BILL ANALYSIS

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

When a utility is operationally abandoned by its owner, the Public Utility Commission (PUC) or the Texas Commission on Environmental Quality (TCEQ) assigns a temporary manager who will invest copious amounts of time and capital into ensuring that water is restored to the service area. Temporary managers often assume operation of the utility with its acquisition in mind; however, in order to approve this acquisition, the PUC needs a signature from the utility's current owner.

After their abandonment, utilities' current owners often cannot be contacted or located to provide a signature for transaction approval. This lack of a signature draws out the transaction process, impacting both the temporary manager's ability to recoup the costs of operation and management and the affected community's sustained access to clean, continuous water.

C.S.S.B. 1965 will require the PUC to adopt an expedited sale, transfer, or merger process to streamline utility acquisitions for temporary managers in the specific case of operational abandonment and lack of access to the current owner's signature. This mechanism will provide temporary managers with assurance that their costs will be recoverable and provide communities with assurance that their essential water and sewer service is no longer at risk.

S.B. 1965 amends current law relating to requirements for the purchase or acquisition of certain water and sewer systems.

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the Public Utility Commission of Texas in SECTION 1 (Section 13.301, Water Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 13.301, Water Code, by amending Subsection (h) and adding Subsections (l), (m), and (n), as follows:

(h) Requires the Public Utility Commission of Texas (PUC) to approve a transaction to which Section 13.301 (Report of Sale, Merger, Etc.; Investigation; Disallowance of Transaction) applies without an owner's signature required by other law if the owner has abandoned operation of the facilities that are the subject of the transaction and cannot be located or does not respond to an application filed under Subsection (l).

(l) Requires the PUC by rule to adopt an expedited process that, notwithstanding any other provision of this section, allows a person appointed by the PUC or the Texas Commission on Environmental Quality (TCEQ) under Section 13.4132 (Operation of Utility That Discontinues Operation or Is Referred for Appointment of Receiver) 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 PUC 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. Requires that the expedited process:

(1)  waive public notice requirements regardless of whether the person elects to charge initial rates in accordance with Section 13.3011 (Initial Rates for Certain Water or Sewer Systems After Purchase or Acquisition) or use a voluntary valuation determined under Section 13.305 (Voluntary Valuation of Acquired Utility or Facilities);

(2)  require approval of the acquisition transaction if the transaction is considered to be in the public interest; and

(3)  provide that:

(A)  the 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 person; and

(B)  all used and useful invested capital and just and reasonable operations and maintenance costs incurred by the person during the 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 person and are recoverable in the person's next comprehensive rate proceeding or system improvement charge application.

(m) Provides that all used and useful invested capital and just and reasonable operations and maintenance costs incurred by the person in excess of costs covered by the temporary rate, if a temporary rate under Section 13.046 (Temporary Rates for Services Provided for Nonfunctioning System; Sanctions for Noncompliance) is adopted during the period described by Subsection (l)(3)(B), are considered to be a regulatory asset for the person and are recoverable in the person's next comprehensive rate proceeding or system improvement charge application.

(n) Requires the PUC and TCEQ to provide a reasonable period for a person acquiring a utility under Subsection (l) to bring the acquired utility into compliance with PUC and TCEQ rules before imposing a penalty for any violation committed by the acquired utility for which no enforcement action has been completed at the time of acquisition.

SECTION 2. Effective date: September 1, 2023.