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