By Counts, Ellis, Hilderbran, Hope,                   H.B. No. 1281
         77R10927 JJT-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to water utility services, rates, and tariffs.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1. Section 13.137, Water Code, is amended to read as
 1-5     follows:
 1-6           Sec. 13.137.  OFFICE AND OTHER BUSINESS LOCATIONS OF UTILITY;
 1-7     RECORDS; REMOVAL FROM STATE.  (a)  Every utility shall:
 1-8                 (1)  make available and notify its customers of a
 1-9     business location where its customers may make payments to prevent
1-10     disconnection of or to restore service:
1-11                       (A)  in each county in which the utility provides
1-12     service; or
1-13                       (B)  not more than 20 miles from the residence of
1-14     any residential customer if there is no location to receive
1-15     payments in the county; and
1-16                 (2)  have an office in a county of this state or in the
1-17     immediate area in which its property or some part of its property
1-18     is located in which it shall keep all books, accounts, records, and
1-19     memoranda required by the commission to be kept in this state.
1-20           (b)  The commission by rule may provide for waiving the
1-21     requirements of Subsection (a)(1) for a utility for which meeting
1-22     those requirements would cause a rate increase or otherwise harm or
1-23     inconvenience customers.  The rules must provide for an additional
1-24     14 days to be given for a customer to pay before a utility that is
1-25     granted a waiver may disconnect service for late payment.
 2-1           (c)  Books, accounts, records, or memoranda required by the
 2-2     regulatory authority to be kept in the state may not be removed
 2-3     from the state, except on conditions prescribed by the commission.
 2-4           SECTION 2. Section 13.144, Water Code, is amended to read as
 2-5     follows:
 2-6           Sec. 13.144.  NOTICE OF WHOLESALE WATER SUPPLY CONTRACT. A
 2-7     district or authority created under Section 52, Article III, or
 2-8     Section 59, Article XVI, Texas Constitution, a retail public
 2-9     utility, a wholesale water service, or other person providing a
2-10     retail public utility with a wholesale water supply shall provide
2-11     the commission with a certified copy of any wholesale water supply
2-12     contract with a retail public utility within 30 days after the date
2-13     of the execution of the contract.  The submission must include the
2-14     amount of water being supplied, term of the contract, consideration
2-15     being given for the water, purpose of use, location of use, source
2-16     of supply, point of delivery, limitations on the reuse of water, a
2-17     disclosure of any affiliated interest between the parties to the
2-18     contract, and any other condition or agreement relating to the
2-19     contract.
2-20           SECTION 3. Subchapter E, Chapter 13, Water Code, is amended
2-21     by adding Section 13.145 to read as follows:
2-22           Sec. 13.145.  MULTIPLE SYSTEMS CONSOLIDATED UNDER TARIFF. A
2-23     utility may consolidate more than one system under a single tariff
2-24     only if:
2-25                 (1)  the systems under the tariff are substantially
2-26     similar in terms of facilities, quality of service, and cost of
2-27     service; and
 3-1                 (2)  the tariff provides for rates that promote water
 3-2     conservation for single-family residences and landscape irrigation.
 3-3           SECTION 4.  Section 13.182, Water Code, is amended to read as
 3-4     follows:
 3-5           Sec. 13.182.  JUST AND REASONABLE RATES.  (a)  The regulatory
 3-6     authority shall ensure that every rate made, demanded, or received
 3-7     by any utility or by any two or more utilities jointly shall be
 3-8     just and reasonable.
 3-9           (b)  Rates shall not be unreasonably preferential,
3-10     prejudicial, or discriminatory but shall be sufficient, equitable,
3-11     and consistent in application to each class of consumers.
3-12           (c)  For ratemaking purposes, the commission may treat two or
3-13     more municipalities served by a utility as a single class wherever
3-14     the commission considers that treatment to be appropriate.
3-15           (d)  The commission by rule shall establish a preference that
3-16     rates under  a consolidated  tariff  be consolidated by region.
3-17     The regions under consolidated tariffs must be determined  on a
3-18     case-by-case basis.
3-19           SECTION 5.  Section 13.183, Water Code, is amended by
3-20     amending Subsection (c) and adding Subsections (d) and (e) to read
3-21     as follows:
3-22           (c)  To ensure that retail customers receive a higher
3-23     quality, more affordable, or more reliable water or sewer service,
3-24     to encourage regionalization, or to maintain financially stable and
3-25     technically sound utilities, the regulatory authority, by rule or
3-26     ordinance, as appropriate, may adopt specific alternative
3-27     ratemaking [may develop] methodologies for water or sewer rates
 4-1     based on factors other than rate of return and those specified in
 4-2     Section 13.185. Overall revenues determined according [pursuant] to
 4-3     an alternative ratemaking [alternate] methodology adopted
 4-4     [developed] under this section must provide revenues to the utility
 4-5     that satisfy the requirements of Subsection (a).  The regulatory
 4-6     authority may not approve rates under an alternative ratemaking
 4-7     methodology unless the regulatory authority adopts the methodology
 4-8     before the date the rate application was administratively complete.
 4-9           (d)  A regulatory authority other than the commission may not
4-10     approve an acquisition adjustment for a system purchased before the
4-11     effective date of an ordinance authorizing acquisition adjustments.
4-12           (e)  In determining to use an alternative ratemaking
4-13     methodology [alternate ratemaking methodologies], the regulatory
4-14     authority shall assure that rates, operations, and services are
4-15     just and reasonable to the consumers and to the utilities.
4-16           SECTION 6.  Section 13.187, Water Code, is amended to read as
4-17     follows:
4-18           Sec. 13.187.  STATEMENT OF INTENT TO CHANGE RATES;  HEARING;
4-19     DETERMINATION OF RATE LEVEL. (a)  A utility may not make changes in
4-20     its rates except by delivering a statement of intent to each
4-21     ratepayer and with the regulatory authority having original
4-22     jurisdiction at least 60 [30] days before the effective date of the
4-23     proposed change.  The effective date of the new rates must be the
4-24     first day of a billing period, and the new rates may not apply to
4-25     service received before the effective date of the new rates.  The
4-26     statement of intent must include:
4-27                 (1)  the information required by the regulatory
 5-1     authority's rules;
 5-2                 (2)  a billing comparison regarding the existing water
 5-3     rate and the new water rate computed for the use of:
 5-4                       (A)  10,000 gallons of water; and
 5-5                       (B)  30,000 gallons of water; and
 5-6                 (3)  a billing comparison regarding the existing sewer
 5-7     rate and the new sewer rate computed for the use of 10,000 gallons,
 5-8     unless the utility proposes a flat rate for sewer services.
 5-9           (b)  A copy of the statement of intent shall be mailed or
5-10     delivered to the appropriate offices of each affected municipality,
5-11     and to any other affected persons as required by the regulatory
5-12     authority's rules.
5-13           (c)  When the statement of intent is delivered, the utility
5-14     shall file with the regulatory authority an application to change
5-15     rates.  The application must include information the regulatory
5-16     authority requires by rule.  If the utility fails to provide within
5-17     a reasonable time after the application is filed the necessary
5-18     documentation or other evidence that supports the costs and
5-19     expenses that are shown in the application, the regulatory
5-20     authority may disallow the nonsupported expenses.
5-21           (d)  If the application or the statement of intent is not
5-22     substantially complete or does not comply with the regulatory
5-23     authority's rules, it may be rejected and the effective date of the
5-24     rate change may be suspended until a properly completed application
5-25     is accepted by the regulatory authority and a proper statement of
5-26     intent is provided.  The commission may also suspend the effective
5-27     date of any rate change if the utility does not have a certificate
 6-1     of public convenience and necessity or a completed application for
 6-2     a certificate or to transfer a certificate pending before the
 6-3     commission or if the utility is delinquent in paying the assessment
 6-4     and any applicable penalties or interest required by Section
 6-5     5.235(n) of this code.
 6-6           (e) [(b)]  If, before the 91st day [within 60 days] after the
 6-7     effective date of the rate change, the regulatory authority
 6-8     receives a complaint from any affected municipality, or from the
 6-9     lesser of 1,000 or 10 percent of the ratepayers of the utility over
6-10     whose rates the regulatory authority has original jurisdiction, the
6-11     regulatory authority shall set the matter for hearing.
6-12           (f)  The regulatory authority may set the matter for hearing
6-13     on its own motion at any time within 120 days after the effective
6-14     date of the rate change.  If more than half of the ratepayers of
6-15     the utility receive service in a county with a population of more
6-16     than 2.5 million, the hearing must be held at a location in that
6-17     county.
6-18           (g)  The hearing may be informal.
6-19           (h)  If, after hearing, the regulatory authority finds the
6-20     rates currently being charged or those proposed to be charged are
6-21     unreasonable or in violation of law, the regulatory authority shall
6-22     determine the rates to be charged by the utility and shall fix the
6-23     rates by order served on the utility.
6-24           (i) [(c)]  The regulatory authority, pending final action in
6-25     a rate proceeding, may order the utility to deposit all or part of
6-26     the rate increase received or to be received into an escrow account
6-27     with a financial institution approved by the regulatory authority.
 7-1     Unless otherwise agreed to by the parties to the rate proceeding,
 7-2     the utility shall refund or credit against future bills all sums
 7-3     collected during the pendency of the rate proceeding in excess of
 7-4     the rate finally ordered plus interest as determined by the
 7-5     regulatory authority.
 7-6           (j)  For good cause shown, the regulatory authority may
 7-7     authorize the release of funds to the utility from the escrow
 7-8     account during the pendency of the proceeding.
 7-9           (k)  If the regulatory authority receives at least the number
7-10     of complaints from ratepayers required for the regulatory authority
7-11     to set a hearing under Subsection (e), the regulatory authority
7-12     may, pending the hearing and a decision, suspend the date the rate
7-13     change would otherwise be effective.  The proposed rate may not be
7-14     suspended for longer than:
7-15                 (1)  90 days by a local regulatory authority; or
7-16                 (2)  150 days by the commission.
7-17           (l)  At any time during the pendency of the rate proceeding
7-18     the regulatory authority may fix interim rates to remain in effect
7-19     until a final determination is made on the proposed rate.
7-20           (m)  If the regulatory authority sets a final rate that is
7-21     higher than the interim rate, the utility shall be allowed to
7-22     collect the difference between the interim rate and final rate
7-23     unless otherwise agreed to by the parties to the rate proceeding.
7-24           (n)  For good cause shown, the regulatory authority may at
7-25     any time during the proceeding require the utility to refund money
7-26     collected under a proposed rate before the rate was suspended or an
7-27     interim rate was established to the extent the proposed rate
 8-1     exceeds the existing rate or the interim rate.
 8-2           (o)  If a [the] regulatory authority other than the
 8-3     commission establishes interim rates or an escrow account, the
 8-4     regulatory authority must make a final determination on the rates
 8-5     not later than the first anniversary of [within 335 days after] the
 8-6     effective date of the interim rates or escrowed rates or the rates
 8-7     are automatically approved as requested by the utility.
 8-8           (p) [(d)]  Except to implement a rate adjustment provision
 8-9     approved by the regulatory authority by rule or ordinance, as
8-10     applicable, or to adjust the rates of a newly acquired utility
8-11     system, a utility or two or more utilities under common control and
8-12     ownership may not file a statement of intent to increase its rates
8-13     more than once in a 12-month period, unless the regulatory
8-14     authority determines that a financial hardship exists.  If the
8-15     regulatory authority requires the utility to deliver a corrected
8-16     statement of intent, the utility is not considered to be in
8-17     violation of the 12-month filing requirement.
8-18           SECTION 7. Subchapter I, Chapter 13, Water Code, is amended
8-19     by adding Section 13.343 to read as follows:
8-20           Sec. 13.343.  WHOLESALE WATER CONTRACTS BETWEEN CERTAIN
8-21     AFFILIATES. (a)  The owner of a utility that supplies retail water
8-22     service may not contract to purchase from an affiliated supplier
8-23     wholesale water service for any of that owner's systems unless:
8-24                 (1)  the wholesale service is provided for not more
8-25     than 90 days to remedy an emergency condition, as defined by
8-26     commission rule; or
8-27                 (2)  the executive director determines that the utility
 9-1     cannot obtain wholesale water service from another source at a
 9-2     lower cost than from the affiliate.
 9-3           (b)  The utility may not purchase groundwater from any
 9-4     provider if:
 9-5                 (1)  the source of the groundwater is located in a
 9-6     priority groundwater management area; and
 9-7                 (2)  a wholesale supply of surface water is available.
 9-8           SECTION 8.  (a)  This Act takes effect immediately if it
 9-9     receives a vote of two-thirds of all the members elected to each
9-10     house, as provided by Section 39, Article III, Texas Constitution.
9-11     If this Act does not receive the vote necessary for immediate
9-12     effect, this Act takes effect September 1, 2001.
9-13           (b)  The changes in law made by this Act apply to a
9-14     proceeding in which the Texas Natural Resource Conservation
9-15     Commission has not issued a final order before the effective date
9-16     of this Act.
9-17           (c)  Section 13.343, Water Code, as added by this Act, does
9-18     not apply to a contract executed before the effective date of this
9-19     Act.  A contract executed before the effective date of this Act is
9-20     governed by the law in effect on the date it was executed, and that
9-21     law is continued in effect for that purpose.