BILL ANALYSIS

Senate Research Center	H.B. 1318
89R1848 CXP-D	By: Guillen (Flores)
	Water, Agriculture and Rural Affairs
	5/8/2025
	Engrossed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Over the years, concerns have been raised regarding the lack of due process for the granting of single certification by the Public Utility Commission of Texas (PUC) to a municipality for the provision of retail utility service to an incorporated or annexed area that is being served by a retail public utility.

The Texas Legislature has sought to level the scales and provide due process to the decertification�responding to numerous cases where utilities received minimal or no compensation for their investments, as the interpretation of what constitutes compensable property is often restrictive. The current framework grants municipalities significant power to assume control over service areas with limited recourse for primarily rural retail utilities, raising issues regarding the equitable treatment of these water providers.

H.B. 1318 simply clarifies the Water Code Section 13.255 compensation provisions when a municipality files a petition with the PUC to take over a portion of a retail water utility's certificated service territory. Specifically, S.B. 947 states that the water utility will receive adequate and just compensation from the PUC for any adverse impacts to its remaining infrastructure as a result of the decertification of a portion of its service territory. The bill does not eliminate a municipality's ability to decertify.

H.B. 1318 amends current law relating to a certificate of public convenience and necessity to provide water or sewer service in an area incorporated or annexed by a municipality.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Sections 13.255(c), (d), (e), (f), and (i), Water Code, as follows:

(c) Requires the Public Utility Commission (PUC), if the municipality in its application for single certification has requested the transfer of specified property of the retail public utility to the municipality or to a franchised utility, to also determine in its order the adequate and just compensation to be paid, under the provisions of Section 13.255 (Single Certification in Incorporated or Annexed Areas), for the transferred property and damages to or adverse effects on property remaining in the ownership of the retail public utility after single certification, rather than 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.

Deletes existing text requiring the PUC to determine in its order the monetary amount that is adequate and just to compensate the retail public utility for any of the retail public utility's property the PUC determines is being rendered useless or valueless by the single certification.

(d) Requires the district court of Travis County, in the event the final order of the PUC is not appealed within 30 days, to render a judgment that transfers to the municipally owned utility or franchised utility title to certain property as delineated by the PUC's final order, rather than certain property as delineated by the PUC's final order and property determined by the PUC to be rendered useless or valueless by the granting of single certification, and orders payment to the retail public utility of adequate and just compensation, rather than just compensation for the property, as determined by the PUC in its final order under Subsection (c).

(e) Requires the court, after a hearing, if the court determines that the municipally owned utility or franchised utility is entitled to single certification under the provisions of this section, to enter a judgment that orders payment in accordance with Subsection (g) (relating to determining the value of real property owned and utilized by the retail public utility for its facilities) to the retail public utility of adequate and just compensation for the property transferred, and for the property remaining in the ownership of the retail public utility after single certification that is damaged or adversely affected, as determined by the court or jury. Makes a conforming change.

(f) Authorizes the municipality or franchised utility, after the judgment of the court is entered, to take possession of transferred, rather than condemned, property pending appeal if certain conditions are met. Requires the municipality or franchised utility, to provide security in the event an appellate court, or the trial court in a new trial or on remand, awards compensation in excess of the original award, as the case may be, to deposit in the registry of the court an additional sum in the amount of the award, or a surety bond in the same amount issued by a surety company qualified to do business in this state, conditioned to secure the payment of an award of compensation, rather than damages, in excess of the original award of the trial court.

(i) Provides that, in the event that the municipality files an application for single certification on behalf of a franchised utility, a municipality is required to be joined in such application by such franchised utility, and the franchised utility is required to make all payments required in the court's judgment to adequately and justly compensate the retail public utility for the transfer of property to such franchised utility and for the property remaining in the ownership of the retail public utility after single certification that is damaged or adversely affected, rather than adequately and justly compensate the retail public utility for any taking or damaging of property and for the transfer of property to such franchised utility.

SECTION 2. Makes application of this Act prospective.

SECTION 3. Effective date: September 1, 2025.