Bill Text: TX HB1520 | 2021-2022 | 87th Legislature | Enrolled
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-Enrolled.html
H.B. No. 1520 |
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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. | ||
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 in accordance with Subchapter I, | ||
Chapter 104, Utilities Code. | ||
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; [ |
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(3) stranded costs of a municipal power agency; or | ||
(4) customer rate relief bonds approved by the | ||
Railroad Commission of Texas in accordance with Subchapter I, | ||
Chapter 104, Utilities Code. | ||
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 PROPERTY. (a) The definitions in Section | ||
104.362, Utilities Code, apply to terms used in this section. | ||
(b) The authority may create an issuing financing entity for | ||
the purpose of issuing customer rate relief bonds approved by the | ||
Railroad Commission of Texas in a financing order, as provided by | ||
Subchapter I, Chapter 104, Utilities Code. | ||
(c) An issuing financing entity created under this section | ||
is a duly constituted public authority and instrumentality of the | ||
state and is authorized to issue customer rate relief bonds on | ||
behalf of the state for the purposes of Section 103, Internal | ||
Revenue Code of 1986 (26 U.S.C. Section 103). | ||
(d) The issuing financing entity must be governed by a | ||
governing board of three members appointed by the authority. A | ||
member of the governing board may be a current or former director of | ||
the authority. A member of the governing board serves without | ||
compensation but is entitled to reimbursement for travel expenses | ||
incurred in attending board meetings. | ||
(e) The issuing financing entity must be formed in | ||
accordance with, be governed by, and have the powers, rights, and | ||
privileges provided for a nonprofit corporation organized under the | ||
Business Organizations Code, including Chapter 22 of that code, | ||
subject to the express exceptions and limitations provided by this | ||
section and Subchapter I, Chapter 104, Utilities Code. A single | ||
organizer selected by the executive director of the authority shall | ||
prepare the certificate of formation of the issuing financing | ||
entity under Chapters 3 and 22, Business Organizations Code. The | ||
certificate of formation must be consistent with the provisions of | ||
this section. | ||
(f) The authority shall establish the issuing financing | ||
entity to act on behalf of the state as its duly constituted | ||
authority and instrumentality to issue customer rate relief bonds | ||
approved under Subchapter I, Chapter 104, Utilities Code. | ||
(g) On a request to the authority from the Railroad | ||
Commission of Texas, the authority shall direct an issuing | ||
financing entity to issue customer rate relief bonds in accordance | ||
with a financing order issued by the railroad commission as | ||
provided in Subchapter I, Chapter 104, Utilities Code. | ||
(h) Before the issuance of any customer rate relief bonds, | ||
the authority and the Railroad Commission of Texas shall ensure | ||
that adequate provision is made in any financing order for the | ||
recovery of all issuance costs and all other fees, costs, and | ||
expenses of the authority, the issuing financing entity, and any | ||
advisors or counsel hired by the authority or the entity for the | ||
purposes of this section during the life of the customer rate relief | ||
bonds. | ||
(i) Customer rate relief bonds are limited obligations of | ||
the issuing financing entity payable solely from customer rate | ||
relief property and any other money pledged by the issuing | ||
financing entity to the payment of the bonds and are not a debt of | ||
this state, the Railroad Commission of Texas, the authority, or a | ||
gas utility. | ||
(j) The Railroad Commission of Texas shall ensure that | ||
customer rate relief charges are imposed, collected, and enforced | ||
in an amount sufficient to pay on a timely basis all bond | ||
obligations, financing costs, and bond administrative expenses | ||
associated with any issuance of customer rate relief bonds. | ||
(k) 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 property, including regulatory | ||
assets, extraordinary costs, and related financing costs approved | ||
by the Railroad Commission of Texas in accordance with Subchapter | ||
I, Chapter 104, Utilities Code. | ||
(l) Any interest on the customer rate relief bonds 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. | ||
(m) The authority shall make periodic reports to the | ||
Railroad Commission of Texas and the public regarding each | ||
financing made in accordance with Section 104.373(b), Utilities | ||
Code, and if required by the applicable financing order. | ||
(n) The issuing financing entity shall issue customer rate | ||
relief bonds in accordance with and subject to other provisions of | ||
Title 9 applicable to the authority. | ||
(o) The issuing financing entity may exercise the powers | ||
granted to the governing body of an issuer with regard to the | ||
issuance of obligations and the execution of credit agreements | ||
under Chapter 1371. A purpose for which bonds, obligations, or | ||
other evidences of indebtedness are issued under this section and | ||
Subchapter I, Chapter 104, Utilities Code, constitutes an eligible | ||
project for purposes of Chapter 1371 of this code. | ||
(p) Assets of an issuing financing entity may not be | ||
considered part of any state fund and must be held outside the state | ||
treasury. The liabilities of the issuing financing entity may not | ||
be considered to be a debt of the state or a pledge of the state's | ||
credit. An issuing financing entity must be self-funded from | ||
customer rate relief property and established in accordance with | ||
Subchapter I, Chapter 104, Utilities Code. A state agency may | ||
provide money appropriated for the purpose to the issuing financing | ||
entity to provide for initial operational expenses of the issuing | ||
financing entity. | ||
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 incurred to secure gas supply and provide service during | ||
Winter Storm Uri, and to restore gas utility systems after that | ||
event, 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 costs described by this subsection 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, credit agreement, other hedging arrangement, or | ||
liquidity or credit support arrangement. | ||
(2) "Authority" means the Texas Public Finance | ||
Authority. | ||
(3) "Bond administrative expenses" means all costs and | ||
expenses incurred by the railroad commission, the authority, or any | ||
issuing financing entity to evaluate, issue, and administer | ||
customer rate relief bonds issued under this subchapter, including | ||
fees and expenses of the authority, any bond administrator, and the | ||
issuing financing entity, fees for paying agents, trustees, and | ||
attorneys, and fees for paying for other consulting and | ||
professional services necessary to ensure compliance with this | ||
subchapter, applicable state or federal law, and the terms of the | ||
financing order. | ||
(4) "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. | ||
(5) "Credit agreement" has the meaning assigned by | ||
Section 1371.001, Government Code. | ||
(6) "Customer rate relief bonds" means bonds, notes, | ||
certificates, or other evidence 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 issuing financing entity under a | ||
financing order; and | ||
(B) payable from and secured by customer rate | ||
relief property and amounts on deposit in any trust accounts | ||
established for the benefit of the customer rate relief bondholders | ||
as approved by the applicable financing order. | ||
(7) "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, bond administrative | ||
expenses, 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. | ||
(8) "Customer rate relief property" means: | ||
(A) all rights and interests of an issuing | ||
financing entity or any successor under a financing order, | ||
including the right to impose, bill, collect, and receive customer | ||
rate relief charges authorized in the financing order and to obtain | ||
periodic adjustments to those customer rate relief charges as | ||
provided in the financing order and in accordance with Section | ||
104.370; and | ||
(B) all revenues, collections, claims, rights to | ||
payments, payments, money, or proceeds arising from the rights and | ||
interests specified by Paragraph (A), regardless of whether the | ||
revenues, collections, claims, rights to payments, payments, | ||
money, or proceeds are imposed, billed, received, collected, or | ||
maintained together with or commingled with other revenues, | ||
collections, rights to payments, payments, money, or proceeds. | ||
(9) "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 or credit agreement or 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 or ongoing costs related to | ||
supporting, repaying, servicing, or refunding customer rate relief | ||
bonds, including servicing fees, accounting or auditing fees, | ||
trustee fees, legal fees or expenses, consulting fees, | ||
administrative fees, printing fees, financial advisor fees or | ||
expenses, Securities and Exchange Commission registration fees, | ||
issuer fees, bond administrative expenses, placement and | ||
underwriting fees, capitalized interest, overcollateralization | ||
funding requirements including amounts to fund or replenish any | ||
reserve established for a series of customer rate relief bonds, | ||
rating agency fees, stock exchange listing and compliance fees, | ||
filing fees, and any other bond administrative expenses; and | ||
(D) the costs to the railroad commission of | ||
acquiring professional or consulting services for the purpose of | ||
evaluating extraordinary costs under this subchapter. | ||
(10) "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. | ||
(11) "Financing party" means a holder of customer rate | ||
relief bonds, including a trustee, a pledgee, a collateral agent, | ||
any party under an ancillary agreement, or other person acting for | ||
the holder's benefit. | ||
(12) "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. | ||
(13) "Issuing financing entity" means a special | ||
purpose nonmember, nonstock, nonprofit public corporation | ||
established by the authority under Section 1232.1072, Government | ||
Code. | ||
(14) "Nonbypassable" means a charge that: | ||
(A) must be 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 the gas | ||
utility's successors or assignees, even if a customer elects to | ||
purchase gas from an alternative gas supplier; and | ||
(B) 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. | ||
(17) "Servicer" means, with respect to each issuance | ||
of customer rate relief bonds, the entity identified by the | ||
railroad commission in the financing order as servicer responsible | ||
for collecting customer rate relief charges from participating gas | ||
utilities, remitting all collected funds to the applicable issuing | ||
financing entity or the bond trustee, calculating true-up | ||
adjustments, and performing any other duties as specified in the | ||
financing order. | ||
(18) "Winter Storm Uri" means the North American | ||
winter storm that occurred in February 2021. | ||
Sec. 104.363. EXTRAORDINARY COSTS. For the purposes of | ||
this subchapter, extraordinary costs are the reasonable and | ||
necessary costs related to Winter Storm Uri, 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 property | ||
must be created and vested in an issuing financing entity and does | ||
not constitute property of the railroad commission or any 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. A gas utility may request recovery of | ||
a regulatory asset under this subchapter only if the regulatory | ||
asset is related to Winter Storm Uri. | ||
(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 must file an application with the | ||
railroad commission on or before the 60th day after the effective | ||
date of the Act enacting this subchapter. | ||
(c) If the railroad commission does not make a final | ||
determination regarding the regulatory asset amount to be recovered | ||
by a gas utility before the 151st 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. | ||
(d) 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. | ||
(e) 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. | ||
(f) 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. | ||
(g) 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. | ||
(h) The railroad commission shall establish a schedule, | ||
filing requirements, and a procedure for determining the prudence | ||
of the costs included in a gas utility's regulatory asset. | ||
(i) 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 direct an | ||
issuing financing entity to issue customer rate relief bonds. | ||
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: | ||
(1) considering customer affordability; and | ||
(2) comparing: | ||
(A) the estimated monthly costs to customers | ||
resulting from the issuance of customer rate relief bonds; and | ||
(B) the estimated monthly costs to customers that | ||
would result from the application of conventional recovery methods. | ||
(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 issuance of customer rate relief | ||
bonds through an issuing financing entity; | ||
(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; | ||
(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; and | ||
(C) the maximum interest rate that the customer | ||
rate relief bonds may bear, not to exceed the maximum net effective | ||
interest rate allowed by law; | ||
(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 and | ||
successors of gas utilities for which a regulatory asset | ||
determination has been made under Section 104.365 to ensure that | ||
the customer rate relief bonds and all related financing costs will | ||
be paid in full and on a timely basis by customer rate relief | ||
charges; | ||
(7) authorize the creation of customer rate relief | ||
property in favor of the issuing financing entity and pledge of | ||
customer rate relief property to the payment of the customer rate | ||
relief bonds; | ||
(8) direct the issuing financing entity to disperse | ||
the proceeds of customer rate relief bonds, net of bond issuance | ||
costs, reserves, and any capitalized interest, to gas utilities for | ||
which a regulatory asset determination has been made under Section | ||
104.365 and include the amounts to be distributed to each | ||
participating gas utility; | ||
(9) provide that customer rate relief charges be | ||
collected and allocated among customers of each gas 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 a 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 financing order may provide for a centralized | ||
servicer to coordinate with participating gas utilities who bill | ||
and collect customer rate relief charges and to provide certain | ||
collection and forecast data required for calculating true-up | ||
adjustments. The financing order may not provide for the railroad | ||
commission, the authority, the issuing financing entity, or a | ||
participating utility to act as servicer. | ||
(e) The principal amount determined by the railroad | ||
commission must be increased to include an amount sufficient to: | ||
(1) pay the financing costs associated with the | ||
issuance, including all bond administrative expenses to be paid | ||
from the proceeds of the bonds; | ||
(2) reimburse the authority and the railroad | ||
commission for any costs incurred for the issuance of the customer | ||
rate relief bonds and related bond administrative expenses; | ||
(3) provide for any applicable bond reserve fund; and | ||
(4) capitalize interest for the period determined | ||
necessary by the railroad commission. | ||
(f) The authority, consistent with this subchapter and the | ||
terms of the financing order, shall: | ||
(1) direct an issuing financing entity to 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; | ||
(2) determine the methods of sale, types of bonds, | ||
bond forms, interest rates, principal amortization, amount of | ||
reserves or capitalized interest, 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 financing at | ||
the lowest practicable cost; and | ||
(3) reimburse the railroad commission, the authority, | ||
or any issuing financing entity for bond administrative expenses | ||
and other costs authorized under this subchapter. | ||
(g) To the extent authorized in the applicable financing | ||
order, an issuing financing entity may enter into credit agreements | ||
or ancillary agreements in connection with the issuance of customer | ||
rate relief bonds. | ||
(h) 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 (j) and | ||
authorized by Section 104.370. | ||
(i) 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. | ||
(j) 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. | ||
(k) 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. | ||
(l) 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. | ||
(m) The railroad commission shall transmit a financing | ||
order to the authority after all appeals under this section have | ||
been exhausted. | ||
(n) The authority shall direct an issuing financing entity | ||
to issue customer rate relief bonds as soon as practicable and not | ||
later than the 180th day after receipt of a financing order issued | ||
under this section, except that the authority may cause the | ||
issuance after the 180th day if necessary based on bond market | ||
conditions, the receipt of necessary approvals, and the timely | ||
receipt of necessary financial disclosure information from each | ||
participating gas utility. | ||
(o) The issuing financing entity shall deliver customer | ||
rate relief bond proceeds net of upfront financing costs in | ||
accordance with the applicable financing order. | ||
(p) For the benefit of the authority, the issuing financing | ||
entity, holders of customer rate relief bonds, and all other | ||
financing parties, the railroad commission shall guarantee in a | ||
financing order that the railroad commission will take all actions | ||
in the railroad commission's powers to enforce the provisions of | ||
the financing order to ensure that customer rate relief charge | ||
revenues are sufficient to pay on a timely basis scheduled | ||
principal and interest on the customer rate relief bonds and all | ||
related financing costs and bond administrative expenses. | ||
(q) The railroad commission shall make periodic reports to | ||
the public regarding each financing. | ||
Sec. 104.367. PROPERTY RIGHTS. (a) Customer rate relief | ||
bonds are the limited obligation solely of the 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. A trust fund created | ||
in connection with the issuance of customer rate relief bonds is not | ||
subject to Subtitle B, Title 9, Property Code. | ||
(c) The rights and interests of an issuing financing entity | ||
or the successor under a financing order, including the right to | ||
receive customer rate relief charges authorized in the financing | ||
order, are only contract rights until 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 created under a financing | ||
order is vested ab initio in the issuing financing entity. 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 an issuing financing entity under an | ||
ancillary agreement or a credit agreement is payable from and | ||
secured by a pledge and interest in the customer rate relief | ||
property to the extent provided in the documents evidencing the | ||
ancillary agreement or credit agreement. | ||
Sec. 104.368. PROPERTY INTEREST NOT SUBJECT TO SETOFF, | ||
COUNTERCLAIM, SURCHARGE, OR DEFENSE. The interest of an issuing | ||
financing entity 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, the authority, | ||
an issuing financing entity, or any successor or assignee of the gas | ||
utility, authority, or issuing financing entity. | ||
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 by the servicer or replacement servicer, | ||
including a subservicer or replacement subservicer, 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 customer rate relief bond | ||
principal and interest payments and other 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 servicer 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 | ||
that secures customer rate relief bonds are governed by Chapter | ||
1208, Government Code. | ||
(b) The priority of a lien and security interest perfected | ||
under this section is not impaired by any later adjustment of | ||
customer rate relief charges 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 issuing financing | ||
entity or a financing party. If customer rate relief property has | ||
been transferred to a trustee or another pledgee of the issuing | ||
financing entity, any proceeds of that property must be held in | ||
trust for the financing party. | ||
(c) 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 issuing | ||
financing entity may deposit proceeds of customer rate relief bonds | ||
issued by the issuing financing entity under this subchapter with a | ||
trustee selected by the issuing financing entity 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, net of the financing costs and reserves | ||
described by Subdivisions (2) and (3), including investment income, | ||
must be held in trust for the exclusive benefit of the railroad | ||
commission's policy of reimbursing gas utility costs and applied in | ||
accordance with the financing order. The issuing financing entity | ||
shall deliver the net proceeds, as provided in the applicable | ||
financing order, 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 or fund any capitalized | ||
interest, as applicable. | ||
(c) On full payment of the customer rate relief bonds and | ||
any related financing costs, any customer rate relief charges or | ||
other amounts held as security for the bonds shall be used to | ||
provide credits to gas utility customers as provided in the | ||
financing order. | ||
Sec. 104.373. REPAYMENT OF CUSTOMER RATE RELIEF BONDS. (a) | ||
As long as 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 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 issuing financing entity 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 issuing financing entity or the bond trustee for the customer | ||
rate relief bonds to pay bond obligations and ongoing financing | ||
costs, including bond administrative expenses, to ensure timely | ||
payment of bond obligations and financing costs. | ||
(d) Customer rate relief property, including 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. Each | ||
issuing financing entity shall include this pledge in any | ||
documentation relating to customer rate relief bonds. | ||
(c) Before the date that is two years and one day after the | ||
date that an issuing financing entity no longer has any payment | ||
obligation with respect to customer rate relief bonds, the issuing | ||
financing entity may not wind up or dissolve the financing entity's | ||
operations, may not file a voluntary petition under federal | ||
bankruptcy law, and neither the board of the issuing financing | ||
entity nor any public official nor any organization, entity, or | ||
other person may authorize the issuing financing entity 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, and the provisions of this | ||
subsection are hereby made a part of the contractual obligation | ||
that is subject to the state pledge made in this section. | ||
Sec. 104.375. TAX EXEMPTION. (a) The sale or purchase of | ||
or revenue derived from services performed in the issuance or | ||
transfer of customer rate relief bonds issued under this subchapter | ||
is exempt from taxation by this state or a political subdivision of | ||
this state. | ||
(b) A gas utility's receipt of customer rate relief charges | ||
is exempt from state and local sales and use taxes and utility gross | ||
receipts taxes and assessments, and is excluded from revenue for | ||
purposes of franchise tax under Section 171.1011, Tax Code. | ||
Sec. 104.376. RECOVERABLE TAX EXPENSE. 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 allowable expense under Section 104.055. | ||
Sec. 104.377. ISSUING FINANCING ENTITY OR FINANCING PARTY | ||
NOT PUBLIC UTILITY. An issuing financing entity 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. 104.378. NO PERSONAL LIABILITY. A commissioner of the | ||
railroad commission, a railroad commission employee, a member of | ||
the board of directors of the authority, an employee of the | ||
authority, or a director, officer, or employee of any issuing | ||
financing entity is not personally liable for a result of an | ||
exercise of a duty or responsibility established under this | ||
subchapter. | ||
Sec. 104.379. CATASTROPHIC WEATHER EVENT STUDY. (a) The | ||
railroad commission shall conduct a study on measures to mitigate | ||
catastrophic weather events, including measures to: | ||
(1) establish natural gas storage capacity to ensure a | ||
reliable gas supply, including location, ownership, and other | ||
pertinent factors regarding gas storage capacity; | ||
(2) assess the advantages and disadvantages of | ||
requiring local distribution companies to use hedging tactics to | ||
avoid volatile customer rates; and | ||
(3) assess the advantages and disadvantages of | ||
prohibiting spot market purchases during a catastrophic weather | ||
event that contribute to volatile customer rates. | ||
(b) Not later than December 1, 2022, the railroad commission | ||
shall report the railroad commission's findings to the governor, | ||
the lieutenant governor, and the speaker of the house of | ||
representatives. | ||
(c) This section expires August 31, 2023. | ||
Sec. 104.380. SEVERABILITY. After the date customer rate | ||
relief bonds are issued under this subchapter, if any provision in | ||
this title or portion of this title or related provisions in Title | ||
9, Government Code, are held to be invalid or are invalidated, | ||
superseded, replaced, repealed, or expire for any reason, that | ||
occurrence does not affect the validity or continuation of this | ||
subchapter or any other provision of this title or related | ||
provisions in Title 9, Government Code, that are 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. | ||
______________________________ | ______________________________ | |
President of the Senate | Speaker of the House | |
I certify that H.B. No. 1520 was passed by the House on April | ||
20, 2021, by the following vote: Yeas 139, Nays 5, 1 present, not | ||
voting; and that the House concurred in Senate amendments to H.B. | ||
No. 1520 on May 28, 2021, by the following vote: Yeas 130, Nays 12, | ||
1 present, not voting. | ||
______________________________ | ||
Chief Clerk of the House | ||
I certify that H.B. No. 1520 was passed by the Senate, with | ||
amendments, on May 26, 2021, by the following vote: Yeas 29, Nays | ||
2. | ||
______________________________ | ||
Secretary of the Senate | ||
APPROVED: __________________ | ||
Date | ||
__________________ | ||
Governor |