Section 1232.1072, Government
Code.
(14) "Nonbypassable" means a charge that:
(A) must be 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 the gas
utility's successors or assignees, even if a customer elects to
purchase gas from an alternative gas supplier; and
(B) 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.
(17) "Servicer" means, with respect to each issuance
of customer rate relief bonds, the entity identified by the
railroad commission in the financing order as servicer responsible
for collecting customer rate relief charges from participating gas
utilities, remitting all collected funds to the applicable issuing
financing entity or the bond trustee, calculating true-up
adjustments, and performing any other duties as specified in the
financing order.
(18) "Winter Storm Uri" means the North American
winter storm that occurred in February 2021.
Sec. 104.363. EXTRAORDINARY COSTS. For the purposes of
this subchapter, extraordinary costs are the reasonable and
necessary costs related to Winter Storm Uri, including carrying
costs, placed in a regulatory asset and approved by the railroad
commission in a regulatory asset determination under Section
104.365.
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 property
must be created and vested in an issuing financing entity and does
not constitute property of the railroad commission or any 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. A gas utility may request recovery of
a regulatory asset under this subchapter only if the regulatory
asset is related to Winter Storm Uri.
(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 must file an application with the
railroad commission on or before the 60th day after the effective
date of the Act enacting this subchapter.
(c) If the railroad commission does not make a final
determination regarding the regulatory asset amount to be recovered
by a gas utility before the 151st 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) The railroad commission shall establish a schedule,
filing requirements, and a procedure for determining the prudence
of the costs included in a gas utility's regulatory asset.
(i) 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 for which regulatory asset recovery was approved, 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 direct an
issuing financing entity to issue customer rate relief bonds.
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:
(1) considering customer affordability; and
(2) comparing:
(A) the estimated monthly costs to customers
resulting from the issuance of customer rate relief bonds; and
(B) the estimated monthly costs to customers that
would result from the application of conventional recovery methods.
(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 issuance of customer rate relief
bonds through an issuing financing entity;
(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;
(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; and
(C) the maximum interest rate that the customer
rate relief bonds may bear, not to exceed the maximum net effective
interest rate allowed by law;
(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 and
successors of gas utilities for which a regulatory asset
determination has been made under Section 104.365 to ensure that
the customer rate relief bonds and all related financing costs will
be paid in full and on a timely basis by customer rate relief
charges;
(7) authorize the creation of customer rate relief
property in favor of the issuing financing entity and pledge of
customer rate relief property to the payment of the customer rate
relief bonds;
(8) direct the issuing financing entity to disperse
the proceeds of customer rate relief bonds, net of bond issuance
costs, reserves, and any capitalized interest, to gas utilities for
which a regulatory asset determination has been made under Section
104.365 and include the amounts to be distributed to each
participating gas utility;
(9) provide that customer rate relief charges be
collected and allocated among customers of each gas 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 a 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 financing order may provide for a centralized
servicer to coordinate with participating gas utilities who bill
and collect customer rate relief charges and to provide certain
collection and forecast data required for calculating true-up
adjustments. The financing order may not provide for the railroad
commission, the authority, the issuing financing entity, or a
participating utility to act as servicer.
(e) The principal amount determined by the railroad
commission must be increased to include an amount sufficient to:
(1) pay the financing costs associated with the
issuance, including all bond administrative expenses to be paid
from the proceeds of the bonds;
(2) reimburse the authority and the railroad
commission for any costs incurred for the issuance of the customer
rate relief bonds and related bond administrative expenses;
(3) provide for any applicable bond reserve fund; and
(4) capitalize interest for the period determined
necessary by the railroad commission.
(f) The authority, consistent with this subchapter and the
terms of the financing order, shall:
(1) direct an issuing financing entity to 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;
(2) determine the methods of sale, types of bonds,
bond forms, interest rates, principal amortization, amount of
reserves or capitalized interest, 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 financing at
the lowest practicable cost; and
(3) reimburse the railroad commission, the authority,
or any issuing financing entity for bond administrative expenses
and other costs authorized under this subchapter.
(g) To the extent authorized in the applicable financing
order, an issuing financing entity may enter into credit agreements
or ancillary agreements in connection with the issuance of customer
rate relief bonds.
(h) 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, is irrevocable and not subject
to reduction, impairment, or adjustment by further action of the
railroad commission, except as provided under Subsection (j) and
authorized by Section 104.370.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
(m) The railroad commission shall transmit a financing
order to the authority after all appeals under this section have
been exhausted.
(n) The authority shall direct an issuing financing entity
to issue customer rate relief bonds as soon as practicable and not
later than the 180th day after receipt of a financing order issued
under this section, except that the authority may cause the
issuance after the 180th day if necessary based on bond market
conditions, the receipt of necessary approvals, and the timely
receipt of necessary financial disclosure information from each
participating gas utility.
(o) The issuing financing entity shall deliver customer
rate relief bond proceeds net of upfront financing costs in
accordance with the applicable financing order.
(p) For the benefit of the authority, the issuing financing
entity, holders of customer rate relief bonds, and all other
financing parties, the railroad commission shall guarantee in a
financing order that the railroad commission will take all actions
in the railroad commission's powers to enforce the provisions of
the financing order to ensure that customer rate relief charge
revenues are sufficient to pay on a timely basis scheduled
principal and interest on the customer rate relief bonds and all
related financing costs and bond administrative expenses.
(q) The railroad commission shall make periodic reports to
the public regarding each financing.
Sec. 104.367. PROPERTY RIGHTS. (a) Customer rate relief
bonds are the limited obligation solely of the 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. A trust fund created
in connection with the issuance of customer rate relief bonds is not
subject to Subtitle B, Title 9, Property Code.
(c) The rights and interests of an issuing financing entity
or the successor under a financing order, including the right to
receive customer rate relief charges authorized in the financing
order, are only contract rights until 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 created under a financing
order is vested ab initio in the issuing financing entity. 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 an issuing financing entity under an
ancillary agreement or a credit agreement is payable from and
secured by a pledge and interest in the customer rate relief
property to the extent provided in the documents evidencing the
ancillary agreement or credit agreement.
Sec. 104.368. PROPERTY INTEREST NOT SUBJECT TO SETOFF,
COUNTERCLAIM, SURCHARGE, OR DEFENSE. The interest of an issuing
financing entity or pledgee in customer rate relief property,
including the revenue and collections arising from customer rate
relief charges, is 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, the authority,
an issuing financing entity, or any successor or assignee of the gas
utility, authority, or issuing financing entity.
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 by the servicer or replacement servicer,
including a subservicer or replacement subservicer, 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 customer rate relief bond
principal and interest payments and other 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 servicer 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
that secures customer rate relief bonds are governed by Chapter
1208, Government Code.
(b) The priority of a lien and security interest perfected
under this section is not impaired by any later adjustment of
customer rate relief charges 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 issuing financing
entity or a financing party. If customer rate relief property has
been transferred to a trustee or another pledgee of the issuing
financing entity, any proceeds of that property must be held in
trust for the financing party.
(c) 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 issuing
financing entity may deposit proceeds of customer rate relief bonds
issued by the issuing financing entity under this subchapter with a
trustee selected by the issuing financing entity 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, net of the financing costs and reserves
described by Subdivisions (2) and (3), including investment income,
must be held in trust for the exclusive benefit of the railroad
commission's policy of reimbursing gas utility costs and applied in
accordance with the financing order. The issuing financing entity
shall deliver the net proceeds, as provided in the applicable
financing order, 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 or fund any capitalized
interest, as applicable.
(c) On full payment of the customer rate relief bonds and
any related financing costs, any customer rate relief charges or
other amounts held as security for the bonds shall be used to
provide credits to gas utility customers as provided in the
financing order.
Sec. 104.373. REPAYMENT OF CUSTOMER RATE RELIEF BONDS. (a)
As long as 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 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 issuing financing entity 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 issuing financing entity or the bond trustee for the customer
rate relief bonds to pay bond obligations and ongoing financing
costs, including bond administrative expenses, to ensure timely
payment of bond obligations and financing costs.
(d) Customer rate relief property, including 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. Each
issuing financing entity shall include this pledge in any
documentation relating to customer rate relief bonds.
(c) Before the date that is two years and one day after the
date that an issuing financing entity no longer has any payment
obligation with respect to customer rate relief bonds, the issuing
financing entity may not wind up or dissolve the financing entity's
operations, may not file a voluntary petition under federal
bankruptcy law, and neither the board of the issuing financing
entity nor any public official nor any organization, entity, or
other person may authorize the issuing financing entity 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, and the provisions of this
subsection are hereby made a part of the contractual obligation
that is subject to the state pledge made in this section.
Sec. 104.375. TAX EXEMPTION. (a) The sale or purchase of
or revenue derived from services performed in the issuance or
transfer of customer rate relief bonds issued under this subchapter
is exempt from taxation by this state or a political subdivision of
this state.
(b) A gas utility's receipt of customer rate relief charges
is exempt from state and local sales and use taxes and utility gross
receipts taxes and assessments, and is excluded from revenue for
purposes of franchise tax under Section 171.1011, Tax Code.
Sec. 104.376. RECOVERABLE TAX EXPENSE. 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 allowable expense under Section 104.055.
Sec. 104.377. ISSUING FINANCING ENTITY OR FINANCING PARTY
NOT PUBLIC UTILITY. An issuing financing entity 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. 104.378. NO PERSONAL LIABILITY. A commissioner of the
railroad commission, a railroad commission employee, a member of
the board of directors of the authority, an employee of the
authority, or a director, officer, or employee of any issuing
financing entity is not personally liable for a result of an
exercise of a duty or responsibility established under this
subchapter.
Sec. 104.379. CATASTROPHIC WEATHER EVENT STUDY. (a) The
railroad commission shall conduct a study on measures to mitigate
catastrophic weather events, including measures to:
(1) establish natural gas storage capacity to ensure a
reliable gas supply, including location, ownership, and other
pertinent factors regarding gas storage capacity;
(2) assess the advantages and disadvantages of
requiring local distribution companies to use hedging tactics to
avoid volatile customer rates; and
(3) assess the advantages and disadvantages of
prohibiting spot market purchases during a catastrophic weather
event that contribute to volatile customer rates.
(b) Not later than December 1, 2022, the railroad commission
shall report the railroad commission's findings to the governor,
the lieutenant governor, and the speaker of the house of
representatives.
(c) This section expires August 31, 2023.
Sec. 104.380. SEVERABILITY. After the date customer rate
relief bonds are issued under this subchapter, if any provision in
this title or portion of this title or related provisions in Title
9, Government Code, are held to be invalid or are invalidated,
superseded, replaced, repealed, or expire for any reason, that
occurrence does not affect the validity or continuation of this
subchapter or any other provision of this title or related
provisions in Title 9, Government Code, that are 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.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1520 was passed by the House on April
20, 2021, by the following vote: Yeas 139, Nays 5, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 1520 on May 28, 2021, by the following vote: Yeas 130, Nays 12,
1 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1520 was passed by the Senate, with
amendments, on May 26, 2021, by the following vote: Yeas 29, Nays
2.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor