87R13157 BRG-F
By: Larson H.B. No. 4147
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of rates for water sales and the
provision of wholesale water or sewer service.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 11.041(a), Water Code, is amended to
read as follows:
(a) Any person entitled to receive or use water from any
canal, ditch, flume, lateral, dam, reservoir, or lake or from any
conserved or stored supply may present to the commission a written
petition showing:
(1) that the person [he] is entitled to receive or use
the water;
(2) that the person [he] is willing and able to pay the
price demanded for the water [a just and reasonable price for the
water];
(3) that the party owning or controlling the water
supply has water not contracted to others and available for the
petitioner's use; and
(4) that the party owning or controlling the water
supply fails or refuses to supply the available water to the
petitioner[, or that the price or rental demanded for the available
water is not reasonable and just or is discriminatory].
SECTION 2. Section 13.043(h), Water Code, is amended to
read as follows:
(h) The utility commission may, on a motion by the utility
commission or by the appellant under Subsection (a) or [,] (b) [, or
(f)], establish interim rates to be in effect until a final decision
is made.
SECTION 3. Subtitle B, Title 2, Water Code, is amended by
adding Chapter 14 to read as follows:
CHAPTER 14. REGULATION OF RATES FOR RAW WATER SALES AND WHOLESALE
WATER OR SEWER SERVICE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 14.0101. PURPOSE. The purpose of this chapter is to
establish policies and procedures for regulating rates for raw
water sales and wholesale water and sewer service.
Sec. 14.0102. DEFINITIONS. In this chapter:
(1) "Commission" means the Texas Commission on
Environmental Quality.
(2) "Debt service and public security requirements"
means revenue or income sufficient to:
(A) meet all debt service requirements on a
public security;
(B) pay or repay any amounts required to be
deposited in any special or reserve fund required to be established
and maintained by the public security authorization for the public
security; and
(C) achieve and maintain compliance with all
revenue and income requirements set forth in the public security
authorization for the public security.
(3) "Facilities" means all the plant and equipment of
a seller required to accomplish a sale and purchase of water or the
provision of wholesale water or sewer service, including all
tangible and intangible real and personal property without
limitation, and any and all means and instrumentalities in any
manner owned, operated, leased, licensed, used, controlled,
furnished, or supplied for, by, or in connection with the business
of the seller.
(4) "Person" includes natural persons, partnerships
of two or more persons having a joint or common interest, mutual or
cooperative associations, water supply or sewer service
corporations, and corporations.
(5) "Political subdivision" includes a river
authority.
(6) "Purchaser" means a person who pays compensation
to another person for supply of raw water or a retail public utility
that pays compensation to a political subdivision or other retail
public utility for wholesale water or sewer service.
(7) "Public security" means an instrument, including a
bond, certificate, note, or other type of obligation issued or
authorized to be issued by a political subdivision under a statute,
a municipal home-rule charter, or the constitution of this state,
for the purpose or purposes of financing or refinancing the
acquisition, construction, or improvement of facilities and
payable wholly or partly from revenue or income derived from the
operation of the facilities.
(8) "Public security authorization" means a
resolution, order, or ordinance that is approved or adopted, or any
other action taken in a proceeding, by the governing body of a
political subdivision in authorizing the issuance of a public
security.
(9) "Rate" means the cost fixed, charged, or paid in
connection with the sale and purchase of water or the provision of
wholesale water or sewer service.
(10) "Raw water" means untreated surface water or
groundwater.
(11) "Retail public utility" means any person,
corporation, public utility, water supply or sewer service
corporation, municipality, political subdivision, or agency
operating, maintaining, or controlling in this state facilities for
providing potable water service or sewer service, or both, for
compensation.
(12) "Retail water or sewer utility service" means
potable water service or sewer service, or both, provided by a
retail public utility to the ultimate consumer for compensation.
(13) "Sale and purchase of water" means the provision
of raw water for compensation.
(14) "Seller" means a retail public utility or
political subdivision that sells raw water or provides wholesale
water or sewer service.
(15) "Utility commission" means the Public Utility
Commission of Texas.
(16) "Weather emergencies" means severe local storms,
winter storms, drought, flooding, coastal hazards including
tropical cyclones, and non-precipitation hazards, including
extreme hot or cold conditions and high winds.
(17) "Wholesale water or sewer service" means potable
water or sewer service, or both, provided for compensation to a
person or political subdivision who is not the ultimate consumer of
the service.
(18) "Written contract" means a written agreement
between a purchaser and seller relating to the sale and purchase of
water or to the provision of wholesale water or sewer service that
is sufficiently definite in its material terms to ascertain the
parties' intent. The term includes the following:
(A) a contract that obligates the seller to make
available and the purchaser to pay for a minimum volume of raw or
potable water, or sewer treatment capacity, regardless of the
amount actually delivered or used by the purchaser;
(B) a contract for the sale and purchase of water
or for wholesale water or sewer service in which the exact amount of
raw water purchased and sold or the volume of wholesale water or
sewer service required by the purchaser is not specifically
determined and under which the seller guarantees to meet the needs
of the purchaser;
(C) a contract that provides for the price to be
initially fixed and adjusted by the seller over time;
(D) a contract that extends for any period for
which the parties agree or provide that such contracts will
continue in effect until bonds specified by the contract and any
refunding bonds issued to pay those bonds are paid;
(E) a contract that provides that the purchaser
may not obtain water or services from a source other than the seller
except as provided by the written contract; and
(F) a contract entered into under Section
791.026, Government Code.
Sec. 14.0103. APPLICABILITY. This chapter applies to the
rates fixed, charged, or paid for the sale and purchase of water or
the provision of wholesale water or sewer service that are subject
to the jurisdiction of the utility commission under any provision
of Chapters 11 and 12. This chapter does not apply to rates,
agreements, or contracts subject to regulation under Subchapter F,
Chapter 13, or rates for retail water or sewer utility service
charged under a tariff, a rate order, or ordinance.
Sec. 14.0104. APPLICABILITY OF ADMINISTRATIVE PROCEDURE
ACT. Chapter 2001, Government Code, applies to all proceedings
under this chapter except to the extent inconsistent with this
chapter.
SUBCHAPTER B. JURISDICTION
Sec. 14.0151. RATES. (a) The utility commission shall fix
reasonable rates for the sale and purchase of water for any purpose
mentioned in Chapter 11 or 12 and for wholesale water and sewer
service.
(b) The utility commission in reviewing and fixing
reasonable rates for the sale and purchase of water or for wholesale
water or sewer service under this chapter may use any reasonable
basis for fixing rates as may be determined by the utility
commission to be appropriate under the circumstances of the case
being reviewed. The utility commission may not fix a rate which a
political subdivision may charge that is less than the amount
required to meet:
(1) the debt service and public security requirements
of that political subdivision or that impairs the political
subdivision's financial integrity; and
(2) the costs of preparedness for weather emergencies.
(c) The utility commission's jurisdiction under this
section relating to a municipality is limited to water furnished by
the municipality to another political subdivision on a wholesale
basis.
(d) In a proceeding under Section 14.0204, the utility
commission may establish interim rates and compel continuing
service during the pendency of a rate proceeding under this
chapter. The utility commission may not fix an interim rate for a
political subdivision which is less than the amount required to
meet:
(1) the debt service and public security requirements
of that political subdivision or that impairs the political
subdivision's financial integrity; and
(2) the costs of preparedness for weather emergencies.
(e) The utility commission may order a refund or assess
additional charges from the date a petition for rate review is
received by the utility commission of the difference between the
rate actually charged and the rate fixed by the utility commission,
plus interest at the statutory rate.
Sec. 14.0152. REGULATION AND REVIEW OF RATES. (a) The
utility commission shall review rates charged for the sale and
purchase of water or the provision of wholesale water or sewer
service under this chapter.
(b) The utility commission may consult with the commission
as necessary in carrying out its duties related to the regulation of
the sale and purchase of water or the provision of wholesale water
or sewer service.
Sec. 14.0153. APPELLATE JURISDICTION. (a) A retail public
utility that receives wholesale water or sewer service from another
retail public utility or political subdivision of the state,
including an affected county, may appeal to the utility commission
a rate change.
(b) An appeal of a rate change under this section must be
initiated not later than the 91st day after the date of notice of
the rate change by the filing of a petition by the retail public
utility.
SUBCHAPTER C. PROCEEDINGS BEFORE UTILITY COMMISSION ON RATES SET
UNDER WRITTEN CONTRACT
Sec. 14.0201. GENERAL POLICY. (a) This subchapter is
adopted to protect the sanctity of written contracts governed by
this chapter.
(b) It is the policy of the state that sales under written
contracts governed by this chapter shall be regulated in a fashion
that accords deference to a contract's terms unless a contract
seriously harms the public interest.
(c) The legislature finds that the use of cost of service
evidence to determine whether a rate seriously harms the public
interest does not give sufficient deference to contractual
agreements.
Sec. 14.0202. PRESUMPTION OF REASONABLENESS.
Notwithstanding any other provision of law, written contracts, and
their requirements regarding the rates paid, including
cost-allocation terms, shall be presumed to be just and reasonable
and without discrimination, unless the utility commission finds,
after hearing, that public necessity or extraordinary
circumstances require the rate to be set aside as seriously harming
the public interest. A rate may seriously harm the public interest
if the rate:
(1) significantly impairs the ability of the seller or
purchaser to continue its service;
(2) casts on other consumers an excessive burden;
(3) constitutes an abuse of monopoly power; or
(4) is unduly discriminatory.
Sec. 14.0203. LIMITATION ON CONSIDERATION OF COST OF
SERVICE. (a) The public interest does not require that rates
collected from a purchaser under a written contract equal the
seller's cost of providing service to the purchaser.
(b) The utility commission may not determine whether a rate
subject to the provisions of this subchapter seriously harms the
public interest based on an analysis of the seller's cost of
service. Cost-of-service evidence is not relevant to determine
whether a rate seriously harms the public interest in a proceeding
under this section.
Sec. 14.0204. PROCEDURE TO CHALLENGE REASONABLENESS. (a)
In any proceeding in which a rate charged under a written contract
is challenged, the utility commission must determine that the rate
seriously harms the public interest before holding a hearing on or
otherwise determining or prescribing just and reasonable rates. A
finding by the commission that the rate charged under a written
contract harms the public interest is final for purposes of appeal
in accordance with Section 2001.144, Government Code.
(b) A party adversely affected by a determination of the
utility commission that a rate charged under a written contract
seriously harms the public interest may seek judicial review of the
utility commission's determination before any utility commission
proceeding to determine or prescribe just and reasonable rates.
(c) Appeals under Subsection (b) shall be governed by the
procedures specified by Chapter 2001, Government Code, including
the requirement that a timely motion for rehearing is a
prerequisite to an appeal. Judicial review of an agency
determination regarding whether a rate seriously harms the public
interest shall be by trial de novo.
(d) The utility commission shall abate proceedings in the
event of an appeal under Subsection (b) until the entry of a final
judicial determination that a rate that is charged under a written
contract harms the public interest.
(e) After a final judicial determination that affirms a
determination by the utility commission that a rate charged under a
written contract seriously harms the public interest under
Subsection (b), or if no judicial review under Subsection (b) is
sought, the utility commission shall, before holding a hearing on,
or otherwise determining or prescribing a just and reasonable rate,
provide the contracting parties at least 60 days to amend the
contract. If the parties amend their contract, no challenge of the
contract may be brought before the utility commission by the
parties for five years from the effective date of the amended
contract.
(f) In a proceeding under this chapter, if the seller and
purchaser do not agree that the protested rate is charged under a
written contract, or if the purchaser alleges that the seller
failed to comply with any terms of a written contract, the utility
commission shall abate the proceeding until the contract dispute
has been resolved by a court of proper jurisdiction.
Sec. 14.0205. FIXING RATES. (a) On the expiration of the
60-day period required by Section 14.0204(e) or where the sale and
purchase of water or the provision of wholesale water or sewer
service is not under a written contract, the utility commission
shall, after hearing, fix just and reasonable rates to be charged.
(b) In fixing the rates under this chapter for the sale and
purchase of water and for the provision of wholesale water or sewer
service provided by a seller that is a political subdivision, the
utility commission shall fix rates that will be sufficient:
(1) to meet the political subdivision's debt service
and public security requirements or that do not impair the
political subdivision's financial integrity; and
(2) to permit the political subdivision to provide
continuity of service in weather emergencies.
(c) In determining the sufficiency of rates under
Subsection (b), the utility commission shall consider any testimony
or evidence provided by the political subdivision concerning the
political subdivision's debt service and public security
requirements or regarding impairment of the political
subdivision's financial integrity.
(d) The utility commission may not disallow the recovery of
a seller's costs or debt service and public security requirements
associated with facilities related to the provision of service on
the basis that the facilities are not used and useful in rendering
service to the purchaser or on the basis that the costs or debt
service and public security requirements were imprudently
incurred.
(e) The utility commission may, on a showing that the seller
acted arbitrarily or capriciously in including costs in a rate,
other than debt service and public security requirements, disallow
the recovery of the costs.
(f) The utility commission may not disallow costs
associated with a facility:
(1) incurred in a manner consistent with a state or a
regional water plan approved or adopted under Chapter 16; and
(2) incurred to permit the political subdivision to
provide continuity of service in weather emergencies.
Sec. 14.0206. SYSTEM RATES. A seller may charge a single
consolidated system rate for providing service to geographically
separate and distinct areas served by one or more separate
facilities. The reasonableness of the decision to charge a
consolidated system rate is not subject to review under this
chapter absent a showing that the seller acted arbitrarily or
capriciously.
Sec. 14.0207. COST ALLOCATION. In fixing the rates for sale
and purchase of water and for the provision of wholesale water or
sewer service under this chapter, the utility commission may not
allocate costs among purchasers in a manner inconsistent with the
allocation of costs contained in any contract between the seller
and another purchaser or purchasers, absent a showing that the
seller acted arbitrarily or capriciously.
SECTION 4. Sections 12.013 and 13.043(f), Water Code, are
repealed.
SECTION 5. This Act takes effect September 1, 2021.