H.B. No. 2876
AN ACT
relating to certificates of public convenience and necessity for
water service and sewer service.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 13.002, Water Code, is amended by
amending Subdivision (1) and adding Subdivision (1-a) to read as
follows:
(1) "Affected person" means any landowner within an
area for which a certificate of public convenience and necessity is
filed, any retail public utility affected by any action of the
regulatory authority, any person or corporation whose utility
service or rates are affected by any proceeding before the
regulatory authority, or any person or corporation that is a
competitor of a retail public utility with respect to any service
performed by the retail public utility or that desires to enter into
competition.
(1-a) "Landowner," "owner of a tract of land," and
"owners of each tract of land" include multiple owners of a single
deeded tract of land.
SECTION 2. Section 13.241(a), Water Code, is amended to
read as follows:
(a) In determining whether to grant or amend a certificate
of public convenience and necessity, the commission shall ensure
that the applicant possesses the financial, managerial, and
technical capability to provide continuous and adequate service.
SECTION 3. Section 13.242, Water Code, is amended by adding
Subsection (d) to read as follows:
(d) A supplier of wholesale water or sewer service may not
require a purchaser to obtain a certificate of public convenience
and necessity if the purchaser is not otherwise required by this
chapter to obtain the certificate.
SECTION 4. Section 13.244, Water Code, is amended to read as
follows:
Sec. 13.244. APPLICATION; MAPS AND OTHER INFORMATION;
EVIDENCE AND CONSENT. (a) To obtain a certificate of public
convenience and necessity or an amendment to a certificate, a [A]
public utility or water supply or sewer service corporation shall
submit to the commission an application for [to obtain] a
certificate [of public convenience and necessity] or for an
amendment as provided by this section [of a certificate].
(b) Each [On request by the commission, each] public utility
and water supply or sewer service corporation shall file with the
commission a map or maps showing all its facilities and
illustrating separately facilities for production, transmission,
and distribution of its services, and each certificated retail
public utility shall file with the commission a map or maps showing
any facilities, customers, or area currently being served outside
its certificated areas.
(c) Each applicant for a certificate or for an amendment
shall file with the commission evidence required by the commission
to show that the applicant has received the required consent,
franchise, or permit of the proper municipality or other public
authority.
(d) An application for a certificate of public convenience
and necessity or for an amendment to a certificate must contain:
(1) a description of the proposed service area by:
(A) a metes and bounds survey certified by a
licensed state land surveyor or a registered professional land
surveyor;
(B) the Texas State Plane Coordinate System;
(C) verifiable landmarks, including a road,
creek, or railroad line; or
(D) if a recorded plat of the area exists, lot and
block number;
(2) a description of any requests for service in the
proposed service area;
(3) a capital improvements plan, including a budget
and estimated timeline for construction of all facilities necessary
to provide full service to the entire proposed service area;
(4) a description of the sources of funding for all
facilities;
(5) to the extent known, a description of current and
projected land uses, including densities;
(6) a current financial statement of the applicant;
(7) according to the tax roll of the central appraisal
district for each county in which the proposed service area is
located, a list of the owners of each tract of land that is:
(A) at least 50 acres; and
(B) wholly or partially located within the
proposed service area; and
(8) any other item required by the commission.
SECTION 5. Subchapter G, Chapter 13, Water Code, is amended
by adding Sections 13.245 and 13.2451 to read as follows:
Sec. 13.245. MUNICIPAL BOUNDARIES OR EXTRATERRITORIAL
JURISDICTION OF CERTAIN MUNICIPALITIES. (a) This section applies
only to a municipality with a population of 500,000 or more.
(b) Except as provided by Subsection (c), the commission may
not grant to a retail public utility a certificate of public
convenience and necessity for a service area within the boundaries
or extraterritorial jurisdiction of a municipality without the
consent of the municipality. The municipality may not unreasonably
withhold the consent. As a condition of the consent, a municipality
may require that all water and sewer facilities be designed and
constructed in accordance with the municipality's standards for
facilities.
(c) If a municipality has not consented under Subsection (b)
before the 180th day after the date the municipality receives the
retail public utility's application, the commission shall grant the
certificate of public convenience and necessity without the consent
of the municipality if the commission finds that the municipality:
(1) does not have the ability to provide service; or
(2) has failed to make a good faith effort to provide
service on reasonable terms and conditions.
(d) A commitment described by Subsection (c)(2) must
provide that the construction of service facilities will begin
within one year and will be substantially completed within two
years after the date the retail public utility's application was
filed with the municipality.
(e) If the commission makes a decision under Subsection (d)
regarding the grant of a certificate of public convenience and
necessity without the consent of the municipality, the municipality
or the retail public utility may appeal the decision to the
appropriate state district court. The court shall hear the petition
within 120 days after the date the petition is filed. On final
disposition, the court may award reasonable fees to the prevailing
party.
Sec. 13.2451. EXTENSION BEYOND EXTRATERRITORIAL
JURISDICTION. (a) Except as provided by Subsection (b), if a
municipality extends its extraterritorial jurisdiction to include
an area certificated to a retail public utility, the retail public
utility may continue and extend service in its area of public
convenience and necessity under the rights granted by its
certificate and this chapter.
(b) The commission may not extend a municipality's
certificate of public convenience and necessity beyond its
extraterritorial jurisdiction without the written consent of the
landowner who owns the property in which the certificate is to be
extended. The portion of any certificate of public convenience and
necessity that extends beyond the extraterritorial jurisdiction of
the municipality without the consent of the landowner is void.
SECTION 6. Section 13.246, Water Code, is amended by
amending Subsections (a), (b), (c), and (d) and adding Subsections
(a-1), (h), and (i) to read as follows:
(a) If an application for a certificate of
public convenience and necessity or for an amendment to a
certificate is filed, the commission shall cause notice of the
application to be given to affected parties and, if requested,
shall fix a time and place for a hearing and give notice of the
hearing. Any person affected by the application may intervene at
the hearing.
(a-1) Except as otherwise provided by this subsection, in
addition to the notice required by Subsection (a), the commission
shall require notice to be mailed to each owner of a tract of land
that is at least 50 acres and is wholly or partially included in the
area proposed to be certified. Notice required under this
subsection must be mailed by first class mail to the owner of the
tract according to the most current tax appraisal rolls of the
applicable central appraisal district at the time the commission
received the application for the certificate or amendment. Good
faith efforts to comply with the requirements of this subsection
shall be considered adequate notice to landowners. Notice under
this subsection is not required for a matter filed with the
commission under:
(1) Section 13.248 or 13.255; or
(2) Chapter 65.
(b) The commission may grant applications and issue
certificates and amendments to certificates only if the commission
finds that a certificate or amendment is necessary for the service,
accommodation, convenience, or safety of the public. The
commission may issue a certificate or amendment as requested, or
refuse to issue it, or issue it for the construction of only a
portion of the contemplated system or facility or extension, or for
the partial exercise only of the right or privilege and may impose
special conditions necessary to ensure that continuous and adequate
service is provided.
(c) Certificates of public convenience and necessity and
amendments to certificates shall be granted on a nondiscriminatory
basis after consideration by the commission of:
(1) the adequacy of service currently provided to the
requested area;
(2) [,] the need for additional service in the
requested area, including whether any landowners, prospective
landowners, tenants, or residents have requested service;
(3) [,] the effect of the granting of a certificate
or of an amendment on the recipient of the certificate or amendment,
on the landowners in the area, and on any retail public utility of
the same kind already serving the proximate area;
(4) [,] the ability of the applicant to provide
adequate service, including meeting the standards of the
commission, taking into consideration the current and projected
density and land use of the area;
(5) the feasibility of obtaining service from an
adjacent retail public utility;
(6) the financial ability of the applicant to pay for
the facilities necessary to provide continuous and adequate service
and [,] the financial stability of the applicant, including, if
applicable, the adequacy of the applicant's debt-equity ratio;
(7) [,] environmental integrity;
(8) [, and] the probable improvement of service or
lowering of cost to consumers in that area resulting from the
granting of the certificate or amendment; and
(9) the effect on the land to be included in the
certificated area.
(d) The commission may require an applicant for a
certificate or for an amendment [utility] to provide a bond or other
financial assurance in a form and amount specified by the
commission to ensure that continuous and adequate utility service
is provided.
(h) Except as provided by Subsection (i), a landowner who
owns a tract of land that is at least 25 acres and that is wholly or
partially located within the proposed service area may elect to
exclude some or all of the landowner's property from the proposed
service area by providing written notice to the commission before
the 30th day after the date the landowner receives notice of a new
application for a certificate of public convenience and necessity
or for an amendment to an existing certificate of public
convenience and necessity. The landowner's election is effective
without a further hearing or other process by the commission. If a
landowner makes an election under this subsection, the application
shall be modified so that the electing landowner's property is not
included in the proposed service area.
(i) A landowner is not entitled to make an election under
Subsection (h) but is entitled to contest the inclusion of the
landowner's property in the proposed service area at a hearing held
by the commission regarding the application if the proposed service
area is located within the boundaries or extraterritorial
jurisdiction of a municipality with a population of more than
500,000 and the municipality or a utility owned by the municipality
is the applicant.
SECTION 7. The heading to Section 13.247, Water Code, is
amended to read as follows:
Sec. 13.247. AREA [INCLUDED] WITHIN MUNICIPALITY [CITY,
TOWN, OR VILLAGE].
SECTION 8. Section 13.247, Water Code, is amended by
amending Subsections (a) and (c) and adding Subsection (d) to read
as follows:
(a) If an area [has been or] is [included] within the
boundaries of a municipality [city as the result of annexation,
incorporation, or otherwise], all retail public utilities
certified or entitled to certification under this chapter to
provide service or operate facilities in that area [before the
inclusion] may continue and extend service in its area of public
convenience and necessity within the [annexed or incorporated] area
pursuant to the rights granted by its certificate and this chapter,
unless the municipality exercises its power of eminent domain to
acquire the property of the retail public utility under Subsection
(d). Except as provided by Section 13.255 [of this code], a
municipally owned or operated utility may not provide retail water
and sewer utility service within the area certificated to another
retail public utility without first having obtained from the
commission a certificate of public convenience and necessity that
includes the areas to be served.
(c) This section may not be construed as limiting the power
of municipalities [cities] to incorporate or extend their
boundaries by annexation, or as prohibiting any municipality [city]
from levying taxes and other special charges for the use of the
streets as are authorized by Section 182.025, Tax Code.
(d) In addition to any other rights provided by law, a
municipality with a population of more than 500,000 may exercise
the power of eminent domain in the manner provided by Chapter 21,
Property Code, to acquire a substandard water or sewer system if all
the facilities of the system are located entirely within the
municipality's boundaries. The municipality shall pay just and
adequate compensation for the property. In this subsection,
"substandard water or sewer system" means a system that is not in
compliance with the municipality's standards for water and
wastewater service.
SECTION 9. Section 13.254, Water Code, is amended by
amending Subsections (a), (e), and (g) and adding Subsections (a-1)
through (a-4) and (g-1) to read as follows:
(a) The commission at any time after notice and hearing may,
on its own motion or on receipt of a petition described by
Subsection (a-1), revoke or amend any certificate of public
convenience and necessity with the written consent of the
certificate holder or if it finds that:
(1) the certificate holder has never provided, is no
longer providing, is incapable of providing, or has failed to
provide continuous and adequate service in the area, or part of the
area, covered by the certificate;
(2) in an affected county as defined in Section
16.341, the cost of providing service by the certificate holder is
so prohibitively expensive as to constitute denial of service,
provided that, for commercial developments or for residential
developments started after September 1, 1997, in an affected county
as defined in Section 16.341, the fact that the cost of obtaining
service from the currently certificated retail public utility makes
the development economically unfeasible does not render such cost
prohibitively expensive in the absence of other relevant factors;
(3) the certificate holder has agreed in writing to
allow another retail public utility to provide service within its
service area, except for an interim period, without amending its
certificate; or
(4) the certificate holder has failed to file a cease
and desist action pursuant to Section 13.252 within 180 days of the
date that it became aware that another retail public utility was
providing service within its service area, unless the certificate
holder demonstrates good cause for its failure to file such action
within the 180 days.
(a-1) As an alternative to decertification under Subsection
(a), the owner of a tract of land that is at least 50 acres and that
is not in a platted subdivision actually receiving water or sewer
service may petition the commission under this subsection for
expedited release of the area from a certificate of public
convenience and necessity so that the area may receive service from
another retail public utility. The petitioner shall deliver, via
certified mail, a copy of the petition to the certificate holder,
who may submit information to the commission to controvert
information submitted by the petitioner. The petitioner must
demonstrate that:
(1) a written request for service, other than a
request for standard residential or commercial service, has been
submitted to the certificate holder, identifying:
(A) the area for which service is sought;
(B) the timeframe within which service is needed
for current and projected service demands in the area;
(C) the level and manner of service needed for
current and projected service demands in the area; and
(D) any additional information requested by the
certificate holder that is reasonably related to determination of
the capacity or cost for providing the service;
(2) the certificate holder has been allowed at least
90 calendar days to review and respond to the written request and
the information it contains;
(3) the certificate holder:
(A) has refused to provide the service;
(B) is not capable of providing the service on a
continuous and adequate basis within the timeframe, at the level,
or in the manner reasonably needed or requested by current and
projected service demands in the area; or
(C) conditions the provision of service on the
payment of costs not properly allocable directly to the
petitioner's service request, as determined by the commission; and
(4) the alternate retail public utility from which the
petitioner will be requesting service is capable of providing
continuous and adequate service within the timeframe, at the level,
and in the manner reasonably needed or requested by current and
projected service demands in the area.
(a-2) A landowner is not entitled to make the election
described in Subsection (a-1) but is entitled to contest the
involuntary certification of its property in a hearing held by the
commission if the landowner's property is located:
(1) within the boundaries of any municipality or the
extraterritorial jurisdiction of a municipality with a population
of more than 500,000 and the municipality or retail public utility
owned by the municipality is the holder of the certificate; or
(2) in a platted subdivision actually receiving water
or sewer service.
(a-3) Within 90 calendar days from the date the commission
determines the petition filed pursuant to Subsection (a-1) to be
administratively complete, the commission shall grant the petition
unless the commission makes an express finding that the petitioner
failed to satisfy the elements required in Subsection (a-1) and
supports its finding with separate findings and conclusions for
each element based solely on the information provided by the
petitioner and the certificate holder. The commission may grant or
deny a petition subject to terms and conditions specifically
related to the service request of the petitioner and all relevant
information submitted by the petitioner and the certificate holder.
In addition, the commission may require an award of compensation as
otherwise provided by this section.
(a-4) Chapter 2001, Government Code, does not apply to any
petition filed under Subsection (a-1). The decision of the
commission on the petition is final after any reconsideration
authorized by the commission's rules and may not be appealed.
(e) The determination of the monetary amount of
compensation, if any, shall be determined at the time another
retail public utility seeks to provide service in the previously
decertified area and before service is actually provided. The
commission shall ensure that the monetary amount of compensation is
determined not later than the 90th calendar day after the date on
which a retail public utility notifies the commission of its intent
to provide service to the decertified area.
(g) For the purpose of implementing this section, the value
of real property owned and utilized by the retail public utility for
its facilities shall be determined according to the standards set
forth in Chapter 21, Property Code, governing actions in eminent
domain and the value of personal property shall be determined
according to the factors in this subsection. The factors ensuring
that the compensation to a retail public utility [for the taking,
damaging, or loss of personal property, including the retail public
utility's business,] is just and adequate shall [at a minimum]
include: the amount of the retail public utility's debt allocable
for service to the area in question [the impact on the existing
indebtedness of the retail public utility and its ability to repay
that debt]; the value of the service facilities of the retail
public utility located within the area in question; the amount of
any expenditures for planning, design, or construction of service
facilities that are allocable to service to the area in question;
the amount of the retail public utility's contractual obligations
allocable to the area in question; any demonstrated impairment of
service or increase of cost to consumers of the retail public
utility remaining after the decertification; the impact on future
revenues lost from existing customers [and expenses of the retail
public utility]; necessary and reasonable legal expenses and
professional fees; [factors relevant to maintaining the current
financial integrity of the retail public utility;] and other
relevant factors. The commission shall adopt rules governing the
evaluation of these factors.
(g-1) If the retail public utilities cannot agree on an
independent appraiser within 10 calendar days after the date on
which the retail public utility notifies the commission of its
intent to provide service to the decertified area, each retail
public utility shall engage its own appraiser at its own expense,
and each appraisal shall be submitted to the commission within 60
calendar days. After receiving the appraisals, the commission
shall appoint a third appraiser who shall make a determination of
the compensation within 30 days. The determination may not be less
than the lower appraisal or more than the higher appraisal. Each
retail public utility shall pay half the cost of the third
appraisal.
SECTION 10. Section 13.255, Water Code, is amended by
amending Subsection (g) and by adding Subsection (g-1) to read as
follows:
(g) For the purpose of implementing this section, the value
of real property owned and utilized by the retail public utility for
its facilities shall be determined according to the standards set
forth in Chapter 21, Property Code, governing actions in eminent
domain; the value of personal property shall be determined
according to the factors in this subsection. The factors ensuring
that the compensation to a retail public utility [for the taking,
damaging, and/or loss of personal property, including the retail
public utility's business,] is just and adequate, shall, at a
minimum, include: impact on the existing indebtedness of the
retail public utility and its ability to repay that debt, the value
of the service facilities of the retail public utility located
within the area in question, the amount of any expenditures for
planning, design, or construction of service facilities outside the
incorporated or annexed area that are allocable to service to the
area in question, the amount of the retail public utility's
contractual obligations allocable to the area in question, any
demonstrated impairment of service or increase of cost to consumers
of the retail public utility remaining after the single
certification, the impact on future revenues lost from existing
customers [and expenses of the retail public utility], necessary
and reasonable legal expenses and professional fees, factors
relevant to maintaining the current financial integrity of the
retail public utility, and other relevant factors.
(g-1) The commission shall adopt rules governing the
evaluation of the factors to be considered in determining the
monetary compensation under Subsection (g). The commission by rule
shall adopt procedures to ensure that the total compensation to be
paid to a retail public utility under Subsection (g) is determined
not later than the 90th calendar day after the date on which the
commission determines that the municipality's application is
administratively complete.
SECTION 11. Subchapter G, Chapter 13, Water Code, is
amended by adding Section 13.2551 to read as follows:
Sec. 13.2551. COMPLETION OF DECERTIFICATION. (a) As a
condition to decertification or single certification under Section
13.254 or 13.255, and on request by an affected retail public
utility, the commission may order:
(1) the retail public utility seeking to provide
service to a decertified area to serve the entire service area of
the retail public utility that is being decertified; and
(2) the transfer of the entire certificate of public
convenience and necessity of a partially decertified retail public
utility to the retail public utility seeking to provide service to
the decertified area.
(b) The commission shall order service to the entire area
under Subsection (a) if the commission finds that the decertified
retail public utility will be unable to provide continuous and
adequate service at an affordable cost to the remaining customers.
(c) The commission shall require the retail public utility
seeking to provide service to the decertified area to provide
continuous and adequate service to the remaining customers at a
cost comparable to the cost of that service to its other customers
and shall establish the terms under which the service must be
provided. The terms may include:
(1) transferring debt and other contract obligations;
(2) transferring real and personal property;
(3) establishing interim service rates for affected
customers during specified times; and
(4) other provisions necessary for the just and
reasonable allocation of assets and liabilities.
(d) The retail public utility seeking decertification shall
not charge the affected customers any transfer fee or other fee to
obtain service other than the retail public utility's usual and
customary rates for monthly service or the interim rates set by the
commission, if applicable.
(e) The commission shall not order compensation to the
decertificated retail utility if service to the entire service area
is ordered under this section.
SECTION 12. Section 13.257, Water Code, is amended by
amending Subsections (a), (b), and (d) and adding Subsections (r)
and (s) to read as follows:
(a) In this section, "utility service provider" means a
retail public utility other than a district subject to Section
49.452 of this code[, a water supply or sewer service corporation,
or a special utility district organized and operating under Chapter
65].
(b) If a person proposes to sell or convey [unimproved] real
property located in a certificated service area of a utility
service provider, the person must give to the purchaser written
notice as prescribed by this section. An executory contract for the
purchase and sale of real property that has a performance period of
more than six months is considered a sale of real property under
this section.
(d) The notice must be executed by the seller and read as
follows: "The real property, described below, that you are about to
purchase may be [is] located in a certificated [the] water or sewer
service area [of ___________________] , which is [the utility
service provider] authorized by law to provide water or sewer
service to the properties in the certificated area. If your
property is located in a certificated area there [. No other retail
public utility is authorized to provide water or sewer service to
your property. There] may be special costs or charges that you will
be required to pay before you can receive water or sewer service.
There may be a period required to construct lines or other
facilities necessary to provide water or sewer service to your
property. You are advised to determine if the property is in a
certificated area and contact the utility service provider to
determine the cost that you will be required to pay and the period,
if any, that is required to provide water or sewer service to your
property.
"The undersigned purchaser hereby acknowledges receipt of
the foregoing notice at or before the execution of a binding
contract for the purchase of the real property described in the
notice or at closing of purchase of the real property.
________________________________
Date
________________________________
Signature of Purchaser
"[(Note: Correct name of utility service provider is to be
placed in the appropriate space.)] Except for notices included as
an addendum to or paragraph of a purchase contract, the notice must
be executed by the seller and purchaser, as indicated."
(r) A utility service provider shall:
(1) record in the real property records of each county
in which the service area or a portion of the service area is
located a certified copy of the map of the certificate of public
convenience and necessity and of any amendment to the certificate
as contained in the commission's records, and a boundary
description of the service area by:
(A) a metes and bounds survey certified by a
licensed state land surveyor or a registered professional land
surveyor;
(B) the Texas State Plane Coordinate System;
(C) verifiable landmarks, including a road,
creek, or railroad line; or
(D) if a recorded plat of the area exists, lot and
block number; and
(2) submit to the executive director evidence of the
recording.
(s) Each county shall accept and file in its real property
records a utility service provider's map presented to the county
clerk under this section if the map meets filing requirements, does
not exceed 11 inches by 17 inches in size, and is accompanied by the
appropriate fee. The recording required by this section must be
completed not later than the 31st day after the date a utility
service provider receives a final order from the commission
granting an application for a new certificate or for an amendment to
a certificate that results in a change in the utility service
provider's service area.
SECTION 13. The following provisions of the Water Code are
repealed:
(1) Section 13.254(h); and
(2) Section 13.2541.
SECTION 14. A holder of a certificate of public convenience
and necessity on the effective date of this Act must comply with
Section 13.257, Water Code, as amended by this Act, not later than
January 1, 2007.
SECTION 15. The changes in law made by this Act apply only
to:
(1) an application for a certificate of public
convenience and necessity or for an amendment to a certificate of
public convenience and necessity submitted to the Texas Commission
on Environmental Quality on or after January 1, 2006; and
(2) a proceeding to amend or revoke a certificate of
public convenience and necessity initiated on or after January 1,
2006.
SECTION 16. The Texas Commission on Environmental Quality
shall promulgate rules implementing the changes in law effected by
this Act by January 1, 2006, or shall report to the governor,
lieutenant governor, and speaker of the house any failure to comply
with this deadline.
SECTION 17. This Act takes effect September 1, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2876 was passed by the House on May
12, 2005, by a non-record vote; that the House refused to concur in
Senate amendments to H.B. No. 2876 on May 27, 2005, and requested
the appointment of a conference committee to consider the
differences between the two houses; and that the House adopted the
conference committee report on H.B. No. 2876 on May 29, 2005, by a
non-record vote.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2876 was passed by the Senate, with
amendments, on May 25, 2005, by the following vote: Yeas 31, Nays
0; at the request of the House, the Senate appointed a conference
committee to consider the differences between the two houses; and
that the Senate adopted the conference committee report on H.B. No.
2876 on May 29, 2005, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor