By Counts                                             H.B. No. 1281
         77R5689 JJT-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to water and sewer utility rates and tariffs.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1. Section 13.144, Water Code, is amended to read as
 1-5     follows:
 1-6           Sec. 13.144.  NOTICE OF WHOLESALE WATER SUPPLY CONTRACT. A
 1-7     district or authority created under Section 52, Article III, or
 1-8     Section 59, Article XVI, Texas Constitution, a retail public
 1-9     utility, a wholesale water service, or other person providing a
1-10     retail public utility with a wholesale water supply shall provide
1-11     the commission with a certified copy of any wholesale water supply
1-12     contract with a retail public utility within 30 days after the date
1-13     of the execution of the contract.  The submission must include the
1-14     amount of water being supplied, term of the contract, consideration
1-15     being given for the water, purpose of use, location of use, source
1-16     of supply, point of delivery, limitations on the reuse of water, a
1-17     disclosure of any affiliated interest between the parties to the
1-18     contract, and any other condition or agreement relating to the
1-19     contract.
1-20           SECTION 2. Subchapter E, Chapter 13, Water Code, is amended
1-21     by adding Section 13.145 to read as follows:
1-22           Sec. 13.145.  MULTIPLE SYSTEMS CONSOLIDATED UNDER TARIFF. (a)
1-23     A utility may consolidate more than one system under a single
1-24     tariff only if:
 2-1                 (1)  the tariff includes not more than 20 systems;
 2-2                 (2)  the systems under the tariff serve contiguous
 2-3     areas or are interconnected;
 2-4                 (3)  the systems under the tariff are substantially
 2-5     similar in terms of facilities, quality of service, and cost of
 2-6     service; and
 2-7                 (4)  for a tariff that relates to more than five
 2-8     systems, the  tariff provides for rates that promote water
 2-9     conservation for single-family residences.
2-10           (b)  The commission by rule shall ensure that a utility may
2-11     not consolidate systems under multiple tariffs in a manner that
2-12     would violate Subsection (a) if the systems were consolidated under
2-13     a single tariff.
2-14           SECTION 3.  Section 13.183, Water Code, is amended by
2-15     amending Subsection (c) and adding Subsections (d) and (e) to read
2-16     as follows:
2-17           (c)  To ensure that retail customers receive a higher
2-18     quality, more affordable, or more reliable water or sewer service,
2-19     to encourage regionalization, or to maintain financially stable and
2-20     technically sound utilities, the regulatory authority, by rule or
2-21     ordinance, as appropriate, may adopt specific alternative [may
2-22     develop] methodologies for water or sewer rates based on factors
2-23     other than rate of return and those specified in Section 13.185.
2-24     Overall revenues determined according [pursuant] to an alternative
2-25     [alternate] methodology adopted [developed] under this section must
2-26     provide revenues to the utility that satisfy the requirements of
2-27     Subsection (a).  The regulatory authority may not approve rates
 3-1     under an alternative methodology unless the regulatory authority
 3-2     adopts the methodology before the beginning of the rate proceeding
 3-3     in which the methodology is applied.
 3-4           (d)  A regulatory authority that uses an alternative
 3-5     methodology to determine rates [In determining to use alternate
 3-6     ratemaking methodologies, the regulatory authority] shall assure
 3-7     that rates, operations, and services are just and reasonable to the
 3-8     consumers and to the utilities.  The regulatory authority may not
 3-9     authorize the use of a uniform rate across unconnected systems or
3-10     another alternative methodology that would allow revenues from
3-11     customers of a system with a lower cost of service or higher
3-12     quality of service to subsidize the costs of service of or
3-13     improvements to an unconnected system.
3-14           (e)  Except as provided by this subsection, the regulatory
3-15     authority shall base rates under an alternative methodology on the
3-16     original cost, as defined by Section 13.185(b), including
3-17     construction work in progress as provided by that section, used and
3-18     useful to the utility in providing service.  An alternative
3-19     methodology may provide for a rate to enable a utility that
3-20     purchased a system from another utility to recover an amount equal
3-21     to the lesser of the fair market value of or price the utility paid
3-22     for the system, but greater than the original cost, plus any
3-23     included construction work in progress only if the utility shows by
3-24     clear and convincing evidence that:
3-25                 (1)  a rate based on that original cost would endanger
3-26     the financial integrity of the utility; and
3-27                 (2)  a rate based on the fair market value of or price
 4-1     paid for the system would ensure the financial integrity of the
 4-2     system.
 4-3           SECTION 4. Section 13.187(c), Water Code, is amended to read
 4-4     as follows:
 4-5           (c)  The regulatory authority, pending final action in a rate
 4-6     proceeding, may order the utility to deposit all or part of the
 4-7     rate increase received or to be received into an escrow account
 4-8     with a financial institution approved by the regulatory authority.
 4-9     The [Unless otherwise agreed to by the parties to the rate
4-10     proceeding, the] utility shall refund or credit against future
4-11     bills all sums collected during the pendency of the rate proceeding
4-12     in excess of the rate finally ordered plus interest as determined
4-13     by the regulatory authority.  For good cause shown, the regulatory
4-14     authority may authorize the release of funds to the utility from
4-15     the escrow account during the pendency of the proceeding.  At any
4-16     time during the pendency of the rate proceeding the regulatory
4-17     authority may fix interim rates to remain in effect until a final
4-18     determination is made.  If the regulatory authority sets a final
4-19     rate that is higher than the interim rate, the utility shall be
4-20     allowed to collect the difference between the interim rate and
4-21     final rate unless otherwise agreed to by the parties to the rate
4-22     proceeding.  If the regulatory authority establishes interim rates
4-23     or an escrow account, the regulatory authority must make a final
4-24     determination on the rates not later than the first anniversary of
4-25     [within 335 days after] the effective date of the interim rates or
4-26     escrowed rates or the rates are automatically approved as requested
4-27     by the utility.
 5-1           SECTION 5. Subchapter I, Chapter 13, Water Code, is amended
 5-2     by adding Section 13.343 to read as follows:
 5-3           Sec. 13.343.  WHOLESALE WATER CONTRACTS BETWEEN CERTAIN
 5-4     AFFILIATES. (a)  This section applies only to the owner of more
 5-5     than 50 systems.
 5-6           (b)  An owner that is an affiliate of a utility that supplies
 5-7     retail water or sewer service through any of the owner's systems
 5-8     may not provide wholesale water supply service to that utility
 5-9     unless:
5-10                 (1)  the wholesale service is provided for not more
5-11     than 30 days to remedy an emergency condition, as defined by
5-12     commission rule; or
5-13                 (2)  the commission finds, after a hearing, that the
5-14     utility cannot obtain wholesale water service from another source
5-15     at a lower cost than from the affiliate.
5-16           SECTION 6.  (a)  This Act takes effect immediately if it
5-17     receives a vote of two-thirds of all the members elected to each
5-18     house, as provided by Section 39, Article III, Texas Constitution.
5-19     If this Act does not receive the vote necessary for immediate
5-20     effect, this Act takes effect September 1, 2001.
5-21           (b)  The changes in law made by this Act apply to a
5-22     proceeding in which the Texas Natural Resource Conservation
5-23     Commission has not issued a final order before the effective date
5-24     of this Act.
5-25           (c)  Section 13.343, Water Code, as added by this Act, does
5-26     not apply to a contract executed before the effective date of this
5-27     Act.  A contract executed before the effective date of this Act is
 6-1     governed by the law in effect on the date it was executed, and that
 6-2     law is continued in effect for that purpose.