By: Hancock S.B. No. 1579
A BILL TO BE ENTITLED
AN ACT
relating to the recovery and securitization of extraordinary costs
incurred by certain gas utilities; authority to issue bonds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 1232.002, Government Code, is amended by
adding a new (3) 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;
(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. Chapter 1232.06(a), Government Code is amended
by adding (4) to read as follows:
Sec. 1232.06. BOARD AUTHORITY. Sec. 1232.066. BOARD
AUTHORITY. (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;
(3) stranded costs of a municipal power agency; or
(4) customer rate relief bonds approved by the
railroad commission.
SECTION 3. Chapter 1232, Government Code is amended to add a
new section to read as follows:
Sec. 1232.1072. ISSUANCE OF OBLIGATIONS FOR CUSTOMER RATE
RELIEF BONDS APPROVED BY THE RAILROAD COMMISSION OF TEXAS. (a) The
authority may, either directly or by means of a trust or trusts
established by it, issue obligations or other evidences of
indebtedness for financing customer rate relief bonds approved by
the Railroad Commission of Texas pursuant to Chapter 104, Utilities
Code.
(b) At the request of the Railroad Commission of Texas, the
authority shall issue obligations or other evidences of
indebtedness in the amount of the requested customer rate relief
bonds, plus the issuance costs, and shall make a grant of the
proceeds of the obligations or evidences of indebtedness to the
Railroad Commission of Texas. The Railroad Commission of Texas'
request under this subsection must include a statement of the
payment terms for recovering customer rate relief costs.
(c) Obligations or evidences of indebtedness issued by the
authority under this section must be created pursuant to financing
orders issued by the Railroad Commission of Texas. Such financing
orders shall authorize the authority to create isolated bankruptcy
remote financing entities to hold customer rate relief property,
and the establishment of such financing entities is hereby
authorized.
(d) Obligations or evidences of indebtedness issued by the
authority under this section shall also include administrative
costs related to each approved customer rate relief financing, as
part of the financing costs of each financing.
(e) Obligations or evidences of indebtedness issued by the
authority under this section must be secured by CRR property, as
defined in Section 104.361 (10), Utilities Code, and non-bypassable
CRR charges, as defined in Section 104.361 (9), Utilities Code,
imposed by the authority on customers receiving natural gas
services provided by the requesting gas utility, which must be
consistent with the customer rate relief recovery terms stated in
the gas utility's request unless otherwise approved by the Railroad
Commission of Texas. Obligations or evidences of indebtedness
issued by the authority under this section are not a debt of this
state, the Railroad Commission of Texas, or any gas utility.
(f) The Railroad Commission of Texas shall provide
necessary assistance to the authority to ensure the collection and
enforcement of the non-bypassable charges, either directly or by
using the assistance and powers of the requesting gas utility as
servicer.
(1) 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.
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 shall not be included as part of the measurement of a tax by
this state or a political subdivision of this state.
(2) The authority shall make periodic reports to the
Railroad Commission of Texas and the public regarding each
financing.
SECTION 4. Chapter 1232.018, Government Code is amended to
read as follows:
Sec. 1232.108. LEGISLATIVE AUTHORIZATION REQUIRED. Except
as permitted by Section 1232.109, 1232.1072, 2166.452, 1232.1072
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. 104.360. PURPOSE. The purpose of this subchapter is to
reduce the cost that customers would otherwise experience due to
the extraordinary costs that gas utilities incurred and may incur
to secure gas supply and provide service during natural and
man-made disasters, system failures, and other catastrophic events
and to restore gas utility systems after such events by providing
securitization financing enabling gas utilities to recover these
costs. This financing mechanism will provide rate relief to
customers by extending the timeframe over which the extraordinary
costs are recovered from customers and support the financial
strength and stability of gas utility companies. The commission
shall determine that securitization provides tangible and
quantifiable benefits to customers, greater than would have been
achieved absent the issuance of the CRR bonds, as defined herein.
The commission shall determine that the structuring and pricing of
the CRR bonds result in CRR bond charges consistent with the terms
of the applicable financing order and market conditions at the time
of the pricing of the CRR bonds. The proceeds of the CRR bonds shall
be used solely for the purpose of reducing the amount of the
regulatory asset determined by the commission to be reasonable and
other purposes provided herein.
SECTION 6. Chapter 104, Utilities Code, is amended by
adding Section 104.361 to read as follows:
Sec. 104.361. DEFINITIONS. In this subchapter:
(1) "Ancillary agreement" means any bond, insurance
policy, letter of credit, reserve account, surety bond, interest
rate or currency swap arrangement, interest rate lock agreement,
forward payment conversion agreement, or other hedging
arrangement, liquidity or credit support arrangement, or other
financial arrangement entered into in connection with the issuance
or payment of CRR bonds that enhances the marketability, security,
or creditworthiness of CRR bonds.
(2) "Assignee" means any legally recognized entity to
which an interest in CRR property is transferred, other than as
security. The term includes a corporation, limited liability
company, public authority, trust, general partnership or limited
partnership, or other financing entity, including any assignee of
that party.
(3) "Authority" means the Texas Public Finance
Authority, as the sponsoring issuer of CRR bonds.
(4) "Bond administrative expenses" means expenses
incurred to administer CRR bonds issued under this subchapter,
including fees for paying agents, trustees, and attorneys, and for
other professional services necessary to ensure compliance with
applicable state or federal law.
(5) "Bond obligations" means the principal of a CRR
bond and any premium and interest on a CRR bond issued under this
subchapter, together with any amount owed under a related ancillary
agreement or credit agreement
(6) "Commission" means the Railroad Commission of
Texas.
(7) "Credit agreement" means a loan agreement, a
revolving credit agreement, an agreement establishing a line of
credit, or any similar financing arrangement.
(8) "CRR bonds" means bonds, notes, certificates, or
other evidences of indebtedness or ownership that are issued by an
assignee pursuant to an financing order, the proceeds of which are
used directly or indirectly to recover, finance or refinance
railroad commission-approved regulatory assets, including
extraordinary costs, and related financing costs, and that are
payable from and secured by CRR property and amounts on deposit in
the obligation trust fund to the extent provided by the applicable
financing order.
(9) "CRR charges" means the amounts authorized by the
commission to repay, finance, or refinance regulatory assets,
including extraordinary costs, financing costs, and other costs
authorized by the financing order and that are non-bypassable
charges:
(a) imposed on and part of customer bills of a gas utility
who has received a regulatory asset determination under Section
104.363;
(b) collected by a gas utility who has received a regulatory
asset determination under Section 104.363, or its successors or
assignees, or a collection agent, as servicer, in full, 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
104.363 or its successors or assignees, even if a customer elects to
purchase gas from an alternative gas supplier.
Such charges shall continue to be paid until all CRR bonds and
financing costs are paid in full. CRR charges shall be designed as
uniform volumetric charges applicable to all existing or future
customers receiving service from a gas utility that has received a
regulatory asset determination under Section 104.363.
(10) "CRR property" means the property described in
Section 104.365.
(11) "Extraordinary costs" means:
(A) Reasonable and necessary costs placed in a
regulatory asset as defined in subpart (16) and approved by the
commission in a regulatory asset determination pursuant to section
104.363. Extraordinary costs eligible for inclusion in a
regulatory asset 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 any
tropical storm or hurricane, ice or snow storm, flood, or other
weather-related event, other natural or man-made disaster, system
failure, or other catastrophic event. (B) Extraordinary costs may
include natural gas procurement costs above normalized market
pricing, mobilization, staging, construction, reconstruction,
replacement, or repair of system facilities. Extraordinary costs
may include reasonable estimates of the costs of natural gas
procurement above normalized market pricing and any activity or
activities 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, and such
estimates may be subject to reconciliation after the actual costs
are known but before the commission makes a determination as to the
utility's regulatory asset in accordance with Section 104.363.
(C) Extraordinary costs may include:
(i) a carrying charge interest rate at the
gas utility's cost of long-term debt as last approved by the
commission in a general rate proceeding if the final order (which
may be an order on rehearing) approving the cost of long-term debt
was filed less than three years before the application for
regulatory asset recovery was filed;
(ii) if the final order approving the gas
utility's cost of long-term debt is not stated in a final order
meeting the requirements of subsection (c)(i) or the final order
was filed three or more years before the application for regulatory
asset recovery was filed an alternative cost of long-term debt
shall be used that reflects the average cost of long-term debt
established by the commission for all gas utilities based on final
orders issued in the most recent three-year period preceding the
filing of the application for regulatory asset recovery; or
(iii) the carrying charge interest rate set
at the applicable cost of long-term debt set forth in subsection
(c)(i-ii) shall be applied from the date on which the extraordinary
costs were incurred until the date that CRR bonds are issued or
until extraordinary costs are otherwise recovered by the gas
utility pursuant to the provisions of this section.
Extraordinary costs include any costs of acquiring, retiring, and
refunding the gas utility's existing debt and equity securities or
credit facilities in connection with the issuance of CRR bonds.
(12) "Financing costs" means any of the following:
(A) interest and acquisition, defeasance, or
redemption premiums that are payable on CRR bonds.
(B) any payment required under an ancillary
agreement and any amount required to fund or replenish reserve or
other accounts established under the terms of any indenture,
ancillary agreement, or other financing documents pertaining to CRR
bonds.
(C) issuance costs, and any ongoing costs related
to supporting, repaying, servicing, and refunding CRR bonds,
including but not limited to servicing fees, accounting and
auditing fees, trustee fees, legal fees and expenses, consulting
fees, administrative fees, printing fees, financial advisor fees
and expenses, SEC 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. The term includes the costs to the commission of
acquiring professional services for the purpose of evaluating
extraordinary costs under this subchapter.
(13) "Financing order" means an order of the
commission adopted under Section 104.364 approving the issuance of
CRR bonds and the creation of CRR property and associated CRR
charges for the recovery of regulatory assets, including
extraordinary costs, and related financing costs, and other costs
authorized by such financing order.
(14) "Financing party" means a holder of CRR bonds,
including trustees, collateral agents, any party under an ancillary
agreement and other persons acting for the benefit of the holder.
(15) "Gas utility" shall mean:
(A) An operator of natural gas distribution
pipelines that delivers and sells natural gas to the public and that
is subject to the commission's jurisdiction under Section 102.001
of this title; and
(B) a gas utility that transmits, transports,
delivers, or sells natural gas or synthetic natural gas to
operators of natural gas distribution pipelines and whose rates for
such services are established by the commission in a cost of service
rate proceeding filed pursuant to Chapter 104 of this title.
(16) "Non-bypassable" shall mean a charge that may not
be offset by any credit.
(17) "Normalized market pricing" shall be determined
using the average monthly pricing at the Henry Hub for the three (3)
preceding months prior to the month during which extraordinary
costs were incurred, plus contractual adders to the index price,
and other non-indexed gas procurement costs.
(18) "Regulatory asset" includes the extraordinary
costs recorded by the gas utility in its 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 (FERC USOA) and Generally Accepted Accounting Principles (GAAP)
or classified as a receivable or financial asset under
International Financial Reporting Standards (IFRS) pursuant to the
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 on issued on
February 13, 2021, or any notice or order issued by the commission
thereafter for other similarly authorized natural or man-made
disasters or system failure events.
SECTION 7. Chapter 104, Utilities Code, is amended by
adding Section 104.361 to read as follows:
Sec. 104.361. JURISDICTION AND POWERS OF THE COMMISSION AND
OTHER REGULATORY AUTHORITIES. (a) The commission may authorize the
issuance of CRR bonds if the commission finds pursuant to Section
104.363 that the proposed structuring, expected pricing, and
proposed financing costs of the CRR bonds are reasonably expected
to provide benefits to customers comparing the net present value of
the costs to customers resulting from the issuance of CRR bonds and
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.
(b) The commission may assess to a gas utility costs
associated with administering this subchapter and such assessments
shall be recovered from rate-regulated customers as part of gas
cost.
(c) The commission has exclusive, original jurisdiction to
issue financing orders that authorize the creation of CRR property,
CRR charges to service CRR bonds and financing costs. CRR charges,
if authorized by the commission through a financing order in its
sole discretion, will be imposed pursuant to CRR property, and not
by a gas utility.
(d) Except as provided by (c), this subchapter does not in
any way 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 of this subtitle.
SECTION 8. Chapter 104, Utilities Code, is amended by
adding Section 104.362 to read as follows:
Sec. 104.362. REGULATORY ASSET DETERMINATION. (a) The
commission shall, upon application of a gas utility to recover a
regulatory asset, determine the regulatory asset amount to be
recovered by the gas utility.
(b) A gas utility desiring to participate in the CRR bond
process pursuant to a financing order shall file an application
with the commission no later than 90 days following the conclusion
of the event for which regulatory asset recovery is requested or no
later than 60 days following the effective date of this
subchapter's passage. The application date deadline shall be
determined by the commission consistent with this subpart.
(c) If the commission does not make a final determination
concerning the regulatory asset amount to be recovered by the gas
utility not later than 90 days of an application filed under (a),
the commission is considered to have approved the regulatory asset
amount requested by the gas utility.
(d) The regulatory asset determination shall not otherwise
be subject to reduction, impairment, or adjustment by further
action of the commission, except as permitted by Section 104.368.
(e) The regulatory asset determination is not subject to
rehearing by the commission. A regulatory asset determination may
only be appealed to a Travis County district court by a party to the
proceeding filed not later than 15 days after the order is signed by
the commission. The judgment of the district court may be reviewed
only by direct appeal to the Supreme Court of Texas filed not later
than 15 days after entry of judgment. 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 commission and briefs to the court and shall be limited to
whether the financing order conforms to the constitution and laws
of this state and the United States and is within the authority of
the commission under this subchapter.
(f) The commission shall issue an order to establish a
schedule, filing requirements, and procedure for determining the
prudence of the costs included in a gas utility's regulatory asset.
(g) To the extent a gas utility subject to this subchapter
receives insurance proceeds, governmental grants, or any other
sources of funding that compensates or otherwise reimburses or
indemnifies it for extraordinary costs following the issuance of
CRR bonds a gas utility may record the amount in a regulatory
liability account and such amounts will be reviewed in a future
proceeding. If any audit conducted under a valid gas purchase
agreement identifies a change to the total amount of greater than 5%
of the gas supply costs incurred during the extraordinary event set
forth in Section 104.361(10)(A) is identified, the gas utility may
record the amount in a regulatory asset or regulatory liability
account and such amounts will be reviewed for recovery in a future
proceeding.
SECTION 7. Chapter 104, Utilities Code, is amended by
adding Section 104.363 to read as follows:
Sec. 104.363. FINANCING ORDERS AND ISSUANCE OF CRR BONDS BY
OR ON BEHALF OF THE AUTHORITY. (a) If the commission determines
that CRR bond financing for extraordinary costs is the most
cost-effective method of funding several regulatory asset
reimbursements to be made to gas utilities, the commission may,
following the final resolution of all applications filed under
Section 104.363, request the authority to issue CRR bonds on its
behalf. Before making a request of the authority under this
section, the commission must issue a financing order that complies
with the provisions of this Section 104.363.
(b) The financing order shall include a finding that the use
of the securitization financing mechanism is in the public interest
and that the financing order is consistent with the standards set
forth in Section 104.360.
(c) The financing order shall detail the total amount of the
regulatory asset determinations to be included in the CRR bond
issuance.
(d) The financing order shall authorize the recovery of any
tax obligation of the gas utilities arising or resulting from its
receipt of CRR bond proceeds, or from the collection or remittance
of CRR charges through the gas utilities' gas cost recovery
mechanism or other means determined by the commission to be
reasonable.
(e) The financing order shall authorize the authority's
issuance of CRR bonds through one or more legally isolated
bankruptcy remote financing entities established by the authority.
(f) The financing order shall include a statement of the
aggregated regulatory asset determination to be included in the
principal amount of the CRR bonds, not to exceed $10 billion for any
separate bond issue, and the maximum scheduled final maturity of
the CRR bonds may not exceed 30 years, however the legal final
maturity may be longer, based upon rating agency and market
considerations.
(g) The financing order shall provide for the imposition and
mandatory periodic formulaic adjustment of CRR charges in
accordance with Section 104.368 and the collection thereof by all
gas utilities for whom a regulatory asset determination has been
made pursuant to Section 104.363 to guarantee that the bonds will be
paid in full.
(h) The financing order shall authorize the creation of CRR
property in favor of the authority and the authority's transfer
thereof.
(i) The financing order shall direct the authority to
disperse the proceeds of CRR bonds to gas utilities for which a
regulatory asset determination has been made under Section 104.363
and the amounts to be distributed.
(j) The principal amount determined by the commission under
subsection (c) may be increased to include an amount sufficient to:
(1) pay the financing costs for such 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 commission.
(k) The authority, consistent with this subchapter and the
terms of the financing order, shall issue CRR bonds on request by
the commission, in accordance with the requirements of Chapter
1232, Government Code, as amended by this subchapter and other
provisions of Title 9, Government Code, that apply to bond issuance
by a state agency.
(l) The authority, consistent with this subchapter and the
terms of the financing order, shall determine the method of sale,
type of bond, bond form, maximum interest rates, and other terms of
the CRR 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.
(m) 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 CRR bonds.
(n) The financing order shall provide that CRR charges shall
be collected and allocated among customers of each utility for whom
a regulatory determination has been made under Section 104.363
through uniform, monthly volumetric charges to be paid by customers
as a component of the gas utility's gas cost or in such other manner
as determined by the commission to be reasonable.
(o) The financing order shall reflect the commitment made by
each gas utility receiving proceeds therefrom that such proceeds
shall be in lieu of recovery of these costs through the regular
rate-making process or other mechanism to the extent such costs are
reimbursed to the gas utility by CRR bond financing proceeds.
(p) The financing order shall become effective in
accordance with its terms, and the financing order, together with
the CRR property and the CRR charges authorized by the financing
order, shall thereafter be irrevocable and not subject to
reduction, impairment, or adjustment by further action of the
commission, except as provided under subpart (r) and permitted by
Section 104.368.
(q) The commission shall issue a financing order under this
Section not later than 90 days following the conclusion of all
proceedings filed under Section 104.363.
(r) A financing order is not subject to rehearing by the
commission. A financing order may only be appealed to a Travis
County district court by a party to the proceeding filed within 15
days after the financing order is signed by the commission. The
judgment of the district court may be reviewed only by direct appeal
to the Supreme Court of Texas filed within 15 days after entry of
judgment. 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 commission and briefs to
the court and shall be limited to whether the financing order
conforms to the constitution and laws of this state and the United
States and is within the authority of the commission under this
subchapter.
(s) The authority shall issue CRR bonds within 45 days of
the receipt of a financing order issued pursuant to this section.
The authority shall deliver CRR 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 104.363 within 15 days of issuance of the CRR bonds.
For the weather event that took place in February 2021, the
authority shall deliver CRR bond proceeds net of upfront financing
costs to each gas utility no later than December 31, 2021.
SECTION 8. Chapter 104, Utilities Code, is amended by
adding Section 104.364 to read as follows:
Sec. 104.364. PROPERTY RIGHTS. (a) The CRR bonds will be
solely the obligation of the assignee or issuing financing entity
and will not be a debt of a gas utility or a debt or a pledge of the
faith and credit of the state or any political or governmental unit
thereof.
(b) The CRR bonds shall be nonrecourse to the credit or any
assets of the state and the authority.
(c) The rights and interests of the authority or successor
under a financing order, including the right to impose and receive
CRR charges authorized in the financing order, shall be only
contract rights until they are first transferred to an assignee or
pledged in connection with the issuance of the CRR bonds, at which
time they will become "CRR property."
(d) CRR property shall constitute a present property right
for purposes of contracts concerning the sale or pledge of
property, even though the imposition and collection of CRR charges
depends on further acts of the gas utility or others that have not
yet occurred. The financing order shall remain in effect, and the
CRR property shall continue to exist for the same period as the
pledge of the state described in Section 104.372.
(e) All revenues and collections resulting from CRR charges
shall 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 shall be payable from and secured by the CRR
property, including CRR charges and amounts to the extent provided
in the proceedings authorizing the credit agreement.
SECTION 9. Chapter 104, Utilities Code, is amended by
adding Section 104.365 to read as follows:
Sec. 104.365. NO SET-OFF. The interest of an assignee or
pledgee in CRR property, including the revenues and collections
arising from CRR 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 shall remain in effect and
unabated notwithstanding the bankruptcy of the gas utility, the
authority or their successors, or assignees.
SECTION 10. Chapter 104, Utilities Code, is amended by
adding Section 104.366 to read as follows:
Sec. 104.366. NO BYPASS. A financing order shall include
terms ensuring that the imposition and collection of the CRR charge
authorized in the order shall be non-bypassable.
SECTION 11. Chapter 104, Utilities Code, is amended by
adding Section 104.367 to read as follows:
Sec. 104.367. TRUE-UP. The financing order shall include a
formulaic true-up charge adjustment mechanism that requires that
the CRR charges be reviewed and adjusted at least annually, at time
periods and frequencies provided in the financing order, to correct
any overcollections or under collections of the preceding 12 months
and to ensure the expected recovery of amounts sufficient to
provide for the timely payment of upcoming scheduled CRR bond
payments and financing costs. Such true-up charge adjustments
shall become effective within 30 days of the receipt of the true-up
charge adjustment letter from the gas utility or replacement
servicer to the commission that notifies the commission of the
pending adjustment. Any administrative review of such charge
adjustments shall be limited to notifying the servicer of
mathematical or clerical errors in the calculation, and the
servicer may correct its error and refile its letter, with the
adjustment becoming effective as soon as possible within 30 days
after the refiled letter.
SECTION 12. Chapter 104, Utilities Code, is amended by
adding Section 104.368 to read as follows:
Sec. 104.368. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;
DEFAULT. (a) CRR 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 CRR property are governed by this section and
not by the Business & Commerce Code.
(b) A valid and enforceable lien and security interest in
CRR 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 CRR bonds. The lien and
security interest shall attach automatically from the time that
value is received for the CRR bonds and, on perfection through the
filing of notice with the secretary of state in accordance with the
rules prescribed under subsection (d), shall be a continuously
perfected lien and security interest in the CRR property and all
proceeds of the property, whether accrued or not, shall have
priority in the order of filing and take precedence over any
subsequent judicial or other lien creditor. If notice is filed
within 10 days after value is received for the CRR bonds, the
security interest shall be perfected retroactive to the date value
was received, otherwise, the security interest shall be perfected
as of the date of filing.
(c) Transfer of an interest in CRR property to an assignee
shall be 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); provided, however, that if
notice of the transfer has not been filed in accordance with this
subsection within 10 days 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 implement this section by
establishing and maintaining a separate system of records for the
filing of notices under this section and prescribing the rules for
those filings based on Chapter 9, Business & Commerce Code, adapted
to this subchapter and using the terms defined in 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 Section 104.368 or by the commingling of
funds arising from CRR charges with other funds, and any other
security interest that may apply to those funds shall be terminated
when they are transferred to a segregated account for the assignee
or a financing party. If CRR property has been transferred to an
assignee, any proceeds of that property shall be held in trust for
the assignee.
(f) If a default or termination occurs under the CRR bonds,
the financing parties or their representatives, a district court of
Travis County, on application by or on behalf of the financing
parties, shall order the sequestration and payment to them of
revenues arising from the CRR charges.
SECTION 13. Chapter 104, Utilities Code, is amended by
adding Section 104.369 to read as follows:
Sec. 104.369. BOND PROCEEDS. (a) The proceeds of CRR bonds
issued by or on behalf of the authority under this subchapter may be
deposited with a trustee selected by the authority or 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, shall be
held in trust for the exclusive benefit of the commission's policy
of reimbursing such 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) Any excess money remaining after the purposes for which
the bonds were issued is satisfied may be used to provide credits to
gas utility customers.
(d) If there are no outstanding bonds or bond interest to be
paid, the remaining proceeds shall be used to provide credits to gas
utility customers.
SECTION 14. Chapter 104, Utilities Code, is amended by
adding Section 104.370 to read as follows:
Sec. 104.370. REPAYMENT OF CRR BONDS. (a) If any CRR bonds
and related financing costs remain outstanding, a uniform, monthly,
volumetric CRR charges shall be paid by all existing and future
customers that receive service from a gas utility for whom a
regulatory asset determination under Section 104.363. A gas
utility and its successors, assigns and or replacements, shall
continue to bill and collect, as servicer, CRR charges from the gas
utility's existing and future customers until all CRR bonds and
financing costs are paid in full.
(b) With regard to outstanding CRR bonds issued by the
authority under this subchapter, the authority shall report to the
commission the amount of the bond obligations outstanding and the
estimated amount of bond administrative expenses each year.
(c) All revenue collected from the CRR charges shall be
promptly remitted 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) Revenues received from the CRR charges may be applied
only as provided by this subchapter.
(e) Bond obligations are payable only from sources provided
for payment in this subchapter.
SECTION 15. Chapter 104, Utilities Code, is amended by
adding Section 104.371 to read as follows:
Sec. 104.371. PLEDGE OF STATE. (a) CRR bonds issued under
this subchapter, and any related ancillary agreement, or credit
agreement, are not a debt of the state or any state agency or
political subdivision of the state and are not a pledge of the faith
and credit of any of them. A CRR bond, ancillary agreement, or
credit agreement is payable solely from CRR charges as provided by
this subchapter.
(b) The state, including the commission and the authority
pledge, however, for the benefit and protection of the financing
parties and the gas utility, that it will not take or permit any
action that would impair the value of CRR property, or, except as
permitted by Section 104.368, reduce, alter, or impair the CRR
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 CRR bonds and
financing costs have been paid and performed in full. The authority
or any other entity issuing CRR bonds is authorized to include this
pledge in any documentation relating to those bonds.
SECTION 16. Chapter 104, Utilities Code, is amended by
adding Section 104.372 to read as follows:
Sec. 104.372. TAX EXEMPTION. (a) A CRR bond issued under
this subchapter, any transaction relating to CRR bonds, and profits
made from the sale of CRR bonds are exempt from taxation by this
state or by a municipality or other political subdivision of this
state.
(b) A gas utility's receipt or collection of CRR charge
amounts is exempt from state and local income, sales, franchise,
gross receipts, and other taxes or similar assessment.
(c) Any tax obligation of the gas utility arising from its
receipt of CRR bond proceeds, or from the collection or remittance
of CRR charges is an expense that shall be recovered by the gas
utility.
SECTION 17. Chapter 104, Utilities Code, is amended by
adding Section 104.373 to read as follows:
Sec. 104.373. NOT PUBLIC UTILITY. An assignee or financing
party shall not be considered to be a public utility or person
providing natural gas service solely by virtue of the transactions
described in this subchapter.
SECTION 18. Chapter 104, Utilities Code, is amended by
adding Section 104.374 to read as follows:
Sec. 104.374. NO PERSONAL LIABILITY. The Commissioners of
the commission, commission employees, the board of directors of the
authority, and the employees of the authority shall not be
personally liable as a result of exercising the duties and
responsibilities established under this subchapter.
SECTION 19. Chapter 104, Utilities Code, is amended by
adding Section 104.375 to read as follows:
Sec. 104.375. SEVERABILITY. Effective on the date the CRR
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 CRR bonds or to any actions of the gas
utility, its successors, an assignee, a collection agent, or a
financing party, which shall remain in full force and effect.
SECTION 20. 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.