By: Creighton S.B. No. 1782
 
 
 
   
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the response and resilience of certain utilities to
  major weather-related events or natural disasters.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 36.402(a), Utilities Code, is amended to
  read as follows:
         (a)  In this subchapter, "system restoration costs" means
  reasonable and necessary costs, including costs expensed, charged
  to self-insurance reserves, deferred, capitalized, or otherwise
  financed, that are incurred by an electric utility due to any
  activity or activities conducted by or on behalf of the electric
  utility in connection with the restoration of service and
  infrastructure associated with electric power outages affecting
  customers of the electric utility as the result of any tropical
  storm or hurricane, ice or snow storm, flood, or other
  weather-related event or natural disaster that occurred in calendar
  year 2008 or thereafter. System restoration costs include
  mobilization, staging, and construction, reconstruction,
  replacement, or repair of electric generation, transmission,
  distribution, or general plant facilities. System restoration
  costs shall include reasonable estimates of the costs of an
  activity or activities conducted or expected to be conducted by or
  on behalf of the electric utility in connection with the
  restoration of service or infrastructure associated with electric
  power outages, but such estimates shall be subject to true-up and
  reconciliation after the actual costs are known. System
  restoration costs also include reasonable and necessary
  weatherization and storm-hardening costs incurred, as well as
  reasonable estimates of costs to be incurred by the electric
  utility, but such estimates shall be subject to true-up and
  reconciliation after the actual costs are known.
         SECTION 2.  Chapter 36, Utilities Code, is amended by adding
  Subchapter J to read as follows:
  SUBCHAPTER J. LOWER COST FINANCING MECHANISM FOR 
  SECURITIZATION FOR RECOVERY OF SYSTEM RESTORATION COSTS
         Sec. 36.407.  LOWER COST FINANCING MECHANISM FOR
  SECURITIZATION FOR RECOVERY OF SYSTEM RESTORATION COSTS; PURPOSE
  AND DEFINITIONS. 
         (a)  Except as otherwise specifically provided in this
  subchapter, the same procedures, standards, and protections for
  securitization authorized in Subchapter I and, to the extent made
  applicable to Subchapter I, Subchapter G, Chapter 39, apply to the
  lower cost financing mechanism for securitization of transition
  costs (or "system restoration costs") as set forth in Subchapter I.
  To the extent any conflict exists between the provisions of this
  subchapter and Subchapter I or, to the extent made applicable by
  Subchapter I, Subchapter G, Chapter 39, in cases involving the
  securitization of system restoration costs under this subchapter,
  the provisions of this subchapter control.
         (b)  The purpose of this subchapter is to make available a
  lower cost and supplemental financing mechanism to allow an
  electric utility to obtain timely recovery of system restoration
  costs under Subchapter I through securitization and the issuance of
  transition bonds (or "system restoration bonds") by an issuer other
  than the electric utility or an affiliated special purpose entity.
  Financing of system restoration costs pursuant to this subchapter
  is hereby recognized to be a valid and essential public purpose.
         (c)  The Texas Electric Utility System Restoration
  Corporation shall be created pursuant to this subchapter as a
  special purpose public corporation and instrumentality of the state
  for the essential public purpose of providing a lower cost
  financing mechanism available to the commission and an electric
  utility to attract low-cost capital to finance system restoration
  costs.
         (d)  System restoration bonds issued consistent with this
  subchapter will be solely the obligation of the issuer and the
  corporation (as borrower, if applicable) and will not be a debt of
  or a pledge of the faith and credit of the state.
         (e)  System restoration bonds issued consistent with this
  subchapter shall be nonrecourse to the credit or any assets of the
  state and the commission.
         (f)  This subchapter does not in any way limit or impair the
  commission's jurisdiction under this title to regulate the rates
  charged and the services rendered by electric utilities in this
  state.
         (g)  An electric utility receiving the proceeds of
  securitization financing under this subchapter shall not be
  required to provide utility services to the corporation or the
  state as a result of receiving such proceeds except in their role as
  customers of the electric utility, nor shall this subchapter create
  any obligation of the corporation or any issuer to provide any
  electric services to the electric utility or its customers.
         (h)  As used in this subchapter:
                     (1)  "corporation" means the Texas Electric
  Utility System Restoration Corporation.
                     (2)  "issuer" means the corporation or any other
  Texas corporation, public trust, public instrumentality, or other
  entity that issues system restoration bonds approved by a financing
  order.
               (3)  For purposes of this subchapter, "qualified
  costs," as defined by Section 39.302 and as used in Subchapter G,
  Chapter 39, also includes all costs of establishing, maintaining,
  and operating the corporation and all costs of the corporation and
  any issuer in connection with the issuance and servicing of the
  system restoration bonds, all as approved in the financing order.
               (4)  Except as otherwise specifically provided in this
  subchapter, the defined terms provided in Subchapter I and, if made
  applicable by Subchapter I, Subchapter G, Chapter 39, have the same
  meaning in this subchapter.
         Sec. 36.408.  CREATION OF THE CORPORATION. (a) The
  corporation shall be incorporated as a nonprofit corporation and
  instrumentality of the state, and shall perform the essential
  governmental function of financing system restoration costs in
  accordance with this subchapter. The corporation shall perform
  only those functions consistent with this subchapter, shall
  exercise its powers through a governing board, and shall be subject
  to the regulation of the commission. The corporation shall have a
  legal existence as a public corporate body and instrumentality of
  the state separate and distinct from the state.
         (b)  Assets of the corporation shall not be considered part
  of any state fund. The state shall not budget for or provide any
  general fund appropriations to the corporation, and the debts,
  claims, obligations, and liabilities of the corporation shall not
  be considered to be a debt of the state or a pledge of its credit.
  The corporation shall be self-funded. Prior to the imposition of
  transition charges (or "system restoration charges"), the
  corporation may accept and expend for its operating expenses such
  funds as may be received from any source, including financing
  agreements with the state, a commercial bank, or another entity to
  finance the corporation's obligations until the corporation
  receives sufficient transition property to cover its operating
  expenses as financing costs, and to repay any short-term borrowing
  under any such financing agreement.  
         (c)  The corporation shall have the powers, rights, and
  privileges provided for a corporation organized under Chapter 22,
  Business Organizations Code, subject to the express exceptions and
  limitations set forth in this subchapter.
         (d)  An incorporator selected by the executive director of
  the commission shall prepare the articles of incorporation of the
  corporation under Chapter 22, Business Organizations Code, which
  articles shall be consistent with the provisions of this
  subchapter.
         (e)  State officers, departments, and agencies are
  authorized to render services to the corporation within their
  respective functions, as may be requested by the commission or the
  corporation.
         (f)  The corporation and any issuer may retain such
  professionals, financial advisors, and accountants as it may deem
  necessary to fulfill its duties under this subchapter and may
  determine their duties and compensation, subject to approval of the
  commission.
         (g)  The governing body of the corporation shall be a board
  of directors that shall consist of five members appointed by the
  commission. All official action of the governing body shall
  require the favorable vote of a majority of the board members
  present and voting at any meeting of the board of directors.
         Sec. 36.409.  POWERS AND DUTIES OF THE CORPORATION. (a) The
  corporation shall, in each instance subject to the prior
  authorization of the commission, participate in the financial
  transactions contemplated by this subchapter. The corporation
  shall engage in no other business activities except those
  activities provided for in this subchapter and those ancillary and
  incidental thereto. Neither the corporation nor any issuer shall
  apply any proceeds of system restoration bonds or system
  restoration charges to any purpose not specified in a financing
  order, or to any purpose in excess of the amount allowed for such
  purpose in the order, or to any purpose in contravention of the
  order.
         (b)  The governing board of the corporation shall, pursuant
  to the provisions of this subchapter, have the power to employ or
  retain such persons as are necessary to perform the duties of the
  corporation.
         (c)  The corporation may:
               (1)  Acquire, sell, pledge, and transfer transition
  property as necessary to effect the purposes of this subchapter. In
  connection therewith, the corporation may agree to such terms and
  conditions as it deems necessary and proper, consistent with the
  terms of a financing order, (i) to acquire transition property and
  to pledge such transition property, and any other collateral, (a)
  to secure payment of system restoration bonds issued by the
  corporation, together with payment of any other qualified costs, or
  (b) to secure repayment of any borrowing from any other issuer of
  system restoration bonds, or (ii) to sell the transition property
  to another issuer, which may in turn pledge such transition
  property, together with any other collateral, to the repayment of
  system restoration bonds issued by the issuer together with any
  other qualified costs;
               (2)  Issue system restoration bonds on terms and
  conditions consistent with a financing order; 
               (3)  Borrow funds from an issuer of system restoration
  bonds to acquire transition property, and pledge such transition
  property to the repayment of any borrowing from an issuer, together
  with any related qualified costs, all on terms and conditions
  consistent with a financing order. The corporation may also borrow
  funds for initial operating expenses as specified in Section
  36.408;
               (4)  Sue or be sued in its corporate name. The
  corporation has the authority to intervene as a party before the
  commission or any court in this state in any matter involving the
  corporation's powers and duties;
               (5)  Negotiate and become a party to such contracts as
  necessary, convenient, or desirable to carry out the purposes of
  this subchapter; and
               (6)  Engage in corporate actions or undertakings that
  are permitted for nonprofit corporations in this state and that are
  not prohibited by, or contrary to, the provisions of this
  subchapter. 
         (d)  The corporation shall maintain separate accounts and
  records relating to each electric utility that is collecting system
  restoration charges for all charges, revenues, assets,
  liabilities, and expenses relating to that utility's related system
  restoration bond issuances.
         (e)  The governing board of the corporation shall be
  prohibited from authorizing any rehabilitation, liquidation, or
  dissolution of the corporation, and no such rehabilitation,
  liquidation, or dissolution of the corporation shall take effect as
  long as any system restoration bonds are outstanding unless
  adequate protection and provision has been made for the payment of
  the bonds pursuant to the documents authorizing the issuance of the
  bonds. In the event of any rehabilitation, liquidation, or
  dissolution, the assets of the corporation shall be applied first
  to pay all debts, liabilities, and obligations of the corporation,
  including the establishment of reasonable reserves for any
  contingent liabilities or obligations, and all remaining funds of
  the corporation shall be applied and distributed as provided by an
  order of the commission.
         (f)  Prior to the date that is two years and one day after
  which the corporation no longer has any payment obligation with
  respect to any system restoration bonds, including any obligation
  to any issuer of any system restoration bonds outstanding, the
  corporation is prohibited from filing and shall have no authority
  to file a voluntary petition under the Federal Bankruptcy Code, as
  it may, from time to time, be in effect, and neither any public
  official nor any organization, entity, or other person shall
  authorize the corporation to be or to become a debtor under the
  Federal Bankruptcy Code during such period.  The state covenants
  that it will not limit or alter the denial of authority under this
  subsection or subsection (e), and the provisions of such
  subsections are hereby made a part of the contractual obligation
  that is subject to the state pledge set forth in Section 39.310.
         (g)  The corporation shall prepare an operating budget
  annually that shall be submitted for approval to the commission. If
  requested by the commission, the corporation shall prepare and
  submit an annual report containing, among other appropriate
  matters, the annual operating and financial statements of the
  corporation.
         Sec. 36.410.  COMMISSION REGULATION OF THE CORPORATION. The
  commission shall regulate the corporation as provided for in this
  subchapter. Such regulation shall be concomitant with the
  commission's regulation of public utilities. Notwithstanding such
  regulation, the corporation is not a public utility.
         Sec. 36.411.  FINANCING ORDER. (a) This section applies to
  the commission's issuance of a financing order under this
  subchapter.  
         (b)  Except as otherwise specifically provided in this
  subchapter, the provisions in Subchapter I and, to the extent made
  applicable to Subchapter I, Subchapter G, Chapter 39, addressing
  the commission's issuance of a financing order apply to the
  commission's issuance of a financing order under this subchapter.
         (c)  The corporation and any issuer shall be a party to the
  commission's proceedings addressing the issuance of a financing
  order along with the pertinent electric utility. 
         (d)  A financing order issued under this subchapter shall, in
  addition to the requirements of Subchapter I (as applicable):
               (1)  Require the sale, assignment, or other transfer of
  certain specified transition property created by the financing
  order to the corporation (in the manner contemplated by Section
  39.308), and following such sale, assignment, or transfer, system
  restoration charges paid under any financing order shall be
  created, assessed, and collected as the property of the
  corporation, subject to subsequent sale, assignment, or transfer by
  the corporation as authorized under this subchapter.  
               (2)  Authorize either:
                     (A)  the issuance of system restoration bonds by
  the corporation secured by a pledge of such specified transition
  property, and the application of the proceeds of such system
  restoration bonds (net of issuance costs) to the acquisition of the
  transition property from the electric utility; or 
                     (B)  the acquisition of specified transition
  property from the electric utility by the corporation, financed (i)
  by a loan by an issuer to the corporation of the proceeds of system
  restoration bonds (net of issuance costs), or (ii) by the
  acquisition by an issuer from the corporation of such transition
  property, and in each case, the pledge of such transition property
  to the repayment of such loan or system restoration bonds, as
  applicable; 
               (3)  Authorize the electric utility to serve as
  collection agent to collect the system restoration charges and
  transfer those collected charges to the corporation, the issuer, or
  a financing party, as appropriate.
         (e)  After issuance of the financing order, the corporation
  shall arrange for the issuance of system restoration bonds as
  specified in the financing order by it or another issuer selected by
  the corporation and approved by the commission.
         (f)  System restoration bonds issued pursuant to a financing
  order under this section are secured only by the related transition
  property and any other funds pledged under the bond documents, and
  no assets of the state or electric utility shall be subject to
  claims by such bondholders. Notwithstanding the provisions in
  Subchapter G, Chapter 39, following assignment of the transition
  property, the electric utility shall not have any beneficial
  interest or claim of right in such system restoration charges or in
  any transition property.
         Sec. 36.412.  SEVERABILITY. Effective on the date the first
  system restoration bonds associated with system restoration costs
  are issued under this subchapter, if any provision in this title or
  portion of this title is held to be invalid or is invalidated,
  superseded, replaced, repealed, or expires for any reason, that
  occurrence does not affect the validity or continuation of this
  subchapter, Subchapter I, as it applies to this subchapter,
  Subchapter G, Chapter 39, as it applies to this subchapter, or any
  part of those provisions, or any other provision of this title that
  is relevant to the issuance, administration, payment, retirement,
  or refunding of system restoration bonds or to any actions of the
  electric utility, its successors, an assignee, a collection agent,
  the corporation, an issuer, or a financing party, and those
  provisions shall remain in full force and effect.
         SECTION 3.  Section 37.051, Utilities Code, is amended by
  adding Subsection (d) to read as follows:
         (d)  Notwithstanding any other provision of this title, an
  electric utility may, but shall not be required to, obtain a
  certificate to install, own, or operate a generation facility with
  a capacity of ten megawatts or less.
         SECTION 4.  Section 37.056(c)(4)(E), Utilities Code, is
  amended to read as follows:
                     (E)  the probable improvement of service or
  lowering of cost to consumers in the area if the certificate is
  granted, including any potential economic or reliability benefits
  associated with dual fuel and fuel storage capabilities; and
         SECTION 5.  Subchapter F, Chapter 104, Utilities Code, is
  amended by adding Section 104.259 to read as follows:
         Sec. 104.259.  PRIORITIES DURING NATURAL GAS CURTAILMENT.
  (a) If the curtailment of natural gas is necessary during a state
  of disaster as declared by the governor or an extreme weather
  emergency as defined in Section 104.258, a gas utility shall
  observe the following priorities for the continued delivery of gas
  in descending order:
               (1)  deliveries of natural gas by gas utilities to
  residences, hospitals, schools, churches, and other human needs
  customers, and deliveries to local distribution companies that
  serve human needs customers.
               (2)  deliveries of natural gas by gas utilities to
  electric generation facilities that serve human needs customers.
               (3)  deliveries of natural gas by gas utilities to
  small industrial and regular commercial loads, defined as those
  customers using less than 3,000,000 cubic feet of gas per day, and
  delivery of gas for use as pilot lights or in accessory or auxiliary
  equipment essential to avoid serious damage to industrial plants;
               (4)  deliveries of natural gas by gas utilities to
  large users of gas for fuel as raw material where an alternate fuel
  source cannot be used and operation and plant production would be
  curtailed or completely cease when gas is curtailed;
               (5)  deliveries of natural gas by gas utilities to
  large users of gas for boiler fuel or other fuel users where an
  alternate fuel source can be used. This category is not to be
  determined by whether or not a user has actually installed
  alternate fuel facilities, but whether or not an alternate fuel
  could be used.
         SECTION 6.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution. If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2021.