Bill Text: TX HB1510 | 2021-2022 | 87th Legislature | Enrolled


Bill Title: Relating to the response and resilience of certain electricity service providers to major weather-related events or other natural disasters; granting authority to issue bonds.

Spectrum: Slight Partisan Bill (Republican 12-5)

Status: (Passed) 2021-06-01 - Effective immediately [HB1510 Detail]

Download: Texas-2021-HB1510-Enrolled.html
 
 
  H.B. No. 1510
 
 
 
 
AN ACT
  relating to the response and resilience of certain electricity
  service providers to major weather-related events or other natural
  disasters; granting authority to issue bonds.
         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 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. 36.451.  PURPOSE AND APPLICABILITY. (a) Except as
  otherwise specifically provided by this subchapter, the same
  procedures, standards, and protections for securitization
  authorized by Subchapter I of this chapter and, to the extent made
  applicable to Subchapter I of this chapter, by Subchapter G,
  Chapter 39, apply to the lower-cost financing mechanism for
  securitization of transition costs or system restoration costs as
  provided by Subchapter I. To the extent of any conflict between the
  provisions of this subchapter and Subchapter I of this chapter or,
  to the extent made applicable by Subchapter I of this chapter,
  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, supplemental financing mechanism to allow an electric
  utility operating solely outside of ERCOT 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 under this subchapter is a valid and essential public
  purpose.
         (c)  The Texas Electric Utility System Restoration
  Corporation is created under this subchapter as a special purpose
  public corporation and instrumentality of the state for the
  essential public purpose of providing a lower-cost, supplemental
  financing mechanism available to the commission and an electric
  utility to attract low-cost capital to finance system restoration
  costs.
         (d)  In approving securitization under this subchapter, the
  commission shall ensure that customers are not harmed as a result of
  any financing through the Texas Electric Utility System Restoration
  Corporation and that any financial savings or other benefits are
  appropriately reflected in customer rates.
         (e)  System restoration bonds issued under 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.
         (f)  System restoration bonds issued under this subchapter
  shall be nonrecourse to the credit or any assets of the state and
  the commission.
         (g)  This subchapter does not 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.
         (h)  An electric utility receiving the proceeds of
  securitization financing under this subchapter is not required to
  provide utility services to the corporation or the state as a result
  of receiving such proceeds except in the role of the corporation or
  the state as a customer of the electric utility. This subchapter
  does not create an obligation of the corporation or an issuer to
  provide electric services to the electric utility or its customers.
         Sec. 36.452.  DEFINITIONS. (a) In this subchapter:
               (1)  "Corporation" means the Texas Electric Utility
  System Restoration Corporation.
               (2)  "Issuer" means the corporation or any other
  corporation, public trust, public instrumentality, or entity that
  issues system restoration bonds approved by a financing order.
         (b)  For the 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 an
  issuer in connection with the issuance and servicing of the system
  restoration bonds, all as approved in the financing order.
         (c)  Except as otherwise specifically provided by this
  subchapter, any defined terms provided by Subchapter I of this
  chapter and, if made applicable by Subchapter I of this chapter,
  Subchapter G, Chapter 39, have the same meaning in this subchapter.
         Sec. 36.453.  CREATION OF CORPORATION. (a) The corporation
  is 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:
               (1)  shall perform only functions consistent with this
  subchapter;
               (2)  shall exercise its powers through a governing
  board; 
               (3)  is subject to the regulation of the commission;
  and
               (4)  has a legal existence as a public corporate body
  and instrumentality of the state separate and distinct from the
  state.
         (b)  Assets of the corporation may not be considered part of
  any state fund. The state may not budget for or provide any state
  money to the corporation. The debts, claims, obligations, and
  liabilities of the corporation may not be considered to be a debt of
  the state or a pledge of its credit. 
         (c)  The corporation must be self-funded. Before the
  imposition of transition charges or system restoration charges, the
  corporation may accept and expend for its operating expenses money
  that may be received from any source, including financing
  agreements with the state, a commercial bank, or another entity to:
               (1)  finance the corporation's obligations until the
  corporation receives sufficient transition property to cover its
  operating expenses as financing costs; and 
               (2)  repay any short-term borrowing under any such
  financing agreements.
         (d)  The corporation has the powers, rights, and privileges
  provided for a corporation organized under Chapter 22, Business
  Organizations Code, subject to the express exceptions and
  limitations provided by this subchapter.
         (e)  An organizer selected by the executive director of the
  commission shall prepare the certificate of formation of the
  corporation under Chapters 3 and 22, Business Organizations Code.
  The certificate of formation must be consistent with the provisions
  of this subchapter.
         (f)  State officers and agencies are authorized to render
  services to the corporation, within their respective functions, as
  may be requested by the commission or the corporation.
         (g)  The corporation or an issuer may:
               (1)  retain professionals, financial advisors, and
  accountants the corporation or issuer considers necessary to
  fulfill the corporation's or issuer's duties under this subchapter;
  and 
               (2)  determine the duties and compensation of a person
  retained under Subdivision (1), subject to the approval of the
  commission.
         (h)  The corporation is governed by a board of five directors
  appointed by the commission for two-year terms. 
         (i)  An official action of the board requires the favorable
  vote of a majority of the directors present and voting at a meeting
  of the board.
         Sec. 36.454.  POWERS AND DUTIES OF CORPORATION. (a) The
  corporation, in each instance subject to the prior authorization of
  the commission, shall participate in the financial transactions
  authorized by this subchapter. The corporation may not engage in
  business activities except those activities provided for in this
  subchapter and those ancillary and incidental thereto. The
  corporation or an issuer may not apply proceeds of system
  restoration bonds or system restoration charges to a purpose not
  specified in a financing order, to a purpose in an amount that
  exceeds the amount allowed for such purpose in the order, or to a
  purpose in contravention of the order.
         (b)  The board of the corporation, under the provisions of
  this subchapter, may employ or retain persons as are necessary to
  perform the duties of the corporation.
         (c)  The corporation may:
               (1)  acquire, sell, pledge, or transfer transition
  property as necessary to effect the purposes of this subchapter
  and, in connection with the action, agree to such terms and
  conditions as the corporation deems necessary and proper,
  consistent with the terms of a financing order:
                     (A)  to acquire transition property and to pledge
  such transition property, and any other collateral:
                           (i)  to secure payment of system restoration
  bonds issued by the corporation, together with payment of any other
  qualified costs; or 
                           (ii)  to secure repayment of any borrowing
  from any other issuer of system restoration bonds; or 
                     (B)  to sell the transition property to another
  issuer, which may in turn pledge that 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 that 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;
               (4)  sue or be sued in its corporate name;
               (5)  intervene as a party before the commission or any
  court in this state in any matter involving the corporation's
  powers and duties;
               (6)  negotiate and become a party to contracts as
  necessary, convenient, or desirable to carry out the purposes of
  this subchapter; and
               (7)  engage in corporate actions or undertakings that
  are permitted for nonprofit corporations in this state and that are
  not prohibited by, or contrary to, this subchapter.
         (d)  The corporation shall maintain separate accounts and
  records relating to each electric utility that collects system
  restoration charges for all charges, revenues, assets,
  liabilities, and expenses relating to that utility's related system
  restoration bond issuances.
         (e)  The board of the corporation may not authorize any
  rehabilitation, liquidation, or dissolution of the corporation and
  a rehabilitation, liquidation, or dissolution of the corporation
  may not take effect as long as any system restoration bonds are
  outstanding unless adequate protection and provision have 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 must 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 must be applied and distributed as
  provided by an order of the commission.
         (f)  Before the date that is two years and one day after the
  date that the corporation no longer has any payment obligation with
  respect to any system restoration bonds, including any obligation
  to an issuer of any system restoration bonds outstanding, the
  corporation may not file a voluntary petition under federal
  bankruptcy law and neither any public official nor any
  organization, entity, or other person may authorize the corporation
  to be or to become a debtor under federal bankruptcy law during that
  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 this subsection and Subsection (e) 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 and submit to the
  commission for approval an annual operating budget. If requested by
  the commission, the corporation shall prepare and submit an annual
  report containing the annual operating and financial statements of
  the corporation and any other appropriate information. 
         Sec. 36.455.  COMMISSION REGULATION OF CORPORATION. The
  commission shall regulate the corporation as provided by this
  subchapter and consistent with the manner in which it regulates
  public utilities. Notwithstanding the regulation authorized by
  this section, the corporation is not a public utility.
         Sec. 36.456.  FINANCING ORDER. (a) This section applies to
  the commission's issuance of a financing order under this
  subchapter.
         (b)  Except as otherwise specifically provided by this
  subchapter, the provisions of Subchapter I of this chapter and, to
  the extent made applicable to Subchapter I of this chapter,
  Subchapter G, Chapter 39, that address 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 must be a party to the
  commission's proceedings that address the issuance of a financing
  order along with the relevant electric utility.
         (d)  In addition to the requirements of Subchapter I, as
  applicable, a financing order issued under this subchapter must:
               (1)  require the sale, assignment, or other transfer to
  the corporation of certain specified transition property created by
  the financing order in the manner contemplated by Section 39.308,
  and, following that sale, assignment, or transfer, require that
  system restoration charges paid under any financing order 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:
                     (A)  the issuance of system restoration bonds by
  the corporation secured by a pledge of specified transition
  property, and the application of the proceeds of those 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, secured by a pledge of the specified transition
  property; or 
                           (ii)  by the acquisition by an issuer from
  the corporation of the transition property financed from the net
  proceeds of transition bonds issued by the issuer; and
               (3)  authorize the electric utility to serve as
  collection agent to collect the system restoration charges and
  transfer the 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. No
  assets of the state or electric utility are subject to claims by
  such bondholders. Notwithstanding the provisions of Subchapter G,
  Chapter 39, following assignment of the transition property, the
  electric utility does not have any beneficial interest or claim of
  right in such system restoration charges or in any transition
  property.
         Sec. 36.457.  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 of this chapter, as that subchapter
  applies to this subchapter, Subchapter G, Chapter 39, as that
  subchapter 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 37.056(c), Utilities Code, is amended to
  read as follows:
         (c)  The commission shall grant each certificate on a
  nondiscriminatory basis after considering:
               (1)  the adequacy of existing service;
               (2)  the need for additional service;
               (3)  the effect of granting the certificate on the
  recipient of the certificate and any electric utility serving the
  proximate area; and
               (4)  other factors, such as:
                     (A)  community values;
                     (B)  recreational and park areas;
                     (C)  historical and aesthetic values;
                     (D)  environmental integrity;
                     (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 in areas
  outside the ERCOT power region; and
                     (F)  to the extent applicable, the effect of
  granting the certificate on the ability of this state to meet the
  goal established by Section 39.904(a) of this title.
         SECTION 4.  Section 37.058, Utilities Code, is amended by
  adding Subsection (e) to read as follows:
         (e)  Notwithstanding any other provision of this title, an
  electric utility operating solely outside of the ERCOT power region
  may, but shall not be required to, obtain a certificate to install,
  own, or operate a generation facility with a capacity of 10
  megawatts or less.
         SECTION 5.  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.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 1510 was passed by the House on April
  20, 2021, by the following vote:  Yeas 145, Nays 0, 1 present, not
  voting.
 
  ______________________________
  Chief Clerk of the House   
 
 
         I certify that H.B. No. 1510 was passed by the Senate on May
  19, 2021, by the following vote:  Yeas 31, Nays 0.
 
  ______________________________
  Secretary of the Senate    
  APPROVED:  _____________________
                     Date          
   
            _____________________
                   Governor       
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