By: Perry, Eckhardt, West S.B. No. 740
A BILL TO BE ENTITLED
AN ACT
relating to certain proceedings by the Public Utility Commission of
Texas regarding water or sewer service.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 13.002, Water Code, is amended by adding
Subdivision (16-a) to read as follows:
(16-a) "Public utility agency" means a public utility
agency created under Chapter 572, Local Government Code.
SECTION 2. Section 13.183, Water Code, is amended by
amending Subsection (c) and adding Subsections (c-1), (c-2), (c-3),
and (c-4) to read as follows:
(c) To ensure that retail customers receive a higher
quality, more affordable, or more reliable water or sewer service,
to encourage regionalization, or to maintain financially stable and
technically sound utilities, the regulatory authority, by rule or
ordinance, as appropriate, may adopt specific alternative
ratemaking methodologies for water or sewer rates to allow for more
timely and efficient cost recovery. Appropriate alternative
ratemaking methodologies are the introduction of new customer
classes, the cash needs method, and phased and multi-step rate
changes. The regulatory authority may also adopt system
improvement charges that may be periodically adjusted to ensure
timely recovery of infrastructure investment. If the utility
commission is the appropriate regulatory authority, the utility
commission shall enter a final order on a request for a system
improvement charge under this subsection not later than the 60th
day after the date the utility commission determines that a
complete application for a system improvement charge has been
filed. The utility commission may extend the deadline for not more
than 15 days for good cause. The utility commission by rule shall
establish a schedule that requires all utilities that have
implemented a system improvement charge approved by the utility
commission to make periodic filings with the utility commission to
modify or review base rates charged by the utility. Overall
revenues determined according to an alternative ratemaking
methodology adopted under this section must provide revenues to the
utility that satisfy the requirements of Subsection (a). The
regulatory authority may not approve rates under an alternative
ratemaking methodology unless the regulatory authority adopts the
methodology before the date the rate application was
administratively complete.
(c-1) The utility commission shall by rule:
(1) establish the information required for an
application for a system improvement charge to be considered
complete by the utility commission under this section, which must
include the documentation listed in Subsection (c-2); and
(2) prescribe a standard form for an application to
the utility commission for a system improvement charge under
Subsection (c).
(c-2) An application for a system improvement charge under
Subsection (c) may not be considered complete by the utility
commission unless, to substantiate each claimed eligible cost of a
utility's eligible plant that is not already included in the
applying utility's rates, the application includes:
(1) receipts;
(2) invoices;
(3) contracts; or
(4) other documentation of eligible costs.
(c-3) An application for a system improvement charge under
Subsection (c) may not be considered complete by the utility
commission before the 30th day after the date the application is
filed with the utility commission.
(c-4) At the time an applicant files an application for a
system improvement charge under Subsection (c) with the utility
commission, the applicant shall provide a copy of the application
to the Office of Public Utility Counsel. The utility commission
shall allow the office to comment on the application not later than
the 30th day after the date the application is filed. The utility
commission shall provide to the office, at no cost and in electronic
form, any data related to the application held by the commission.
Information provided to the office under this subsection that is
confidential and not subject to disclosure by the utility
commission under Chapter 552, Government Code, or other law is
confidential and not subject to disclosure by the office.
SECTION 3. Section 13.301(l), Water Code, is amended to
read as follows:
(l) Notwithstanding any other provision of this section or
Section 13.302, the utility commission by rule shall adopt a [an
expedited] process to expedite an application for the acquisition
of the stock or ownership interest under Section 13.302, or of
assets under this section, of a utility in receivership under
Section 13.412, a utility in supervision under Section 13.4131, or
a utility in temporary management under Section 13.4132, and, if
applicable, its certificated service area, by a Class A or Class B
utility. The applicant must have been appointed as a temporary
manager or supervisor for the utility by the utility commission or
commission or have been appointed as a receiver for the utility at
the request of the utility commission or commission before filing
the application [that allows a person appointed by the utility
commission or commission under Section 13.4132 as a temporary
manager of a utility, utility in receivership, or utility in
supervision, who is also an operator of a Class A or Class B utility
to apply for utility commission approval of the person's
acquisition of the stock, ownership interest, or assets of the
temporarily managed and operated utility, utility in receivership,
or utility in supervision, its facilities, and, if applicable, its
certificated service area]. The [expedited] process must:
(1) waive public notice requirements regardless of
whether the applicant [person] elects to charge initial rates in
accordance with Section 13.3011 or use a voluntary valuation
determined under Section 13.305;
(2) require approval of the acquisition transaction if
the transaction is considered to be in the public interest; and
(3) provide that:
(A) the applicant's [person's] appointment is
considered sufficient to demonstrate adequate financial,
managerial, and technical capability for providing continuous and
adequate service to the service area to be acquired and any areas
currently certificated to the applicant [person]; and
(B) all used and useful invested capital and just
and reasonable operations and maintenance costs incurred by the
applicant [person] during the applicant's [person's] appointment as
temporary manager and operator of the utility, utility in
receivership, or utility in supervision to be acquired are
considered to be a regulatory asset for the applicant [person] and
are recoverable in the applicant's [person's] next comprehensive
rate proceeding or system improvement charge application.
SECTION 4. Subchapter H, Chapter 13, Water Code, is amended
by adding Section 13.3021 to read as follows:
Sec. 13.3021. SALES, TRANSFERS, AND MERGERS FOR CERTAIN
RETAIL PUBLIC UTILITIES. (a) The utility commission by rule shall
adopt an expedited process to authorize a municipally owned
utility, a county, a water supply or sewer service corporation, a
public utility agency, or a district or authority created under
Section 52, Article III, or Section 59, Article XVI, Texas
Constitution, to acquire the stock or ownership interest under
Section 13.302, or assets under Section 13.301, of a utility in
receivership under Section 13.412, a utility in supervision under
Section 13.4131, or a utility in temporary management under Section
13.4132, and, if applicable, its certificated service area, in the
manner provided by Sections 13.301 and 13.302.
(b) The municipally owned utility, county, water supply or
sewer service corporation, public utility agency, district, or
authority must have been appointed as a temporary manager or
supervisor for the utility by the utility commission or commission
or as a receiver for the utility at the request of the utility
commission or commission before filing an acquisition application
under this section.
(c) The process must:
(1) be based on the expedited process adopted under
Section 13.301(l), except for any aspects of the process that
cannot be applied to an entity over which the utility commission
does not have original rate jurisdiction;
(2) waive public notice requirements;
(3) require approval of the acquisition transaction if
the transaction is considered to be in the public interest; and
(4) provide that the municipally owned utility's,
county's, water supply or sewer service corporation's, public
utility agency's, district's, or authority's appointment is
considered sufficient to demonstrate adequate financial,
managerial, and technical capability for providing continuous and
adequate service to the service area to be acquired and any areas
currently certificated to the municipally owned utility, county,
corporation, public utility agency, district, or authority.
SECTION 5. Section 13.412(g), Water Code, is amended to
read as follows:
(g) Notwithstanding Section 64.021, Civil Practice and
Remedies Code, a receiver appointed under this section may:
(1) be a person, a municipally owned utility, a
county, a water supply or sewer service corporation, a public
utility agency, or a district or authority created under Section
52, Article III, or Section 59, Article XVI, Texas Constitution;
and
(2) seek approval from the utility commission and the
commission to acquire the water or sewer utility's facilities and
transfer the utility's certificate of convenience and necessity.
The receiver must apply in accordance with Subchapter H.
SECTION 6. Section 13.4132, Water Code, is amended by
amending Subsection (a) and adding Subsection (a-1) to read as
follows:
(a) The utility commission or the commission, after
providing to the utility notice and an opportunity to be heard by
the commissioners at a utility commission or commission meeting,
may authorize a willing person, municipally owned utility, county,
water supply or sewer service corporation, public utility agency,
or district or authority created under Section 52, Article III, or
Section 59, Article XVI, Texas Constitution, to temporarily manage
and operate a utility if the utility:
(1) has discontinued or abandoned operations or the
provision of services;
(2) has been or is being referred to the attorney
general for the appointment of a receiver under Section 13.412; or
(3) provides retail water or sewer utility service
through fewer than 10,000 taps or connections and violates a final
order of the commission by failing to:
(A) provide system capacity that is greater than
the required raw water or groundwater production rate or the
anticipated daily demand of the system;
(B) provide a minimum pressure of 35 pounds per
square inch throughout the distribution system under normal
operating conditions; or
(C) maintain accurate or properly calibrated
testing equipment or other means of monitoring the effectiveness of
a chemical treatment or pathogen inactivation or removal process.
(a-1) For the purposes of this section, a reference to a
person includes a municipally owned utility, county, water supply
or sewer service corporation, public utility agency, or district or
authority created under Section 52, Article III, or Section 59,
Article XVI, Texas Constitution.
SECTION 7. (a) The Public Utility Commission of Texas shall
adopt the rules required by Section 13.183(c-1), Water Code, as
added by this Act, not later than September 1, 2026.
(b) Section 13.183(c), Water Code, as amended by this Act,
and Section 13.183(c-2), Water Code, as added by this Act, apply
only to an application for system improvement charges received by
the Public Utility Commission of Texas on or after September 1,
2026. An application for system improvement charges received
before September 1, 2026, is governed by the law in effect on the
date the application is filed, and the former law is continued in
effect for that purpose.
SECTION 8. This Act takes effect September 1, 2025.