BILL ANALYSIS

S.B. 1965

By: Alvarado

Natural Resources

Committee Report (Unamended)

BACKGROUND AND PURPOSE

When a utility is operationally abandoned, the Public Utility Commission of Texas (PUC) or Texas Commission on Environmental Quality assigns a temporary manager (TM) who will invest time and money into ensuring that water is restored to the service area with the utility's acquisition in mind. However, the PUC needs a signature from the utility's current owner to authorize this acquisition. After abandonment, utilities' current owners often cannot be located to provide that signature. This draws out the transaction process, impacting both the TM's ability to recover the costs of management and the affected community's sustained access to clean, continuous water. S.B. 1965 seeks to address these issues by creating an expedited sale, transfer, and merger process to streamline utility acquisitions for TMs in the specific case of operational abandonment and lack of owner accessibility.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Public Utility Commission of Texas in SECTION 1 of this bill.

ANALYSIS

S.B. 1965 amends the Water Code to require the Public Utility Commission of Texas (PUC) to approve a sale, acquisition, lease, or rental of a water or sewer system owned by an entity that is required by law to possess a certificate of public convenience and necessity without an owner's signature required by other law if the owner has abandoned operation of the facilities that are the subject of the transaction and cannot be located or does not respond to an application that is filed with the PUC concerning the transaction.

S.B. 1965 requires the PUC by rule to adopt an expedited process that allows a person appointed by the PUC or the Texas Commission on Environmental Quality (TCEQ) as a temporary manager for a utility that has discontinued operations or is being referred for the appointment of a receiver or failing to provide adequate service that is also an operator of a Class A or Class B utility to apply for PUC approval of the person's acquisition of the stock, ownership interest, or assets of the temporarily managed and operated utility, its facilities, and its certificated service area, if applicable. The expedited process must do the following:

· waive public notice requirements regardless of whether the person elects to charge initial rates or use a voluntary valuation;

· require approval of the acquisition transaction if it is considered to be in the public interest; and

· provide that:

o the person's appointment is considered sufficient to demonstrate adequate financial, managerial, and technical capability for providing continuous and adequate service to the service area to be acquired and any areas currently certificated to the person; and

o all used and useful invested capital and just and reasonable operations and maintenance costs incurred by the person during the person's appointment as temporary manager and operator of the utility, utility in receivership, or utility in supervision to be acquired are considered to be a regulatory asset for the person and are recoverable in the person's next comprehensive rate proceeding or system improvement charge application.

S.B. 1965 establishes that if a temporary rate is adopted during the person's appointment as temporary manager, then all used and useful invested capital and just and reasonable operations and maintenance costs incurred by the person in excess of costs covered by the temporary rate are considered to be a regulatory asset for the person and thus are recoverable in the person's next comprehensive rate proceeding or system improvement charge application. The bill requires the PUC and the TCEQ to provide a reasonable period for a person acquiring a utility under the bill's provisions, to bring that utility into compliance with PUC and TCEQ rules before imposing a penalty for any violation committed by the acquired utility for which no enforcement action has been completed at the time of acquisition.

EFFECTIVE DATE

September 1, 2023.