BILL ANALYSIS C.S.H.B. 2387 By: Johnson 3-20-95 Committee Report (Substituted) BACKGROUND Chapter 13, Texas Water Code, provides for a comprehensive regulatory scheme governing water and sewer utility service in the State of Texas. This regulatory scheme is administered by the Texas Natural Resource Conservation Commission (TNRCC). This bill enacts amendments to various sections of Chapter 13, Texas Water Code. PURPOSE The purpose of this bill is to enact certain amendments to Chapter 13, Texas Water Code, to clarify statutory provisions to reflect the consolidation of certain regulatory functions previously administered by other State agencies and to update administration of certain regulatory requirements for water and sewer utilities based on the TNRCC's regulatory experience. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends the definition of "member" under Section 13.002(11), Texas Water Code, in non-profit water supply and sewer service corporations organized under Article 1434a, Tex. Civ. Stat. Ann. to expand the category of persons who may qualify as members of these corporations. As amended, a "member" could be either a person receiving water or sewer utility service or the record owner of fee simple title to the property receiving the service. Previously, the definition of "member" restricted membership to those persons owning the fee simple title to property being served. Also amends the definition of "water supply or sewer service corporation" to exclude corporations that provide retail water or sewer service to a person who is not a member; also provides exceptions. SECTION 2. Amends Section 13.043(g), Texas Water Code, to ensure that the TNRCC's appellate review of certain charges and fees assessed by water supply or sewer service corporations will be reasonable in deference to the fact that such fees and charges are assessed by boards of directors elected by the actual water utility or sewer utility service customers and, further, to prevent repetitive appeals challenging the same fees and charges, which unduly burdens the State's administrative supervision of such appeals and the costs imposed on non-profit water supply and sewer service corporations. SECTION 3. Amends Section 13.139(d), Texas Water Code, to delete the reference to the Texas Department of Health since minimum capacity requirements are now determined by the TNRCC pursuant to the Legislature's consolidation of public water supply supervisory functions. SECTION 4. Amends Section 13.187(d), Texas Water Code, to minimize unnecessary regulatory supervision over pass-through rates, which are required by either the TNRCC or, in cases involving franchised municipal utilities, city councils, when these rates involve the recovery of charges required by law and are not optional to the utility. SECTION 5. Amends Section 13.250(b), Texas Water Code, to clarify that agreements between water utility service providers and sewer utility service providers, when these services are provided by separate retail utilities, may allow for the disconnection of water utility service as a more efficient means of ensuring payment of sewer utility services, and that this means of enforcement may be allowed under an arrangement between the service providers which is approved by TNRCC order. SECTION 6. Adds new Section 13.2502 to clearly state TNRCC regulatory policy which allows a water supply or sewer service corporation or a special utility district created under Chapter 65, Texas Water Code, to deny service when a developer of a subdivision fails to pay the full costs involved in organized water or sewer utility service to the subdivision. Subsection (a) sets forth the appropriate regulatory limitations on the ability of a non-profit water supply or sewer service corporation or a special utility publication or other demonstration of effective notice to affected persons. Subsection (d) expressly provides that the service policies set forth under this provision do not affect the TNRCC's jurisdiction for review of the charges and fees assessed for such service pursuant to Section 13.043(g), Texas Water Code. Subsection (e) defines "developer" for purposes of this new section. SECTION 7. Amends Section 13.301, Texas Water Code, to add a new subparagraph (c)(5), expressly authorizing the TNRCC to review those factors generally relevant to the issuance of certificates of convenience and necessity in determining whether to authorize the transfer, sale, or merger of one utility system to another utility. SECTION 8. Amends Section 13.304, Texas Water Code, by adding new subsections (b) and (c) to provide flexibility for financial institutions foreclosing on utility systems. The TNRCC's experience has been that certain financial institutions, in foreclosing on utility systems, do not provide the 120-day prior notice, and that this is largely unnecessary. However, new subsection (b) still requires financial institutions to provide the TNRCC with a minimum of 30 days written notice prior to completion of the foreclosure, and new subsection (c) provides that such financial institutions must continue to operate the utility services subject to the same rules and restrictions, and protections to the utility service customers, as are binding on the TNRCC's regulation of the utility itself. SECTION 9. Provides for an effective date of September 1, 1995. SECTION 10. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE (1) At Section 1, the definition of "member" will differ as follows: ORIGINAL: ""Member" means a person who holds a membership in a water supply or sewer service corporation , who receives water or sewer utility service from the corporation, and who is a record owner...." SUBSTITUTE: ""Member" means a person who holds a membership in a water supply or sewer service corporation and who either receives water or sewer utility service from the corporation or is a record owner...." (2) At Section 6, page 5, lines 7-9: ORIGINAL: "....comply with the subdivision extension policy of the corporation or special district as set forth in the tariff of the corporation or the policies of the special district;..." SUBSTITUTE: "....comply with the subdivision service extension policy of the corporation or special utility district as set forth in the tariff of the corporation or the policies of the special utility district;..." (3) At Section 6, page 5, (lines 11-14 of Original; lines 12-15 of Substitute): ORIGINAL: "....the corporation or special district gave notice as provided by this section of the rules of the corporation or special district applicable to service to subdivisions from the system of the corporation or special district." SUBSTITUTE: "....the corporation or special utility district gave notice as provided by this section of the rules of the corporation or special utility district applicable to service to subdivisions from the corporation or special utility district." (4) At Section 6, page 5, lines 21-22 of Substitute: The words "on a biennial basis" were inserted in the Substitute, and were not found in the Original. (5) The words "service extension policy" and "extension policy" in the Original were changed in the Substitute to "subdivision service extension policy" in a number of places. (6) The words "special district" in the Original were changed in the Substitute to "special utility district" in a number of places. (7) At Section 6, page 6, lines 17-18 of Substitute: There was no definition for "service applicant" in the Original. (8) At Section 8, page 7, (lines 26-27 of Substitute, lines 21-22 of Original): ORIGINAL: "A financial institution that forecloses on all of the facilities of a utility that are used...." SUBSTITUTE: "A financial institution that forecloses on a utility or on any part of the utility's facilities or property that are used...." SUMMARY OF COMMITTEE ACTION H.B.2387 was considered by the committee in a public hearing on March 20, 1995. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The following persons testified in favor of the bill: Mr. Kent B. Watson, representing himself and Texas Rural Water Trade Association; Mr. John Burke, representing Aqua Water Supply Corporation; The following persons testified against the bill: None (0). The following person testified on the bill: Mr. Dean Robbins, representing the Texas Natural Resource Conservation Commission. The bill was reported favorably as substituted, with the recommendation that it do pass and be printed and be sent to the Committee on Local and Consent Calendars, by a record vote of 7 ayes, 0 nays, 0 pnv, 2 absent.