Bill Text: TX HB1520 | 2021-2022 | 87th Legislature | Engrossed
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Relating to certain extraordinary costs incurred by certain gas utilities relating to Winter Storm Uri and a study of measures to mitigate similar future costs; providing authority to issue bonds and impose fees and assessments.
Spectrum: Bipartisan Bill
Status: (Passed) 2021-06-16 - Effective immediately [HB1520 Detail]
Download: Texas-2021-HB1520-Engrossed.html
Bill Title: Relating to certain extraordinary costs incurred by certain gas utilities relating to Winter Storm Uri and a study of measures to mitigate similar future costs; providing authority to issue bonds and impose fees and assessments.
Spectrum: Bipartisan Bill
Status: (Passed) 2021-06-16 - Effective immediately [HB1520 Detail]
Download: Texas-2021-HB1520-Engrossed.html
By: Paddie, et al. | H.B. No. 1520 |
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relating to the recovery and securitization of certain | ||
extraordinary costs incurred by certain gas utilities; providing | ||
authority to issue bonds and impose fees and assessments. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 1232.002, Government Code, is amended to | ||
read as follows: | ||
Sec. 1232.002. PURPOSE. The purpose of this chapter is to | ||
provide a method of financing for: | ||
(1) the acquisition or construction of buildings; | ||
[ |
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(2) the purchase or lease of equipment by executive or | ||
judicial branch state agencies; and | ||
(3) customer rate relief bonds authorized by the | ||
Railroad Commission of Texas. | ||
SECTION 2. Section 1232.066(a), Government Code, is amended | ||
to read as follows: | ||
(a) The board's authority under this chapter is limited to | ||
the financing of: | ||
(1) the acquisition or construction of a building; | ||
(2) the purchase or lease of equipment; [ |
||
(3) stranded costs of a municipal power agency; or | ||
(4) customer rate relief bonds approved by the | ||
Railroad Commission of Texas. | ||
SECTION 3. Subchapter C, Chapter 1232, Government Code, is | ||
amended by adding Section 1232.1072 to read as follows: | ||
Sec. 1232.1072. ISSUANCE OF OBLIGATIONS FOR FINANCING | ||
CUSTOMER RATE RELIEF BONDS. (a) The authority, either directly or | ||
by means of a financing entity established by the authority, may | ||
issue obligations or other evidences of indebtedness for financing | ||
customer rate relief bonds approved under Subchapter I, Chapter | ||
104, Utilities Code. | ||
(b) On a request to the authority from the Railroad | ||
Commission of Texas, the authority shall: | ||
(1) issue obligations or other evidences of | ||
indebtedness in the amount of the requested customer rate relief | ||
bonds, plus the issuance costs; and | ||
(2) grant to the Railroad Commission of Texas the | ||
proceeds of the obligations or evidences of indebtedness described | ||
by Subdivision (1). | ||
(c) The request from the Railroad Commission of Texas | ||
described by Subsection (b) must include a statement of the payment | ||
terms for recovering customer rate relief costs. | ||
(d) Obligations or evidences of indebtedness the authority | ||
issues under this section must be created under financing orders | ||
issued by the Railroad Commission of Texas. The financing orders | ||
must authorize the authority to create legally isolated, | ||
bankruptcy-remote financing entities to hold customer rate relief | ||
property. The authority may establish a financing entity | ||
authorized by a financing order. | ||
(e) Obligations or evidences of indebtedness the authority | ||
issues under this section for each approved customer rate relief | ||
financing must include, as part of the financing costs of the | ||
financing, the administrative costs related to the financing. | ||
(f) Obligations or evidences of indebtedness the authority | ||
issues under this section must be secured by: | ||
(1) customer rate relief property, as defined by | ||
Section 104.362, Utilities Code; and | ||
(2) customer rate relief charges, as defined by | ||
Section 104.362, Utilities Code, that are nonbypassable, as defined | ||
by that section, imposed by the authority on customers receiving | ||
natural gas services provided by the gas utility, as defined by that | ||
section, that is making the request to recover a regulatory asset | ||
under Section 104.365, Utilities Code. | ||
(g) The customer rate relief property and customer rate | ||
relief charges described by Subsection (f) must be consistent with | ||
the customer rate relief recovery terms stated in the gas utility's | ||
request to recover a regulatory asset under Section 104.365, | ||
Utilities Code, unless otherwise approved by the Railroad | ||
Commission of Texas. | ||
(h) An obligation or evidence of indebtedness the authority | ||
issues under this section is not a debt of this state, the Railroad | ||
Commission of Texas, or a gas utility. | ||
(i) The Railroad Commission of Texas shall provide to the | ||
authority assistance necessary to ensure that the customer rate | ||
relief charges described by Subsection (f) are collected and | ||
enforced, either directly or by using the assistance and powers of | ||
the gas utility requesting to recover a regulatory asset under | ||
Section 104.365, Utilities Code, as servicer. | ||
(j) The authority and the Railroad Commission of Texas have | ||
all the powers necessary to perform the duties and responsibilities | ||
described by this section. This section shall be interpreted | ||
broadly in a manner consistent with the most cost-effective | ||
financing of customer rate relief related costs. | ||
(k) Obligations or evidences of indebtedness issued by the | ||
authority under this section may be structured so that any interest | ||
on the obligations or evidences of indebtedness is excluded from | ||
gross income for federal income tax purposes. Any interest on the | ||
obligations or evidences of indebtedness is not subject to taxation | ||
by and may not be included as part of the measurement of a tax by | ||
this state or a political subdivision of this state. | ||
(l) The authority shall make periodic reports to the | ||
Railroad Commission of Texas and the public regarding each | ||
financing made under this section. | ||
SECTION 4. Section 1232.108, Government Code, is amended to | ||
read as follows: | ||
Sec. 1232.108. LEGISLATIVE AUTHORIZATION REQUIRED. Except | ||
as permitted by Section 1232.1072, 1232.109, 2166.452, or 2166.453, | ||
before the board may issue and sell bonds, the legislature by the | ||
General Appropriations Act or other law must have authorized: | ||
(1) the specific project for which the bonds are to be | ||
issued and sold; and | ||
(2) the estimated cost of the project or the maximum | ||
amount of bonded indebtedness that may be incurred by the issuance | ||
and sale of bonds for the project. | ||
SECTION 5. Chapter 104, Utilities Code, is amended by | ||
adding Subchapter I to read as follows: | ||
SUBCHAPTER I. CUSTOMER RATE RELIEF BONDS | ||
Sec. 104.361. PURPOSE; RAILROAD COMMISSION DUTY. (a) The | ||
purpose of this subchapter is to reduce the cost that customers | ||
would otherwise experience because of extraordinary costs that gas | ||
utilities incur to secure gas supply and provide service during | ||
natural and man-made disasters, system failures, or other | ||
catastrophic events, and to restore gas utility systems after those | ||
types of events, by providing securitization financing for gas | ||
utilities to recover those costs. The securitization financing | ||
mechanism authorized by this subchapter will: | ||
(1) provide rate relief to customers by extending the | ||
period during which the extraordinary costs described by Subsection | ||
(a) are recovered from customers; and | ||
(2) support the financial strength and stability of | ||
gas utility companies. | ||
(b) The railroad commission shall ensure that | ||
securitization provides tangible and quantifiable benefits to | ||
customers, greater than would have been achieved absent the | ||
issuance of customer rate relief bonds. | ||
Sec. 104.362. DEFINITIONS. In this subchapter: | ||
(1) "Ancillary agreement" means a financial | ||
arrangement entered into in connection with the issuance or payment | ||
of customer rate relief bonds that enhances the marketability, | ||
security, or creditworthiness of customer rate relief bonds, | ||
including a bond, insurance policy, letter of credit, reserve | ||
account, surety bond, interest rate or currency swap arrangement, | ||
interest rate lock agreement, forward payment conversion | ||
agreement, other hedging arrangement, or liquidity or credit | ||
support arrangement. | ||
(2) "Assignee" means any legally recognized entity to | ||
which an interest in customer rate relief property is transferred, | ||
other than as security. The term includes a corporation, limited | ||
liability company, public authority, trust, general partnership, | ||
limited partnership, or other financing entity. | ||
(3) "Authority" means the Texas Public Finance | ||
Authority. | ||
(4) "Bond administrative expenses" means expenses | ||
incurred to administer customer rate relief bonds issued under this | ||
subchapter, including fees for paying agents, trustees, and | ||
attorneys, and for paying for other professional services necessary | ||
to ensure compliance with applicable state or federal law. | ||
(5) "Bond obligations" means the principal of a | ||
customer rate relief bond and any premium and interest on a customer | ||
rate relief bond issued under this subchapter, together with any | ||
amount owed under a related ancillary agreement or credit | ||
agreement. | ||
(6) "Credit agreement" means a loan agreement, | ||
revolving credit agreement, agreement establishing a line of | ||
credit, or similar financing arrangement. | ||
(7) "Customer rate relief bonds" means bonds, notes, | ||
certificates, or other evidences of indebtedness or ownership the | ||
proceeds of which are used directly or indirectly to recover, | ||
finance, or refinance regulatory assets approved by the railroad | ||
commission, including extraordinary costs and related financing | ||
costs, and that are: | ||
(A) issued by an assignee under a financing | ||
order; and | ||
(B) payable from and secured by customer rate | ||
relief property and amounts on deposit in the obligation trust fund | ||
to the extent provided by the applicable financing order. | ||
(8) "Customer rate relief charges" means the amounts | ||
authorized by the railroad commission as nonbypassable charges to | ||
repay, finance, or refinance regulatory assets, including | ||
extraordinary costs, financing costs, and other costs authorized by | ||
the financing order: | ||
(A) imposed on and included in customer bills of | ||
a gas utility that has received a regulatory asset determination | ||
under Section 104.365; | ||
(B) collected in full by a gas utility that has | ||
received a regulatory asset determination under Section 104.365, or | ||
its successors or assignees, or a collection agent, as servicer, | ||
separate and apart from the gas utility's base rates; and | ||
(C) paid by all existing or future customers | ||
receiving service from a gas utility that has received a regulatory | ||
asset determination under Section 104.365 or its successors or | ||
assignees, even if a customer elects to purchase gas from an | ||
alternative gas supplier. | ||
(9) "Customer rate relief property" means property | ||
described by Section 104.367. | ||
(10) "Financing costs" means any of the following: | ||
(A) interest and acquisition, defeasance, or | ||
redemption premiums that are payable on customer rate relief bonds; | ||
(B) a payment required under an ancillary | ||
agreement and an amount required to fund or replenish reserve or | ||
other accounts established under the terms of an indenture, | ||
ancillary agreement, or other financing document pertaining to | ||
customer rate relief bonds; | ||
(C) issuance costs and ongoing costs related to | ||
supporting, repaying, servicing, or refunding customer rate relief | ||
bonds, including servicing fees, accounting and auditing fees, | ||
trustee fees, legal fees and expenses, consulting fees, | ||
administrative fees, printing fees, financial advisor fees and | ||
expenses, Securities and Exchange Commission registration fees, | ||
issuer fees, placement and underwriting fees, capitalized | ||
interest, overcollateralization funding requirements, rating | ||
agency fees, stock exchange listing and compliance fees, filing | ||
fees, and any other bond administration expenses; and | ||
(D) the costs to the railroad commission of | ||
acquiring professional services for the purpose of evaluating | ||
extraordinary costs under this subchapter. | ||
(11) "Financing order" means an order adopted under | ||
Section 104.366 approving the issuance of customer rate relief | ||
bonds and the creation of customer rate relief property and | ||
associated customer rate relief charges for the recovery of | ||
regulatory assets, including extraordinary costs, related | ||
financing costs, and other costs authorized by the financing order. | ||
(12) "Financing party" means a holder of customer rate | ||
relief bonds, including a trustee, collateral agent, any party | ||
under an ancillary agreement, or other person acting for the | ||
holder's benefit. | ||
(13) "Gas utility" means: | ||
(A) an operator of natural gas distribution | ||
pipelines that delivers and sells natural gas to the public and that | ||
is subject to the railroad commission's jurisdiction under Section | ||
102.001; or | ||
(B) an operator that transmits, transports, | ||
delivers, or sells natural gas or synthetic natural gas to | ||
operators of natural gas distribution pipelines and whose rates for | ||
those services are established by the railroad commission in a rate | ||
proceeding filed under this chapter. | ||
(14) "Nonbypassable" means a charge that may not be | ||
offset by any credit. | ||
(15) "Normalized market pricing" means the average | ||
monthly pricing at the Henry Hub for the three months immediately | ||
preceding the month during which extraordinary costs were incurred, | ||
plus contractual adders to the index price and other non-indexed | ||
gas procurement costs. | ||
(16) "Regulatory asset" includes extraordinary costs: | ||
(A) recorded by a gas utility in the utility's | ||
books and records in accordance with the uniform system of accounts | ||
prescribed for natural gas companies subject to the provisions of | ||
the Natural Gas Act (15 U.S.C. Section 717 et seq.) by the Federal | ||
Energy Regulatory Commission and generally accepted accounting | ||
principles; or | ||
(B) classified as a receivable or financial asset | ||
under international financial reporting standards under the | ||
railroad commission's authorization in the Notice of Authorization | ||
for Regulatory Asset Accounting for Local Distribution Companies | ||
Affected by the February 2021 Winter Weather Event issued February | ||
13, 2021, or any later notice or order issued by the railroad | ||
commission for other similarly authorized natural or man-made | ||
disasters or system failure events. | ||
Sec. 104.363. EXTRAORDINARY COSTS. For the purposes of | ||
this subchapter, extraordinary costs are the reasonable and | ||
necessary costs, including carrying costs, placed in a regulatory | ||
asset and approved by the railroad commission in a regulatory asset | ||
determination under Section 104.365. | ||
Sec. 104.364. JURISDICTION AND POWERS OF RAILROAD | ||
COMMISSION AND OTHER REGULATORY AUTHORITIES. (a) The railroad | ||
commission may authorize the issuance of customer rate relief bonds | ||
if the requirements of Section 104.366 are met. | ||
(b) The railroad commission may assess to a gas utility | ||
costs associated with administering this subchapter. Assessments | ||
must be recovered from rate-regulated customers as part of gas | ||
cost. | ||
(c) The railroad commission has exclusive, original | ||
jurisdiction to issue financing orders that authorize the creation | ||
of customer rate relief property, customer rate relief charges to | ||
service customer rate relief bonds, and financing costs. Customer | ||
rate relief charges, if authorized by the railroad commission | ||
through a financing order in that commission's sole discretion, | ||
must be imposed pursuant to customer rate relief property and not by | ||
a gas utility. | ||
(d) Except as provided by Subsection (c), this subchapter | ||
does not limit or impair a regulatory authority's plenary | ||
jurisdiction over the rates, charges, and services rendered by gas | ||
utilities in this state under Chapter 102. | ||
Sec. 104.365. REGULATORY ASSET DETERMINATION. (a) The | ||
railroad commission, on application of a gas utility to recover a | ||
regulatory asset, shall determine the regulatory asset amount to be | ||
recovered by the gas utility. | ||
(b) A gas utility desiring to participate in the customer | ||
rate relief bond process under a financing order must file an | ||
application with the railroad commission not later than the 90th | ||
day after the date of the conclusion of the event for which | ||
regulatory asset recovery is requested. The railroad commission | ||
shall determine an application date deadline consistent with this | ||
subsection. | ||
(c) Notwithstanding the deadline provided by Subsection | ||
(b), a gas utility desiring to participate in the customer rate | ||
relief bond process under a financing order by requesting recovery | ||
of a regulatory asset relating to the February 2021 winter storm may | ||
file an application with the railroad commission on or before the | ||
60th day after the effective date of the Act enacting this | ||
subchapter. | ||
(d) If the railroad commission does not make a final | ||
determination regarding the regulatory asset amount to be recovered | ||
by a gas utility before the 91st day after the gas utility files the | ||
application, the railroad commission is considered to have approved | ||
the regulatory asset amount requested by the gas utility. | ||
(e) The regulatory asset determination is not subject to | ||
reduction, impairment, or adjustment by further action of the | ||
railroad commission, except as authorized by Section 104.370. | ||
(f) The regulatory asset determination is not subject to | ||
rehearing by the railroad commission and may be appealed only to a | ||
Travis County district court by a party to the proceeding. The | ||
appeal must be filed not later than the 15th day after the date the | ||
order is signed by the railroad commission. | ||
(g) The judgment of the district court may be reviewed only | ||
by direct appeal to the Supreme Court of Texas. The appeal must be | ||
filed not later than the 15th day after the date of entry of | ||
judgment. | ||
(h) All appeals shall be heard and determined by the | ||
district court and the Supreme Court of Texas as expeditiously as | ||
possible with lawful precedence over other matters. Review on | ||
appeal shall be based solely on the record before the railroad | ||
commission and briefs to the court and limited to whether the | ||
financing order: | ||
(1) complies with the constitution and laws of this | ||
state and the United States; and | ||
(2) is within the authority of the railroad commission | ||
to issue under this subchapter. | ||
(i) The railroad commission by order shall establish a | ||
schedule, filing requirements, and a procedure for determining the | ||
prudence of the costs included in a gas utility's regulatory asset. | ||
(j) To the extent a gas utility subject to this subchapter | ||
receives insurance proceeds, governmental grants, or other sources | ||
of funding that compensate or otherwise reimburse or indemnify the | ||
gas utility for extraordinary costs following the issuance of | ||
customer rate relief bonds, the gas utility may record the amount in | ||
a regulatory liability account and that amount shall be reviewed in | ||
a future proceeding. If an audit conducted under a valid gas | ||
purchase agreement identifies a change of greater than five percent | ||
to the total amount of the gas supply costs incurred during the | ||
event for which regulatory asset recovery was approved, the gas | ||
utility may record the amount in a regulatory asset or regulatory | ||
liability account and that amount shall be reviewed for recovery in | ||
a future proceeding. | ||
Sec. 104.366. FINANCING ORDERS AND ISSUANCE OF CUSTOMER | ||
RATE RELIEF BONDS. (a) If the railroad commission determines that | ||
customer rate relief bond financing for extraordinary costs is the | ||
most cost-effective method of funding regulatory asset | ||
reimbursements to be made to gas utilities, the railroad | ||
commission, after the final resolution of all applications filed | ||
under Section 104.365, may request the authority to issue customer | ||
rate relief bonds on the railroad commission's behalf. Before | ||
making the request, the railroad commission must issue a financing | ||
order that complies with this section. | ||
(b) To make the determination described by Subsection (a), | ||
the railroad commission must find that the proposed structuring, | ||
expected pricing, and proposed financing costs of the customer rate | ||
relief bonds are reasonably expected to provide benefits to | ||
customers by comparing: | ||
(1) the net present value of the costs to customers | ||
resulting from the issuance of customer rate relief bonds; and | ||
(2) the costs that would result from the application | ||
of conventional methods of financing or recovering gas utility | ||
extraordinary costs and other costs authorized by a financing | ||
order. | ||
(c) The financing order must: | ||
(1) include a finding that the use of the | ||
securitization financing mechanism is in the public interest and | ||
consistent with the purposes of this subchapter; | ||
(2) detail the total amount of the regulatory asset | ||
determinations to be included in the customer rate relief bond | ||
issuance; | ||
(3) authorize the recovery of any tax obligation of | ||
the gas utilities arising or resulting from: | ||
(A) receipt of customer rate relief bond | ||
proceeds; or | ||
(B) collection or remittance of customer rate | ||
relief charges through the gas utilities' gas cost recovery | ||
mechanism or other means that the railroad commission determines | ||
reasonable; | ||
(4) authorize the authority's issuance of customer | ||
rate relief bonds through one or more legally isolated, | ||
bankruptcy-remote financing entities established by the authority; | ||
(5) include a statement of: | ||
(A) the aggregated regulatory asset | ||
determination to be included in the principal amount of the | ||
customer rate relief bonds, not to exceed $10 billion for any | ||
separate bond issue; and | ||
(B) the maximum scheduled final maturity of the | ||
customer rate relief bonds, not to exceed 30 years, except that the | ||
legal final maturity may be longer based on rating agency and market | ||
considerations; | ||
(6) provide for the imposition, collection, and | ||
mandatory periodic formulaic adjustment of customer rate relief | ||
charges in accordance with Section 104.370 by all gas utilities for | ||
which a regulatory asset determination has been made under Section | ||
104.365 to guarantee that the bonds will be paid in full; | ||
(7) authorize the creation of customer rate relief | ||
property in favor of the authority and the authority's transfer of | ||
the property; | ||
(8) direct the authority to disperse the proceeds of | ||
customer rate relief bonds to gas utilities for which a regulatory | ||
asset determination has been made under Section 104.365 and include | ||
the amounts to be distributed; | ||
(9) provide that customer rate relief charges be | ||
collected and allocated among customers of each utility for which a | ||
regulatory determination has been made under Section 104.365 | ||
through uniform monthly volumetric charges to be paid by customers | ||
as a component of the gas utility's gas cost or in another manner | ||
that the railroad commission determines reasonable; and | ||
(10) reflect the commitment made by each gas utility | ||
receiving proceeds that the proceeds are in lieu of recovery of | ||
those costs through the regular ratemaking process or other | ||
mechanism to the extent the costs are reimbursed to the gas utility | ||
by customer rate relief bond financing proceeds. | ||
(d) The principal amount determined by the railroad | ||
commission may be increased to include an amount sufficient to: | ||
(1) pay the financing costs for issuance; | ||
(2) reimburse the authority for any costs incurred for | ||
the issuance; | ||
(3) provide a bond reserve fund; and | ||
(4) capitalize interest for the period determined | ||
necessary by the railroad commission. | ||
(e) The authority, consistent with this subchapter and the | ||
terms of the financing order, shall: | ||
(1) issue customer rate relief bonds at the railroad | ||
commission's request, in accordance with the requirements of | ||
Chapter 1232, Government Code, and other provisions of Title 9, | ||
Government Code, that apply to bond issuance by a state agency; and | ||
(2) determine the methods of sale, types of bonds, | ||
bond forms, maximum interest rates, and other terms of the customer | ||
rate relief bonds that in the authority's judgment best achieve the | ||
economic goals of the financing order and effect the financings at | ||
the lowest practicable cost. | ||
(f) The authority shall establish legally isolated, | ||
bankruptcy-remote financing entities and may enter into credit | ||
agreements or ancillary agreements in connection with the issuance | ||
of customer rate relief bonds. | ||
(g) The financing order becomes effective in accordance | ||
with its terms. The financing order, together with the customer | ||
rate relief property and the customer rate relief charges | ||
authorized by the financing order, is irrevocable and not subject | ||
to reduction, impairment, or adjustment by further action of the | ||
railroad commission, except as provided under Subsection (i) and | ||
authorized by Section 104.370. | ||
(h) The railroad commission shall issue a financing order | ||
under this section not later than the 90th day following the date of | ||
the conclusion of all proceedings filed under Section 104.365. | ||
(i) A financing order is not subject to rehearing by the | ||
railroad commission. A financing order may be appealed only to a | ||
Travis County district court by a party to the proceeding. The | ||
appeal must be filed not later than the 15th day after the date the | ||
financing order is signed by the railroad commission. | ||
(j) The judgment of the district court may be reviewed only | ||
by direct appeal to the Supreme Court of Texas. The appeal must be | ||
filed not later than the 15th day after the date of entry of | ||
judgment. | ||
(k) All appeals shall be heard and determined by the | ||
district court and the Supreme Court of Texas as expeditiously as | ||
possible with lawful precedence over other matters. Review on | ||
appeal shall be based solely on the record before the railroad | ||
commission and briefs to the court and is limited to whether the | ||
financing order: | ||
(1) complies with the constitution and laws of this | ||
state and the United States; and | ||
(2) is within the authority of the railroad commission | ||
to issue under this subchapter. | ||
(l) The authority shall issue customer rate relief bonds not | ||
later than the 45th day after receipt of a financing order issued | ||
under this section. | ||
(m) The authority shall deliver customer rate relief bond | ||
proceeds net of upfront financing costs to each gas utility | ||
sufficient to reimburse the gas utility the regulatory asset amount | ||
determined to be reasonable under Section 104.365 not later than | ||
the 15th day after the date of issuance of the customer rate relief | ||
bonds. | ||
(n) For the weather-related event that occurred in February | ||
2021, the authority shall deliver customer rate relief bond | ||
proceeds net of upfront financing costs to each gas utility no later | ||
than December 31, 2021. This subsection expires September 1, 2023. | ||
Sec. 104.367. PROPERTY RIGHTS. (a) Customer rate relief | ||
bonds are solely the obligation of the assignee or issuing | ||
financing entity and are not a debt of a gas utility or a debt or a | ||
pledge of the faith and credit of this state or any political | ||
subdivision of this state. | ||
(b) Customer rate relief bonds are nonrecourse to the credit | ||
or any assets of this state or the authority. | ||
(c) The rights and interests of the authority or the | ||
authority's successor under a financing order, including the right | ||
to impose and receive customer rate relief charges authorized in | ||
the financing order, are only contract rights until first | ||
transferred to an assignee or pledged in connection with the | ||
issuance of the customer rate relief bonds, at which time the rights | ||
and interests become customer rate relief property. | ||
(d) Customer rate relief property constitutes a present | ||
property right for purposes of contracts concerning the sale or | ||
pledge of property, notwithstanding that the imposition and | ||
collection of customer rate relief charges depends on further acts | ||
of the gas utility or others that have not yet occurred. The | ||
financing order remains in effect, and the customer rate relief | ||
property continues to exist, for the same period as the pledge of | ||
the state described by Section 104.374. | ||
(e) All revenue and collections resulting from customer | ||
rate relief charges constitute proceeds only of a property right | ||
arising from the financing order. | ||
(f) An amount owed by the authority or an issuer under a | ||
credit agreement is payable from and secured by the customer rate | ||
relief property, including customer rate relief charges and amounts | ||
to the extent provided in the proceedings authorizing the credit | ||
agreement. | ||
Sec. 104.368. PROPERTY INTEREST NOT SUBJECT TO SETOFF, | ||
COUNTERCLAIM, SURCHARGE, OR DEFENSE. The interest of an assignee | ||
or pledgee in customer rate relief property, including the revenue | ||
and collections arising from customer rate relief charges, is not | ||
subject to setoff, counterclaim, surcharge, or defense by the gas | ||
utility or any other person or in connection with the bankruptcy of | ||
the gas utility, the authority, or any other entity. A financing | ||
order remains in effect and unabated notwithstanding the bankruptcy | ||
of the gas utility or authority, or any successor or assignee of the | ||
gas utility or authority. | ||
Sec. 104.369. CUSTOMER RATE RELIEF CHARGES NONBYPASSABLE. | ||
A financing order must include terms ensuring that the imposition | ||
and collection of the customer rate relief charges authorized in | ||
the order are nonbypassable. | ||
Sec. 104.370. TRUE-UP MECHANISM. (a) A financing order | ||
must include a formulaic true-up charge adjustment mechanism that | ||
requires that the customer rate relief charges be reviewed and | ||
adjusted at least annually, at time periods and frequencies | ||
provided in the financing order, to: | ||
(1) correct any overcollections or undercollections | ||
of the preceding 12 months; and | ||
(2) ensure the expected recovery of amounts sufficient | ||
to provide for the timely payment of upcoming scheduled customer | ||
rate relief bond payments and financing costs. | ||
(b) True-up charge adjustments must become effective not | ||
later than the 30th day after the date the railroad commission | ||
receives a true-up charge adjustment letter from the gas utility or | ||
replacement servicer notifying the railroad commission of the | ||
pending adjustment. | ||
(c) Any administrative review of true-up charge adjustments | ||
must be limited to notifying the servicer of mathematical or | ||
clerical errors in the calculation. The servicer may correct the | ||
error and refile a true-up charge adjustment letter, with the | ||
adjustment becoming effective as soon as practicable but not later | ||
than the 30th day after the date the railroad commission receives | ||
the refiled letter. | ||
Sec. 104.371. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING; | ||
DEFAULT. (a) Customer rate relief property does not constitute an | ||
account or general intangible under Section 9.106, Business & | ||
Commerce Code. The creation, granting, perfection, and enforcement | ||
of liens and security interests in customer rate relief property | ||
are governed by this section and not by the Business & Commerce | ||
Code. | ||
(b) A valid and enforceable lien and security interest in | ||
customer rate relief property may be created only by a financing | ||
order and the execution and delivery of a security agreement with a | ||
financing party in connection with the issuance of customer rate | ||
relief bonds. The lien and security interest attach automatically | ||
from the time that value is received for the customer rate relief | ||
bonds and, on perfection through the filing of notice with the | ||
secretary of state in accordance with the rules prescribed under | ||
Subsection (d), are a continuously perfected lien and security | ||
interest in the customer rate relief property and all proceeds of | ||
the property, whether accrued or not, have priority in the order of | ||
filing and take precedence over any subsequent judicial or other | ||
lien creditor. The security interest is perfected as of the date of | ||
the filing, except that if notice is filed before the 11th day after | ||
value is received for the customer rate relief bonds, the security | ||
interest is perfected retroactive to the date value was received. | ||
(c) Transfer of an interest in customer rate relief property | ||
to an assignee is perfected against all third parties, including | ||
subsequent judicial or other lien creditors, when the financing | ||
order becomes effective, transfer documents have been delivered to | ||
the assignee, and a notice of that transfer has been filed in | ||
accordance with the rules prescribed under Subsection (d). If | ||
notice of the transfer is not filed in accordance with this | ||
subsection before the 11th day after the delivery of transfer | ||
documentation, the transfer of the interest is not perfected | ||
against third parties until the notice is filed. | ||
(d) The secretary of state shall: | ||
(1) establish and maintain a separate system of | ||
records for the filing of notices under this section; and | ||
(2) adopt rules governing filing notices under this | ||
section that are based on Chapter 9, Business & Commerce Code, | ||
adapted to this subchapter, and use the terms as defined by this | ||
subchapter. | ||
(e) The priority of a lien and security interest perfected | ||
under this section is not impaired by any later modification of the | ||
financing order under a mechanism adopted under Section 104.370 or | ||
by the commingling of funds arising from customer rate relief | ||
charges with other funds. Any other security interest that may | ||
apply to those funds is terminated when the funds are transferred to | ||
a segregated account for the assignee or a financing party. If | ||
customer rate relief property has been transferred to an assignee, | ||
any proceeds of that property must be held in trust for the | ||
assignee. | ||
(f) If a default or termination occurs under the customer | ||
rate relief bonds, a district court of Travis County, on | ||
application by or on behalf of the financing parties, shall order | ||
the sequestration and payment to the financing parties of revenue | ||
arising from the customer rate relief charges. | ||
Sec. 104.372. BOND PROCEEDS IN TRUST. (a) The authority | ||
may deposit proceeds of customer rate relief bonds issued by or on | ||
behalf of the authority under this subchapter with a trustee | ||
selected by the authority or the proceeds may be held by the | ||
comptroller in a dedicated trust fund outside the state treasury in | ||
the custody of the comptroller. | ||
(b) Bond proceeds, including investment income, must be | ||
held in trust for the exclusive benefit of the railroad | ||
commission's policy of reimbursing gas utility costs. The | ||
authority shall use the proceeds to: | ||
(1) reimburse each gas utility the regulatory asset | ||
amount determined to be reasonable for that gas utility in the | ||
financing order; | ||
(2) pay the financing costs of issuing the bonds; and | ||
(3) provide bond reserves, as applicable. | ||
(c) If there are no outstanding bonds or bond interest to be | ||
paid, the remaining proceeds must be used to provide credits to gas | ||
utility customers. | ||
Sec. 104.373. REPAYMENT OF CUSTOMER RATE RELIEF BONDS. (a) | ||
If any customer rate relief bonds or related financing costs remain | ||
outstanding, uniform monthly volumetric customer rate relief | ||
charges must be paid by all current and future customers that | ||
receive service from a gas utility for which a regulatory asset | ||
determination has been made under Section 104.365. A gas utility | ||
and its successors, assignees, or replacements shall continue to | ||
bill and collect, as servicer, customer rate relief charges from | ||
the gas utility's current and future customers until all customer | ||
rate relief bonds and financing costs are paid in full. | ||
(b) The authority shall report to the railroad commission | ||
the amount of the outstanding customer rate relief bonds issued by | ||
the authority under this subchapter and the estimated amount of | ||
annual bond administrative expenses. | ||
(c) All revenue collected from the customer rate relief | ||
charges shall be remitted promptly by the applicable servicers to | ||
the authority to pay bond obligations, ongoing financing costs, and | ||
bond administrative expenses to ensure timely payment of bond | ||
obligations and financing costs. | ||
(d) Revenue received from the customer rate relief charges | ||
may be applied only as provided by this subchapter. | ||
(e) Bond obligations are payable only from sources provided | ||
for payment by this subchapter. | ||
Sec. 104.374. PLEDGE OF STATE. (a) Customer rate relief | ||
bonds issued under this subchapter and any related ancillary | ||
agreements or credit agreements are not a debt or pledge of the | ||
faith and credit of this state or a state agency or political | ||
subdivision of this state. A customer rate relief bond, ancillary | ||
agreement, or credit agreement is payable solely from customer rate | ||
relief charges as provided by this subchapter. | ||
(b) Notwithstanding Subsection (a), this state, including | ||
the railroad commission and the authority, pledges for the benefit | ||
and protection of the financing parties and the gas utility that | ||
this state will not take or permit any action that would impair the | ||
value of customer rate relief property, or, except as permitted by | ||
Section 104.370, reduce, alter, or impair the customer rate relief | ||
charges to be imposed, collected, and remitted to financing parties | ||
until the principal, interest and premium, and contracts to be | ||
performed in connection with the related customer rate relief bonds | ||
and financing costs have been paid and performed in full. The | ||
authority or any other entity issuing customer rate relief bonds | ||
may include this pledge in any documentation relating to those | ||
bonds. | ||
Sec. 104.375. TAX EXEMPTION. (a) Customer rate relief | ||
bonds issued under this subchapter, transactions relating to | ||
customer rate relief bonds, and profits made from the sale of | ||
customer rate relief bonds are exempt from taxation by this state or | ||
a political subdivision of this state. | ||
(b) A gas utility's receipt or collection of customer rate | ||
relief charges is exempt from state and local income, sales, | ||
franchise, gross receipts, and other taxes or similar assessments. | ||
(c) A tax obligation of the gas utility arising from receipt | ||
of customer rate relief bond proceeds or from the collection or | ||
remittance of customer rate relief charges is an expense that may be | ||
recovered by the gas utility. | ||
Sec. 104.376. ASSIGNEE OR FINANCING PARTY NOT PUBLIC | ||
UTILITY. An assignee or financing party may not be considered to be | ||
a public utility or person providing natural gas service solely by | ||
virtue of the transactions described by this subchapter. | ||
Sec. 104.377. NO PERSONAL LIABILITY. A commissioner of the | ||
railroad commission, a railroad commission employee, a member of | ||
the board of directors of the authority, or an employee of the | ||
authority is not personally liable for a result of an exercise of a | ||
duty or responsibility established under this subchapter. | ||
Sec. 104.378. SEVERABILITY. After the date customer rate | ||
relief bonds 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 or any other provision of this | ||
title that is relevant to the issuance, administration, payment, | ||
retirement, or refunding of customer rate relief bonds or to any | ||
actions of a gas utility, its successors, an assignee, a collection | ||
agent, or a financing party, which shall remain in full force and | ||
effect. | ||
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. |