1-1  By:  Johnson (Senate Sponsor - Ratliff)               H.B. No. 2387
    1-2        (In the Senate - Received from the House May 1, 1995;
    1-3  May 2, 1995, read first time and referred to Committee on Natural
    1-4  Resources; May 5, 1995, reported favorably by the following vote:
    1-5  Yeas 8, Nays 0; May 5, 1995, sent to printer.)
    1-6                         A BILL TO BE ENTITLED
    1-7                                AN ACT
    1-8  relating to the regulation of retail water or sewer service
    1-9  utilities.
   1-10        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   1-11        SECTION 1.  Subdivisions (11) and (24), Section 13.002, Water
   1-12  Code, are amended to read as follows:
   1-13              (11)  "Member" means a person who holds a membership in
   1-14  a water supply or sewer service corporation and who either receives
   1-15  water or sewer utility service from the corporation or <and who> is
   1-16  a record owner of a fee simple title to property in an area served
   1-17  by a water supply or sewer service corporation.  <The term does not
   1-18  include a person or entity that holds an interest in property
   1-19  solely as security for the performance of an obligation, or that
   1-20  only builds on or develops the property for sale to others.>  In
   1-21  determining member control of a water supply or sewer service
   1-22  corporation, a person is entitled to only one vote regardless of
   1-23  the number of memberships the person owns.
   1-24              (24)  "Water supply or sewer service corporation" means
   1-25  a nonprofit, member-owned, member-controlled corporation organized
   1-26  and operating under Chapter 76, Acts of the 43rd Legislature, 1st
   1-27  Called Session, 1933 (Article 1434a, Vernon's Texas Civil Statutes)
   1-28  that provides potable water service or sewer service for
   1-29  compensation.  The term does not include a corporation that
   1-30  provides retail water or sewer service to a person who is not a
   1-31  member, except that the corporation may provide retail water or
   1-32  sewer service to a person who is not a member if the person only
   1-33  builds on or develops property to sell to another and the service
   1-34  is provided on an interim basis before the property is sold.
   1-35        SECTION 2.  Section 13.043(g), Water Code, is amended to read
   1-36  as follows:
   1-37        (g)  An applicant for service from a water supply or sewer
   1-38  service corporation may appeal to the commission a decision of the
   1-39  water supply or sewer service corporation affecting the amount to
   1-40  be paid to obtain service other than <in addition to> the regular
   1-41  membership or tap fees.  In addition to the factors specified under
   1-42  Subsection (j), in an appeal brought under this subsection the
   1-43  commission shall determine whether the amount paid by the applicant
   1-44  is consistent with the tariff of the water supply or sewer service
   1-45  corporation and is reasonably related to the cost of installing
   1-46  on-site and off-site facilities to provide service to that
   1-47  applicant.  If the commission finds the amount charged to be
   1-48  clearly unreasonable, it shall establish the fee to be paid for
   1-49  that applicant.  An appeal under this subsection must be initiated
   1-50  within 90 days after the date written notice is provided to the
   1-51  applicant or member of the water supply or sewer service
   1-52  corporation's decision relating to the applicant's initial request
   1-53  for that service.  A determination made by the commission on an
   1-54  appeal under this subsection is binding on all similarly situated
   1-55  applicants for service, and the commission may not consider other
   1-56  appeals on the same issue until the applicable provisions of the
   1-57  tariff of the water supply or sewer service corporation are
   1-58  amended.
   1-59        SECTION 3.  Section 13.139(d), Water Code, is amended to read
   1-60  as follows:
   1-61        (d)  Not later than the 90th day after the date on which a
   1-62  retail public utility that has a certificate of public convenience
   1-63  and necessity reaches 85 percent of its capacity, as compared to
   1-64  the <Texas Department of Health's> minimum capacity requirements
   1-65  for a public drinking water system, the retail public utility shall
   1-66  submit to the executive director a planning report that includes
   1-67  details on how the retail public utility will provide the expected
   1-68  service to the remaining areas within the boundaries of its
    2-1  certificated area.  The executive director may waive the reporting
    2-2  requirement if the executive director finds that the projected
    2-3  growth of the area will not require the utility to exceed its
    2-4  capacity.  The commission by rule may require the submission of
    2-5  revised reports at specified intervals.
    2-6        SECTION 4.  Section 13.187(d), Water Code, is amended to read
    2-7  as follows:
    2-8        (d)  Except to implement a rate <an approved purchased water
    2-9  pass through> adjustment provision approved by the regulatory
   2-10  authority by rule or ordinance, as applicable, or to adjust the
   2-11  rates of a newly acquired utility system, a utility or two or more
   2-12  utilities under common control and ownership may not file a
   2-13  statement of intent to increase its rates more than once in a
   2-14  12-month period, unless the regulatory authority determines that a
   2-15  financial hardship exists.  If the regulatory authority requires
   2-16  the utility to deliver a corrected statement of intent, the utility
   2-17  is not considered to be in violation of the 12-month filing
   2-18  requirement.
   2-19        SECTION 5.  Section 13.250(b), Water Code, is amended to read
   2-20  as follows:
   2-21        (b)  Unless the commission issues a certificate that neither
   2-22  the present nor future convenience and necessity will be adversely
   2-23  affected, the holder of a certificate or a person who possesses
   2-24  facilities used to provide utility service shall not discontinue,
   2-25  reduce, or impair service to a certified service area or part of a
   2-26  certified service area except for:
   2-27              (1)  nonpayment of charges for services provided by the
   2-28  certificate holder or a person who possesses facilities used to
   2-29  provide utility service;
   2-30              (2)  nonpayment of charges for sewer service provided
   2-31  by another retail public utility under an agreement between the
   2-32  retail public utility and the certificate holder or a person who
   2-33  possesses facilities used to provide utility service or under a
   2-34  commission-ordered arrangement between the two service providers
   2-35  <commission order>;
   2-36              (3)  nonuse; or
   2-37              (4)  other similar reasons in the usual course of
   2-38  business.
   2-39        SECTION 6.  Subchapter G, Chapter 13, Water Code, is amended
   2-40  by adding Section 13.2502 to read as follows:
   2-41        Sec. 13.2502.  SERVICE EXTENSIONS BY WATER SUPPLY AND SEWER
   2-42  SERVICE CORPORATION OR SPECIAL UTILITY DISTRICT.
   2-43  (a)  Notwithstanding Section 13.250, a water supply or sewer
   2-44  service corporation or a special utility district organized under
   2-45  Chapter 65 is not required to extend retail water or sewer utility
   2-46  service within the certificated area of the corporation or special
   2-47  utility district to a service applicant in a subdivision if the
   2-48  corporation or special utility district documents that:
   2-49              (1)  the developer of the subdivision has failed to
   2-50  comply with the subdivision service extension policy of the
   2-51  corporation or special utility district as set forth in the tariff
   2-52  of the corporation or the policies of the special utility district;
   2-53  and
   2-54              (2)  the service applicant purchased the property after
   2-55  the corporation or special utility district gave notice as provided
   2-56  by this section of the rules of the corporation or special utility
   2-57  district applicable to service to subdivisions from the corporation
   2-58  or special utility district.
   2-59        (b)  Publication of notice in a newspaper of general
   2-60  circulation in each county in which the corporation or special
   2-61  utility district is certificated for utility service of the
   2-62  requirement to comply with the subdivision service extension policy
   2-63  constitutes notice under this section.  The notice must be
   2-64  published once a week for two consecutive weeks on a biennial basis
   2-65  and must contain information describing the subdivision service
   2-66  extension policy of the corporation or special utility district.
   2-67  The corporation or special utility district must be able to provide
   2-68  proof of publication through an affidavit of the publisher of the
   2-69  newspaper that specifies each county in which the newspaper is
   2-70  generally circulated.
    3-1        (c)  As an alternative to publication of notice as provided
    3-2  by Subsection (b), a corporation or special utility district may
    3-3  demonstrate by any reasonable means that a developer has been
    3-4  notified for purposes of this section, including:
    3-5              (1)  an agreement executed by the developer;
    3-6              (2)  correspondence with the developer that sets forth
    3-7  the subdivision service extension policy; or
    3-8              (3)  any other documentation that reasonably
    3-9  establishes that the developer should be aware of the subdivision
   3-10  service extension policy.
   3-11        (d)  This section does not limit or extend the jurisdiction
   3-12  of the commission under Section 13.043(g).
   3-13        (e)  For purposes of this section:
   3-14              (1)  "Developer" means a person who subdivides land or
   3-15  requests more than two water or sewer service connections on a
   3-16  single contiguous tract of land.
   3-17              (2)  "Service applicant" means a person, other than a
   3-18  developer, who applies for retail water or sewer utility service.
   3-19        SECTION 7.  Section 13.301(c), Water Code, is amended to read
   3-20  as follows:
   3-21        (c)  Before the expiration of the 120-day notification
   3-22  period, the executive director shall notify all known parties to
   3-23  the transaction of the executive director's decision whether to
   3-24  request that the commission hold a public hearing to determine if
   3-25  the transaction will serve the public interest.  The executive
   3-26  director may request a hearing if:
   3-27              (1)  the notification to the commission or the public
   3-28  notice was improper;
   3-29              (2)  the person purchasing or acquiring the water or
   3-30  sewer system is inexperienced as a utility service provider;
   3-31              (3)  the person or an affiliated interest of the person
   3-32  purchasing or acquiring the water or sewer system has a history of
   3-33  noncompliance with the requirements of the commission or the Texas
   3-34  Department of Health or of continuing mismanagement or misuse of
   3-35  revenues as a utility service provider; <or>
   3-36              (4)  the person purchasing or acquiring the water or
   3-37  sewer system cannot demonstrate the financial ability to provide
   3-38  the necessary capital investment to ensure the provision of
   3-39  continuous and adequate service to the customers of the water or
   3-40  sewer system; or
   3-41              (5)  there are concerns that the transaction may not
   3-42  serve the public interest, after the application of the
   3-43  considerations provided by Section 13.246(c) for determining
   3-44  whether to grant a certificate of convenience and necessity.
   3-45        SECTION 8.  Section 13.304, Water Code, is amended to read as
   3-46  follows:
   3-47        Sec. 13.304.  FORECLOSURE REPORT. (a) A utility that receives
   3-48  notice that all or a portion of the utility's facilities or
   3-49  property used to provide utility service are being posted for
   3-50  foreclosure shall notify the commission in writing of that fact not
   3-51  later than the 10th day after the date on which the utility
   3-52  receives the notice.
   3-53        (b)  A financial institution that forecloses on a utility or
   3-54  on any part of the utility's facilities or property that are used
   3-55  to provide utility service is not required to provide the 120-day
   3-56  notice prescribed by Section 13.301, but shall provide written
   3-57  notice to the commission before the 30th day preceding the date on
   3-58  which the foreclosure is completed.
   3-59        (c)  The financial institution may operate the utility for an
   3-60  interim period prescribed by commission rule before transferring or
   3-61  otherwise obtaining a certificate of convenience and necessity.  A
   3-62  financial institution that operates a utility during an interim
   3-63  period under this subsection is subject to each commission rule to
   3-64  which the utility was subject and in the same manner.
   3-65        SECTION 9.  This Act takes effect September 1, 1995.
   3-66        SECTION 10.  The importance of this legislation and the
   3-67  crowded condition of the calendars in both houses create an
   3-68  emergency and an imperative public necessity that the
   3-69  constitutional rule requiring bills to be read on three several
   3-70  days in each house be suspended, and this rule is hereby suspended.
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