H.B. No. 1432 1-1 AN ACT 1-2 relating to the powers of a river authority that engages in the 1-3 distribution and sale of electric energy; granting the authority to 1-4 issue bonds. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Chapter 245, Acts of the 67th Legislature, 1-7 Regular Session, 1981 (Article 717p, Vernon's Texas Civil 1-8 Statutes), is amended by adding Sections 4A and 4B to read as 1-9 follows: 1-10 Sec. 4A. (a) The board of directors of a river authority 1-11 that is engaged in the distribution and sale of electric energy to 1-12 the public may create by order one or more nonprofit corporations 1-13 to act on behalf of the authority as its duly constituted authority 1-14 and instrumentality to exercise any power of the authority under 1-15 law except a power relating to solid waste management activities or 1-16 activities as an "exempt wholesale generator" as defined by the 1-17 Public Utility Holding Company Act of 1935 (15 U.S.C. Section 1-18 79z-5a(a)), but including the authority to acquire, develop, 1-19 operate, and sell fuel, fuel reserves, and mineral interests. 1-20 (b) When exercising a power under this Act, a corporation 1-21 created under this Act and the board of directors of the 1-22 corporation have the same powers as the creating river authority 1-23 and the authority's board. 1-24 (c) The board of directors of the authority shall appoint 2-1 the directors of a nonprofit corporation created under this 2-2 section. A member of the authority's board of directors may serve 2-3 as a member of the nonprofit corporation's board. The 2-4 corporation's directors serve at the will of the authority's 2-5 directors. 2-6 (d) The budget of a nonprofit corporation created under this 2-7 section must be approved by the board of directors of the 2-8 authority. The activities of the corporation are subject to the 2-9 continuing review and supervision of the authority's board of 2-10 directors. 2-11 (e) The Texas Non-Profit Corporation Act (Article 1396-1.01 2-12 et seq., Vernon's Texas Civil Statutes) and its subsequent 2-13 amendments apply to and govern a corporation created under this 2-14 section. Sections 5-20 and 33-36, Development Corporation Act of 2-15 1979 (Article 5190.6, Vernon's Texas Civil Statutes), and their 2-16 subsequent amendments apply to and govern a corporation created 2-17 under this section, except that a reference in those sections to an 2-18 Act includes this Act, as appropriate, and a reference to a unit 2-19 includes a river authority to which this Act applies. 2-20 (f) The property of a nonprofit corporation created under 2-21 this section is not exempt from taxes and special assessments of 2-22 the state or of a municipality, county, or other political 2-23 subdivision of the state. 2-24 (g) The board of directors of the nonprofit corporation may 2-25 issue bonds or other obligations or otherwise borrow money on 2-26 behalf of the river authority to carry out any of its corporate 2-27 purposes. The issuance of any bonds or obligations must be 3-1 approved by the board of directors of the river authority. Bonds 3-2 and other obligations issued or entered into by the nonprofit 3-3 corporation and the proceedings authorizing the issuance or the 3-4 entering into of an obligation shall be submitted to the attorney 3-5 general for examination. If the attorney general finds that the 3-6 bonds or other obligations have been authorized in accordance with 3-7 the Texas Constitution and this Act, the attorney general shall 3-8 approve them, and they shall be registered by the comptroller. 3-9 After approval and registration the bonds and obligations are 3-10 incontestable in any court or other forum for any reason and are 3-11 valid and binding obligations in accordance with their terms for 3-12 all purposes. 3-13 (h) In addition to other authority granted by this Act, the 3-14 board of directors of the nonprofit corporation may exercise the 3-15 powers granted to the governing body of an issuer and a public 3-16 agency with regard to the issuance of obligations under Chapter 3-17 656, Acts of the 68th Legislature, Regular Session, 1983 (Article 3-18 717q, Vernon's Texas Civil Statutes), Chapter 3, Acts of the 61st 3-19 Legislature, Regular Session, 1969 (Article 717k-2, Vernon's Texas 3-20 Civil Statutes), and Chapter 845, Acts of the 67th Legislature, 3-21 Regular Session, 1981 (Article 717k-6, Vernon's Texas Civil 3-22 Statutes), and their subsequent amendments. 3-23 Sec. 4B. (a) A river authority that is engaged in the 3-24 distribution and sale of electric energy to the public or a 3-25 corporation created under Section 4A of this Act may enter into a 3-26 hedging contract and related security and insurance agreements in 3-27 relation to crude oil, fuel oil, natural gas, and electric energy 4-1 to protect against loss due to price fluctuations. A hedging 4-2 transaction must comply with the regulations of the Commodity 4-3 Futures Trading Commission and the Securities and Exchange 4-4 Commission. 4-5 (b) A payment made by a river authority or a nonprofit 4-6 corporation under a hedging contract or related agreement in 4-7 relation to fuel supplies or fuel reserves constitutes a fuel 4-8 expense, and the authority or nonprofit corporation may credit any 4-9 amounts it receives under the contract or agreement against fuel 4-10 expenses. 4-11 (c) Except as provided by Subsection (d) of this section, 4-12 the board of directors of a river authority may determine and 4-13 designate the amount of money to be invested in a hedging 4-14 transaction. 4-15 (d) The directors of the river authority by formal policy 4-16 shall regulate the investment of funds in crude oil, fuel oil, 4-17 natural gas, and electric energy futures contracts or in options on 4-18 those futures contracts. The policy must provide restrictions and 4-19 procedures for making the investments that a person of ordinary 4-20 prudence, discretion, and intelligence, exercising the judgment and 4-21 care under the circumstances then prevailing, would follow in the 4-22 management of the person's own affairs, not in regard to 4-23 speculation but in regard to the permanent disposition of the 4-24 person's funds, considering the probable income as well as the 4-25 probable safety of the person's capital. The investment may be 4-26 made only for hedging purposes. 4-27 (e) In this section, "hedging" means the buying and selling 5-1 of crude oil, fuel oil, natural gas, and electric energy futures or 5-2 options or similar contracts on those commodity futures as a 5-3 protection against loss due to price fluctuation. 5-4 (f) This section does not in any way limit the authority of 5-5 the Public Utility Commission to determine the recoverability of 5-6 cost from rate payers. 5-7 SECTION 2. The importance of this legislation and the 5-8 crowded condition of the calendars in both houses create an 5-9 emergency and an imperative public necessity that the 5-10 constitutional rule requiring bills to be read on three several 5-11 days in each house be suspended, and this rule is hereby suspended, 5-12 and that this Act take effect and be in force from and after its 5-13 passage, and it is so enacted.