By: Creighton S.B. No. 1782
A BILL TO BE ENTITLED
AN ACT
relating to the response and resilience of certain utilities to
major weather-related events or natural disasters.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 36.402(a), Utilities Code, is amended to
read as follows:
(a) In this subchapter, "system restoration costs" means
reasonable and necessary costs, including costs expensed, charged
to self-insurance reserves, deferred, capitalized, or otherwise
financed, that are incurred by an electric utility due to any
activity or activities conducted by or on behalf of the electric
utility in connection with the restoration of service and
infrastructure associated with electric power outages affecting
customers of the electric utility as the result of any tropical
storm or hurricane, ice or snow storm, flood, or other
weather-related event or natural disaster that occurred in calendar
year 2008 or thereafter. System restoration costs include
mobilization, staging, and construction, reconstruction,
replacement, or repair of electric generation, transmission,
distribution, or general plant facilities. System restoration
costs shall include reasonable estimates of the costs of an
activity or activities conducted or expected to be conducted by or
on behalf of the electric utility in connection with the
restoration of service or infrastructure associated with electric
power outages, but such estimates shall be subject to true-up and
reconciliation after the actual costs are known. System
restoration costs also include reasonable and necessary
weatherization and storm-hardening costs incurred, as well as
reasonable estimates of costs to be incurred by the electric
utility, but such estimates shall be subject to true-up and
reconciliation after the actual costs are known.
SECTION 2. Chapter 36, Utilities Code, is amended by adding
Subchapter J to read as follows:
SUBCHAPTER J. LOWER COST FINANCING MECHANISM FOR
SECURITIZATION FOR RECOVERY OF SYSTEM RESTORATION COSTS
Sec. 36.407. LOWER COST FINANCING MECHANISM FOR
SECURITIZATION FOR RECOVERY OF SYSTEM RESTORATION COSTS; PURPOSE
AND DEFINITIONS.
(a) Except as otherwise specifically provided in this
subchapter, the same procedures, standards, and protections for
securitization authorized in Subchapter I and, to the extent made
applicable to Subchapter I, Subchapter G, Chapter 39, apply to the
lower cost financing mechanism for securitization of transition
costs (or "system restoration costs") as set forth in Subchapter I.
To the extent any conflict exists between the provisions of this
subchapter and Subchapter I or, to the extent made applicable by
Subchapter I, Subchapter G, Chapter 39, in cases involving the
securitization of system restoration costs under this subchapter,
the provisions of this subchapter control.
(b) The purpose of this subchapter is to make available a
lower cost and supplemental financing mechanism to allow an
electric utility to obtain timely recovery of system restoration
costs under Subchapter I through securitization and the issuance of
transition bonds (or "system restoration bonds") by an issuer other
than the electric utility or an affiliated special purpose entity.
Financing of system restoration costs pursuant to this subchapter
is hereby recognized to be a valid and essential public purpose.
(c) The Texas Electric Utility System Restoration
Corporation shall be created pursuant to this subchapter as a
special purpose public corporation and instrumentality of the state
for the essential public purpose of providing a lower cost
financing mechanism available to the commission and an electric
utility to attract low-cost capital to finance system restoration
costs.
(d) System restoration bonds issued consistent with this
subchapter will be solely the obligation of the issuer and the
corporation (as borrower, if applicable) and will not be a debt of
or a pledge of the faith and credit of the state.
(e) System restoration bonds issued consistent with this
subchapter shall be nonrecourse to the credit or any assets of the
state and the commission.
(f) This subchapter does not in any way limit or impair the
commission's jurisdiction under this title to regulate the rates
charged and the services rendered by electric utilities in this
state.
(g) An electric utility receiving the proceeds of
securitization financing under this subchapter shall not be
required to provide utility services to the corporation or the
state as a result of receiving such proceeds except in their role as
customers of the electric utility, nor shall this subchapter create
any obligation of the corporation or any issuer to provide any
electric services to the electric utility or its customers.
(h) As used in this subchapter:
(1) "corporation" means the Texas Electric
Utility System Restoration Corporation.
(2) "issuer" means the corporation or any other
Texas corporation, public trust, public instrumentality, or other
entity that issues system restoration bonds approved by a financing
order.
(3) For purposes of this subchapter, "qualified
costs," as defined by Section 39.302 and as used in Subchapter G,
Chapter 39, also includes all costs of establishing, maintaining,
and operating the corporation and all costs of the corporation and
any issuer in connection with the issuance and servicing of the
system restoration bonds, all as approved in the financing order.
(4) Except as otherwise specifically provided in this
subchapter, the defined terms provided in Subchapter I and, if made
applicable by Subchapter I, Subchapter G, Chapter 39, have the same
meaning in this subchapter.
Sec. 36.408. CREATION OF THE CORPORATION. (a) The
corporation shall be incorporated as a nonprofit corporation and
instrumentality of the state, and shall perform the essential
governmental function of financing system restoration costs in
accordance with this subchapter. The corporation shall perform
only those functions consistent with this subchapter, shall
exercise its powers through a governing board, and shall be subject
to the regulation of the commission. The corporation shall have a
legal existence as a public corporate body and instrumentality of
the state separate and distinct from the state.
(b) Assets of the corporation shall not be considered part
of any state fund. The state shall not budget for or provide any
general fund appropriations to the corporation, and the debts,
claims, obligations, and liabilities of the corporation shall not
be considered to be a debt of the state or a pledge of its credit.
The corporation shall be self-funded. Prior to the imposition of
transition charges (or "system restoration charges"), the
corporation may accept and expend for its operating expenses such
funds as may be received from any source, including financing
agreements with the state, a commercial bank, or another entity to
finance the corporation's obligations until the corporation
receives sufficient transition property to cover its operating
expenses as financing costs, and to repay any short-term borrowing
under any such financing agreement.
(c) The corporation shall have the powers, rights, and
privileges provided for a corporation organized under Chapter 22,
Business Organizations Code, subject to the express exceptions and
limitations set forth in this subchapter.
(d) An incorporator selected by the executive director of
the commission shall prepare the articles of incorporation of the
corporation under Chapter 22, Business Organizations Code, which
articles shall be consistent with the provisions of this
subchapter.
(e) State officers, departments, and agencies are
authorized to render services to the corporation within their
respective functions, as may be requested by the commission or the
corporation.
(f) The corporation and any issuer may retain such
professionals, financial advisors, and accountants as it may deem
necessary to fulfill its duties under this subchapter and may
determine their duties and compensation, subject to approval of the
commission.
(g) The governing body of the corporation shall be a board
of directors that shall consist of five members appointed by the
commission. All official action of the governing body shall
require the favorable vote of a majority of the board members
present and voting at any meeting of the board of directors.
Sec. 36.409. POWERS AND DUTIES OF THE CORPORATION. (a) The
corporation shall, in each instance subject to the prior
authorization of the commission, participate in the financial
transactions contemplated by this subchapter. The corporation
shall engage in no other business activities except those
activities provided for in this subchapter and those ancillary and
incidental thereto. Neither the corporation nor any issuer shall
apply any proceeds of system restoration bonds or system
restoration charges to any purpose not specified in a financing
order, or to any purpose in excess of the amount allowed for such
purpose in the order, or to any purpose in contravention of the
order.
(b) The governing board of the corporation shall, pursuant
to the provisions of this subchapter, have the power to employ or
retain such persons as are necessary to perform the duties of the
corporation.
(c) The corporation may:
(1) Acquire, sell, pledge, and transfer transition
property as necessary to effect the purposes of this subchapter. In
connection therewith, the corporation may agree to such terms and
conditions as it deems necessary and proper, consistent with the
terms of a financing order, (i) to acquire transition property and
to pledge such transition property, and any other collateral, (a)
to secure payment of system restoration bonds issued by the
corporation, together with payment of any other qualified costs, or
(b) to secure repayment of any borrowing from any other issuer of
system restoration bonds, or (ii) to sell the transition property
to another issuer, which may in turn pledge such transition
property, together with any other collateral, to the repayment of
system restoration bonds issued by the issuer together with any
other qualified costs;
(2) Issue system restoration bonds on terms and
conditions consistent with a financing order;
(3) Borrow funds from an issuer of system restoration
bonds to acquire transition property, and pledge such transition
property to the repayment of any borrowing from an issuer, together
with any related qualified costs, all on terms and conditions
consistent with a financing order. The corporation may also borrow
funds for initial operating expenses as specified in Section
36.408;
(4) Sue or be sued in its corporate name. The
corporation has the authority to intervene as a party before the
commission or any court in this state in any matter involving the
corporation's powers and duties;
(5) Negotiate and become a party to such contracts as
necessary, convenient, or desirable to carry out the purposes of
this subchapter; and
(6) Engage in corporate actions or undertakings that
are permitted for nonprofit corporations in this state and that are
not prohibited by, or contrary to, the provisions of this
subchapter.
(d) The corporation shall maintain separate accounts and
records relating to each electric utility that is collecting system
restoration charges for all charges, revenues, assets,
liabilities, and expenses relating to that utility's related system
restoration bond issuances.
(e) The governing board of the corporation shall be
prohibited from authorizing any rehabilitation, liquidation, or
dissolution of the corporation, and no such rehabilitation,
liquidation, or dissolution of the corporation shall take effect as
long as any system restoration bonds are outstanding unless
adequate protection and provision has been made for the payment of
the bonds pursuant to the documents authorizing the issuance of the
bonds. In the event of any rehabilitation, liquidation, or
dissolution, the assets of the corporation shall be applied first
to pay all debts, liabilities, and obligations of the corporation,
including the establishment of reasonable reserves for any
contingent liabilities or obligations, and all remaining funds of
the corporation shall be applied and distributed as provided by an
order of the commission.
(f) Prior to the date that is two years and one day after
which the corporation no longer has any payment obligation with
respect to any system restoration bonds, including any obligation
to any issuer of any system restoration bonds outstanding, the
corporation is prohibited from filing and shall have no authority
to file a voluntary petition under the Federal Bankruptcy Code, as
it may, from time to time, be in effect, and neither any public
official nor any organization, entity, or other person shall
authorize the corporation to be or to become a debtor under the
Federal Bankruptcy Code during such period. The state covenants
that it will not limit or alter the denial of authority under this
subsection or subsection (e), and the provisions of such
subsections are hereby made a part of the contractual obligation
that is subject to the state pledge set forth in Section 39.310.
(g) The corporation shall prepare an operating budget
annually that shall be submitted for approval to the commission. If
requested by the commission, the corporation shall prepare and
submit an annual report containing, among other appropriate
matters, the annual operating and financial statements of the
corporation.
Sec. 36.410. COMMISSION REGULATION OF THE CORPORATION. The
commission shall regulate the corporation as provided for in this
subchapter. Such regulation shall be concomitant with the
commission's regulation of public utilities. Notwithstanding such
regulation, the corporation is not a public utility.
Sec. 36.411. FINANCING ORDER. (a) This section applies to
the commission's issuance of a financing order under this
subchapter.
(b) Except as otherwise specifically provided in this
subchapter, the provisions in Subchapter I and, to the extent made
applicable to Subchapter I, Subchapter G, Chapter 39, addressing
the commission's issuance of a financing order apply to the
commission's issuance of a financing order under this subchapter.
(c) The corporation and any issuer shall be a party to the
commission's proceedings addressing the issuance of a financing
order along with the pertinent electric utility.
(d) A financing order issued under this subchapter shall, in
addition to the requirements of Subchapter I (as applicable):
(1) Require the sale, assignment, or other transfer of
certain specified transition property created by the financing
order to the corporation (in the manner contemplated by Section
39.308), and following such sale, assignment, or transfer, system
restoration charges paid under any financing order shall be
created, assessed, and collected as the property of the
corporation, subject to subsequent sale, assignment, or transfer by
the corporation as authorized under this subchapter.
(2) Authorize either:
(A) the issuance of system restoration bonds by
the corporation secured by a pledge of such specified transition
property, and the application of the proceeds of such system
restoration bonds (net of issuance costs) to the acquisition of the
transition property from the electric utility; or
(B) the acquisition of specified transition
property from the electric utility by the corporation, financed (i)
by a loan by an issuer to the corporation of the proceeds of system
restoration bonds (net of issuance costs), or (ii) by the
acquisition by an issuer from the corporation of such transition
property, and in each case, the pledge of such transition property
to the repayment of such loan or system restoration bonds, as
applicable;
(3) Authorize the electric utility to serve as
collection agent to collect the system restoration charges and
transfer those collected charges to the corporation, the issuer, or
a financing party, as appropriate.
(e) After issuance of the financing order, the corporation
shall arrange for the issuance of system restoration bonds as
specified in the financing order by it or another issuer selected by
the corporation and approved by the commission.
(f) System restoration bonds issued pursuant to a financing
order under this section are secured only by the related transition
property and any other funds pledged under the bond documents, and
no assets of the state or electric utility shall be subject to
claims by such bondholders. Notwithstanding the provisions in
Subchapter G, Chapter 39, following assignment of the transition
property, the electric utility shall not have any beneficial
interest or claim of right in such system restoration charges or in
any transition property.
Sec. 36.412. SEVERABILITY. Effective on the date the first
system restoration bonds associated with system restoration costs
are issued under this subchapter, if any provision in this title or
portion of this title is held to be invalid or is invalidated,
superseded, replaced, repealed, or expires for any reason, that
occurrence does not affect the validity or continuation of this
subchapter, Subchapter I, as it applies to this subchapter,
Subchapter G, Chapter 39, as it applies to this subchapter, or any
part of those provisions, or any other provision of this title that
is relevant to the issuance, administration, payment, retirement,
or refunding of system restoration bonds or to any actions of the
electric utility, its successors, an assignee, a collection agent,
the corporation, an issuer, or a financing party, and those
provisions shall remain in full force and effect.
SECTION 3. Section 37.051, Utilities Code, is amended by
adding Subsection (d) to read as follows:
(d) Notwithstanding any other provision of this title, an
electric utility may, but shall not be required to, obtain a
certificate to install, own, or operate a generation facility with
a capacity of ten megawatts or less.
SECTION 4. Section 37.056(c)(4)(E), Utilities Code, is
amended to read as follows:
(E) the probable improvement of service or
lowering of cost to consumers in the area if the certificate is
granted, including any potential economic or reliability benefits
associated with dual fuel and fuel storage capabilities; and
SECTION 5. Subchapter F, Chapter 104, Utilities Code, is
amended by adding Section 104.259 to read as follows:
Sec. 104.259. PRIORITIES DURING NATURAL GAS CURTAILMENT.
(a) If the curtailment of natural gas is necessary during a state
of disaster as declared by the governor or an extreme weather
emergency as defined in Section 104.258, a gas utility shall
observe the following priorities for the continued delivery of gas
in descending order:
(1) deliveries of natural gas by gas utilities to
residences, hospitals, schools, churches, and other human needs
customers, and deliveries to local distribution companies that
serve human needs customers.
(2) deliveries of natural gas by gas utilities to
electric generation facilities that serve human needs customers.
(3) deliveries of natural gas by gas utilities to
small industrial and regular commercial loads, defined as those
customers using less than 3,000,000 cubic feet of gas per day, and
delivery of gas for use as pilot lights or in accessory or auxiliary
equipment essential to avoid serious damage to industrial plants;
(4) deliveries of natural gas by gas utilities to
large users of gas for fuel as raw material where an alternate fuel
source cannot be used and operation and plant production would be
curtailed or completely cease when gas is curtailed;
(5) deliveries of natural gas by gas utilities to
large users of gas for boiler fuel or other fuel users where an
alternate fuel source can be used. This category is not to be
determined by whether or not a user has actually installed
alternate fuel facilities, but whether or not an alternate fuel
could be used.
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.