1-1     By:  Counts, et al. (Senate Sponsor - Wentworth)      H.B. No. 1281
 1-2           (In the Senate - Received from the House April 24, 2001;
 1-3     April 25, 2001, read first time and referred to Committee on
 1-4     Natural Resources; May 11, 2001, reported favorably by the
 1-5     following vote:  Yeas 6, Nays 1; May 11, 2001, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to water utility services, rates, and tariffs.
 1-9           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10           SECTION 1. Section 13.137, Water Code, is amended to read as
1-11     follows:
1-12           Sec. 13.137.  OFFICE AND OTHER BUSINESS LOCATIONS OF UTILITY;
1-13     RECORDS; REMOVAL FROM STATE.  (a)  Every utility shall:
1-14                 (1)  make available and notify its customers of a
1-15     business location where its customers may make payments to prevent
1-16     disconnection of or to restore service:
1-17                       (A)  in each county in which the utility provides
1-18     service; or
1-19                       (B)  not more than 20 miles from the residence of
1-20     any residential customer if there is no location to receive
1-21     payments in the county; and
1-22                 (2)  have an office in a county of this state or in the
1-23     immediate area in which its property or some part of its property
1-24     is located in which it shall keep all books, accounts, records, and
1-25     memoranda required by the commission to be kept in this state.
1-26           (b)  The commission by rule may provide for waiving the
1-27     requirements of Subsection (a)(1) for a utility for which meeting
1-28     those requirements would cause a rate increase or otherwise harm or
1-29     inconvenience customers.  The rules must provide for an additional
1-30     14 days to be given for a customer to pay before a utility that is
1-31     granted a waiver may disconnect service for late payment.
1-32           (c)  Books, accounts, records, or memoranda required by the
1-33     regulatory authority to be kept in the state may not be removed
1-34     from the state, except on conditions prescribed by the commission.
1-35           SECTION 2. Section 13.144, Water Code, is amended to read as
1-36     follows:
1-37           Sec. 13.144.  NOTICE OF WHOLESALE WATER SUPPLY CONTRACT. A
1-38     district or authority created under Section 52, Article III, or
1-39     Section 59, Article XVI, Texas Constitution, a retail public
1-40     utility, a wholesale water service, or other person providing a
1-41     retail public utility with a wholesale water supply shall provide
1-42     the commission with a certified copy of any wholesale water supply
1-43     contract with a retail public utility within 30 days after the date
1-44     of the execution of the contract.  The submission must include the
1-45     amount of water being supplied, term of the contract, consideration
1-46     being given for the water, purpose of use, location of use, source
1-47     of supply, point of delivery, limitations on the reuse of water, a
1-48     disclosure of any affiliated interest between the parties to the
1-49     contract, and any other condition or agreement relating to the
1-50     contract.
1-51           SECTION 3. Subchapter E, Chapter 13, Water Code, is amended
1-52     by adding Section 13.145 to read as follows:
1-53           Sec. 13.145.  MULTIPLE SYSTEMS CONSOLIDATED UNDER TARIFF. A
1-54     utility may consolidate more than one system under a single tariff
1-55     only if:
1-56                 (1)  the systems under the tariff are substantially
1-57     similar in terms of facilities, quality of service, and cost of
1-58     service; and
1-59                 (2)  the tariff provides for rates that promote water
1-60     conservation for single-family residences and landscape irrigation.
1-61           SECTION 4.  Section 13.182, Water Code, is amended to read as
1-62     follows:
1-63           Sec. 13.182.  JUST AND REASONABLE RATES.  (a)  The regulatory
1-64     authority shall ensure that every rate made, demanded, or received
 2-1     by any utility or by any two or more utilities jointly shall be
 2-2     just and reasonable.
 2-3           (b)  Rates shall not be unreasonably preferential,
 2-4     prejudicial, or discriminatory but shall be sufficient, equitable,
 2-5     and consistent in application to each class of consumers.
 2-6           (c)  For ratemaking purposes, the commission may treat two or
 2-7     more municipalities served by a utility as a single class wherever
 2-8     the commission considers that treatment to be appropriate.
 2-9           (d)  The commission by rule shall establish a preference that
2-10     rates under  a consolidated  tariff  be consolidated by region.
2-11     The regions under consolidated tariffs must be determined  on a
2-12     case-by-case basis.
2-13           SECTION 5.  Section 13.183, Water Code, is amended by
2-14     amending Subsection (c) and adding Subsections (d) and (e) to read
2-15     as follows:
2-16           (c)  To ensure that retail customers receive a higher
2-17     quality, more affordable, or more reliable water or sewer service,
2-18     to encourage regionalization, or to maintain financially stable and
2-19     technically sound utilities, the regulatory authority, by rule or
2-20     ordinance, as appropriate, may adopt specific alternative
2-21     ratemaking [may develop] methodologies for water or sewer rates
2-22     based on factors other than rate of return and those specified in
2-23     Section 13.185. Overall revenues determined according [pursuant] to
2-24     an alternative ratemaking [alternate] methodology adopted
2-25     [developed] under this section must provide revenues to the utility
2-26     that satisfy the requirements of Subsection (a).  The regulatory
2-27     authority may not approve rates under an alternative ratemaking
2-28     methodology unless the regulatory authority adopts the methodology
2-29     before the date the rate application was administratively complete.
2-30           (d)  A regulatory authority other than the commission may not
2-31     approve an acquisition adjustment for a system purchased before the
2-32     effective date of an ordinance authorizing acquisition adjustments.
2-33           (e)  In determining to use an alternative ratemaking
2-34     methodology [alternate ratemaking methodologies], the regulatory
2-35     authority shall assure that rates, operations, and services are
2-36     just and reasonable to the consumers and to the utilities.
2-37           SECTION 6.  Section 13.187, Water Code, is amended to read as
2-38     follows:
2-39           Sec. 13.187.  STATEMENT OF INTENT TO CHANGE RATES;  HEARING;
2-40     DETERMINATION OF RATE LEVEL. (a)  A utility may not make changes in
2-41     its rates except by delivering a statement of intent to each
2-42     ratepayer and with the regulatory authority having original
2-43     jurisdiction at least 60 [30] days before the effective date of the
2-44     proposed change.  The effective date of the new rates must be the
2-45     first day of a billing period, and the new rates may not apply to
2-46     service received before the effective date of the new rates.  The
2-47     statement of intent must include:
2-48                 (1)  the information required by the regulatory
2-49     authority's rules;
2-50                 (2)  a billing comparison regarding the existing water
2-51     rate and the new water rate computed for the use of:
2-52                       (A)  10,000 gallons of water; and
2-53                       (B)  30,000 gallons of water; and
2-54                 (3)  a billing comparison regarding the existing sewer
2-55     rate and the new sewer rate computed for the use of 10,000 gallons,
2-56     unless the utility proposes a flat rate for sewer services.
2-57           (b)  A copy of the statement of intent shall be mailed or
2-58     delivered to the appropriate offices of each affected municipality,
2-59     and to any other affected persons as required by the regulatory
2-60     authority's rules.
2-61           (c)  When the statement of intent is delivered, the utility
2-62     shall file with the regulatory authority an application to change
2-63     rates.  The application must include information the regulatory
2-64     authority requires by rule.  If the utility fails to provide within
2-65     a reasonable time after the application is filed the necessary
2-66     documentation or other evidence that supports the costs and
2-67     expenses that are shown in the application, the regulatory
2-68     authority may disallow the nonsupported expenses.
2-69           (d)  If the application or the statement of intent is not
 3-1     substantially complete or does not comply with the regulatory
 3-2     authority's rules, it may be rejected and the effective date of the
 3-3     rate change may be suspended until a properly completed application
 3-4     is accepted by the regulatory authority and a proper statement of
 3-5     intent is provided.  The commission may also suspend the effective
 3-6     date of any rate change if the utility does not have a certificate
 3-7     of public convenience and necessity or a completed application for
 3-8     a certificate or to transfer a certificate pending before the
 3-9     commission or if the utility is delinquent in paying the assessment
3-10     and any applicable penalties or interest required by Section
3-11     5.235(n) of this code.
3-12           (e) [(b)]  If, before the 91st day [within 60 days] after the
3-13     effective date of the rate change, the regulatory authority
3-14     receives a complaint from any affected municipality, or from the
3-15     lesser of 1,000 or 10 percent of the ratepayers of the utility over
3-16     whose rates the regulatory authority has original jurisdiction, the
3-17     regulatory authority shall set the matter for hearing.
3-18           (f)  The regulatory authority may set the matter for hearing
3-19     on its own motion at any time within 120 days after the effective
3-20     date of the rate change.  If more than half of the ratepayers of
3-21     the utility receive service in a county with a population of more
3-22     than 2.5 million, the hearing must be held at a location in that
3-23     county.
3-24           (g)  The hearing may be informal.
3-25           (h)  If, after hearing, the regulatory authority finds the
3-26     rates currently being charged or those proposed to be charged are
3-27     unreasonable or in violation of law, the regulatory authority shall
3-28     determine the rates to be charged by the utility and shall fix the
3-29     rates by order served on the utility.
3-30           (i) [(c)]  The regulatory authority, pending final action in
3-31     a rate proceeding, may order the utility to deposit all or part of
3-32     the rate increase received or to be received into an escrow account
3-33     with a financial institution approved by the regulatory authority.
3-34     Unless otherwise agreed to by the parties to the rate proceeding,
3-35     the utility shall refund or credit against future bills all sums
3-36     collected during the pendency of the rate proceeding in excess of
3-37     the rate finally ordered plus interest as determined by the
3-38     regulatory authority.
3-39           (j)  For good cause shown, the regulatory authority may
3-40     authorize the release of funds to the utility from the escrow
3-41     account during the pendency of the proceeding.
3-42           (k)  If the regulatory authority receives at least the number
3-43     of complaints from ratepayers required for the regulatory authority
3-44     to set a hearing under Subsection (e), the regulatory authority
3-45     may, pending the hearing and a decision, suspend the date the rate
3-46     change would otherwise be effective.  The proposed rate may not be
3-47     suspended for longer than:
3-48                 (1)  90 days by a local regulatory authority; or
3-49                 (2)  150 days by the commission.
3-50           (l)  At any time during the pendency of the rate proceeding
3-51     the regulatory authority may fix interim rates to remain in effect
3-52     until a final determination is made on the proposed rate.
3-53           (m)  If the regulatory authority sets a final rate that is
3-54     higher than the interim rate, the utility shall be allowed to
3-55     collect the difference between the interim rate and final rate
3-56     unless otherwise agreed to by the parties to the rate proceeding.
3-57           (n)  For good cause shown, the regulatory authority may at
3-58     any time during the proceeding require the utility to refund money
3-59     collected under a proposed rate before the rate was suspended or an
3-60     interim rate was established to the extent the proposed rate
3-61     exceeds the existing rate or the interim rate.
3-62           (o)  If a [the] regulatory authority other than the
3-63     commission establishes interim rates or an escrow account, the
3-64     regulatory authority must make a final determination on the rates
3-65     not later than the first anniversary of [within 335 days after] the
3-66     effective date of the interim rates or escrowed rates or the rates
3-67     are automatically approved as requested by the utility.
3-68           (p) [(d)]  Except to implement a rate adjustment provision
3-69     approved by the regulatory authority by rule or ordinance, as
 4-1     applicable, or to adjust the rates of a newly acquired utility
 4-2     system, a utility or two or more utilities under common control and
 4-3     ownership may not file a statement of intent to increase its rates
 4-4     more than once in a 12-month period, unless the regulatory
 4-5     authority determines that a financial hardship exists.  If the
 4-6     regulatory authority requires the utility to deliver a corrected
 4-7     statement of intent, the utility is not considered to be in
 4-8     violation of the 12-month filing requirement.
 4-9           SECTION 7. Subchapter I, Chapter 13, Water Code, is amended
4-10     by adding Section 13.343 to read as follows:
4-11           Sec. 13.343.  WHOLESALE WATER CONTRACTS BETWEEN CERTAIN
4-12     AFFILIATES. (a)  The owner of a utility that supplies retail water
4-13     service may not contract to purchase from an affiliated supplier
4-14     wholesale water service for any of that owner's systems unless:
4-15                 (1)  the wholesale service is provided for not more
4-16     than 90 days to remedy an emergency condition, as defined by
4-17     commission rule; or
4-18                 (2)  the executive director determines that the utility
4-19     cannot obtain wholesale water service from another source at a
4-20     lower cost than from the affiliate.
4-21           (b)  The utility may not purchase groundwater from any
4-22     provider if:
4-23                 (1)  the source of the groundwater is located in a
4-24     priority groundwater management area; and
4-25                 (2)  a wholesale supply of surface water is available.
4-26           SECTION 8.  (a)  This Act takes effect immediately if it
4-27     receives a vote of two-thirds of all the members elected to each
4-28     house, as provided by Section 39, Article III, Texas Constitution.
4-29     If this Act does not receive the vote necessary for immediate
4-30     effect, this Act takes effect September 1, 2001.
4-31           (b)  The changes in law made by this Act apply to a
4-32     proceeding in which the Texas Natural Resource Conservation
4-33     Commission has not issued a final order before the effective date
4-34     of this Act.
4-35           (c)  Section 13.343, Water Code, as added by this Act, does
4-36     not apply to a contract executed before the effective date of this
4-37     Act.  A contract executed before the effective date of this Act is
4-38     governed by the law in effect on the date it was executed, and that
4-39     law is continued in effect for that purpose.
4-40                                  * * * * *