82S10180 JXC-D
 
  By: Larson H.B. No. 71
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the establishment of certain water and sewer utility
  rates and the transfer of certain functions from the Texas
  Commission on Environmental Quality to the Public Utility
  Commission of Texas.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
  ARTICLE 1.  AUTHORITY TO ESTABLISH INTERIM RATES
         SECTION 1.01.  Subsection (h), Section 13.043, Water Code,
  is amended to read as follows:
         (h)  The utility commission or the executive director of the
  utility commission may[, on a motion by the executive director or by
  the appellant under Subsection (a), (b), or (f) of this section,]
  establish interim rates to be in effect until a final decision is
  made in an appeal filed under Subsection (a), (b), or (f).
         SECTION 1.02.  Subsections (b) and (l), Section 13.187,
  Water Code, are amended to read as follows:
         (b)  A copy of the statement of intent shall be mailed, sent
  by e-mail, or delivered to the appropriate offices of each affected
  municipality, to the executive director of the utility commission,
  and to any [other] affected persons as required by the regulatory
  authority's rules.
         (l)  At any time during the pendency of the rate proceeding
  the regulatory authority or, if the regulatory authority is the
  utility commission, the executive director of the utility
  commission may fix interim rates to remain in effect until a final
  determination is made on the proposed rate.
  ARTICLE 2. WATER AND SEWER UTILITIES
         SECTION 2.01.  Section 13.002, Water Code, is amended by
  amending Subdivisions (2) and (18) and adding Subdivision (22-a) to
  read as follows:
               (2)  "Affiliated interest" or "affiliate" means:
                     (A)  any person or corporation owning or holding
  directly or indirectly five percent or more of the voting
  securities of a utility;
                     (B)  any person or corporation in any chain of
  successive ownership of five percent or more of the voting
  securities of a utility;
                     (C)  any corporation five percent or more of the
  voting securities of which is owned or controlled directly or
  indirectly by a utility;
                     (D)  any corporation five percent or more of the
  voting securities of which is owned or controlled directly or
  indirectly by any person or corporation that owns or controls
  directly or indirectly five percent or more of the voting
  securities of any utility or by any person or corporation in any
  chain of successive ownership of five percent of those utility
  securities;
                     (E)  any person who is an officer or director of a
  utility or of any corporation in any chain of successive ownership
  of five percent or more of voting securities of a public utility;
                     (F)  any person or corporation that the utility
  commission, after notice and hearing, determines actually
  exercises any substantial influence or control over the policies
  and actions of a utility or over which a utility exercises such
  control or that is under common control with a utility, such control
  being the possession directly or indirectly of the power to direct
  or cause the direction of the management and policies of another,
  whether that power is established through ownership or voting of
  securities or by any other direct or indirect means; or
                     (G)  any person or corporation that the utility
  commission, after notice and hearing, determines is exercising
  substantial influence over the policies and actions of the utility
  in conjunction with one or more persons or corporations with which
  they are related by ownership or blood relationship, or by action in
  concert, that together they are affiliated within the meaning of
  this section, even though no one of them alone is so affiliated.
               (18)  "Regulatory authority" means, in accordance with
  the context in which it is found, either the commission, the utility
  commission, or the governing body of a municipality.
               (22-a)  "Utility commission" means the Public Utility
  Commission of Texas.
         SECTION 2.02.  Section 13.004, Water Code, is amended to
  read as follows:
         Sec. 13.004.  JURISDICTION OF UTILITY COMMISSION OVER
  CERTAIN WATER SUPPLY OR SEWER SERVICE CORPORATIONS.
  (a)  Notwithstanding any other law, the utility commission has the
  same jurisdiction over a water supply or sewer service corporation
  that the utility commission has under this chapter over a water and
  sewer utility if the utility commission finds that the water supply
  or sewer service corporation:
               (1)  is failing to conduct annual or special meetings
  in compliance with Section 67.007; or
               (2)  is operating in a manner that does not comply with
  the requirements for classifications as a nonprofit water supply or
  sewer service corporation prescribed by Sections 13.002(11) and
  (24).
         (b)  If the water supply or sewer service corporation
  voluntarily converts to a special utility district operating under
  Chapter 65, the utility commission's jurisdiction provided by this
  section ends.
         SECTION 2.03.  Section 13.011, Water Code, is amended to
  read as follows:
         Sec. 13.011.  EMPLOYEES. (a)  The executive director of the
  utility commission and the executive director of the commission,
  subject to approval, as applicable, by the utility commission or
  the commission, shall employ any engineering, accounting, and
  administrative personnel necessary to carry out each agency's
  powers and duties under this chapter.
         (b)  The executive director and the commission's staff are
  responsible for the gathering of information relating to all
  matters within the jurisdiction of the commission under this
  subchapter. The executive director of the utility commission and
  the utility commission's staff are responsible for the gathering of
  information relating to all matters within the jurisdiction of the
  utility commission under this subchapter. The duties of the
  respective executive directors and staffs [director and the staff]
  include:
               (1)  accumulation of evidence and other information
  from water and sewer utilities, [and] from the agency and governing
  body, [commission and the board] and from other sources for the
  purposes specified by this chapter;
               (2)  preparation and presentation of evidence before
  the agency [commission] or its appointed examiner in proceedings;
               (3)  conducting investigations of water and sewer
  utilities under the jurisdiction of the agency [commission];
               (4)  preparation of recommendations that the agency
  [commission] undertake an investigation of any matter within its
  jurisdiction;
               (5)  preparation of recommendations and a report for
  inclusion in the annual report of the agency [commission];
               (6)  protection and representation of the public
  interest[, together with the public interest advocate,] before the
  agency [commission]; and
               (7)  other activities that are reasonably necessary to
  enable the executive director and the staff to perform their
  duties.
         SECTION 2.04.  Section 13.014, Water Code, is amended to
  read as follows:
         Sec. 13.014.  ATTORNEY GENERAL TO REPRESENT COMMISSION OR
  UTILITY COMMISSION. The attorney general shall represent the
  commission or the utility commission under this chapter in all
  matters before the state courts and any court of the United States.
         SECTION 2.05.  Subchapter B, Chapter 13, Water Code, is
  amended by adding Section 13.017 to read as follows:
         Sec. 13.017.  OFFICE OF PUBLIC UTILITY COUNSEL; POWERS AND
  DUTIES.  (a)  In this section, "counsellor" and "office" have the
  meanings assigned by Section 11.003, Utilities Code.
         (b)  The office represents the interests of residential and
  small commercial consumers under this chapter. The office:
               (1)  shall assess the effect of utility rate changes
  and other regulatory actions on residential consumers in this
  state;
               (2)  shall advocate in the office's own name a position
  determined by the counsellor to be most advantageous to a
  substantial number of residential consumers;
               (3)  may appear or intervene, as a party or otherwise,
  as a matter of right on behalf of:
                     (A)  residential consumers, as a class, in any
  proceeding before the utility commission, including an alternative
  dispute resolution proceeding; and
                     (B)  small commercial consumers, as a class, in
  any proceeding in which the counsellor determines that small
  commercial consumers are in need of representation, including an
  alternative dispute resolution proceeding;
               (4)  may initiate or intervene as a matter of right or
  otherwise appear in a judicial proceeding:
                     (A)  that involves an action taken by an
  administrative agency in a proceeding, including an alternative
  dispute resolution proceeding, in which the counsellor is
  authorized to appear; or
                     (B)  in which the counsellor determines that
  residential consumers or small commercial consumers are in need of
  representation;
               (5)  is entitled to the same access as a party, other
  than utility commission staff, to records gathered by the utility
  commission under Section 13.133;
               (6)  is entitled to discovery of any nonprivileged
  matter that is relevant to the subject matter of a proceeding or
  petition before the utility commission;
               (7)  may represent an individual residential or small
  commercial consumer with respect to the consumer's disputed
  complaint concerning retail utility services that is unresolved
  before the utility commission; and
               (8)  may recommend legislation to the legislature that
  the office determines would positively affect the interests of
  residential and small commercial consumers.
         (c)  This section does not limit the authority of the utility
  commission to represent residential or small commercial consumers.
         (d)  The appearance of the counsellor in a proceeding does
  not preclude the appearance of other parties on behalf of
  residential or small commercial consumers. The counsellor may not
  be grouped with any other party.
         SECTION 2.06.  Section 13.041, Water Code, is amended to
  read as follows:
         Sec. 13.041.  GENERAL POWERS OF UTILITY COMMISSION AND
  COMMISSION [POWER]; RULES; HEARINGS. (a)  The utility commission
  may regulate and supervise the business of each [every] water and
  sewer utility within its jurisdiction, including ratemaking and
  other economic regulation.  The commission shall regulate water and
  sewer utilities within its jurisdiction to ensure safe drinking
  water and environmental protection.  The utility commission and the
  commission [and] may do all things, whether specifically designated
  in this chapter or implied in this chapter, necessary and
  convenient to the exercise of these powers [this power] and
  jurisdiction.  The utility commission may consult with the
  commission as necessary in carrying out its duties related to the
  regulation of water and sewer utilities.
         (b)  The commission and the utility commission shall adopt
  and enforce rules reasonably required in the exercise of [its]
  powers and jurisdiction of each agency, including rules governing
  practice and procedure before the commission and the utility
  commission.
         (c)  The commission and the utility commission may call and
  hold hearings, administer oaths, receive evidence at hearings,
  issue subpoenas to compel the attendance of witnesses and the
  production of papers and documents, and make findings of fact and
  decisions with respect to administering this chapter or the rules,
  orders, or other actions of the commission or the utility
  commission.
         (d)  The utility commission may issue emergency orders, with
  or without a hearing:
               (1)  to compel a water or sewer service provider that
  has obtained or is required to obtain a certificate of public
  convenience and necessity to provide continuous and adequate water
  service, sewer service, or both, if the discontinuance of the
  service is imminent or has occurred because of the service
  provider's actions or failure to act; and
               (2)  to compel a retail public utility to provide an
  emergency interconnection with a neighboring retail public utility
  for the provision of temporary water or sewer service, or both, for
  not more than 90 days if service discontinuance or serious
  impairment in service is imminent or has occurred.
         (e)  The utility commission may establish reasonable
  compensation for the temporary service required under Subsection
  (d)(2) [of this section] and may allow the retail public utility
  receiving the service to make a temporary adjustment to its rate
  structure to ensure proper payment.
         (f)  If an order is issued under Subsection (d) without a
  hearing, the order shall fix a time, as soon after the emergency
  order is issued as is practicable, and place for a hearing to be
  held before the utility commission.
         (g)  The regulatory assessment required by Section 5.701(n) 
  [5.235(n) of this code] is not a rate and is not reviewable by the
  utility commission under Section 13.043 [of this code]. The
  commission has the authority to enforce payment and collection of
  the regulatory assessment.
         SECTION 2.07.  Section 13.042, Water Code, is amended to
  read as follows:
         Sec. 13.042.  JURISDICTION OF MUNICIPALITY; ORIGINAL AND
  APPELLATE JURISDICTION OF UTILITY COMMISSION. (a)  Subject to the
  limitations imposed in this chapter and for the purpose of
  regulating rates and services so that those rates may be fair, just,
  and reasonable and the services adequate and efficient, the
  governing body of each municipality has exclusive original
  jurisdiction over all water and sewer utility rates, operations,
  and services provided by a water and sewer utility within its
  corporate limits.
         (b)  The governing body of a municipality by ordinance may
  elect to have the utility commission exercise exclusive original
  jurisdiction over the utility rates, operation, and services of
  utilities, within the incorporated limits of the municipality.
         (c)  The governing body of a municipality that surrenders its
  jurisdiction to the utility commission may reinstate its
  jurisdiction by ordinance at any time after the second anniversary
  of the date on which the municipality surrendered its jurisdiction
  to the utility commission, except that the municipality may not
  reinstate its jurisdiction during the pendency of a rate proceeding
  before the utility commission. The municipality may not surrender
  its jurisdiction again until the second anniversary of the date on
  which the municipality reinstates jurisdiction.
         (d)  The utility commission shall have exclusive appellate
  jurisdiction to review orders or ordinances of those municipalities
  as provided in this chapter.
         (e)  The utility commission shall have exclusive original
  jurisdiction over water and sewer utility rates, operations, and
  services not within the incorporated limits of a municipality
  exercising exclusive original jurisdiction over those rates,
  operations, and services as provided in this chapter.
         (f)  This subchapter does not give the utility commission
  power or jurisdiction to regulate or supervise the rates or service
  of a utility owned and operated by a municipality, directly or
  through a municipally owned corporation, within its corporate
  limits or to affect or limit the power, jurisdiction, or duties of a
  municipality that regulates land and supervises water and sewer
  utilities within its corporate limits, except as provided by this
  code.
         SECTION 2.08.  Subsections (a), (b), (c), (e), (f), (g), and
  (j), Section 13.043, Water Code, are amended to read as follows:
         (a)  Any party to a rate proceeding before the governing body
  of a municipality may appeal the decision of the governing body to
  the utility commission. This subsection does not apply to a
  municipally owned utility. An appeal under this subsection must be
  initiated within 90 days after the date of notice of the final
  decision by the governing body by filing a petition for review with
  the utility commission and by serving copies on all parties to the
  original rate proceeding. The utility commission shall hear the
  appeal de novo and shall fix in its final order the rates the
  governing body should have fixed in the action from which the appeal
  was taken and may include reasonable expenses incurred in the
  appeal proceedings. The utility commission may establish the
  effective date for the utility commission's rates at the original
  effective date as proposed by the utility provider and may order
  refunds or allow a surcharge to recover lost revenues. The utility
  commission may consider only the information that was available to
  the governing body at the time the governing body made its decision
  and evidence of reasonable expenses incurred in the appeal
  proceedings.
         (b)  Ratepayers of the following entities may appeal the
  decision of the governing body of the entity affecting their water,
  drainage, or sewer rates to the utility commission:
               (1)  a nonprofit water supply or sewer service
  corporation created and operating under Chapter 67;
               (2)  a utility under the jurisdiction of a municipality
  inside the corporate limits of the municipality;
               (3)  a municipally owned utility, if the ratepayers
  reside outside the corporate limits of the municipality;
               (4)  a district or authority created under Article III,
  Section 52, or Article XVI, Section 59, of the Texas Constitution
  that provides water or sewer service to household users; and
               (5)  a utility owned by an affected county, if the
  ratepayer's rates are actually or may be adversely affected. For
  the purposes of this section ratepayers who reside outside the
  boundaries of the district or authority shall be considered a
  separate class from ratepayers who reside inside those boundaries.
         (c)  An appeal under Subsection (b) [of this section] must be
  initiated by filing a petition for review with the utility
  commission and the entity providing service within 90 days after
  the effective day of the rate change or, if appealing under
  Subdivision (b)(2) or (5) [of this section], within 90 days after
  the date on which the governing body of the municipality or affected
  county makes a final decision. The petition must be signed by the
  lesser of 10,000 or 10 percent of those ratepayers whose rates have
  been changed and who are eligible to appeal under Subsection (b) [of
  this section].
         (e)  In an appeal under Subsection (b) [of this section], the
  utility commission shall hear the appeal de novo and shall fix in
  its final order the rates the governing body should have fixed in
  the action from which the appeal was taken. The utility commission
  may establish the effective date for the utility commission's rates
  at the original effective date as proposed by the service provider,
  may order refunds or allow a surcharge to recover lost revenues, and
  may allow recovery of reasonable expenses incurred by the retail
  public utility in the appeal proceedings. The utility commission
  may consider only the information that was available to the
  governing body at the time the governing body made its decision and
  evidence of reasonable expenses incurred by the retail public
  utility in the appeal proceedings. The rates established by the
  utility commission in an appeal under Subsection (b) [of this
  section] remain in effect until the first anniversary of the
  effective date proposed by the retail public utility for the rates
  being appealed or until changed by the service provider, whichever
  date is later, unless the utility commission determines that a
  financial hardship exists.
         (f)  A retail public utility that receives water or sewer
  service from another retail public utility or political subdivision
  of the state, including an affected county, may appeal to the
  utility commission a decision of the provider of water or sewer
  service affecting the amount paid for water or sewer service. An
  appeal under this subsection must be initiated within 90 days after
  the date of notice of the decision is received from the provider of
  water or sewer service by the filing of a petition by the retail
  public utility.
         (g)  An applicant for service from an affected county or a
  water supply or sewer service corporation may appeal to the utility
  commission a decision of the county or water supply or sewer service
  corporation affecting the amount to be paid to obtain service other
  than the regular membership or tap fees. In addition to the factors
  specified under Subsection (j), in an appeal brought under this
  subsection the utility commission shall determine whether the
  amount paid by the applicant is consistent with the tariff of the
  water supply or sewer service corporation and is reasonably related
  to the cost of installing on-site and off-site facilities to
  provide service to that applicant. If the utility commission finds
  the amount charged to be clearly unreasonable, it shall establish
  the fee to be paid for that applicant. An appeal under this
  subsection must be initiated within 90 days after the date written
  notice is provided to the applicant or member of the decision of an
  affected county or water supply or sewer service corporation
  relating to the applicant's initial request for that service. A
  determination made by the utility commission on an appeal under
  this subsection is binding on all similarly situated applicants for
  service, and the utility commission may not consider other appeals
  on the same issue until the applicable provisions of the tariff of
  the water supply or sewer service corporation are amended.
         (j)  In an appeal under this section, the utility commission
  shall ensure that every rate made, demanded, or received by any
  retail public utility or by any two or more retail public utilities
  jointly shall be just and reasonable. Rates shall not be
  unreasonably preferential, prejudicial, or discriminatory but
  shall be sufficient, equitable, and consistent in application to
  each class of customers. The utility commission shall use a
  methodology that preserves the financial integrity of the retail
  public utility. For agreements between municipalities the utility
  commission shall consider the terms of any wholesale water or sewer
  service agreement in an appellate rate proceeding.
         SECTION 2.09.  Subsection (b), Section 13.044, Water Code,
  is amended to read as follows:
         (b)  Notwithstanding the provisions of any resolution,
  ordinance, or agreement, a district may appeal the rates imposed by
  the municipality by filing a petition with the utility commission.
  The utility commission shall hear the appeal de novo and the
  municipality shall have the burden of proof to establish that the
  rates are just and reasonable. The utility commission shall fix the
  rates to be charged by the municipality and the municipality may not
  increase such rates without the approval of the utility commission.
         SECTION 2.10.  Section 13.046, Water Code, is amended to
  read as follows:
         Sec. 13.046.  TEMPORARY RATES FOR SERVICES PROVIDED FOR
  NONFUNCTIONING SYSTEM; SANCTIONS FOR NONCOMPLIANCE. (a)  The
  utility commission by rule shall establish a procedure that allows
  a retail public utility that takes over the provision of services
  for a nonfunctioning retail water or sewer utility service provider
  to charge a reasonable rate for the services provided to the
  customers of the nonfunctioning system and to bill the customers
  for the services at that rate immediately to recover service costs.
         (b)  The rules must provide a streamlined process that the
  retail public utility that takes over the nonfunctioning system may
  use to apply to the utility commission for a ruling on the
  reasonableness of the rates the utility is charging under
  Subsection (a).  The process must allow for adequate consideration
  of costs for interconnection or other costs incurred in making
  services available and of the costs that may necessarily be
  incurred to bring the nonfunctioning system into compliance with
  utility commission and commission rules.
         (c)  The utility commission shall provide a reasonable
  period for the retail public utility that takes over the
  nonfunctioning system to bring the nonfunctioning system into
  compliance with utility commission and commission rules during
  which the utility commission or the commission may not impose a
  penalty for any deficiency in the system that is present at the time
  the utility takes over the nonfunctioning system.  The utility
  commission must consult with the utility before determining the
  period and may grant an extension of the period for good cause.
         SECTION 2.11.  Section 13.081, Water Code, is amended to
  read as follows:
         Sec. 13.081.  FRANCHISES. This chapter may not be construed
  as in any way limiting the rights and powers of a municipality to
  grant or refuse franchises to use the streets and alleys within its
  limits and to make the statutory charges for their use, but no
  provision of any franchise agreement may limit or interfere with
  any power conferred on the utility commission by this chapter. If a
  municipality performs regulatory functions under this chapter, it
  may make such other charges as may be provided in the applicable
  franchise agreement, together with any other charges permitted by
  this chapter.
         SECTION 2.12.  Section 13.082, Water Code, is amended to
  read as follows:
         Sec. 13.082.  LOCAL UTILITY SERVICE; EXEMPT AND NONEXEMPT
  AREAS. (a)  Notwithstanding any other provision of this section,
  municipalities shall continue to regulate each kind of local
  utility service inside their boundaries until the utility
  commission has assumed jurisdiction over the respective utility
  pursuant to this chapter.
         (b)  If a municipality does not surrender its jurisdiction,
  local utility service within the boundaries of the municipality
  shall be exempt from regulation by the utility commission under
  this chapter to the extent that this chapter applies to local
  service, and the municipality shall have, regarding service within
  its boundaries, the right to exercise the same regulatory powers
  under the same standards and rules as the utility commission or
  other standards and rules not inconsistent with them.  The utility
  commission's rules relating to service and response to requests for
  service for utilities operating within a municipality's corporate
  limits apply unless the municipality adopts its own rules.
         (c)  Notwithstanding any election, the utility commission
  may consider water and sewer utilities' revenues and return on
  investment in exempt areas in fixing rates and charges in nonexempt
  areas and may also exercise the powers conferred necessary to give
  effect to orders under this chapter for the benefit of nonexempt
  areas. Likewise, in fixing rates and charges in the exempt area,
  the governing body may consider water and sewer utilities' revenues
  and return on investment in nonexempt areas.
         (d)  Utilities serving exempt areas are subject to the
  reporting requirements of this chapter. Those reports and tariffs
  shall be filed with the governing body of the municipality as well
  as with the utility commission.
         (e)  This section does not limit the duty and power of the
  utility commission to regulate service and rates of municipally
  regulated water and sewer utilities for service provided to other
  areas in Texas.
         SECTION 2.13.  Section 13.085, Water Code, is amended to
  read as follows:
         Sec. 13.085.  ASSISTANCE BY UTILITY COMMISSION. On request,
  the utility commission may advise and assist municipalities and
  affected counties in connection with questions and proceedings
  arising under this chapter. This assistance may include aid to
  municipalities or an affected county in connection with matters
  pending before the utility commission, the courts, the governing
  body of any municipality, or the commissioners court of an affected
  county, including making members of the staff available to them as
  witnesses and otherwise providing evidence.
         SECTION 2.14.  Subsection (c), Section 13.087, Water Code,
  is amended to read as follows:
         (c)  Notwithstanding any other provision of this chapter,
  the utility commission has jurisdiction to enforce this section.
         SECTION 2.15.  Subsections (a), (b), (c), and (e), Section
  13.131, Water Code, are amended to read as follows:
         (a)  Every water and sewer utility shall keep and render to
  the regulatory authority in the manner and form prescribed by the
  utility commission uniform accounts of all business transacted.
  The utility commission may also prescribe forms of books, accounts,
  records, and memoranda to be kept by those utilities, including the
  books, accounts, records, and memoranda of the rendition of and
  capacity for service as well as the receipts and expenditures of
  money, and any other forms, records, and memoranda that in the
  judgment of the utility commission may be necessary to carry out
  this chapter.
         (b)  In the case of a utility subject to regulation by a
  federal regulatory agency, compliance with the system of accounts
  prescribed for the particular class of utilities by that agency may
  be considered a sufficient compliance with the system prescribed by
  the utility commission. However, the utility commission may
  prescribe forms of books, accounts, records, and memoranda covering
  information in addition to that required by the federal agency. The
  system of accounts and the forms of books, accounts, records, and
  memoranda prescribed by the utility commission for a utility or
  class of utilities may not conflict or be inconsistent with the
  systems and forms established by a federal agency for that utility
  or class of utilities.
         (c)  The utility commission shall fix proper and adequate
  rates and methods of depreciation, amortization, or depletion of
  the several classes of property of each utility and shall require
  every utility to carry a proper and adequate depreciation account
  in accordance with those rates and methods and with any other rules
  the utility commission prescribes.  Rules adopted under this
  subsection must require the book cost less net salvage of
  depreciable utility plant retired to be charged in its entirety to
  the accumulated depreciation account in a manner consistent with
  accounting treatment of regulated electric and gas utilities in
  this state.  Those rates, methods, and accounts shall be utilized
  uniformly and consistently throughout the rate-setting and appeal
  proceedings.
         (e)  Every utility is required to keep and render its books,
  accounts, records, and memoranda accurately and faithfully in the
  manner and form prescribed by the utility commission and to comply
  with all directions of the regulatory authority relating to those
  books, accounts, records, and memoranda. The regulatory authority
  may require the examination and audit of all accounts.
         SECTION 2.16.  Section 13.132, Water Code, is amended to
  read as follows:
         Sec. 13.132.  POWERS OF UTILITY COMMISSION. (a)  The
  utility commission may:
               (1)  require that water and sewer utilities report to
  it any information relating to themselves and affiliated interests
  both inside and outside this state that it considers useful in the
  administration of this chapter;
               (2)  establish forms for all reports;
               (3)  determine the time for reports and the frequency
  with which any reports are to be made;
               (4)  require that any reports be made under oath;
               (5)  require that a copy of any contract or arrangement
  between any utility and any affiliated interest be filed with it and
  require that such a contract or arrangement that is not in writing
  be reduced to writing;
               (6)  require that a copy of any report filed with any
  federal agency or any governmental agency or body of any other state
  be filed with it; and
               (7)  require that a copy of annual reports showing all
  payments of compensation, other than salary or wages subject to the
  withholding of federal income tax, made to residents of Texas, or
  with respect to legal, administrative, or legislative matters in
  Texas, or for representation before the Texas Legislature or any
  governmental agency or body be filed with it.
         (b)  On the request of the governing body of any
  municipality, the utility commission may provide sufficient staff
  members to advise and consult with the municipality on any pending
  matter.
         SECTION 2.17.  Subsection (b), Section 13.133, Water Code,
  is amended to read as follows:
         (b)  The regulatory authority may require, by order or
  subpoena served on any utility, the production within this state at
  the time and place it may designate of any books, accounts, papers,
  or records kept by that utility outside the state or verified copies
  of them if the regulatory authority [commission] so orders. A
  utility failing or refusing to comply with such an order or subpoena
  violates this chapter.
         SECTION 2.18.  Subsections (b) and (c), Section 13.136,
  Water Code, are amended to read as follows:
         (b)  Each utility annually shall file a service and financial
  report in a form and at times specified by utility commission rule.
         (c)  Every water supply or sewer service corporation shall
  file with the utility commission tariffs showing all rates that are
  subject to the appellate jurisdiction of the utility commission and
  that are in force at the time for any utility service, product, or
  commodity offered. Every water supply or sewer service corporation
  shall file with and as a part of those tariffs all rules and
  regulations relating to or affecting the rates, utility service,
  product, or commodity furnished. The filing required under this
  subsection shall be for informational purposes only.
         SECTION 2.19.  Section 13.137, Water Code, is amended to
  read as follows:
         Sec. 13.137.  OFFICE AND OTHER BUSINESS LOCATIONS OF
  UTILITY; RECORDS; REMOVAL FROM STATE. (a)  Every utility shall:
               (1)  make available and notify its customers of a
  business location where its customers may make payments to prevent
  disconnection of or to restore service:
                     (A)  in each county in which the utility provides
  service; or
                     (B)  not more than 20 miles from the residence of
  any residential customer if there is no location to receive
  payments in the county; and
               (2)  have an office in a county of this state or in the
  immediate area in which its property or some part of its property is
  located in which it shall keep all books, accounts, records, and
  memoranda required by the utility commission to be kept in this
  state.
         (b)  The utility commission by rule may provide for waiving
  the requirements of Subsection (a)(1) for a utility for which
  meeting those requirements would cause a rate increase or otherwise
  harm or inconvenience customers. The rules must provide for an
  additional 14 days to be given for a customer to pay before a
  utility that is granted a waiver may disconnect service for late
  payment.
         (c)  Books, accounts, records, or memoranda required by the
  regulatory authority to be kept in the state may not be removed from
  the state, except on conditions prescribed by the utility
  commission.
         SECTION 2.20.  Subsection (b), Section 13.139, Water Code,
  is amended to read as follows:
         (b)  The governing body of a municipality, as the regulatory
  authority for public utilities operating within its corporate
  limits, and the utility commission or the commission as the
  regulatory authority for public utilities operating outside the
  corporate limits of any municipality, after reasonable notice and
  hearing on its own motion, may:
               (1)  ascertain and fix just and reasonable standards,
  classifications, regulations, service rules, minimum service
  standards or practices to be observed and followed with respect to
  the service to be furnished;
               (2)  ascertain and fix adequate and reasonable
  standards for the measurement of the quantity, quality, pressure,
  or other condition pertaining to the supply of the service;
               (3)  prescribe reasonable regulations for the
  examination and testing of the service and for the measurement of
  service; and
               (4)  establish or approve reasonable rules,
  regulations, specifications, and standards to secure the accuracy
  of all meters, instruments, and equipment used for the measurement
  of any utility service.
         SECTION 2.21.  Section 13.1395, Water Code, is amended by
  adding Subsection (m) to read as follows:
         (m)  The commission shall coordinate with the utility
  commission in the administration of this section.
         SECTION 2.22.  Subsection (b), Section 13.142, Water Code,
  is amended to read as follows:
         (b)  The utility commission shall adopt rules concerning
  payment of utility bills that are consistent with Chapter 2251,
  Government Code.
         SECTION 2.23.  Section 13.144, Water Code, is amended to
  read as follows:
         Sec. 13.144.  NOTICE OF WHOLESALE WATER SUPPLY CONTRACT. A
  district or authority created under Section 52, Article III, or
  Section 59, Article XVI, Texas Constitution, a retail public
  utility, a wholesale water service, or other person providing a
  retail public utility with a wholesale water supply shall provide
  the utility commission and the commission with a certified copy of
  any wholesale water supply contract with a retail public utility
  within 30 days after the date of the execution of the contract. The
  submission must include the amount of water being supplied, term of
  the contract, consideration being given for the water, purpose of
  use, location of use, source of supply, point of delivery,
  limitations on the reuse of water, a disclosure of any affiliated
  interest between the parties to the contract, and any other
  condition or agreement relating to the contract.
         SECTION 2.24.  Subsection (a), Section 13.147, Water Code,
  is amended to read as follows:
         (a)  A retail public utility providing water service may
  contract with a retail public utility providing sewer service to
  bill and collect the sewer service provider's fees and payments as
  part of a consolidated process with the billing and collection of
  the water service provider's fees and payments.  The water service
  provider may provide that service only for customers who are served
  by both providers in an area covered by both providers'
  certificates of public convenience and necessity.  If the water
  service provider refuses to enter into a contract under this
  section or if the water service provider and sewer service provider
  cannot agree on the terms of a contract, the sewer service provider
  may petition the utility commission to issue an order requiring the
  water service provider to provide that service.
         SECTION 2.25.  Subsection (b), Section 13.181, Water Code,
  is amended to read as follows:
         (b)  Subject to this chapter, the utility commission has all
  authority and power of the state to ensure compliance with the
  obligations of utilities under this chapter. For this purpose the
  regulatory authority may fix and regulate rates of utilities,
  including rules and regulations for determining the classification
  of customers and services and for determining the applicability of
  rates. A rule or order of the regulatory authority may not conflict
  with the rulings of any federal regulatory body. The utility
  commission may adopt rules which authorize a utility which is
  permitted under Section 13.242(c) to provide service without a
  certificate of public convenience and necessity to request or
  implement a rate increase and operate according to rules,
  regulations, and standards of service other than those otherwise
  required under this chapter provided that rates are just and
  reasonable for customers and the utility and that service is safe,
  adequate, efficient, and reasonable.
         SECTION 2.26.  Subsections (c) and (d), Section 13.182,
  Water Code, are amended to read as follows:
         (c)  For ratemaking purposes, the utility commission may
  treat two or more municipalities served by a utility as a single
  class wherever the utility commission considers that treatment to
  be appropriate.
         (d)  The utility commission by rule shall establish a
  preference that rates under a consolidated tariff be consolidated
  by region. The regions under consolidated tariffs must be
  determined on a case-by-case basis.
         SECTION 2.27.  Subsection (d), Section 13.183, Water Code,
  is amended to read as follows:
         (d)  A regulatory authority other than the utility
  commission may not approve an acquisition adjustment for a system
  purchased before the effective date of an ordinance authorizing
  acquisition adjustments.
         SECTION 2.28.  Subsection (a), Section 13.184, Water Code,
  is amended to read as follows:
         (a)  Unless the utility commission establishes alternate
  rate methodologies in accordance with Section 13.183(c), the
  utility commission may not prescribe any rate that will yield more
  than a fair return on the invested capital used and useful in
  rendering service to the public. The governing body of a
  municipality exercising its original jurisdiction over rates and
  services may use alternate ratemaking methodologies established by
  ordinance or by utility commission rule in accordance with Section
  13.183(c). Unless the municipal regulatory authority uses
  alternate ratemaking methodologies established by ordinance or by
  utility commission rule in accordance with Section 13.183(c), it
  may not prescribe any rate that will yield more than a fair return
  on the invested capital used and useful in rendering service to the
  public.
         SECTION 2.29.  Subsections (d), (k), and (o), Section
  13.187, Water Code, are amended to read as follows:
         (d)  Except as provided by Subsection (d-1), if the
  application or the statement of intent is not substantially
  complete or does not comply with the regulatory authority's rules,
  it may be rejected and the effective date of the rate change may be
  suspended until a properly completed application is accepted by the
  regulatory authority and a proper statement of intent is provided.  
  The utility commission may also suspend the effective date of any
  rate change if the utility does not have a certificate of public
  convenience and necessity or a completed application for a
  certificate or to transfer a certificate pending before the utility
  commission or if the utility is delinquent in paying the assessment
  and any applicable penalties or interest required by Section
  5.701(n) [of this code].
         (k)  If the regulatory authority receives at least the number
  of complaints from ratepayers required for the regulatory authority
  to set a hearing under Subsection (e), the regulatory authority
  may, pending the hearing and a decision, suspend the date the rate
  change would otherwise be effective.  Except as provided by
  Subsection (d-1), the proposed rate may not be suspended for longer
  than:
               (1)  90 days by a local regulatory authority; or
               (2)  150 days by the utility commission.
         (o)  If a regulatory authority other than the utility
  commission establishes interim rates or an escrow account, the
  regulatory authority must make a final determination on the rates
  not later than the first anniversary of the effective date of the
  interim rates or escrowed rates or the rates are automatically
  approved as requested by the utility.
         SECTION 2.30.  Subsection (a), Section 13.188, Water Code,
  is amended to read as follows:
         (a)  Notwithstanding any other provision in this chapter,
  the utility commission by rule shall adopt a procedure allowing a
  utility to file with the utility commission an application to
  timely adjust the utility's rates to reflect an increase or
  decrease in documented energy costs in a pass through clause.  The
  utility commission, by rule, shall require the pass through of
  documented decreases in energy costs within a reasonable time.  The
  pass through, whether a decrease or increase, shall be implemented
  on no later than an annual basis, unless the utility commission
  determines a special circumstance applies.
         SECTION 2.31.  Subsections (a) and (d), Section 13.241,
  Water Code, are amended to read as follows:
         (a)  In determining whether to grant or amend a certificate
  of public convenience and necessity, the utility commission shall
  ensure that the applicant possesses the financial, managerial, and
  technical capability to provide continuous and adequate service.
         (d)  Before the utility commission grants a new certificate
  of convenience and necessity for an area which would require
  construction of a physically separate water or sewer system, the
  applicant must demonstrate to the utility commission that
  regionalization or consolidation with another retail public
  utility is not economically feasible.
         SECTION 2.32.  Subsections (a) and (c), Section 13.242,
  Water Code, are amended to read as follows:
         (a)  Unless otherwise specified, a utility, a utility
  operated by an affected county, or a water supply or sewer service
  corporation may not in any way render retail water or sewer utility
  service directly or indirectly to the public without first having
  obtained from the utility commission a certificate that the present
  or future public convenience and necessity will require that
  installation, operation, or extension, and except as otherwise
  provided by this subchapter, a retail public utility may not
  furnish, make available, render, or extend retail water or sewer
  utility service to any area to which retail water or sewer utility
  service is being lawfully furnished by another retail public
  utility without first having obtained a certificate of public
  convenience and necessity that includes the area in which the
  consuming facility is located.
         (c)  The utility commission may by rule allow a municipality
  or utility or water supply corporation to render retail water
  service without a certificate of public convenience and necessity
  if the municipality has given notice under Section 13.255 [of this
  code] that it intends to provide retail water service to an area or
  if the utility or water supply corporation has less than 15
  potential connections and is not within the certificated area of
  another retail public utility.
         SECTION 2.33.  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
  public utility or water supply or sewer service corporation shall
  submit to the utility commission an application for a certificate
  or for an amendment as provided by this section.
         (b)  Each public utility and water supply or sewer service
  corporation shall file with the utility 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 utility
  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 utility 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 utility commission.
         SECTION 2.34.  (a) If S.B. No. 573, Acts of the 82nd
  Legislature, Regular Session, 2011, does not become law,
  Subsections (b), (c), and (e), Section 13.245, Water Code, are
  amended to read as follows:
         (b)  Except as provided by Subsection (c), the utility
  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 utility commission shall
  grant the certificate of public convenience and necessity without
  the consent of the municipality if the utility 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.
         (e)  If the utility 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.
         (b)  If S.B. No. 573, Acts of the 82nd Legislature, Regular
  Session, 2011, becomes law, Subsections (b), (c), (c-1), (c-2),
  (c-3), and (e), Section 13.245, Water Code, as effective September
  1, 2011, are amended to read as follows:
         (b)  Except as provided by Subsections (c), (c-1), and (c-2),
  the utility 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 utility commission shall
  grant the certificate of public convenience and necessity without
  the consent of the municipality if the utility 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.
         (c-1)  If a municipality has not consented under Subsection
  (b) before the 180th day after the date a landowner or a retail
  public utility submits to the municipality a formal request for
  service according to the municipality's application requirements
  and standards for facilities on the same or substantially similar
  terms as provided by the retail public utility's application to the
  utility commission, including a capital improvements plan required
  by Section 13.244(d)(3) or a subdivision plat, the utility 
  commission may grant the certificate of public convenience and
  necessity without the consent of the municipality if:
               (1)  the utility commission makes the findings required
  by Subsection (c);
               (2)  the municipality has not entered into a binding
  commitment to serve the area that is the subject of the retail
  public utility's application to the utility commission before the
  180th day after the date the formal request was made; and
               (3)  the landowner or retail public utility that
  submitted the formal request has not unreasonably refused to:
                     (A)  comply with the municipality's service
  extension and development process; or
                     (B)  enter into a contract for water or sewer
  services with the municipality.
         (c-2)  If a municipality refuses to provide service in the
  proposed service area, as evidenced by a formal vote of the
  municipality's governing body or an official notification from the
  municipality, the utility commission is not required to make the
  findings otherwise required by this section and may grant the
  certificate of public convenience and necessity to the retail
  public utility at any time after the date of the formal vote or
  receipt of the official notification.
         (c-3)  The utility commission must include as a condition of
  a certificate of public convenience and necessity granted under
  Subsection (c-1) or (c-2) that all water and sewer facilities be
  designed and constructed in accordance with the municipality's
  standards for water and sewer facilities.
         (e)  If the utility 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.
         SECTION 2.35.  If S.B. No. 573, Acts of the 82nd Legislature,
  Regular Session, 2011, becomes law, Subsection (b), Section
  13.2451, Water Code, as effective September 1, 2011, is amended to
  read as follows:
         (b)  The utility commission may not extend a municipality's
  certificate of public convenience and necessity beyond its
  extraterritorial jurisdiction if an owner of land that is located
  wholly or partly outside the extraterritorial jurisdiction elects
  to exclude some or all of the landowner's property within a proposed
  service area in accordance with Section 13.246(h).  This subsection
  does not apply to a transfer of a certificate as approved by the
  utility commission.
         SECTION 2.36.  Subsection (c), Section 13.2451, Water Code,
  is amended to read as follows:
         (c)  The utility commission, after notice to the
  municipality and an opportunity for a hearing, may decertify an
  area outside a municipality's extraterritorial jurisdiction if the
  municipality does not provide service to the area on or before the
  fifth anniversary of the date the certificate of public convenience
  and necessity was granted for the area.  This subsection does not
  apply to a certificate of public convenience and necessity for an
  area:
               (1)  that was transferred to a municipality on approval
  of the utility commission; and
               (2)  in relation to which the municipality has spent
  public funds.
         SECTION 2.37.  Subsections (a), (a-1), (b), (c), (d), (f),
  and (i), Section 13.246, Water Code, are amended 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 utility commission shall cause notice of the application
  to be given to affected parties and to each county and groundwater
  conservation district that is wholly or partly included in the area
  proposed to be certified.  If requested, the utility commission
  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 utility
  commission shall require notice to be mailed to each owner of a
  tract of land that is at least 25 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
  utility 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 utility commission or the commission under:
               (1)  Section 13.248 or 13.255; or
               (2)  Chapter 65.
         (b)  The utility commission may grant applications and issue
  certificates and amendments to certificates only if the utility
  commission finds that a certificate or amendment is necessary for
  the service, accommodation, convenience, or safety of the public.  
  The utility 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 by the utility
  commission on a nondiscriminatory basis after consideration by the
  utility 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)  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 utility commission may require an applicant for a
  certificate or for an amendment to provide a bond or other financial
  assurance in a form and amount specified by the utility commission
  to ensure that continuous and adequate utility service is provided.
         (f)  If two or more retail public utilities or water supply
  or sewer service corporations apply for a certificate of public
  convenience and necessity to provide water or sewer utility service
  to an uncertificated area located in an economically distressed
  area and otherwise meet the requirements for obtaining a new
  certificate, the utility commission shall grant the certificate to
  the retail public utility or water supply or sewer service
  corporation that is more capable financially, managerially, and
  technically of providing continuous and adequate service.
         (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 utility 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 2.38.  (a) If S.B. No. 573, Acts of the 82nd
  Legislature, Regular Session, 2011, does not become law, Subsection
  (h), Section 13.246, Water Code, is amended to read as follows:
         (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 utility 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 utility
  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.
         (b)  If S.B. No. 573, Acts of the 82nd Legislature, Regular
  Session, 2011, becomes law, Subsection (h), Section 13.246, Water
  Code, as effective September 1, 2011, is amended to read as follows:
         (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 utility 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 utility 
  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.
  An applicant for a certificate of public convenience and necessity
  that has land removed from its proposed certificated service area
  because of a landowner's election under this subsection may not be
  required to provide service to the removed land for any reason,
  including the violation of law or utility commission rules by the
  water or sewer system of another person.
         SECTION 2.39.  Subsection (a), Section 13.247, Water Code,
  is amended to read as follows:
         (a)  If an area is within the boundaries of a municipality,
  all retail public utilities certified or entitled to certification
  under this chapter to provide service or operate facilities in that
  area may continue and extend service in its area of public
  convenience and necessity within the 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, 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 utility commission a
  certificate of public convenience and necessity that includes the
  areas to be served.
         SECTION 2.40.  Section 13.248, Water Code, is amended to
  read as follows:
         Sec. 13.248.  CONTRACTS VALID AND ENFORCEABLE. Contracts
  between retail public utilities designating areas to be served and
  customers to be served by those retail public utilities, when
  approved by the utility commission after public notice and hearing,
  are valid and enforceable and are incorporated into the appropriate
  areas of public convenience and necessity.
         SECTION 2.41.  Subsections (b), (c), and (e), Section
  13.250, Water Code, are amended to read as follows:
         (b)  Unless the utility commission issues a certificate that
  neither the present nor future convenience and necessity will be
  adversely affected, the holder of a certificate or a person who
  possesses facilities used to provide utility service shall not
  discontinue, reduce, or impair service to a certified service area
  or part of a certified service area except for:
               (1)  nonpayment of charges for services provided by the
  certificate holder or a person who possesses facilities used to
  provide utility service;
               (2)  nonpayment of charges for sewer service provided
  by another retail public utility under an agreement between the
  retail public utility and the certificate holder or a person who
  possesses facilities used to provide utility service or under a
  utility commission-ordered arrangement between the two service
  providers;
               (3)  nonuse; or
               (4)  other similar reasons in the usual course of
  business.
         (c)  Any discontinuance, reduction, or impairment of
  service, whether with or without approval of the utility
  commission, shall be in conformity with and subject to conditions,
  restrictions, and limitations that the utility commission
  prescribes.
         (e)  Not later than the 48th hour after the hour in which a
  utility files a bankruptcy petition, the utility shall report this
  fact to the utility commission and the commission in writing.
         SECTION 2.42.  Subsection (d), Section 13.2502, Water Code,
  is amended to read as follows:
         (d)  This section does not limit or extend the jurisdiction
  of the utility commission under Section 13.043(g).
         SECTION 2.43.  Section 13.251, Water Code, is amended to
  read as follows:
         Sec. 13.251.  SALE, ASSIGNMENT, OR LEASE OF CERTIFICATE.
  Except as provided by Section 13.255 [of this code], a utility or a
  water supply or sewer service corporation may not sell, assign, or
  lease a certificate of public convenience and necessity or any
  right obtained under a certificate unless the commission has
  determined that the purchaser, assignee, or lessee is capable of
  rendering adequate and continuous service to every consumer within
  the certified area, after considering the factors under Section
  13.246(c) [of this code]. The sale, assignment, or lease shall be
  on the conditions prescribed by the utility commission.
         SECTION 2.44.  Section 13.252, Water Code, is amended to
  read as follows:
         Sec. 13.252.  INTERFERENCE WITH OTHER RETAIL PUBLIC UTILITY.
  If a retail public utility in constructing or extending a line,
  plant, or system interferes or attempts to interfere with the
  operation of a line, plant, or system of any other retail public
  utility, or furnishes, makes available, renders, or extends retail
  water or sewer utility service to any portion of the service area of
  another retail public utility that has been granted or is not
  required to possess a certificate of public convenience and
  necessity, the utility commission may issue an order prohibiting
  the construction, extension, or provision of service or prescribing
  terms and conditions for locating the line, plant, or system
  affected or for the provision of the service.
         SECTION 2.45.  Section 13.253, Water Code, is amended to
  read as follows:
         Sec. 13.253.  IMPROVEMENTS IN SERVICE; INTERCONNECTING
  SERVICE. (a)  After notice and hearing, the utility commission or
  the commission may:
               (1)  order any retail public utility that is required
  by law to possess a certificate of public convenience and necessity
  or any retail public utility that possesses a certificate of public
  convenience and necessity and is located in an affected county as
  defined in Section 16.341 to:
                     (A)  provide specified improvements in its
  service in a defined area if service in that area is inadequate or
  is substantially inferior to service in a comparable area and it is
  reasonable to require the retail public utility to provide the
  improved service; or
                     (B)  develop, implement, and follow financial,
  managerial, and technical practices that are acceptable to the
  utility commission to ensure that continuous and adequate service
  is provided to any areas currently certificated to the retail
  public utility if the retail public utility has not provided
  continuous and adequate service to any of those areas and, for a
  utility, to provide financial assurance of the utility's ability to
  operate the system in accordance with applicable laws and rules, in
  the form of a bond or other financial assurance in a form and amount
  specified by the utility commission;
               (2)  order two or more public utilities or water supply
  or sewer service corporations to establish specified facilities for
  interconnecting service;
               (3)  order a public utility or water supply or sewer
  service corporation that has not demonstrated that it can provide
  continuous and adequate service from its drinking water source or
  sewer treatment facility to obtain service sufficient to meet its
  obligation to provide continuous and adequate service on at least a
  wholesale basis from another consenting utility service provider;
  or
               (4)  issue an emergency order, with or without a
  hearing, under Section 13.041.
         (b)  If the utility commission has reason to believe that
  improvements and repairs to a water or sewer service system are
  necessary to enable a retail public utility to provide continuous
  and adequate service in any portion of its service area and the
  retail public utility has provided financial assurance under
  Section 341.0355, Health and Safety Code, or under this chapter,
  the utility commission, after providing to the retail public
  utility notice and an opportunity to be heard by the commissioners
  at a [commission] meeting of the utility commission, may
  immediately order specified improvements and repairs to the water
  or sewer system, the costs of which may be paid by the bond or other
  financial assurance in an amount determined by the utility
  commission not to exceed the amount of the bond or financial
  assurance. The order requiring the improvements may be an
  emergency order if it is issued after the retail public utility has
  had an opportunity to be heard [by the commissioners] at a
  [commission] meeting of the utility commission. After notice and
  hearing, the utility commission may require a retail public utility
  to obligate additional money to replace the financial assurance
  used for the improvements.
         SECTION 2.46.  (a)  If S.B. No. 573, Acts of the 82nd
  Legislature, Regular Session, 2011, does not become law, Section
  13.254, Water Code, is amended to read as follows:
         Sec. 13.254.  REVOCATION OR AMENDMENT OF CERTIFICATE.
  (a)  The utility 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 the utility commission [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 utility 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 utility 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 utility
  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
  utility 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 utility
  commission determines the petition filed pursuant to Subsection
  (a-1) to be administratively complete, the utility commission shall
  grant the petition unless the utility 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 utility
  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 utility 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 utility
  commission on the petition is final after any reconsideration
  authorized by the utility commission's rules and may not be
  appealed.
         (b)  Upon written request from the certificate holder, the
  utility commission [executive director] may cancel the certificate
  of a utility or water supply corporation authorized by rule to
  operate without a certificate of public convenience and necessity
  under Section 13.242(c).
         (c)  If the certificate of any retail public utility is
  revoked or amended, the utility commission may require one or more
  retail public utilities with their consent to provide service in
  the area in question. The order of the utility commission shall not
  be effective to transfer property.
         (d)  A retail public utility may not in any way render retail
  water or sewer service directly or indirectly to the public in an
  area that has been decertified under this section without providing
  compensation for any property that the utility commission
  determines is rendered useless or valueless to the decertified
  retail public utility as a result of the decertification.
         (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
  utility 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 utility
  commission of its intent to provide service to the decertified
  area.
         (f)  The monetary amount shall be determined by a qualified
  individual or firm serving as independent appraiser agreed upon by
  the decertified retail public utility and the retail public utility
  seeking to serve the area. The determination of compensation by the
  independent appraiser shall be binding on the utility commission.
  The costs of the independent appraiser shall be borne by the retail
  public utility seeking to serve the 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 is just and
  adequate shall include:  the amount of the retail public utility's
  debt allocable for service to the area in question; 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; necessary and reasonable legal expenses and
  professional fees; and other relevant factors.  The utility
  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 utility 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 utility commission
  within 60 calendar days.  After receiving the appraisals, the
  utility 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.
         (b)  If S.B. No. 573, Acts of the 82nd Legislature, Regular
  Session, 2011, becomes law, Subsections (a), (a-1), (a-2), (a-3),
  (a-6), (a-8), (b), (c), (d), (e), (f), (g), (g-1), and (h), Section
  13.254, Water Code, as effective September 1, 2011, are amended to
  read as follows:
         (a)  The utility commission at any time after notice and
  hearing may 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 utility 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 fact that a certificate holder
  is a borrower under a federal loan program is not a bar to a request
  under this subsection for the release of the petitioner's land and
  the receipt of services from an alternative provider.  On the day
  the petitioner submits the petition to the utility commission, the
  petitioner shall send, via certified mail, a copy of the petition to
  the certificate holder, who may submit information to the utility 
  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;
                     (D)  the approximate cost for the alternative
  provider to provide the service at the same level and manner that is
  requested from the certificate holder;
                     (E)  the flow and pressure requirements and
  specific infrastructure needs, including line size and system
  capacity for the required level of fire protection requested; and
                     (F)  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,
  at the approximate cost that the alternative provider is capable of
  providing for a comparable level of service, 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 utility 
  commission; and
               (4)  the alternate retail public utility from which the
  petitioner will be requesting service possesses the financial,
  managerial, and technical capability to provide continuous and
  adequate service within the timeframe, at the level, at the cost,
  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) or (a-5) but is entitled to contest
  under Subsection (a) the involuntary certification of its property
  in a hearing held by the utility 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 60 calendar days from the date the utility 
  commission determines the petition filed pursuant to Subsection
  (a-1) to be administratively complete, the utility commission shall
  grant the petition unless the utility 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 utility 
  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 utility commission
  may require an award of compensation as otherwise provided by this
  section.
         (a-6)  The utility commission shall grant a petition
  received under Subsection (a-5) not later than the 60th day after
  the date the landowner files the petition.  The utility commission
  may not deny a petition received under Subsection (a-5) based on the
  fact that a certificate holder is a borrower under a federal loan
  program.  The utility commission may require an award of
  compensation by the petitioner to a decertified retail public
  utility that is the subject of a petition filed under Subsection
  (a-5) as otherwise provided by this section.
         (a-8)  If a certificate holder has never made service
  available through planning, design, construction of facilities, or
  contractual obligations to serve the area a petitioner seeks to
  have released under Subsection (a-1), the utility commission is not
  required to find that the proposed alternative provider is capable
  of providing better service than the certificate holder, but only
  that the proposed alternative provider is capable of providing the
  requested service.
         (b)  Upon written request from the certificate holder, the
  utility commission [executive director] may cancel the certificate
  of a utility or water supply corporation authorized by rule to
  operate without a certificate of public convenience and necessity
  under Section 13.242(c).
         (c)  If the certificate of any retail public utility is
  revoked or amended, the utility commission may require one or more
  retail public utilities with their consent to provide service in
  the area in question. The order of the utility commission shall not
  be effective to transfer property.
         (d)  A retail public utility may not in any way render retail
  water or sewer service directly or indirectly to the public in an
  area that has been decertified under this section without providing
  compensation for any property that the utility commission
  determines is rendered useless or valueless to the decertified
  retail public utility as a result of the decertification.
         (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
  utility 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 utility
  commission of its intent to provide service to the decertified
  area.
         (f)  The monetary amount shall be determined by a qualified
  individual or firm serving as independent appraiser agreed upon by
  the decertified retail public utility and the retail public utility
  seeking to serve the area. The determination of compensation by the
  independent appraiser shall be binding on the utility commission.
  The costs of the independent appraiser shall be borne by the retail
  public utility seeking to serve the 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 is just and
  adequate shall include:  the amount of the retail public utility's
  debt allocable for service to the area in question; 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; necessary and reasonable legal expenses and
  professional fees; and other relevant factors.  The utility
  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 utility 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 utility commission
  within 60 calendar days.  After receiving the appraisals, the
  utility 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.
         (h)  A certificate holder that has land removed from its
  certificated service area in accordance with this section may not
  be required, after the land is removed, to provide service to the
  removed land for any reason, including the violation of law or
  utility commission rules by a water or sewer system of another
  person.
         SECTION 2.47.  Subsections (a), (b), (c), (d), (e), (g-1),
  (k), (l), and (m), Section 13.255, Water Code, are amended to read
  as follows:
         (a)  In the event that an area is incorporated or annexed by a
  municipality, either before or after the effective date of this
  section, the municipality and a retail public utility that provides
  water or sewer service to all or part of the area pursuant to a
  certificate of convenience and necessity may agree in writing that
  all or part of the area may be served by a municipally owned
  utility, by a franchised utility, or by the retail public utility.
  In this section, the phrase "franchised utility" shall mean a
  retail public utility that has been granted a franchise by a
  municipality to provide water or sewer service inside municipal
  boundaries. The agreement may provide for single or dual
  certification of all or part of the area, for the purchase of
  facilities or property, and for such other or additional terms that
  the parties may agree on. If a franchised utility is to serve the
  area, the franchised utility shall also be a party to the agreement.
  The executed agreement shall be filed with the utility commission,
  and the utility commission, on receipt of the agreement, shall
  incorporate the terms of the agreement into the respective
  certificates of convenience and necessity of the parties to the
  agreement.
         (b)  If an agreement is not executed within 180 days after
  the municipality, in writing, notifies the retail public utility of
  its intent to provide service to the incorporated or annexed area,
  and if the municipality desires and intends to provide retail
  utility service to the area, the municipality, prior to providing
  service to the area, shall file an application with the utility
  commission to grant single certification to the municipally owned
  water or sewer utility or to a franchised utility. If an
  application for single certification is filed, the utility
  commission shall fix a time and place for a hearing and give notice
  of the hearing to the municipality and franchised utility, if any,
  and notice of the application and hearing to the retail public
  utility.
         (c)  The utility commission shall grant single certification
  to the municipality. The utility commission shall also determine
  whether single certification as requested by the municipality would
  result in property of a retail public utility being rendered
  useless or valueless to the retail public utility, and shall
  determine in its order the monetary amount that is adequate and just
  to compensate the retail public utility for such property. If the
  municipality in its application has requested the transfer of
  specified property of the retail public utility to the municipality
  or to a franchised utility, the utility commission shall also
  determine in its order the adequate and just compensation to be paid
  for such property pursuant to the provisions of this section,
  including an award for damages to property remaining in the
  ownership of the retail public utility after single certification.
  The order of the utility commission shall not be effective to
  transfer property. A transfer of property may only be obtained
  under this section by a court judgment rendered pursuant to
  Subsection (d) or (e) [of this section]. The grant of single
  certification by the utility commission shall go into effect on the
  date the municipality or franchised utility, as the case may be,
  pays adequate and just compensation pursuant to court order, or
  pays an amount into the registry of the court or to the retail
  public utility under Subsection (f). If the court judgment
  provides that the retail public utility is not entitled to any
  compensation, the grant of single certification shall go into
  effect when the court judgment becomes final. The municipality or
  franchised utility must provide to each customer of the retail
  public utility being acquired an individual written notice within
  60 days after the effective date for the transfer specified in the
  court judgment. The notice must clearly advise the customer of the
  identity of the new service provider, the reason for the transfer,
  the rates to be charged by the new service provider, and the
  effective date of those rates.
         (d)  In the event the final order of the utility commission
  is not appealed within 30 days, the municipality may request the
  district court of Travis County to enter a judgment consistent with
  the order of the utility commission. In such event, the court shall
  render a judgment that:
               (1)  transfers to the municipally owned utility or
  franchised utility title to property to be transferred to the
  municipally owned utility or franchised utility as delineated by
  the utility commission's final order and property determined by the
  utility commission to be rendered useless or valueless by the
  granting of single certification; and
               (2)  orders payment to the retail public utility of
  adequate and just compensation for the property as determined by
  the utility commission in its final order.
         (e)  Any party that is aggrieved by a final order of the
  utility commission under this section may file an appeal with the
  district court of Travis County within 30 days after the order
  becomes final. The hearing in such an appeal before the district
  court shall be by trial de novo on all issues. After the hearing, if
  the court determines that the municipally owned utility or
  franchised utility is entitled to single certification under the
  provisions of this section, the court shall enter a judgment that:
               (1)  transfers to the municipally owned utility or
  franchised utility title to property requested by the municipality
  to be transferred to the municipally owned utility or franchised
  utility and located within the singly certificated area and
  property determined by the court or jury to be rendered useless or
  valueless by the granting of single certification; and
               (2)  orders payment in accordance with Subsection (g)
  [of this section] to the retail public utility of adequate and just
  compensation for the property transferred and for the property
  damaged as determined by the court or jury.
         (g-1)  The utility commission shall adopt rules governing
  the evaluation of the factors to be considered in determining the
  monetary compensation under Subsection (g).  The utility 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 utility commission determines that the
  municipality's application is administratively complete.
         (k)  The following conditions apply when a municipality or
  franchised utility makes an application to acquire the service area
  or facilities of a retail public utility described in Subsection
  (j)(2):
               (1)  the utility commission or court must determine
  that the service provided by the retail public utility is
  substandard or its rates are unreasonable in view of the reasonable
  expenses of the utility;
               (2)  if the municipality abandons its application, the
  court or the utility commission is authorized to award to the retail
  public utility its reasonable expenses related to the proceeding
  hereunder, including attorney fees; and
               (3)  unless otherwise agreed by the retail public
  utility, the municipality must take the entire utility property of
  the retail public utility in a proceeding hereunder.
         (l)  For an area incorporated by a municipality, the
  compensation provided under Subsection (g) shall be determined by a
  qualified individual or firm to serve as independent appraiser, who
  shall be selected by the affected retail public utility, and the
  costs of the appraiser shall be paid by the municipality. For an
  area annexed by a municipality, the compensation provided under
  Subsection (g) shall be determined by a qualified individual or
  firm to which the municipality and the retail public utility agree
  to serve as independent appraiser. If the retail public utility and
  the municipality are unable to agree on a single individual or firm
  to serve as the independent appraiser before the 11th day after the
  date the retail public utility or municipality notifies the other
  party of the impasse, the retail public utility and municipality
  each shall appoint a qualified individual or firm to serve as
  independent appraiser. On or before the 10th business day after the
  date of their appointment, the independent appraisers shall meet to
  reach an agreed determination of the amount of compensation. If the
  appraisers are unable to agree on a determination before the 16th
  business day after the date of their first meeting under this
  subsection, the retail public utility or municipality may petition
  the utility commission or a person the utility commission
  designates for the purpose to appoint a third qualified independent
  appraiser to reconcile the appraisals of the two originally
  appointed appraisers. The determination of the third appraiser may
  not be less than the lesser or more than the greater of the two
  original appraisals. The costs of the independent appraisers for
  an annexed area shall be shared equally by the retail public utility
  and the municipality. The determination of compensation under this
  subsection is binding on the utility commission.
         (m)  The utility commission shall deny an application for
  single certification by a municipality that fails to demonstrate
  compliance with the commission's minimum requirements for public
  drinking water systems.
         SECTION 2.48.  Section 13.2551, Water Code, is amended 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 utility 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 utility commission shall order service to the entire
  area under Subsection (a) if the utility 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 utility 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
  utility commission, if applicable.
         (e)  The utility commission shall not order compensation to
  the decertificated retail utility if service to the entire service
  area is ordered under this section.
         SECTION 2.49.  Subsections (e), (i), (r), and (s), Section
  13.257, Water Code, are amended to read as follows:
         (e)  The notice must be given to the prospective purchaser
  before the execution of a binding contract of purchase and sale.
  The notice may be given separately or as an addendum to or paragraph
  of the contract. If the seller fails to provide the notice required
  by this section, the purchaser may terminate the contract. If the
  seller provides the notice at or before the closing of the purchase
  and sale contract and the purchaser elects to close even though the
  notice was not timely provided before the execution of the
  contract, it is conclusively presumed that the purchaser has waived
  all rights to terminate the contract and recover damages or pursue
  other remedies or rights under this section. Notwithstanding any
  provision of this section to the contrary, a seller, title
  insurance company, real estate broker, or examining attorney, or an
  agent, representative, or person acting on behalf of the seller,
  company, broker, or attorney, is not liable for damages under
  Subsection (m) or (n) or liable for any other damages to any person
  for:
               (1)  failing to provide the notice required by this
  section to a purchaser before the execution of a binding contract of
  purchase and sale or at or before the closing of the purchase and
  sale contract if:
                     (A)  the utility service provider did not file the
  map of the certificated service area in the real property records of
  the county in which the service area is located and with the utility
  commission depicting the boundaries of the service area of the
  utility service provider as shown in the real property records of
  the county in which the service area is located; and
                     (B)  the utility commission did not maintain an
  accurate map of the certificated service area of the utility
  service provider as required by this chapter; or
               (2)  unintentionally providing a notice required by
  this section that is incorrect under the circumstances before the
  execution of a binding contract of purchase and sale or at or before
  the closing of the purchase and sale contract.
         (i)  If the notice is given at closing as provided by
  Subsection (g), a purchaser, or the purchaser's heirs, successors,
  or assigns, may not maintain an action for damages or maintain an
  action against a seller, title insurance company, real estate
  broker, or lienholder, or any agent, representative, or person
  acting on behalf of the seller, company, broker, or lienholder, by
  reason of the seller's use of the information filed with the utility
  commission by the utility service provider or the seller's use of
  the map of the certificated service area of the utility service
  provider filed in the real property records to determine whether
  the property to be purchased is within the certificated service
  area of the utility service provider. An action may not be
  maintained against a title insurance company for the failure to
  disclose that the described real property is included within the
  certificated service area of a utility service provider if the
  utility service provider did not file in the real property records
  or with the utility commission the map of the certificated service
  area.
         (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 utility 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 of the utility
  commission 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 utility 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 2.50.  Subsections (a) through (g), Section 13.301,
  Water Code, are amended to read as follows:
         (a)  A utility or a water supply or sewer service
  corporation, on or before the 120th day before the effective date of
  a sale, acquisition, lease, or rental of a water or sewer system
  that is required by law to possess a certificate of public
  convenience and necessity or the effective date of a merger or
  consolidation with such a utility or water supply or sewer service
  corporation, shall:
               (1)  file a written application with the utility
  commission; and
               (2)  unless public notice is waived by the executive
  director of the utility commission for good cause shown, give
  public notice of the action.
         (b)  The utility commission may require that the person
  purchasing or acquiring the water or sewer system demonstrate
  adequate financial, managerial, and technical capability for
  providing continuous and adequate service to the requested area and
  any areas currently certificated to the person.
         (c)  If the person purchasing or acquiring the water or sewer
  system cannot demonstrate adequate financial capability, the
  utility commission may require that the person provide a bond or
  other financial assurance in a form and amount specified by the
  utility commission to ensure continuous and adequate utility
  service is provided.
         (d)  The utility commission shall, with or without a public
  hearing, investigate the sale, acquisition, lease, or rental to
  determine whether the transaction will serve the public interest.
         (e)  Before the expiration of the 120-day notification
  period, the executive director of the utility commission shall
  notify all known parties to the transaction and the Office of Public
  Utility Counsel whether [of] the executive director of the utility
  commission will [director's decision whether to] request that the
  utility commission hold a public hearing to determine if the
  transaction will serve the public interest. The executive director
  of the utility commission may request a hearing if:
               (1)  the application filed with the utility commission
  or the public notice was improper;
               (2)  the person purchasing or acquiring the water or
  sewer system has not demonstrated adequate financial, managerial,
  and technical capability for providing continuous and adequate
  service to the service area being acquired and to any areas
  currently certificated to the person;
               (3)  the person or an affiliated interest of the person
  purchasing or acquiring the water or sewer system has a history of:
                     (A)  noncompliance with the requirements of the
  utility commission, the commission, or the [Texas] Department of
  State Health Services; or
                     (B)  continuing mismanagement or misuse of
  revenues as a utility service provider;
               (4)  the person purchasing or acquiring the water or
  sewer system cannot demonstrate the financial ability to provide
  the necessary capital investment to ensure the provision of
  continuous and adequate service to the customers of the water or
  sewer system; or
               (5)  there are concerns that the transaction may not
  serve the public interest, after the application of the
  considerations provided by Section 13.246(c) for determining
  whether to grant a certificate of convenience and necessity.
         (f)  Unless the executive director of the utility commission
  requests that a public hearing be held, the sale, acquisition,
  lease, or rental may be completed as proposed:
               (1)  at the end of the 120-day period; or
               (2)  at any time after the executive director of the
  utility commission notifies the utility or water supply or sewer
  service corporation that a hearing will not be requested.
         (g)  If a hearing is requested or if the utility or water
  supply or sewer service corporation fails to make the application
  as required or to provide public notice, the sale, acquisition,
  lease, or rental may not be completed unless the utility commission
  determines that the proposed transaction serves the public
  interest.
         SECTION 2.51.  Section 13.302, Water Code, is amended to
  read as follows:
         Sec. 13.302.  PURCHASE OF VOTING STOCK IN ANOTHER PUBLIC
  UTILITY:  REPORT.  (a)  A utility may not purchase voting stock in
  another utility doing business in this state and a person may not
  acquire a controlling interest in a utility doing business in this
  state unless the person or utility files a written application with
  the utility commission not later than the 61st day before the date
  on which the transaction is to occur.
         (b)  The utility commission may require that a person
  acquiring a controlling interest in a utility demonstrate adequate
  financial, managerial, and technical capability for providing
  continuous and adequate service to the requested area and any areas
  currently certificated to the person.
         (c)  If the person acquiring a controlling interest cannot
  demonstrate adequate financial capability, the utility commission
  may require that the person provide a bond or other financial
  assurance in a form and amount specified by the utility commission
  to ensure continuous and adequate utility service is provided.
         (d)  The executive director of the utility commission may
  request that the utility commission hold a public hearing on the
  transaction if the executive director of the utility commission
  believes that a criterion prescribed by Section 13.301(e) applies.
         (e)  Unless the executive director of the utility commission
  requests that a public hearing be held, the purchase or acquisition
  may be completed as proposed:
               (1)  at the end of the 60-day period; or
               (2)  at any time after the executive director of the
  utility commission notifies the person or utility that a hearing
  will not be requested.
         (f)  If a hearing is requested or if the person or utility
  fails to make the application to the utility commission as
  required, the purchase or acquisition may not be completed unless
  the utility commission determines that the proposed transaction
  serves the public interest. A purchase or acquisition that is not
  completed in accordance with the provisions of this section is
  void.
         SECTION 2.52.  Section 13.303, Water Code, is amended to
  read as follows:
         Sec. 13.303.  LOANS TO STOCKHOLDERS:  REPORT. A utility may
  not loan money, stocks, bonds, notes, or other evidences of
  indebtedness to any corporation or person owning or holding
  directly or indirectly any stock of the utility unless the utility
  reports the transaction to the utility commission within 60 days
  after the date of the transaction.
         SECTION 2.53.  Section 13.304, Water Code, is amended to
  read as follows:
         Sec. 13.304.  FORECLOSURE REPORT. (a)  A utility that
  receives notice that all or a portion of the utility's facilities or
  property used to provide utility service are being posted for
  foreclosure shall notify the utility commission and the commission
  in writing of that fact not later than the 10th day after the date on
  which the utility receives the notice.
         (b)  A financial institution that forecloses on a utility or
  on any part of the utility's facilities or property that are used to
  provide utility service is not required to provide the 120-day
  notice prescribed by Section 13.301, but shall provide written
  notice to the utility commission and the commission before the 30th
  day preceding the date on which the foreclosure is completed.
         (c)  The financial institution may operate the utility for an
  interim period prescribed by utility commission rule before
  transferring or otherwise obtaining a certificate of convenience
  and necessity. A financial institution that operates a utility
  during an interim period under this subsection is subject to each
  utility commission rule to which the utility was subject and in the
  same manner.
         SECTION 2.54.  Section 13.341, Water Code, is amended to
  read as follows:
         Sec. 13.341.  JURISDICTION OVER AFFILIATED INTERESTS. The
  utility commission has jurisdiction over affiliated interests
  having transactions with utilities under the jurisdiction of the
  utility commission to the extent of access to all accounts and
  records of those affiliated interests relating to such
  transactions, including but in no way limited to accounts and
  records of joint or general expenses, any portion of which may be
  applicable to those transactions.
         SECTION 2.55.  Section 13.342, Water Code, is amended to
  read as follows:
         Sec. 13.342.  DISCLOSURE OF SUBSTANTIAL INTEREST IN VOTING
  SECURITIES. The utility commission may require the disclosure of
  the identity and respective interests of every owner of any
  substantial interest in the voting securities of any utility or its
  affiliated interest. One percent or more is a substantial interest
  within the meaning of this section.
         SECTION 2.56.  Subsection (a), Section 13.343, Water Code,
  is amended to read as follows:
         (a)  The owner of a utility that supplies retail water
  service may not contract to purchase from an affiliated supplier
  wholesale water service for any of that owner's systems unless:
               (1)  the wholesale service is provided for not more
  than 90 days to remedy an emergency condition, as defined by utility
  commission or commission rule; or
               (2)  the executive director of the utility commission 
  determines that the utility cannot obtain wholesale water service
  from another source at a lower cost than from the affiliate.
         SECTION 2.57.  Section 13.381, Water Code, is amended to
  read as follows:
         Sec. 13.381.  RIGHT TO JUDICIAL REVIEW; EVIDENCE. Any party
  to a proceeding before the utility commission or the commission is
  entitled to judicial review under the substantial evidence rule.
         SECTION 2.58.  Subsection (a), Section 13.382, Water Code,
  is amended to read as follows:
         (a)  Any party represented by counsel who alleges that
  existing rates are excessive or that rates prescribed by the
  utility commission are excessive and who is a prevailing party in
  proceedings for review of a utility commission order or decision
  may in the same action recover against the regulation fund
  reasonable fees for attorneys and expert witnesses and other costs
  incurred by him before the utility commission and the court. The
  amount of the attorney's fees shall be fixed by the court.
         SECTION 2.59.  Section 13.411, Water Code, is amended to
  read as follows:
         Sec. 13.411.  ACTION TO ENJOIN OR REQUIRE COMPLIANCE.
  (a)  If the utility commission or the commission has reason to
  believe that any retail public utility or any other person or
  corporation is engaged in or is about to engage in any act in
  violation of this chapter or of any order or rule of the utility
  commission or the commission entered or adopted under this chapter
  or that any retail public utility or any other person or corporation
  is failing to comply with this chapter or with any rule or order,
  the attorney general on request of the utility commission or the
  commission, in addition to any other remedies provided in this
  chapter, shall bring an action in a court of competent jurisdiction
  in the name of and on behalf of the utility commission or the
  commission against the retail public utility or other person or
  corporation to enjoin the commencement or continuation of any act
  or to require compliance with this chapter or the rule or order.
         (b)  If the executive director of the utility commission or
  the executive director of the commission has reason to believe that
  the failure of the owner or operator of a water utility to properly
  operate, maintain, or provide adequate facilities presents an
  imminent threat to human health or safety, the executive director
  of the utility commission or the executive director of the
  commission shall immediately:
               (1)  notify the utility's representative; and
               (2)  initiate enforcement action consistent with:
                     (A)  this subchapter; and
                     (B)  procedural rules adopted by the utility
  commission or the commission.
         SECTION 2.60.  Section 13.4115, Water Code, is amended to
  read as follows:
         Sec. 13.4115.  ACTION TO REQUIRE ADJUSTMENT TO CONSUMER
  CHARGE; PENALTY. In regard to a customer complaint arising out of a
  charge made by a public utility, if the utility commission [the
  executive director] finds that the utility has failed to make the
  proper adjustment to the customer's bill after the conclusion of
  the complaint process established by the utility commission, the
  utility commission may issue an order requiring the utility to make
  the adjustment. Failure to comply with the order within 30 days of
  receiving the order is a violation for which the utility commission
  may impose an administrative penalty under Section 13.4151.
         SECTION 2.61.  Subsections (a), (f), and (g), Section
  13.412, Water Code, are amended to read as follows:
         (a)  At the request of the utility commission or the
  commission, the attorney general shall bring suit for the
  appointment of a receiver to collect the assets and carry on the
  business of a water or sewer utility that:
               (1)  has abandoned operation of its facilities;
               (2)  informs the utility commission or the commission
  that the owner is abandoning the system;
               (3)  violates a final order of the utility commission
  or the commission; or
               (4)  allows any property owned or controlled by it to be
  used in violation of a final order of the utility commission or the
  commission.
         (f)  For purposes of this section and Section 13.4132,
  abandonment may include but is not limited to:
               (1)  failure to pay a bill or obligation owed to a
  retail public utility or to an electric or gas utility with the
  result that the utility service provider has issued a notice of
  discontinuance of necessary services;
               (2)  failure to provide appropriate water or wastewater
  treatment so that a potential health hazard results;
               (3)  failure to adequately maintain facilities,
  resulting in potential health hazards, extended outages, or
  repeated service interruptions;
               (4)  failure to provide customers adequate notice of a
  health hazard or potential health hazard;
               (5)  failure to secure an alternative available water
  supply during an outage;
               (6)  displaying a pattern of hostility toward or
  repeatedly failing to respond to the utility commission or the
  commission or the utility's customers; and
               (7)  failure to provide the utility commission or the
  commission with adequate information on how to contact the utility
  for normal business and emergency purposes.
         (g)  Notwithstanding Section 64.021, Civil Practice and
  Remedies Code, a receiver appointed under this section may seek
  [commission] approval from the utility commission and the
  commission to acquire the water or sewer utility's facilities and
  transfer the utility's certificate of convenience and necessity.
  The receiver must apply in accordance with Subchapter H.
         SECTION 2.62.  Section 13.413, Water Code, is amended to
  read as follows:
         Sec. 13.413.  PAYMENT OF COSTS OF RECEIVERSHIP. The
  receiver may, subject to the approval of the court and after giving
  notice to all interested parties, sell or otherwise dispose of all
  or part of the real or personal property of a water or sewer utility
  against which a proceeding has been brought under this subchapter
  to pay the costs incurred in the operation of the receivership. The
  costs include:
               (1)  payment of fees to the receiver for his services;
               (2)  payment of fees to attorneys, accountants,
  engineers, or any other person or entity that provides goods or
  services necessary to the operation of the receivership; and
               (3)  payment of costs incurred in ensuring that any
  property owned or controlled by a water or sewer utility is not used
  in violation of a final order of the utility commission or the
  commission.
         SECTION 2.63.  Section 13.4131, Water Code, is amended to
  read as follows:
         Sec. 13.4131.  SUPERVISION OF CERTAIN UTILITIES. (a)  The
  utility commission, after providing to the utility notice and an
  opportunity for a hearing, may place a utility under supervision
  for gross or continuing mismanagement, gross or continuing
  noncompliance with this chapter or a rule adopted under this
  chapter [commission rules], or noncompliance with an order issued
  under this chapter [commission orders].
         (b)  While supervising a utility, the utility commission may
  require the utility to abide by conditions and requirements
  prescribed by the utility commission, including:
               (1)  management requirements;
               (2)  additional reporting requirements;
               (3)  restrictions on hiring, salary or benefit
  increases, capital investment, borrowing, stock issuance or
  dividend declarations, and liquidation of assets; and
               (4)  a requirement that the utility place the utility's
  funds into an account in a financial institution approved by the
  utility commission and use of those funds shall be restricted to
  reasonable and necessary utility expenses.
         (c)  While supervising a utility, the utility commission may
  require that the utility obtain [commission] approval from the
  utility commission before taking any action that may be restricted
  under Subsection (b) [of this section]. Any action or transaction
  which occurs without [commission] approval may be voided by the
  utility commission.
         SECTION 2.64.  Subsections (a) and (c), Section 13.4133,
  Water Code, are amended to read as follows:
         (a)  Notwithstanding the requirements of Section 13.187 [of
  this code], the utility commission may authorize an emergency rate
  increase for a utility for which a person has been appointed under
  Section 13.4132 [of this code] or for which a receiver has been
  appointed under Section 13.412 [of this code] if the increase is
  necessary to ensure the provision of continuous and adequate
  services to the utility's customers.
         (c)  The utility commission shall schedule a hearing to
  establish a final rate within 15 months after the date on which an
  emergency rate increase takes effect. The utility commission shall
  require the utility to provide notice of the hearing to each
  customer and to the Office of Public Utility Counsel. The
  additional revenues collected under an emergency rate increase are
  subject to refund if the utility commission finds that the rate
  increase was larger than necessary to ensure continuous and
  adequate service.
         SECTION 2.65.  Subsections (a) and (c), Section 13.414,
  Water Code, are amended to read as follows:
         (a)  Any retail public utility or affiliated interest that
  violates this chapter, fails to perform a duty imposed on it, or
  fails, neglects, or refuses to obey an order, rule, direction, or
  requirement of the utility commission or the commission or decree
  or judgment of a court is subject to a civil penalty of not less than
  $100 nor more than $5,000 for each violation.
         (c)  The attorney general shall institute suit on his own
  initiative or at the request of, in the name of, and on behalf of the
  utility commission or the commission in a court of competent
  jurisdiction to recover the penalty under this section.
         SECTION 2.66.  (a) If H.B. No. 2694, Acts of the 82nd
  Legislature, Regular Session, 2011, does not become law, Subsection
  (a), Section 13.4151, Water Code, is amended to read as follows:
         (a)  If a person, affiliated interest, or entity subject to
  the jurisdiction of the utility commission or the commission
  violates this chapter or a rule or order adopted under this chapter,
  the utility commission or the commission, as applicable, may assess
  a penalty against that person, affiliated interest, or entity as
  provided by this section. The penalty may be in an amount not to
  exceed $500 a day. Each day a violation continues may be considered
  a separate violation.
         (b)  If H.B. No. 2694, Acts of the 82nd Legislature, Regular
  Session, 2011, becomes law, Subsection (a), Section 13.4151, Water
  Code, as effective September 1, 2011, is amended to read as follows:
         (a)  If a person, affiliated interest, or entity subject to
  the jurisdiction of the utility commission or the commission
  violates this chapter or a rule or order adopted under this chapter,
  the utility commission or the commission, as applicable, may assess
  a penalty against that person, affiliated interest, or entity as
  provided by this section. The penalty may be in an amount not to
  exceed $5,000 a day. Each day a violation continues may be
  considered a separate violation.
         SECTION 2.67.  Subsections (b) through (k) and (m), Section
  13.4151, Water Code, are amended to read as follows:
         (b)  In determining the amount of the penalty, the utility
  commission or the commission shall consider:
               (1)  the nature, circumstances, extent, duration, and
  gravity of the prohibited acts or omissions;
               (2)  with respect to the alleged violator:
                     (A)  the history and extent of previous
  violations;
                     (B)  the degree of culpability, including whether
  the violation was attributable to mechanical or electrical failures
  and whether the violation could have been reasonably anticipated
  and avoided;
                     (C)  the demonstrated good faith, including
  actions taken by the person, affiliated interest, or entity to
  correct the cause of the violation;
                     (D)  any economic benefit gained through the
  violation; and
                     (E)  the amount necessary to deter future
  violations; and
               (3)  any other matters that justice requires.
         (c)  If, after examination of a possible violation and the
  facts surrounding that possible violation, the executive director
  of the utility commission or the executive director of the
  commission concludes that a violation has occurred, the executive
  director of the utility commission or the executive director of the
  commission may issue a preliminary report stating the facts on
  which that conclusion is based, recommending that a penalty under
  this section be imposed on the person, affiliated interest, or
  retail public utility charged, and recommending the amount of that
  proposed penalty. The executive director of the utility commission
  or the executive director of the commission shall base the
  recommended amount of the proposed penalty on the factors provided
  by Subsection (b) [of this section], and shall analyze each factor
  for the benefit of the agency [commission].
         (d)  Not later than the 10th day after the date on which the
  report is issued, the executive director of the utility commission
  or the executive director of the commission shall give written
  notice of the report to the person, affiliated interest, or retail
  public utility charged with the violation. The notice shall
  include a brief summary of the charges, a statement of the amount of
  the penalty recommended, and a statement of the right of the person,
  affiliated interest, or retail public utility charged to a hearing
  on the occurrence of the violation, the amount of the penalty, or
  both.
         (e)  Not later than the 20th day after the date on which
  notice is received, the person, affiliated interest, or retail
  public utility charged may give the agency [commission] written
  consent to the [executive director's] report described by
  Subsection (d), including the recommended penalty, or may make a
  written request for a hearing.
         (f)  If the person, affiliated interest, or retail public
  utility charged with the violation consents to the penalty
  recommended in the report described by Subsection (d) [by the
  executive director] or fails to timely respond to the notice, the
  utility commission or the commission by order shall assess that
  penalty or order a hearing to be held on the findings and
  recommendations in the [executive director's] report. If the
  utility commission or the commission assesses the penalty
  recommended by the report, the utility commission or the commission
  shall give written notice to the person, affiliated interest, or
  retail public utility charged of its decision.
         (g)  If the person, affiliated interest, or retail public
  utility charged requests or the utility commission or the
  commission orders a hearing, the agency [commission] shall call a
  hearing and give notice of the hearing. As a result of the hearing,
  the agency [commission] by order may find that a violation has
  occurred and may assess a civil penalty, may find that a violation
  has occurred but that no penalty should be assessed, or may find
  that no violation has occurred. All proceedings under this
  subsection are subject to Chapter 2001, Government Code. In making
  any penalty decision, the agency [commission] shall analyze each of
  the factors provided by Subsection (b) [of this section].
         (h)  The utility commission or the commission shall give
  notice of its decision to the person, affiliated interest, or
  retail public utility charged, and if the agency [commission] finds
 
  agency [commission] shall give written notice to the person,
  affiliated interest, or retail public utility charged of its
  findings, of the amount of the penalty, and of the person's,
  affiliated interest's, or retail public utility's right to judicial
  review of the agency's [commission's] order. If the agency
  [commission] is required to give notice of a penalty under this
  subsection or Subsection (f) [of this section], the agency
  [commission] shall file notice of the agency's [its] decision in
  the Texas Register not later than the 10th day after the date on
  which the decision is adopted.
         (i)  Within the 30-day period immediately following the day
  on which the agency's [commission's] order is final, as provided by
  Subchapter F, Chapter 2001, Government Code, the person, affiliated
  interest, or retail public utility charged with the penalty shall:
               (1)  pay the penalty in full; or
               (2)  if the person, affiliated interest, or retail
  public utility seeks judicial review of the fact of the violation,
  the amount of the penalty, or both:
                     (A)  forward the amount of the penalty to the
  agency [commission] for placement in an escrow account; or
                     (B)  post with the agency [commission] a
  supersedeas bond in a form approved by the agency [commission] for
  the amount of the penalty to be effective until all judicial review
  of the order or decision is final.
         (j)  Failure to forward the money to or to post the bond with
  the agency [commission] within the time provided by Subsection (i)
  [of this section] constitutes a waiver of all legal rights to
  judicial review. If the person, affiliated interest, or retail
  public utility charged fails to forward the money or post the bond
  as provided by Subsection (i) [of this section], the agency
  [commission] or the executive director of the agency may forward
  the matter to the attorney general for enforcement.
         (k)  Judicial review of the order or decision of the agency
  [commission] assessing the penalty shall be under the substantial
  evidence rule and may be instituted by filing a petition with a
  district court in Travis County, as provided by Subchapter G,
  Chapter 2001, Government Code.
         (m)  Notwithstanding any other provision of law, the agency
  [commission] may compromise, modify, extend the time for payment
  of, or remit, with or without condition, any penalty imposed under
  this section.
         SECTION 2.68.  Section 13.417, Water Code, is amended to
  read as follows:
         Sec. 13.417.  CONTEMPT PROCEEDINGS. If any person or retail
  public utility fails to comply with any lawful order of the utility
  commission or the commission or with any subpoena or subpoena duces
  tecum or if any witness refuses to testify about any matter on which
  he may be lawfully interrogated, the utility commission or the
  commission may apply to any court of competent jurisdiction to
  compel obedience by proceedings for contempt.
         SECTION 2.69.  Section 13.418, Water Code, is amended to
  read as follows:
         Sec. 13.418.  DISPOSITION OF FINES AND PENALTIES; WATER
  UTILITY IMPROVEMENT ACCOUNT.  (a)  Fines and penalties collected
  under this chapter from a retail public utility that is not a public
  utility in other than criminal proceedings shall be [paid to the
  commission and] deposited in the general revenue fund.
         (b)  Fines and penalties collected from a public utility
  under this chapter in other than criminal proceedings shall be
  [paid to the commission and] deposited in the water utility
  improvement account as provided by Section 341.0485, Health and
  Safety Code.
         SECTION 2.70.  Subdivision (7), Section 13.501, Water Code,
  is amended to read as follows:
               (7)  "Multiple use facility" means commercial or
  industrial parks, office complexes, marinas, and others
  specifically identified in utility commission rules with five or
  more units.
         SECTION 2.71.  Subsection (e), Section 13.502, Water Code,
  is amended to read as follows:
         (e)  An owner of an apartment house, manufactured home rental
  community, or multiple use facility or a manager of a condominium
  may not change from submetered billing to allocated billing unless:
               (1)  the executive director of the utility commission 
  approves of the change in writing after a demonstration of good
  cause, including meter reading or billing problems that could not
  feasibly be corrected or equipment failures; and
               (2)  the property owner meets rental agreement
  requirements established by the utility commission.
         SECTION 2.72.  Subsections (a), (b), and (e), Section
  13.503, Water Code, are amended to read as follows:
         (a)  The utility commission shall encourage submetering of
  individual rental or dwelling units by master meter operators or
  building owners to enhance the conservation of water resources.
         (b)  Notwithstanding any other law, the utility commission
  shall adopt rules and standards under which an owner, operator, or
  manager of an apartment house, manufactured home rental community,
  or multiple use facility that is not individually metered for water
  for each rental or dwelling unit may install submetering equipment
  for each individual rental or dwelling unit for the purpose of
  fairly allocating the cost of each individual rental or dwelling
  unit's water consumption, including wastewater charges based on
  water consumption. In addition to other appropriate safeguards for
  the tenant, the rules shall require that, except as provided by this
  section, an apartment house owner, manufactured home rental
  community owner, multiple use facility owner, or condominium
  manager may not impose on the tenant any extra charges, over and
  above the cost per gallon and any other applicable taxes and
  surcharges that are charged by the retail public utility to the
  owner or manager, and that the rental unit or apartment house owner
  or manager shall maintain adequate records regarding submetering
  and make the records available for inspection by the tenant during
  reasonable business hours. The rules shall allow an owner or
  manager to charge a tenant a fee for late payment of a submetered
  water bill if the amount of the fee does not exceed five percent of
  the bill paid late. All submetering equipment is subject to the
  rules and standards established by the utility commission for
  accuracy, testing, and record keeping of meters installed by
  utilities and to the meter-testing requirements of Section 13.140
  [of this code].
         (e)  The utility commission may authorize a building owner to
  use submetering equipment that relies on integrated radio based
  meter reading systems and remote registration in a building
  plumbing system using submeters that comply with nationally
  recognized plumbing standards and are as accurate as utility water
  meters in single application conditions.
         SECTION 2.73.  Section 13.5031, Water Code, is amended to
  read as follows:
         Sec. 13.5031.  NONSUBMETERING RULES. Notwithstanding any
  other law, the utility commission shall adopt rules and standards
  governing billing systems or methods used by manufactured home
  rental community owners, apartment house owners, condominium
  managers, or owners of other multiple use facilities for prorating
  or allocating among tenants nonsubmetered master metered utility
  service costs. In addition to other appropriate safeguards for the
  tenant, those rules shall require that:
               (1)  the rental agreement contain a clear written
  description of the method of calculation of the allocation of
  nonsubmetered master metered utilities for the manufactured home
  rental community, apartment house, or multiple use facility;
               (2)  the rental agreement contain a statement of the
  average manufactured home, apartment, or multiple use facility unit
  monthly bill for all units for any allocation of those utilities for
  the previous calendar year;
               (3)  except as provided by this section, an owner or
  condominium manager may not impose additional charges on a tenant
  in excess of the actual charges imposed on the owner or condominium
  manager for utility consumption by the manufactured home rental
  community, apartment house, or multiple use facility;
               (4)  the owner or condominium manager shall maintain
  adequate records regarding the utility consumption of the
  manufactured home rental community, apartment house, or multiple
  use facility, the charges assessed by the retail public utility,
  and the allocation of the utility costs to the tenants;
               (5)  the owner or condominium manager shall maintain
  all necessary records concerning utility allocations, including
  the retail public utility's bills, and shall make the records
  available for inspection by the tenants during normal business
  hours; and
               (6)  the owner or condominium manager may charge a
  tenant a fee for late payment of an allocated water bill if the
  amount of the fee does not exceed five percent of the bill paid
  late.
         SECTION 2.74.  Section 13.505, Water Code, is amended to
  read as follows:
         Sec. 13.505.  ENFORCEMENT. In addition to the enforcement
  provisions contained in Subchapter K [of this chapter], if an
  apartment house owner, condominium manager, manufactured home
  rental community owner, or other multiple use facility owner
  violates a rule of the utility commission regarding submetering of
  utility service consumed exclusively within the tenant's dwelling
  unit or multiple use facility unit or nonsubmetered master metered
  utility costs, the tenant may recover three times the amount of any
  overcharge, a civil penalty equal to one month's rent, reasonable
  attorney's fees, and court costs from the owner or condominium
  manager. However, an owner of an apartment house, manufactured
  home rental community, or other multiple use facility or
  condominium manager is not liable for a civil penalty if the owner
  or condominium manager proves the violation was a good faith,
  unintentional mistake.
         SECTION 2.75.  Section 13.512, Water Code, is amended to
  read as follows:
         Sec. 13.512.  AUTHORITY TO ENTER INTO PRIVATIZATION
  CONTRACTS. Any eligible city is authorized to enter into
  privatization contracts if such action is recommended by the board
  of utility trustees and authorized by the governing body of the
  eligible city pursuant to an ordinance. Any privatization contract
  entered into prior to the effective date of this Act is validated,
  ratified, and approved. Each eligible city shall file a copy of its
  privatization contract with the utility commission, for
  information purposes only, within 60 days of execution or the
  effective date of this Act, whichever is later.
         SECTION 2.76.  Section 13.513, Water Code, is amended to
  read as follows:
         Sec. 13.513.  ELECTION BY ELIGIBLE CITY TO EXEMPT SERVICE
  PROVIDER FROM UTILITY COMMISSION JURISDICTION. A service provider
  shall not constitute a "water and sewer utility," a "public
  utility," a "utility," or a "retail public utility" within the
  meaning of Chapter 13 as a result of entering into or performing a
  privatization contract, if the governing body of the eligible city
  shall so elect by ordinance and provide notice thereof in writing to
  the utility commission; provided, however, this provision shall not
  affect the application of Chapter 13 to an eligible city itself.
  Notwithstanding anything contained in this section, any service
  provider who seeks to extend or render sewer service to any person
  or municipality other than, or in addition to, an eligible city may
  be a "public utility" for the purposes of Chapter 13 with respect to
  such other person or municipality.
         SECTION 2.77.  Subsection (a), Section 5.013, Water Code, is
  amended to read as follows:
         (a)  The commission has general jurisdiction over:
               (1)  water and water rights including the issuance of
  water rights permits, water rights adjudication, cancellation of
  water rights, and enforcement of water rights;
               (2)  continuing supervision over districts created
  under Article III, Sections 52(b)(1) and (2), and Article XVI,
  Section 59, of the Texas Constitution;
               (3)  the state's water quality program including
  issuance of permits, enforcement of water quality rules, standards,
  orders, and permits, and water quality planning;
               (4)  the determination of the feasibility of certain
  federal projects;
               (5)  the adoption and enforcement of rules and
  performance of other acts relating to the safe construction,
  maintenance, and removal of dams;
               (6)  conduct of the state's hazardous spill prevention
  and control program;
               (7)  the administration of the state's program relating
  to inactive hazardous substance, pollutant, and contaminant
  disposal facilities;
               (8)  the administration of a portion of the state's
  injection well program;
               (9)  the administration of the state's programs
  involving underground water and water wells and drilled and mined
  shafts;
               (10)  the state's responsibilities relating to regional
  waste disposal;
               (11)  the responsibilities assigned to the commission
  by Chapters 361, 363, 382, and 401, Health and Safety Code; and
               (12)  [administration of the state's water rate program
  under Chapter 13 of this code; and
               [(13)]  any other areas assigned to the commission by
  this code and other laws of this state.
         SECTION 2.78.  (a)  On June 1, 2012, the following are
  transferred from the Texas Commission on Environmental Quality to
  the Public Utility Commission of Texas:
               (1)  the powers, duties, functions, programs, and
  activities of the Texas Commission on Environmental Quality
  relating to the economic regulation of water and sewer utilities,
  including the issuance and transfer of certificates of convenience
  and necessity, the determination of rates, and the administration
  of hearings and proceedings involving those matters, under Chapter
  13, Water Code, as provided by this article;
               (2)  any obligations and contracts of the Texas
  Commission on Environmental Quality that are directly related to
  implementing a power, duty, function, program, or activity
  transferred under this article; and
               (3)  all property and records in the custody of the
  Texas Commission on Environmental Quality that are related to a
  power, duty, function, program, or activity transferred under this
  article and all funds appropriated by the legislature for that
  power, duty, function, program, or activity.
         (b)  The Texas Commission on Environmental Quality and the
  Public Utility Commission of Texas shall enter into a memorandum of
  understanding that:
               (1)  identifies in detail the applicable powers and
  duties that are transferred by this article;
               (2)  establishes a plan for the identification and
  transfer of the records, personnel, property, and unspent
  appropriations of the Texas Commission on Environmental Quality
  that are used for purposes of the commission's powers and duties
  directly related to the regulation of water and sewer utilities
  under Chapter 13, Water Code, as amended by this article; and
               (3)  establishes a plan for the transfer of all pending
  applications, hearings, rulemaking proceedings, and orders
  relating to the economic regulation of water and sewer utilities
  under Chapter 13, Water Code, as amended by this article, from the
  Texas Commission on Environmental Quality to the Public Utility
  Commission of Texas.
         (c)  The memorandum of understanding described by this
  section is not required to be adopted by rule under Section 5.104,
  Water Code.
         (d)  The executive directors of the Texas Commission on
  Environmental Quality and the Public Utility Commission of Texas
  may agree in the memorandum of understanding under this section to
  transfer to the Public Utility Commission of Texas any personnel of
  the Texas Commission on Environmental Quality whose functions
  predominantly involve powers, duties, obligations, functions, and
  activities related to the regulation of water and sewer utilities
  under Chapter 13, Water Code, as amended by this article.
         (e)  The Texas Commission on Environmental Quality and the
  Public Utility Commission of Texas shall appoint a transition team
  to accomplish the purposes of this section.  The transition team
  shall establish guidelines on how the two agencies will cooperate
  regarding:
               (1)  meeting federal drinking water standards;
               (2)  maintaining adequate supplies of water;
               (3)  meeting established design criteria for
  wastewater treatment plants;
               (4)  demonstrating the economic feasibility of
  regionalization; and
               (5)  serving the needs of economically distressed
  areas.
         (f)  A rule, form, policy, procedure, or decision of the
  Texas Commission on Environmental Quality related to a power, duty,
  function, program, or activity transferred under this article
  continues in effect as a rule, form, policy, procedure, or decision
  of the Public Utility Commission of Texas and remains in effect
  until amended or replaced by that agency.
         (g)  The memorandum required by this section must be
  completed by April 1, 2012.
         (h)  The Public Utility Commission of Texas and the Texas
  Commission on Environmental Quality shall adopt rules to implement
  the changes in law made by this article to Chapter 13, Water Code,
  not later than November 1, 2012.
         SECTION 2.79.  (a)  The Public Utility Commission of Texas
  shall conduct a comparative analysis of the ratemaking authority of
  the commission before the effective date of this Act and the
  ratemaking authority of the commission after the transition
  described in Section 2.78 of this article, to identify potential
  for procedural standardization. The Public Utility Commission of
  Texas shall issue a report of the analysis, with recommendations
  regarding rate standardization, for consideration by the 83rd
  Legislature.
         (b)  The Public Utility Commission of Texas shall prepare a
  report describing staffing changes related to the transition
  described in Section 2.78 of this article, including reductions in
  staff that the commission may realize as a result of consolidated
  functions. The Public Utility Commission of Texas shall submit the
  report to the Legislative Budget Board and the governor with the
  legislative appropriations request for the 2014-2015 biennium.
         SECTION 2.80.  (a)  On June 1, 2012, the following are
  transferred from the office of public interest counsel of the Texas
  Commission on Environmental Quality to the Office of Public Utility
  Counsel:
               (1)  the powers, duties, functions, programs, and
  activities of the office of public interest counsel of the Texas
  Commission on Environmental Quality relating to the representation
  of the public interest in matters related to the regulation of water
  and sewer utilities under Chapter 13, Water Code, as amended by this
  article;
               (2)  any obligations and contracts of the office of
  public interest counsel of the Texas Commission on Environmental
  Quality that are directly related to implementing a power, duty,
  function, program, or activity transferred under this article; and
               (3)  all property and records in the custody of the
  office of public interest counsel of the Texas Commission on
  Environmental Quality that are related to a power, duty, function,
  program, or activity transferred under this article and all funds
  appropriated by the legislature for that power, duty, function,
  program, or activity.
         (b)  The office of public interest counsel of the Texas
  Commission on Environmental Quality and the Office of Public
  Utility Counsel shall enter into a memorandum of understanding
  that:
               (1)  identifies in detail the applicable powers and
  duties that are transferred by this article; and
               (2)  establishes a plan for the identification and
  transfer of the records, personnel, property, and unspent
  appropriations of the Texas Commission on Environmental Quality
  that are used for purposes of the office of public interest
  counsel's powers and duties directly related to the representation
  of the public interest in matters relating to the regulation of
  water and sewer utilities under Chapter 13, Water Code, as amended
  by this article.
         (c)  The memorandum of understanding described by this
  section is not required to be adopted by rule under Section 5.104,
  Water Code.
         (d)  The office of public interest counsel of the Texas
  Commission on Environmental Quality and the Office of Public
  Utility Counsel may agree in the memorandum of understanding under
  this section to transfer to the Office of Public Utility Counsel any
  personnel of the office of public interest counsel whose functions
  predominantly involve powers, duties, obligations, functions, and
  activities related to the representation of the public interest in
  matters relating to the regulation of water and sewer utilities
  under Chapter 13, Water Code, as amended by this article.
         (e)  The office of public interest counsel of the Texas
  Commission on Environmental Quality and the Office of Public
  Utility Counsel shall appoint a transition team to accomplish the
  purposes of this section.
         (f)  A rule, form, policy, procedure, or decision of the
  office of public interest counsel of the Texas Commission on
  Environmental Quality related to a power, duty, function, program,
  or activity transferred under this article continues in effect as a
  rule, form, policy, procedure, or decision of the Office of Public
  Utility Counsel and remains in effect until amended or replaced by
  that agency.
         (g)  The memorandum required by this section must be
  completed by April 1, 2012.
         (h)  The Office of Public Utility Counsel and the office of
  public interest counsel of the Texas Commission on Environmental
  Quality shall adopt rules to implement the changes in law made by
  this article to Chapter 13, Water Code, not later than November 1,
  2012.
  ARTICLE 3.  OTHER WATER AND SEWER DUTIES OF PUBLIC UTILITY
  COMMISSION OF TEXAS
         SECTION 3.01.  Section 11.002, Water Code, is amended by
  adding Subdivision (21) to read as follows:
               (21)  "Utility commission" means the Public Utility
  Commission of Texas.
         SECTION 3.02.  Section 11.041, Water Code, is amended to
  read as follows:
         Sec. 11.041.  DENIAL OF WATER: COMPLAINT. (a)  Any person
  entitled to receive or use water from any canal, ditch, flume,
  lateral, dam, reservoir, or lake or from any conserved or stored
  supply may present to the utility commission a written petition
  showing:
               (1)  that the person [he] is entitled to receive or use
  the water;
               (2)  that the person [he] is willing and able to pay a
  just and reasonable price for the water;
               (3)  that the party owning or controlling the water
  supply has water not contracted to others and available for the
  petitioner's use; and
               (4)  that the party owning or controlling the water
  supply fails or refuses to supply the available water to the
  petitioner, or that the price or rental demanded for the available
  water is not reasonable and just or is discriminatory.
         (b)  If the petition is accompanied by a deposit of $25, the
  executive director of the utility commission shall have a
  preliminary investigation of the complaint made and determine
  whether or not there are probable grounds for the complaint.
         (c)  If, after preliminary investigation, the executive
  director of the utility commission determines that probable grounds
  exist for the complaint, the utility commission shall enter an
  order setting a time and place for a hearing on the petition.
         (d)  The utility commission may require the complainant to
  make an additional deposit or execute a bond satisfactory to the
  utility commission in an amount fixed by the utility commission
  conditioned on the payment of all costs of the proceeding.
         (e)  At least 20 days before the date set for the hearing, the
  utility commission shall transmit by registered mail a certified
  copy of the petition and a certified copy of the hearing order to
  the person against whom the complaint is made.
         (f)  The utility commission shall hold a hearing on the
  complaint at the time and place stated in the order. It may hear
  evidence orally or by affidavit in support of or against the
  complaint, and it may hear arguments. The commission may
  participate in the hearing for the purpose of presenting evidence
  on the availability of the water requested by the petitioner. On
  completion of the hearing, the utility commission shall render a
  written decision.
         (g)  If, after the preliminary investigation, the executive
  director of the utility commission determines that no probable
  grounds exist for the complaint, the executive director of the
  utility commission shall dismiss the complaint. The utility
  commission may either return the deposit or pay it into the State
  Treasury.
         SECTION 3.03.  Section 12.013, Water Code, is amended to
  read as follows:
         Sec. 12.013.  RATE-FIXING POWER. (a)  The utility
  commission shall fix reasonable rates for the furnishing of raw or
  treated water for any purpose mentioned in Chapter 11 or 12 of this
  code.
         (b)  In this section,  [The term] "political subdivision"
  [when used in this section] means incorporated cities, towns or
  villages, counties, river authorities, water districts, and other
  special purpose districts.
         (c)  The utility commission in reviewing and fixing
  reasonable rates for furnishing water under this section may use
  any reasonable basis for fixing rates as may be determined by the
  utility commission to be appropriate under the circumstances of the
  case being reviewed; provided, however, the utility commission may
  not fix a rate which a political subdivision may charge for
  furnishing water which is less than the amount required to meet the
  debt service and bond coverage requirements of that political
  subdivision's outstanding debt.
         (d)  The utility commission's jurisdiction under this
  section relating to incorporated cities, towns, or villages shall
  be limited to water furnished by such city, town, or village to
  another political subdivision on a wholesale basis.
         (e)  The utility commission may establish interim rates and
  compel continuing service during the pendency of any rate
  proceeding.
         (f)  The utility commission may order a refund or assess
  additional charges from the date a petition for rate review is
  received by the utility commission of the difference between the
  rate actually charged and the rate fixed by the utility commission,
  plus interest at the statutory rate.
         [(g)     No action or proceeding commenced prior to January 1,
  1977, before the Texas Water Rights Commission shall be affected by
  the enactment of this section.
         [(h)     Nothing herein contained shall affect the jurisdiction
  of the Public Utility Commission.]
  ARTICLE 4. EFFECTIVE DATE
         SECTION 4.01.  This Act takes effect on the 91st day after
  the last day of the legislative session.