Bill Text: TX HB1510 | 2021-2022 | 87th Legislature | Engrossed
NOTE: There are more recent revisions of this legislation. Read Latest Draft
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: Moderate Partisan Bill (Republican 13-4)
Status: (Passed) 2021-06-01 - Effective immediately [HB1510 Detail]
Download: Texas-2021-HB1510-Engrossed.html
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: Moderate Partisan Bill (Republican 13-4)
Status: (Passed) 2021-06-01 - Effective immediately [HB1510 Detail]
Download: Texas-2021-HB1510-Engrossed.html
87R16890 JXC-F | ||
By: Metcalf, Moody, Burrows, Paddie, Hefner, | H.B. No. 1510 | |
et al. |
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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. |