S.B. No. 567

	AN ACT
	relating to rates for water service, to the transfer of functions
	relating to the economic regulation of water and sewer service from
	the Texas Commission on Environmental Quality to the Public Utility
	Commission of Texas, and to the duties of the Office of Public
	Utility Counsel regarding the economic regulation of water and
	sewer service.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  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.  Subsection (a), Section 5.311, Water Code, is
	amended to read as follows:
	(a)  The commission may delegate to an administrative law
	judge of the State Office of Administrative Hearings the
	responsibility to hear any matter before the commission [and to
	issue interlocutory orders related to interim rates under Chapter
	13].
	SECTION 3.  Section 5.507, Water Code, is amended to read as
	follows:
	Sec. 5.507.  EMERGENCY ORDER FOR OPERATION OF UTILITY THAT
	DISCONTINUES OPERATION OR IS REFERRED FOR APPOINTMENT OF RECEIVER.
	The commission or the Public Utility Commission of Texas may issue
	an emergency order appointing a willing person to temporarily
	manage and operate a utility under Section 13.4132. Notice of the
	action is adequate if the notice is mailed or hand delivered to the
	last known address of the utility's headquarters.
	SECTION 4.  Subsections (a) and (c), Section 5.508, Water
	Code, are amended to read as follows:
	(a)  Notwithstanding the requirements of Subchapter F,
	Chapter 13 [Section 13.187], the Public Utility Commission of Texas
	[commission] may authorize an emergency rate increase for a utility
	for which a person has been appointed under Section 5.507 or 13.4132
	[13.412] or for which a receiver has been appointed under Section
	13.412 [13.4132] if the increase is necessary to ensure the
	provision of continuous and adequate services to the utility's
	customers.  The Public Utility Commission of Texas shall consult
	with the commission as needed to carry out this section.
	(c)  Notwithstanding Section 5.505, an order may be issued
	under this section for a term not to exceed 15 months. The Public
	Utility Commission of Texas [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 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 5.  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 6.  Subsection (f), Section 11.041, Water Code, is
	amended to read as follows:
	(f)  The 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 utility commission may participate in the
	hearing if necessary to present evidence on the price or rental
	demanded for the available water. On completion of the hearing, the
	commission shall render a written decision.
	SECTION 7.  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.]
	SECTION 8.  Section 13.002, Water Code, is amended by
	amending Subdivisions (2), (18), and (22) and adding Subdivisions
	(4-a), (4-b), (4-c), and (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.
	(4-a)  "Class A utility" means a public utility that
	provides retail water or sewer utility service through 10,000 or
	more taps or connections.
	(4-b)  "Class B utility" means a public utility that
	provides retail water or sewer utility service through 500 or more
	taps or connections but fewer than 10,000 taps or connections.
	(4-c)  "Class C utility" means a public utility that
	provides retail water or sewer utility service through fewer than
	500 taps or connections.
	(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)  "Test year" means the most recent 12-month
	period, beginning on the first day of a calendar or fiscal year
	quarter, for which [representative] operating data for a retail
	public utility are available. [A utility rate filing must be based
	on a test year that ended less than 12 months before the date on
	which the utility made the rate filing.]
	(22-a)  "Utility commission" means the Public Utility
	Commission of Texas.
	SECTION 9.  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 10.  Section 13.011, Water Code, is amended to read
	as follows:
	Sec. 13.011.  EMPLOYEES. (a)  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 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 utility commission, the
	executive director, and the staff of the utility commission or
	commission, as appropriate, include:
	(1)  accumulation of evidence and other information
	from water and sewer utilities, [and] from the utility commission
	or commission, as appropriate, and the governing body of the
	respective agency, [commission and the board] and from other
	sources for the purposes specified by this chapter;
	(2)  preparation and presentation of evidence before
	the utility commission or commission, as appropriate, [commission]
	or its appointed examiner in proceedings;
	(3)  conducting investigations of water and sewer
	utilities under the jurisdiction of the utility commission or
	commission, as appropriate [commission];
	(4)  preparation of recommendations that the utility
	commission or commission, as appropriate, [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 utility commission or
	commission, as appropriate [commission];
	(6)  protection and representation of the public
	interest[, together with the public interest advocate,] before the
	utility commission or commission, as appropriate [commission]; and
	(7)  other activities that are reasonably necessary to
	enable the utility commission and the executive director and the
	staff of the utility commission or commission, as appropriate, to
	perform their duties.
	SECTION 11.  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 12.  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 independent Office of Public Utility Counsel
	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;
	(8)  may recommend legislation to the legislature that
	the office determines would positively affect the interests of
	residential and small commercial consumers; and
	(9)  may conduct consumer outreach and education
	programs for residential and small commercial consumers.
	(c)  This section does not:
	(1)  affect a duty the office is required to perform
	under other law; or
	(2)  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 13.  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 may 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.
	(c-1)  In addition to the powers and duties of the State
	Office of Administrative Hearings under Title 2, Utilities Code,
	the utility commission may delegate to an administrative law judge
	of the State Office of Administrative Hearings the responsibility
	and authority to issue interlocutory orders related to interim
	rates under this chapter.
	(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 14.  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 15.  Subsections (a), (b), (c), (e), (f), (g), (h),
	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, or within 30 days if the appeal
	relates to the rates of a Class A utility, 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.
	(h)  The utility commission may, on a motion by the utility
	commission [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.
	(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 16.  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 17.  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 18.  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 19.  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 20.  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 21.  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 22.  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 23.  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, including any information relating
	to a transaction between the utility and an affiliated interest
	inside or outside this state, to the extent that the transaction is
	subject to the utility commission's jurisdiction;
	(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 24.  Section 13.1325, Water Code, is amended to read
	as follows:
	Sec. 13.1325.  ELECTRONIC COPIES OF RATE INFORMATION.  On
	request, the utility commission [state agency with jurisdiction
	over rates charged by water and sewer utilities] shall provide, at a
	reasonable cost, electronic copies of or Internet access to all
	information provided to the utility commission [agency] under
	Sections 13.016 and[,] 13.043[,] and Subchapter F [13.187] to the
	extent that the information is available and is not confidential.
	Copies of all information provided to the utility commission
	[agency] shall be provided to the Office of Public Utility Counsel,
	on request, at no cost to the office.
	SECTION 25.  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 26.  Section 13.136, Water Code, is amended by
	amending Subsections (b) and (c) and adding Subsection (b-1) to
	read as follows:
	(b)  The utility commission by rule shall require each [Each]
	utility to annually [shall] file a service, [and] financial, and
	normalized earnings report in a form and at times specified by
	utility commission rule.  The report must include information
	sufficient to enable the utility commission to properly monitor
	utilities in this state.  The utility commission shall make
	available to the public information in the report the utility does
	not file as confidential.
	(b-1)  The utility commission shall provide copies of a
	report described by Subsection (b) that include information filed
	as confidential to the Office of Public Utility Counsel on request,
	at no cost to the office.
	(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 27.  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 28.  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 29.  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 30.  Subsections (b), (c), and (f), Section 13.1396,
	Water Code, are amended to read as follows:
	(b)  An affected utility shall submit to the office of
	emergency management of each county in which the utility has more
	than one customer, the utility commission [Public Utility
	Commission of Texas], and the office of emergency management of the
	governor a copy of:
	(1)  the affected utility's emergency preparedness plan
	approved under Section 13.1395; and
	(2)  the commission's notification to the affected
	utility that the plan is accepted.
	(c)  Each affected utility shall submit to the utility
	commission, each electric utility that provides transmission and
	distribution service to the affected utility, each retail electric
	provider that sells electric power to the affected utility, the
	office of emergency management of each county in which the utility
	has water and wastewater facilities that qualify for critical load
	status under rules adopted by the utility commission [Public
	Utility Commission of Texas, the Public Utility Commission of
	Texas], and the division of emergency management of the governor:
	(1)  information identifying the location and
	providing a general description of all water and wastewater
	facilities that qualify for critical load status; and
	(2)  emergency contact information for the affected
	utility, including:
	(A)  the person who will serve as a point of
	contact and the person's telephone number;
	(B)  the person who will serve as an alternative
	point of contact and the person's telephone number; and
	(C)  the affected utility's mailing address.
	(f)  Not later than May 1 of each year, each electric utility
	and each retail electric provider shall determine whether the
	facilities of the affected utility qualify for critical load status
	under rules adopted by the utility commission [Public Utility
	Commission of Texas].
	SECTION 31.  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 32.  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 33.  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 34.  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 35.  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 36.  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 37.  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 38.  Subsections (d) and (h), Section 13.185, Water
	Code, are amended to read as follows:
	(d)  Net income is the total revenues of the utility less all
	reasonable and necessary expenses as determined by the regulatory
	authority.  The regulatory authority shall:
	(1)  base a utility's expenses on historic test year
	information adjusted for known and measurable changes, as
	determined by utility commission rules; and
	(2)  determine expenses and revenues in a manner
	consistent with Subsections (e) through (h) of this section.
	(h)  The regulatory authority may not include for ratemaking
	purposes:
	(1)  legislative advocacy expenses, whether made
	directly or indirectly, including legislative advocacy expenses
	included in trade association dues;
	(2)  costs of processing a refund or credit under this
	subchapter [Section 13.187 of this chapter]; or
	(3)  any expenditure found by the regulatory authority
	to be unreasonable, unnecessary, or not in the public interest,
	including executive salaries, advertising expenses, legal
	expenses, and civil penalties or fines.
	SECTION 39.  Section 13.187, Water Code, is amended to read
	as follows:
	Sec. 13.187.  CLASS A UTILITIES:  STATEMENT OF INTENT TO
	CHANGE RATES; HEARING; DETERMINATION OF RATE LEVEL. (a)  This
	section applies only to a Class A utility.
	(a-1)  A utility may not make changes in its rates except by
	sending by mail or e-mail [delivering] a statement of intent to each
	ratepayer and to [with] the regulatory authority having original
	jurisdiction at least 35 [60] days before the effective date of the
	proposed change. The utility may send the statement of intent to a
	ratepayer by e-mail only if the ratepayer has agreed to receive
	communications electronically.  The effective date of the new rates
	must be the first day of a billing period, and the new rates may not
	apply to service received before the effective date of the new
	rates. The statement of intent must include:
	(1)  the information required by the regulatory
	authority's rules;
	(2)  a billing comparison regarding the existing water
	rate and the new water rate computed for the use of:
	(A)  10,000 gallons of water; and
	(B)  30,000 gallons of water; [and]
	(3)  a billing comparison regarding the existing sewer
	rate and the new sewer rate computed for the use of 10,000 gallons,
	unless the utility proposes a flat rate for sewer services; and
	(4)  a description of the process by which a ratepayer
	may intervene in the ratemaking proceeding.
	(b)  The utility shall mail, send by e-mail, or deliver a [A]
	copy of the statement of intent [shall be mailed, sent by e-mail, or
	delivered] to the Office of Public Utility Counsel, appropriate
	offices of each affected municipality, and [to] any other affected
	persons as required by the regulatory authority's rules.
	(c)  When the statement of intent is delivered, the utility
	shall file with the regulatory authority an application to change
	rates.  The application must include information the regulatory
	authority requires by rule and any appropriate cost and rate
	schedules and written testimony supporting the requested rate
	increase.  If the utility fails to provide within a reasonable time
	after the application is filed the necessary documentation or other
	evidence that supports the costs and expenses that are shown in the
	application, the regulatory authority may disallow the
	nonsupported costs or expenses.
	(d)  Except as provided by Subsections [Subsection] (d-1)
	and (e), 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].
	(d-1)  After written notice to the utility, a local
	regulatory authority may suspend the effective date of a rate
	change for not more than 90 days from the proposed effective date[,
	except that the suspension shall be extended by two days for each
	day a hearing exceeds 15 days].  If the local regulatory authority
	does not make a final determination on the proposed rate before the
	expiration of the [applicable] suspension period, the proposed rate
	shall be considered approved.  This [The] approval is subject to the
	authority of the local regulatory authority thereafter to continue
	[authority's continuation of] a hearing in progress.
	(e)  After written notice to the utility, the utility
	commission may suspend the effective date of a rate change for not
	more than 150 days from the proposed effective date. If the utility
	commission does not make a final determination on the proposed rate
	before the expiration of the suspension period, the proposed rate
	shall be considered approved. This approval is subject to the
	authority of the utility commission thereafter to continue a
	hearing in progress [If, before the 91st day after the effective
	date of the rate change, the regulatory authority receives a
	complaint from any affected municipality, or from the lesser of
	1,000 or 10 percent of the ratepayers of the utility over whose
	rates the regulatory authority has original jurisdiction, the
	regulatory authority shall set the matter for hearing].
	(e-1)  The 150-day period described by Subsection (e) shall
	be extended two days for each day a hearing exceeds 15 days.
	(f)  The regulatory authority shall, not later than the 30th
	day after the effective date of the change, begin a hearing to
	determine the propriety of the change [may set the matter for
	hearing on its own motion at any time within 120 days after the
	effective date of the rate change].  If the regulatory authority is
	the utility commission, the utility commission may refer the matter
	to the State Office of Administrative Hearings as provided by
	utility commission rules [If more than half of the ratepayers of the
	utility receive service in a county with a population of more than
	3.3 million, the hearing   must be held at a location in that county].
	(g)  A local regulatory authority [The] hearing described by
	this section may be informal.
	(g-1)  If the regulatory authority is the utility
	commission, the utility commission shall give reasonable notice of
	the hearing, including notice to the governing body of each
	affected municipality and county. The utility is not required to
	provide a formal answer or file any other formal pleading in
	response to the notice, and the absence of an answer does not affect
	an order for a hearing.
	(h)  If, after hearing, the regulatory authority finds the
	rates currently being charged or those proposed to be charged are
	unreasonable or in violation of law, the regulatory authority shall
	determine the rates to be charged by the utility and shall fix the
	rates by order served on the utility.
	(i)  A utility may put a changed rate into effect throughout
	the area in which the utility sought to change its rates, including
	an area over which the utility commission is exercising appellate
	or original jurisdiction, by filing a bond with the utility
	commission if the suspension period has been extended under
	Subsection (e-1) and the utility commission fails to make a final
	determination before the 151st day after the date the rate change
	would otherwise be effective.
	(j)  The bonded rate may not exceed the proposed rate.  The
	bond must be payable to the utility commission in an amount, in a
	form, and with a surety approved by the utility commission and
	conditioned on refund [The regulatory authority, pending final
	action in a rate proceeding, may order the utility to deposit all or
	part of the rate increase received or to be received into an escrow
	account with a financial institution approved by the regulatory
	authority].
	(k)  Unless otherwise agreed to by the parties to the rate
	proceeding, the utility shall refund or credit against future
	bills:
	(1)  all sums collected under the bonded rates [during
	the pendency of the rate proceeding] in excess of the rate finally
	ordered; and
	(2)  [plus] interest on those sums at the current
	interest rate as determined by the regulatory authority.
	[(j)     For good cause shown, the regulatory authority may
	authorize the release of funds to the utility from the escrow
	account during the pendency of the proceeding.
	[(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 commission.]
	(l)  At any time during the pendency of the rate proceeding
	the regulatory authority may fix interim rates to remain in effect
	during the applicable suspension period under Subsection (d-1) or
	Subsections (e) and (e-1) or until a final determination is made on
	the proposed rate.  If the regulatory authority does not establish
	interim rates, the rates in effect when the application described
	by Subsection (c) was filed continue in effect during the
	suspension period.
	(m)  If the regulatory authority sets a final rate that is
	higher than the interim rate, the utility shall be allowed to
	collect the difference between the interim rate and final rate
	unless otherwise agreed to by the parties to the rate proceeding.
	(n)  For good cause shown, the regulatory authority may at
	any time during the proceeding require the utility to refund money
	collected under a proposed rate before the rate was suspended or an
	interim rate was established to the extent the proposed rate
	exceeds the existing rate or the interim rate.
	(o)  If a regulatory authority other than the utility
	commission establishes interim rates or bonded rates [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 bonded [escrowed] rates or the rates
	are automatically approved as requested by the utility.
	(p)  Except to implement a rate adjustment provision
	approved by the regulatory authority by rule or ordinance, as
	applicable, or to adjust the rates of a newly acquired utility
	system, a utility or two or more utilities under common control and
	ownership may not file a statement of intent to increase its rates
	more than once in a 12-month period, unless the regulatory
	authority determines that a financial hardship exists. If the
	regulatory authority requires the utility to deliver a corrected
	statement of intent, the utility is not considered to be in
	violation of the 12-month filing requirement.
	SECTION 40.  Subchapter F, Chapter 13, Water Code, is
	amended by adding Sections 13.1871 and 13.1872 to read as follows:
	Sec. 13.1871.  CLASS B UTILITIES:  STATEMENT OF INTENT TO
	CHANGE RATES; HEARING; DETERMINATION OF RATE LEVEL.  (a)  Except as
	provided by Section 13.1872, this section applies only to a Class B
	utility.
	(b)  A utility may not make changes in its rates except by
	sending by mail or e-mail a statement of intent to each ratepayer
	and to the regulatory authority having original jurisdiction at
	least 35 days before the effective date of the proposed change. The
	utility may send the statement of intent to a ratepayer by e-mail
	only if the ratepayer has agreed to receive communications
	electronically.  The effective date of the new rates must be the
	first day of a billing period, and the new rates may not apply to
	service received before the effective date of the new rates. The
	statement of intent must include:
	(1)  the information required by the regulatory
	authority's rules;
	(2)  a billing comparison regarding the existing water
	rate and the new water rate computed for the use of:
	(A)  10,000 gallons of water; and
	(B)  30,000 gallons of water;
	(3)  a billing comparison regarding the existing sewer
	rate and the new sewer rate computed for the use of 10,000 gallons,
	unless the utility proposes a flat rate for sewer services; and
	(4)  a description of the process by which a ratepayer
	may file a complaint under Subsection (i).
	(c)  The utility shall mail, send by e-mail, or deliver a
	copy of the statement of intent to the appropriate offices of each
	affected municipality and to any other affected persons as required
	by the regulatory authority's rules.
	(d)  When the statement of intent is delivered, the utility
	shall file with the regulatory authority an application to change
	rates.  The application must include information the regulatory
	authority requires by rule and any appropriate cost and rate
	schedules supporting the requested rate increase.  In adopting
	rules relating to the information required in the application, the
	utility commission shall ensure that a utility can file a less
	burdensome and complex application than is required of a Class A
	utility.  If the utility fails to provide within a reasonable time
	after the application is filed the necessary documentation or other
	evidence that supports the costs and expenses that are shown in the
	application, the regulatory authority may disallow the
	nonsupported costs or expenses.
	(e)  Except as provided by Subsection (f) or (g), 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).
	(f)  After written notice to the utility, a local regulatory
	authority may suspend the effective date of a rate change for not
	more than 90 days from the proposed effective date.  If the local
	regulatory authority does not make a final determination on the
	proposed rate before the expiration of the suspension period, the
	proposed rate shall be considered approved.  This approval is
	subject to the authority of the local regulatory authority
	thereafter to continue a hearing in progress.
	(g)  After written notice to the utility, the utility
	commission may suspend the effective date of a rate change for not
	more than 205 days from the proposed effective date.  If the utility
	commission does not make a final determination on the proposed rate
	before the expiration of the suspension period, the proposed rate
	shall be considered approved.  This approval is subject to the
	authority of the utility commission thereafter to continue a
	hearing in progress.
	(h)  The 205-day period described by Subsection (g) shall be
	extended by two days for each day a hearing exceeds 15 days.
	(i)  If, before the 91st day after the effective date of the
	rate change, the regulatory authority receives a complaint from any
	affected municipality, or from the lesser of 1,000 or 10 percent of
	the ratepayers of the utility over whose rates the regulatory
	authority has original jurisdiction, the regulatory authority
	shall set the matter for hearing.
	(j)  If the regulatory authority receives at least the number
	of complaints from ratepayers required for the regulatory authority
	to set a hearing under Subsection (i), 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 (h), the proposed rate may not be suspended for longer
	than:
	(1)  90 days by a local regulatory authority; or
	(2)  205 days by the utility commission.
	(k)  The regulatory authority may set the matter for hearing
	on its own motion at any time within 120 days after the effective
	date of the rate change.
	(l)  The hearing may be informal.
	(m)  The regulatory authority shall give reasonable notice
	of the hearing, including notice to the governing body of each
	affected municipality and county. The utility is not required to
	provide a formal answer or file any other formal pleading in
	response to the notice, and the absence of an answer does not affect
	an order for a hearing.
	(n)  The utility shall mail notice of the hearing to each
	ratepayer before the hearing.  The notice must include a
	description of the process by which a ratepayer may intervene in the
	ratemaking proceeding.
	(o)  If, after hearing, the regulatory authority finds the
	rates currently being charged or those proposed to be charged are
	unreasonable or in violation of law, the regulatory authority shall
	determine the rates to be charged by the utility and shall fix the
	rates by order served on the utility.
	(p)  A utility may put a changed rate into effect throughout
	the area in which the utility sought to change its rates, including
	an area over which the utility commission is exercising appellate
	or original jurisdiction, by filing a bond with the utility
	commission if the suspension period has been extended under
	Subsection (h) and the utility commission fails to make a final
	determination before the 206th day after the date the rate change
	would otherwise be effective.
	(q)  The bonded rate may not exceed the proposed rate.  The
	bond must be payable to the utility commission in an amount, in a
	form, and with a surety approved by the utility commission and
	conditioned on refund.
	(r)  Unless otherwise agreed to by the parties to the rate
	proceeding, the utility shall refund or credit against future
	bills:
	(1)  all sums collected under the bonded rates in
	excess of the rate finally ordered; and
	(2)  interest on those sums at the current interest
	rate as determined by the regulatory authority.
	(s)  At any time during the pendency of the rate proceeding
	the regulatory authority may fix interim rates to remain in effect
	during the applicable suspension period under Subsection (f) or
	Subsections (g) and (h) or until a final determination is made on
	the proposed rate.  If the regulatory authority does not establish
	interim rates, the rates in effect when the application described
	by Subsection (e) was filed continue in effect during the
	suspension period.
	(t)  If the regulatory authority sets a final rate that is
	higher than the interim rate, the utility shall be allowed to
	collect the difference between the interim rate and final rate
	unless otherwise agreed to by the parties to the rate proceeding.
	(u)  For good cause shown, the regulatory authority may at
	any time during the proceeding require the utility to refund money
	collected under a proposed rate before the rate was suspended or an
	interim rate was established to the extent the proposed rate
	exceeds the existing rate or the interim rate.
	(v)  If a regulatory authority other than the utility
	commission establishes interim rates or bonded rates, 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 bonded rates or the rates are automatically
	approved as requested by the utility.
	(w)  Except to implement a rate adjustment provision
	approved by the regulatory authority by rule or ordinance, as
	applicable, or to adjust the rates of a newly acquired utility
	system, a utility or two or more utilities under common control and
	ownership may not file a statement of intent to increase its rates
	more than once in a 12-month period, unless the regulatory
	authority determines that a financial hardship exists. If the
	regulatory authority requires the utility to deliver a corrected
	statement of intent, the utility is not considered to be in
	violation of the 12-month filing requirement.
	Sec. 13.1872.  CLASS C UTILITIES:  RATE ADJUSTMENT.
	(a)  This section applies only to a Class C utility.
	(b)  For purposes of this section, "price index" means an
	appropriate price index designated annually by the utility
	commission for the purposes of this section.
	(c)  A utility may not make changes in its rates except by:
	(1)  filing an application for a rate adjustment under
	the procedures described by Subsection (e) and sending by mail, or
	by e-mail if the ratepayer has agreed to receive communications
	electronically, a notice to each ratepayer describing the proposed
	rate adjustment at least 30 days before the effective date of the
	proposed change; or
	(2)  complying with the procedures to change rates
	described by Section 13.1871.
	(d)  The utility shall mail, send by e-mail, or deliver a
	copy of the application to the appropriate offices of each affected
	municipality and to any other affected persons as required by the
	regulatory authority's rules.
	(e)  The utility commission by rule shall adopt procedures to
	allow a utility to receive without a hearing an annual rate
	adjustment based on changes in the price index.  The rules must:
	(1)  include standard language to be included in the
	notice described by Subsection (c)(1) describing the rate
	adjustment process; and
	(2)  provide that an annual rate adjustment described
	by this section may not result in a rate increase to any class or
	category of ratepayer of more than the lesser of:
	(A)  five percent; or
	(B)  the percentage increase in the price index
	between the year preceding the year in which the utility requests
	the adjustment and the year in which the utility requests the
	adjustment.
	(f)  A utility may adjust the utility's rates using the
	procedures adopted under Subsection (e) not more than once each
	year and not more than four times between rate proceedings
	described by Section 13.1871.
	SECTION 41.  Section 13.188, Water Code, is amended to read
	as follows:
	Sec. 13.188.  ADJUSTMENT FOR CHANGE IN ENERGY COSTS.  (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.
	(b)  Notwithstanding any other provision to the contrary,
	this adjustment is an uncontested matter not subject to a contested
	case hearing.  However, the utility commission [executive director]
	shall hold an uncontested public meeting:
	(1)  on the request of a member of the legislature who
	represents the area served by the water and sewer utility; or
	(2)  if the utility commission [executive director]
	determines that there is substantial public interest in the matter.
	(c)  A proceeding under this section is not a rate case and
	Sections [Section] 13.187, 13.1871, and 13.1872 do [does] not
	apply.
	SECTION 42.  Subsections (a), (d), and (e), 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.
	(e)  The utility commission by rule shall develop a
	standardized method for determining under Section 13.246(f) which
	of two or more retail public utilities or water supply or sewer
	service corporations that 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 is more capable financially, managerially, and technically of
	providing continuous and adequate service. In this subsection,
	"economically distressed area" has the meaning assigned by Section
	15.001.
	SECTION 43.  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 44.  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
	utility 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 45.  Subsections (b), (c), (c-1), (c-2), (c-3), and
	(e), Section 13.245, Water Code, 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 46.  Subsections (b) and (c), Section 13.2451, Water
	Code, are 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.
	(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 47.  Section 13.246, Water Code, is amended to read
	as follows:
	Sec. 13.246.  NOTICE AND HEARING; ISSUANCE OR REFUSAL;
	FACTORS CONSIDERED. (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.
	(e)  Where applicable, in addition to the other factors in
	this section the utility commission shall consider the efforts of
	the applicant:
	(1)  to extend service to any economically distressed
	areas located within the service areas certificated to the
	applicant; and
	(2)  to enforce the rules adopted under Section 16.343.
	(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.
	(g)  In this section, "economically distressed area" has the
	meaning assigned by Section 15.001.
	(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 or commission
	rules by the water or sewer system of another person.
	(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 48.  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 49.  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 50.  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 51.  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 52.  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 utility 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 53.  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 54.  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 55.  Subsections (a), (a-1), (a-2), (a-3), (a-4),
	(a-6), (a-8), (b), (c), (d), (e), (f), (g), (g-1), and (h), Section
	13.254, Water Code, 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 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 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-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.
	(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 or commission rules by a water or sewer system of
	another person.
	SECTION 56.  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 57.  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 58.  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 utility commission [executive
	director] evidence of the recording.
	(s)  Each county shall accept and file in its real property
	records a utility service provider's map presented to the county
	clerk under this section if the map meets filing requirements, does
	not exceed 11 inches by 17 inches in size, and is accompanied by the
	appropriate fee.  The recording required by this section must be
	completed not later than the 31st day after the date a utility
	service provider receives a final order from the 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 59.  Subsections (a), (b), (c), (d), (e), (f), and
	(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 utility
	commission [executive director] 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 utility commission [executive director] shall notify
	all known parties to the transaction and the Office of Public
	Utility Counsel whether [of] the utility commission will [executive
	director's decision whether to request that the commission] hold a
	public hearing to determine if the transaction will serve the
	public interest. The utility commission may hold [executive
	director 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 utility commission holds [executive director
	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 utility commission
	[executive director] notifies the utility or water supply or sewer
	service corporation that a hearing will not be held [requested].
	(g)  If the utility commission decides to hold 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 60.  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 utility commission [executive director] may
	[request that the commission] hold a public hearing on the
	transaction if the utility commission [executive director]
	believes that a criterion prescribed by Section 13.301(e) applies.
	(e)  Unless the utility commission holds [executive director
	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 utility commission
	[executive director] notifies the person or utility that a hearing
	will not be held [requested].
	(f)  If the utility commission decides to hold 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 61.  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 62.  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 63.  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 64.  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 65.  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 utility commission [executive director]
	determines that the utility cannot obtain wholesale water service
	from another source at a lower cost than from the affiliate.
	SECTION 66.  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 67.  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 68.  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 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 utility commission or the executive director
	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 69.  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 70.  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 71.  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 72.  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 73.  Subsections (a), (b), and (d), Section 13.4132,
	Water Code, are amended to read as follows:
	(a)  The utility commission or the commission, after
	providing to the utility notice and an opportunity to be heard by
	the commissioners at a utility commission or commission meeting,
	may authorize a willing person to temporarily manage and operate a
	utility if the utility:
	(1)  has discontinued or abandoned operations or the
	provision of services; or
	(2)  has been or is being referred to the attorney
	general for the appointment of a receiver under Section 13.412.
	(b)  The utility commission or the commission may appoint a
	person under this section by emergency order, and notice of the
	action is adequate if the notice is mailed or hand-delivered to the
	last known address of the utility's headquarters.
	(d)  This section does not affect the authority of the
	utility commission or the commission to pursue an enforcement claim
	against a utility or an affiliated interest.
	SECTION 74.  Subsections (a) and (c), Section 13.4133, Water
	Code, are amended to read as follows:
	(a)  Notwithstanding the requirements of Subchapter F
	[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. 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 75.  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 76.  Subsections (a), (b), (c), (d), (e), (f), (g),
	(h), (i), (j), (k), and (m), Section 13.4151, Water Code, are
	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.
	(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 utility commission
	or the executive director of the commission concludes that a
	violation has occurred, the utility commission or the executive
	director 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 utility commission or the executive director
	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 appropriate agency
	[commission].
	(d)  Not later than the 10th day after the date on which the
	report is issued, 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 appropriate agency [commission]
	written consent to the [executive director's] report described by
	Subsection (c), 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 (c) [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 appropriate agency [commission]
	shall call a hearing and give notice of the hearing. As a result of
	the hearing, the appropriate 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 appropriate
	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 appropriate agency
	[commission] finds that a violation has occurred and has assessed a
	penalty, that agency [the 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 utility
	commission or the commission is required to give notice of a penalty
	under this subsection or Subsection (f) [of this section], the
	appropriate agency [commission] shall file notice of that 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 utility commission's or 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
	appropriate agency [commission] for placement in an escrow account;
	or
	(B)  post with the appropriate 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 utility commission or the 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 appropriate agency [commission] or the executive
	director of that agency may forward the matter to the attorney
	general for enforcement.
	(k)  Judicial review of the order or decision of the utility
	commission or the 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 utility
	commission or the commission may compromise, modify, extend the
	time for payment of, or remit, with or without condition, any
	penalty imposed under this section.
	SECTION 77.  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 78.  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 79.  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 80.  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 utility commission [executive director]
	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 81.  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 82.  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 83.  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 84.  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 85.  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 this chapter [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 this chapter
	[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 this chapter [Chapter 13] with respect to such other
	person or municipality.
	SECTION 86.  Subsection (c), Section 49.352, Water Code, is
	amended to read as follows:
	(c)  For purposes of this section, a municipality may obtain
	single certification in the manner provided by Section 13.255,
	except that the municipality may file an application with the
	Public Utility Commission of Texas [commission] to grant single
	certification immediately after the municipality provides notice
	of intent to provide service as required by Section 13.255(b).
	SECTION 87.  Subsection (e), Section 552.047, Local
	Government Code, is amended to read as follows:
	(e)  Users residing within the established service area, but
	outside the municipality's boundaries, may appeal rates
	established for drainage charges under [to the Texas Natural
	Resource Conservation Commission as authorized by] Section
	13.043(b), [of the] Water Code.
	SECTION 88.  Subsection (b), Section 7201.004, Special
	District Local Laws Code, is amended to read as follows:
	(b)  This section does not apply to:
	(1)  rules or regulations concerning potable water
	quality standards; or
	(2)  conflicts relating to service areas or
	certificates issued to the corporation or district by the Public
	Utility Commission of Texas or the Texas Commission on
	Environmental Quality.
	SECTION 89.  Subsection (c), Section 7201.005, Special
	District Local Laws Code, is amended to read as follows:
	(c)  District boundaries may be modified in accordance with
	Chapters 13 and 49, Water Code, except that the boundaries must
	include all territory in any area included under a certificate of
	convenience and necessity issued by the Public Utility Commission
	of Texas or the Texas Commission on Environmental Quality to the
	district.
	SECTION 90.  Section 7201.102, Special District Local Laws
	Code, is amended to read as follows:
	Sec. 7201.102.  PROVISION OF SERVICE. The district shall at
	all times operate and construct necessary improvements within the
	certificated areas established by the Public Utility Commission of
	Texas or the Texas Commission on Environmental Quality [commission]
	to provide uninterrupted, continuous, and adequate service to
	existing and future customers for water, sewer, and contract
	services.
	SECTION 91.  Subsection (b), Section 8363.106, Special
	District Local Laws Code, is amended to read as follows:
	(b)  In relation to a retail public utility that provides
	water or sewer service to all or part of the area of the district
	under a certificate of public convenience and necessity, the
	district may exercise the powers given to a municipality provided
	by Section 13.255, Water Code, as if the district were a
	municipality that had annexed the area of the district.  The Public
	Utility Commission of Texas [commission] shall grant single
	certification as to the city as provided by Section 13.255(c),
	Water Code, in the event that the district applies for the
	certification on the city's behalf in the manner provided by
	Section 13.255(b), Water Code.
	SECTION 92.  Subsection (a), Section 8363.251, Special
	District Local Laws Code, is amended to read as follows:
	(a)  The city may dissolve the district by ordinance after
	provision is made for all debts incurred by the district if one or
	more of the following does not occur:
	(1)  on or before the 90th day after the effective date
	of the Act enacting this chapter, the city receives one or more
	petitions requesting annexation of all territory in the district
	remaining in the extraterritorial jurisdiction of the city;
	(2)  on or before the last day of the ninth month after
	the effective date of the Act enacting this chapter, the city adopts
	one or more ordinances annexing all territory in the district
	remaining in the city's extraterritorial jurisdiction;
	(3)  on or before the last day of the third year after
	the effective date of the Act enacting this chapter, the Public
	Utility Commission of Texas [commission] issues an order approving
	the sale and transfer of a certificate of public convenience and
	necessity authorizing the city to provide retail water service to
	territory in the district; or
	(4)  by the end of the fifth year after the effective
	date of the Act enacting this chapter, the district has completed
	construction of internal streets and water and sanitary sewer
	facilities sufficient to serve at least 100 residential lots in the
	district.
	SECTION 93.  Section 8801.201, Special District Local Laws
	Code, is amended to read as follows:
	Sec. 8801.201.  APPEAL OF SURFACE WATER RATES. (a)  A
	person who is required to convert to surface water under this
	chapter and who purchases that water supply wholesale from a
	political subdivision as defined by Section 12.013(b), Water Code,
	may appeal to the Public Utility Commission of Texas [commission]
	the rates the political subdivision charges to the person. Chapter
	12, Water Code, and rules adopted under that chapter apply to an
	appeal under this section.
	(b)  The Public Utility Commission of Texas [commission]
	shall hear the appeal not later than the 180th day after the date
	the appeal is filed.
	(c)  The Public Utility Commission of Texas [commission]
	shall issue a final decision on the appeal not later than the 60th
	day after the date the hearing ends.
	SECTION 94.  Subdivision (1), Section 8803.151, Special
	District Local Laws Code, is amended to read as follows:
	(1)  "Commission" means the Public Utility Commission
	of Texas [Commission on Environmental Quality].
	SECTION 95.  Subdivision (1), Section 8808.151, Special
	District Local Laws Code, is amended to read as follows:
	(1)  "Commission" means the Public Utility Commission
	of Texas [Commission on Environmental Quality].
	SECTION 96.  (a)  On September 1, 2014, 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 service,
	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 Section
	12.013 and Chapter 13, Water Code, as provided by this Act;
	(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 Act; 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
	Act and all funds appropriated by the legislature for that power,
	duty, function, program, or activity.
	(b)  The Texas Commission on Environmental Quality shall
	continue to carry out the commission's duties related to the
	economic regulation of water and sewer service under the law as it
	existed immediately before the effective date of this Act until
	September 1, 2014, and the former law is continued in effect for
	that purpose.
	(c)  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 Act;
	(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 economic regulation of water and sewer
	service under Section 12.013 and Chapter 13, Water Code, as amended
	by this Act; 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 service
	under Section 12.013 and Chapter 13, Water Code, as amended by this
	Act, from the Texas Commission on Environmental Quality to the
	Public Utility Commission of Texas.
	(d)  The memorandum of understanding under this section:
	(1)  is not required to be adopted by rule under Section
	5.104, Water Code; and
	(2)  must be completed by August 1, 2014.
	(e)  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 economic regulation of water and sewer
	service under Section 12.013 and Chapter 13, Water Code, as amended
	by this Act.
	(f)  The Texas Commission on Environmental Quality and the
	Public Utility Commission of Texas shall periodically update the
	Office of Public Utility Counsel on the anticipated contents of the
	memorandum of understanding under this section during the
	development of the memorandum.
	(g)  On or after September 1, 2013, the Office of Public
	Utility Counsel may initiate or intervene in a contested case
	before the Texas Commission on Environmental Quality that the
	office would be entitled to initiate or intervene in if the case
	were before the Public Utility Commission of Texas, as authorized
	by Chapter 13, Water Code, as amended by this Act.
	(h)  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 may
	consult with the Office of Public Utility Counsel 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.
	(i)  The transition team appointed under Subsection (h) of
	this section shall provide monthly updates to the executive
	directors of the Texas Commission on Environmental Quality and the
	Public Utility Commission of Texas on the implementation of this
	Act and provide a final report on the implementation to the
	executive directors not later than September 1, 2014.
	(j)  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 Act 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.  Notwithstanding any other law,
	beginning September 1, 2013, the Public Utility Commission of Texas
	may propose rules, forms, policies, and procedures related to a
	function to be transferred to the Public Utility Commission of
	Texas under this Act.
	(k)  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 Act to Section 12.013 and Chapter
	13, Water Code, not later than September 1, 2015.
	(l)  An affiliate of a Class A utility, as those terms are
	defined by Section 13.002, Water Code, as amended by this Act, may
	not file an application for a rate change on or after the effective
	date of this Act unless the affiliated Class A utility has filed for
	a rate change on or after that date.  In relation to the application
	filed by the affiliate of the Class A utility, the Public Utility
	Commission of Texas:
	(1)  may not approve the rate change application until
	the Public Utility Commission of Texas approves the rate change
	application filed by the affiliated Class A utility; and
	(2)  may require the affiliate to comply with the Class
	A utility rate change process prescribed by Section 13.187, Water
	Code, regardless of whether the affiliate is classified as a Class
	A, B, or C utility under Section 13.002, Water Code, as amended by
	this Act.
	SECTION 97.  This Act takes effect September 1, 2013.
	______________________________	______________________________
	President of the Senate	Speaker of the House
	I hereby certify that S.B. No. 567 passed the Senate on
	April 3, 2013, by the following vote: Yeas 31, Nays 0; and that
	the Senate concurred in House amendments on May 13, 2013, by the
	following vote: Yeas 31, Nays 0.
	______________________________
	Secretary of the Senate
	I hereby certify that S.B. No. 567 passed the House, with
	amendments, on May 3, 2013, by the following vote: Yeas 141,
	Nays 0, one present not voting.
	______________________________
	Chief Clerk of the House
	Approved:
	______________________________
	Date
	______________________________
	Governor