S.B. No. 776
  relating to the operations of a municipally owned utility or
  municipal power agency; providing authority to issue bonds.
         SECTION 1.  Section 37.051, Utilities Code, is amended by
  adding Subsections (g), (h), and (i) to read as follows:
         (g)  A municipally owned utility or a municipal power agency
  created under Chapter 163 may not directly or indirectly construct,
  install, or extend a transmission facility outside of the municipal
  boundaries of the municipality that owns the municipally owned
  utility, or the power agency's boundaries, which for the purposes
  of this subsection consist of the municipal boundaries of the
  participating public entities, unless the municipally owned
  utility or power agency first obtains from the commission, through
  the application process provided by Section 37.053, a certificate
  that states that the public convenience and necessity requires or
  will require the transmission facility.  Section 37.056 applies to
  an application under this subsection.  This subsection does not
  apply to a transmission facility placed in service after September
  1, 2015, that is developed to interconnect a new natural gas
  generation facility to the ERCOT transmission grid and for which,
  on or before January 1, 2015, a municipally owned utility was
  contractually obligated to purchase at least 190 megawatts of
         (h)  The commission shall adopt rules as necessary to provide
  exemptions to the application of Subsection (g) that are similar to
  the exemptions to the application of this section to an electric
  utility, including exemptions for:
               (1)  upgrades to an existing transmission line that do
  not require any additional land, right-of-way, easement, or other
  property not owned by the municipally owned utility; and
               (2)  the construction, installation, or extension of a
  transmission facility that is entirely located not more than 10
  miles outside of a municipally owned utility's certificated service
  area that occurs before September 1, 2021.
         (i)  The commission, not later than the 185th day after the
  date the application is filed, shall approve an application filed
  under Subsection (g) for a facility that is to be constructed under
  an interconnection agreement appended to an offer of settlement
  approved in a final order of the Federal Energy Regulatory
  Commission that was issued in Docket No. TX11-01-001 on or before
  December 31, 2014, directing physical connection between the ERCOT
  and SERC regions under Sections 210, 211, and 212 of the Federal
  Power Act (16 U.S.C. Sections 824i, 824j, and 824k).  In approving
  the application, the commission may prescribe reasonable
  conditions to protect the public interest that are consistent with
  the final order of the Federal Energy Regulatory Commission.
         SECTION 2.  Subchapter A, Chapter 35, Utilities Code, is
  amended by adding Section 35.009 to read as follows:
  CERTAIN FACILITIES. A municipally owned utility that is required
  to apply for a certificate of public convenience and necessity to
  construct, install, or extend a transmission facility within ERCOT
  under Chapter 37 is entitled to recover, through the utility's
  wholesale transmission rate, reasonable payments made to a taxing
  entity in lieu of ad valorem taxes on that transmission facility,
  provided that:
               (1)  the utility enters into a written agreement with
  the governing body of the taxing entity related to the payments;
               (2)  the amount paid is the same as the amount the
  utility would have to pay to the taxing entity on that transmission
  facility if the facility were subject to ad valorem taxation;
               (3)  the governing body of the taxing entity is not the
  governing body of the utility; and
               (4)  the utility provides the commission with a copy of
  the written agreement and any other information the commission
  considers necessary in relation to the agreement.
         SECTION 3.  Chapter 163, Utilities Code, is amended by
  adding Subchapter C-1 to read as follows:
         Sec. 163.071.  DEFINITIONS. In this subchapter:
               (1)  "Agency" means a municipal power agency for which
  concurrent ordinances are adopted under Section 163.073.
               (2)  "Bond" includes a note, but does not include a
  nonnegotiable purchase money note issued under Section 163.067 or
               (3)  "Concurrent ordinance" means an ordinance or order
  adopted under this subchapter by all of the participating public
  entities of an agency.
               (4)  "Obligations" means revenue bonds or notes.
         Sec. 163.072.  CONSTRUCTION. This subchapter shall be
  liberally construed to carry out its purpose.
  (a)  This subchapter applies to a municipal power agency created by
  two or more public entities under Subchapter C or a predecessor
  statute, including an agency re-created under Section 163.055 or a
  predecessor statute.
         (b)  The participating public entities of a municipal power
  agency may by concurrent ordinance elect to apply this subchapter
  to the agency as an alternative to Subchapter C.
         (c)  Concurrent ordinances described by this section must,
  as adopted by each public entity:
               (1)  contain identical provisions; and
               (2)  state that the public entity has elected that the
  agency shall, on and after the date designated in the ordinance, be
  governed by the provisions of this subchapter.
         Sec. 163.074.  CONFLICTS WITH OTHER LAW. This subchapter
  prevails to the extent of a conflict between this subchapter and any
  other law, including:
               (1)  a law regulating the affairs of a municipal
  corporation; or
               (2)  a home-rule charter provision.
         Sec. 163.075.  NATURE OF AGENCY. (a)  An agency is a:
               (1)  separate municipal corporation;
               (2)  political subdivision of this state; and
               (3)  political entity and corporate body.
         (b)  An agency may not impose a tax but has all the other
  powers relating to municipally owned utilities and provided by law
  to a municipality that owns a public utility.
  (a)  The public entities that created or re-created an agency may
  by concurrent ordinances:
               (1)  add a new public entity as a participating public
  entity in the agency; or
               (2)  remove a public entity from participation in the
         (b)  Concurrent ordinances described by this section must,
  as adopted by each public entity:
               (1)  contain identical provisions;
               (2)  define the boundaries of the agency to include the
  territory within the boundaries of each participating public
               (3)  designate the name of the agency; and
               (4)  designate the number, place, terms, and manner of
  appointment of directors, as provided by Section 163.078.
         (c)  The public entities may not add or remove a public
  entity if the addition or removal will impair an agency obligation.
  (a)  Public entities may not adopt concurrent ordinances under
  Section 163.076 adding a participating public entity unless the
  addition has been approved by a majority of the qualified voters of
  the additional public entity at an election called and held for that
         (b)  Notice of an election under this section shall be given
  in accordance with Section 1251.003, Government Code.  The election
  shall be called and held in accordance with:
               (1)  the Election Code;
               (2)  Chapter 1251, Government Code; and
               (3)  this subchapter.
         Sec. 163.078.  BOARD OF DIRECTORS. (a)  The agency shall be
  governed by a board of directors.
         (b)  The board is responsible for the management, operation,
  and control of the property belonging to the agency.
         (c)  The board may by resolution delegate management or
  operational authority to an officer, employee, or committee of the
  agency, except that the delegation may not include legislative
  functions, including the sale or purchase of agency properties, the
  exercise of the power of eminent domain, the adoption or amendment
  of budgets and rates, or the issuance of debt.  The board may repeal
  a resolution delegating management or operational authority:
               (1)  if the board is composed of six or more directors,
  by the affirmative vote of six directors, including the affirmative
  vote of at least one director appointed by each participating
  public entity; or
               (2)  if the board is composed of fewer than six
  directors, by the affirmative vote of at least one director
  appointed by each participating public entity.
         (d)  The board must include at least four directors. Each
  director must be appointed by place by the governing bodies of the
  participating public entities.  Each participating public entity is
  entitled to appoint at least one director.
         (e)  Directors must serve staggered terms. Successor
  directors are appointed in the same manner as the original
         (f)  To qualify to serve as a director, when the person takes
  the constitutional oath of office, the person must be:
               (1)  a qualified voter and reside in the boundaries of
  the appointing public entity;
               (2)  an employee, officer, or member of the governing
  body of the appointing public entity; or
               (3)  a retail electric customer of the appointing
  public entity.
         (g)  Except as provided by Subsections (h) and (i), an
  employee, officer, or member of the governing body of a
  participating public entity serving as a director may not have a
  personal interest in a contract executed by the agency other than as
  an employee, officer, or member of the governing body of the public
         (h)  An employee, officer, or member of the governing body of
  a participating public entity serving as a director is considered
  to be a local public official for the purposes of Chapter 171, Local
  Government Code.
         (i)  An agency and a participating public entity are
  considered to be political subdivisions for the purposes of Section
  131.903, Local Government Code.
         (j)  Directors serve without compensation. A director who is
  an employee, officer, or member of the governing body of a
  participating public entity may continue to receive from the public
  entity the compensation associated with the office or employment.
         (k)  A director serves at the discretion of the appointing
  public entity.  The governing body of a public entity that appoints
  a director may remove the director from office at any time with or
  without cause.  The governing body shall promptly appoint a new
  director to serve the remainder of the unexpired term of the removed
         Sec. 163.079.  SEPARATE BOARDS OF DIRECTORS. (a)  The
  public entities that created or re-created an agency may amend the
  creating concurrent ordinances to provide for the agency to be
  governed by one board of directors for the agency's generation
  system and another board of directors for the agency's transmission
         (b)  The concurrent ordinances as amended must contain
  identical provisions.
         (c)  Section 163.078 applies to the separate boards and to
  the directors of the separate boards, except that:
               (1)  there is no minimum number of directors for a board
  established under this section;
               (2)  each participating public entity is not entitled
  to appoint a director to each board of an agency; and
               (3)  the repeal of a resolution under Section
  163.078(c) does not require approval by at least one director
  appointed by each participating public entity.
         (d)  Separate boards established under this section are not
  required to have the same number of directors.
         Sec. 163.080.  POWERS. (a)  An agency may not engage in any
  utility business other than:
               (1)  the generation and sale or exchange of electric
  energy to:
                     (A)  a participating public entity; or
                     (B)  a private entity that owns jointly with the
  agency an electric generating facility in this state; or
               (2)  the provision of wholesale transmission service
  under Chapter 35.
         (b)  The agency may:
               (1)  perform any act necessary to the full exercise of
  the agency's powers;
               (2)  enter into a contract, lease, or agreement with or
  accept a grant or loan from a:
                     (A)  department or agency of the United States;
                     (B)  department, agency, or political subdivision
  of this state; or
                     (C)  public or private person;
               (3)  use the uniform system of accounts prescribed for
  utilities and licenses by the Federal Energy Regulatory Commission;
               (4)  adopt rules to govern the operation of the agency
  and its employees, facilities, and service.
         (c)  The agency may sell, lease, convey, or otherwise dispose
  of any right, interest, or property of the agency, including its
  electric facilities.  A sale, lease, conveyance, or other
  disposition having a value of more than $10 million shall require
  prior approval of each participating public entity, unless the
  public entities have agreed otherwise by written contract or the
  property was purchased by the agency for mining purposes.
         Sec. 163.081.  CONSTRUCTION CONTRACTS. (a)  Except as
  provided by Subsection (c), an agency may award a contract for
  construction of an improvement that involves the expenditure of
  more than $20,000 only on the basis of competitive bids.
         (b)  The agency shall publish notice of intent to receive
  bids once a week for two consecutive weeks in a newspaper of general
  circulation in this state. The first publication must appear
  before the 14th day before the date bids are to be received.
         (c)  An entity that has joint ownership of the improvement to
  be constructed or that is an agent of a joint owner shall award a
  contract using the entity's contracting procedures.
         Sec. 163.082.  SALE OR EXCHANGE OF ELECTRIC ENERGY. (a)   An
  agency may participate through appropriate contracts in power
  pooling and power exchange agreements with other entities through
  direct or indirect system interconnections.
         (b)  An entity that participates with an agency under this
  section may:
               (1)  purchase electric energy from the agency;
               (2)  sell or dispose of electric energy to the agency;
               (3)  exchange electric energy with the agency.
         (c)  An entity payment for electric energy purchased from the
  agency is an operating expense of the entity's electric system.
         (d)  An agency contract to sell or exchange electric energy
  may require the purchaser to pay for the electric energy regardless
  of whether the electric energy is produced or delivered.
         Sec. 163.083.  RATES AND CHARGES. (a)  An agency may
  establish and maintain rates and charges for electric power and
  energy the agency delivers, transmits, or exchanges. The rates and
  charges must:
               (1)  be reasonable and in accordance with prudent
  utility practices;
               (2)  be based on periodic cost of service studies and
  subject to modification, unless such a basis for rates and charges
  is waived by the purchaser by contract; and
               (3)  be developed to recover the agency's cost of
  producing and transmitting the electric power and energy, as
  applicable, which cost must include the amortization of capital
         (b)  Notwithstanding Subsection (a), this state reserves its
  power to regulate an agency's rates and charges for electric energy
  supplied by the agency's facilities.
         (c)  Until obligations issued under this chapter have been
  paid and discharged, with all interest on the obligations, interest
  on unpaid interest installments on the obligations, and other
  connected and incurred costs or expenses, this state pledges to and
  agrees with the purchasers and successive holders of the
  obligations that it will not:
               (1)  limit or alter the power of an agency to establish
  and collect rates and charges under this section sufficient to pay:
                     (A)  necessary operational and maintenance
                     (B)  interest and principal on obligations issued
  by the agency;
                     (C)  sinking funds and reserve fund payments; and
                     (D)  other charges necessary to fulfill the terms
  of any agreement; or
               (2)  take any action that will impair the rights or
  remedies of the holders of the obligations.
         Sec. 163.084.  REVENUE BONDS. (a)  The agency may issue
  revenue bonds to accomplish the purposes of the agency.
         (b)  The agency may pledge to the payment of the obligations
  the revenues of all or part of its electric facilities, including
  facilities acquired after the obligations are issued. However,
  operating and maintenance expenses, including salaries and labor,
  materials, and repairs of electric facilities necessary to render
  efficient service, constitute a first lien on and charge against
  the pledged revenue.
         (c)  The agency may set aside from the proceeds from the sale
  of the obligations amounts for payment into the interest and
  sinking fund and reserve fund, and for interest and operating
  expenses during construction and development, as specified in the
  proceedings authorizing the obligations.
         (d)  Obligation proceeds may be invested, pending their use,
  in securities, interest-bearing certificates, or time deposits as
  specified in the authorizing proceedings.
         (e)  Agency obligations are authorized investments for:
               (1)  a bank;
               (2)  a savings bank;
               (3)  a trust company;
               (4)  a savings and loan association; and
               (5)  an insurance company.
         (f)  The obligations, when accompanied by all appurtenant,
  unmatured coupons and to the extent of the lesser of their face
  value or market value, are eligible to secure the deposit of public
  funds of this state, a political subdivision of this state, and any
  other political corporation of this state.
         Sec. 163.085.  REFUNDING BONDS. The agency may issue
  refunding bonds.
  (a)  Agency bonds that are payable from agency revenues or
  anticipated bond proceeds and the records relating to their
  issuance must be submitted to the attorney general for examination
  before delivery.
         (b)  The bonds:
               (1)  must mature serially or otherwise not more than 50
  years after the date of issuance;
               (2)  may be made redeemable before maturity at the time
  and at the price or prices set by the agency; and
               (3)  may be sold at public or private sale under the
  terms and for the price the agency determines to be in the best
  interest of the agency.
         (c)  The bonds must be signed by the presiding officer or
  assistant presiding officer of the agency, be attested by the
  secretary, and bear the seal of the agency. The signatures may be
  printed on the bonds if authorized by the agency, and the seal may
  be impressed or printed on the bonds. The agency may adopt or use
  for any purpose the signature of an individual who has been an
  officer of the agency, regardless of whether the individual has
  ceased to be an officer at the time the bonds are delivered to the
         Sec. 163.087.  NONNEGOTIABLE PURCHASE MONEY NOTES. (a)  The
  agency may issue nonnegotiable purchase money notes to acquire land
  or fuel resources.
         (b)  Nonnegotiable purchase money notes are:
               (1)  payable in installments;
               (2)  secured by the property acquired with the notes or
  other collateral the agency substitutes; and
               (3)  not a security or agency obligation.
         (c)  Nonnegotiable purchase money notes may be further
  secured by a promise to issue bonds or bond anticipation notes to
  pay the purchase money notes.
         Sec. 163.088.  BOND ANTICIPATION NOTES. (a)  The agency may
  issue bond anticipation notes:
               (1)  for any purpose for which the agency may issue
  bonds; or
               (2)  to refund previously issued bond anticipation
  notes or nonnegotiable purchase money notes.
         (b)  Bond anticipation notes are subject to the limitations
  and conditions prescribed by this subchapter for bonds.
         (c)  The agency may contract with purchasers of bond
  anticipation notes that the proceeds of one or more series of bonds
  will be used to pay or refund the notes.
         Sec. 163.089.  PUBLIC SECURITIES. (a)  It is a public
  purpose for a public entity that has participated in the creation of
  an agency to pay costs of planning, acquisition, construction,
  ownership, operation, and maintenance of electric facilities.
         (b)  A public entity may issue public securities, as defined
  by Section 1201.002(2), Government Code, including bonds, notes, or
  other forms of indebtedness, in the principal amount approved by
  the governing body of the public entity, for the purpose of
  financing electric facilities or improvements to electric
  facilities to be owned or operated by the agency or otherwise in
  furtherance of a purpose described by this section.
         (c)  A public entity and an agency may agree in a contract, or
  by other official action of the public entity and agency, to terms
  and conditions governing the use by the agency of the proceeds of
  the public securities issued by a public entity for a purpose
  described by this section.
         (d)  A contract or other official action described by
  Subsection (c) may include provisions with respect to, and
  conclusively establish sufficient consideration for, the use of the
  proceeds.  The consideration may include the right to:
               (1)  use the financed facilities or portions of the
               (2)  receive output from the financed facilities; or
               (3)  receive an ownership interest in the financed
  facilities upon the dissolution of the agency or an undivided
  interest in the financed facilities at the time a public entity
  funds facility improvements.
         (e)  A contract or other official action described by
  Subsection (c) may contain other terms and extend for any period on
  which all of the parties agree.
         (f)  A public security issued for the purposes described by
  this section may include:
               (1)  debt obligations issued in accordance with Chapter
  1207, 1331, 1371, 1431, or 1502, Government Code, or Chapter 271,
  Local Government Code; or
               (2)  other types or forms of debt that the public entity
  is authorized to issue.
         (g)  Each participating public entity may exercise any power
  of an issuer under Chapter 1371, Government Code.
         Sec. 163.090.  DISSOLUTION. (a)  The participating public
  entities of an agency may by concurrent ordinance dissolve the
         (b)  Concurrent ordinances dissolving an agency must:
               (1)  contain identical provisions;
               (2)  state that the agency will be dissolved upon the
  winding up of agency affairs;
               (3)  direct the board or boards of the agency to wind up
  the business and affairs of the agency and to inform the
  participating public entities by resolution when the winding up of
  the business and affairs of the agency is complete; and
               (4)  state the date on which the dissolution takes
  effect, provided that the date provides sufficient time for the
  board or boards of the agency to wind up agency affairs.
         (c)  The participating public entities may not dissolve an
  agency if the dissolution will impair the rights or remedies of
  holders of obligations issued by the agency.
         (d)  The dissolved agency continues to exist to:
               (1)  satisfy existing liabilities or obligations;
               (2)  collect, distribute, or liquidate its assets; and
               (3)  take any other action required to adjust and wind
  up its business and affairs.
         (e)  The assets of the dissolved agency that remain after all
  liabilities or obligations of the agency have been satisfied shall
  be distributed to the public entities that created the agency.  The
  public entities shall establish the method of distribution by
         (f)  An agreement between a public entity and an agency
  entered into before September 1, 2015, regarding the distribution
  of the agency's assets after dissolution is enforceable according
  to the terms of the agreement, regardless of a provision to the
  contrary in this subchapter.
         SECTION 4.  The changes in law made by this Act apply only to
  a transmission facility for which construction began on or after
  the effective date of this Act.
         SECTION 5.  This Act takes effect September 1, 2015.
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
         I hereby certify that S.B. No. 776 passed the Senate on
  April 9, 2015, by the following vote: Yeas 31, Nays 0; and that
  the Senate concurred in House amendment on May 31, 2015, by the
  following vote: Yeas 31, Nays 0.
  Secretary of the Senate    
         I hereby certify that S.B. No. 776 passed the House, with
  amendment, on May 26, 2015, by the following vote: Yeas 145,
  Nays 0, two present not voting.
  Chief Clerk of the House