By: Hancock	S.B. No. 1579

	A BILL TO BE ENTITLED
	AN ACT
	relating to the recovery and securitization of extraordinary costs
	incurred by certain gas utilities; authority to issue bonds.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Chapter 1232.002, Government Code, is amended by
	adding a new (3) to read as follows:
	Sec. 1232.002.  PURPOSE. The purpose of this chapter is to
	provide a method of financing for:
	(1)  the acquisition or construction of buildings;
	(2)  the purchase or lease of equipment by executive or
	judicial branch state agencies; and
	(3)  customer rate relief bonds authorized by the
	Railroad Commission of Texas.
	SECTION 2.  Chapter 1232.06(a), Government Code is amended
	by adding (4) to read as follows:
	Sec. 1232.06.  BOARD AUTHORITY. Sec. 1232.066. BOARD
	AUTHORITY. (a) The board's authority under this chapter is limited
	to the financing of:
	(1)  the acquisition or construction of a building;
	(2)  the purchase or lease of equipment;
	(3)  stranded costs of a municipal power agency; or
	(4)  customer rate relief bonds approved by the
	railroad commission.
	SECTION 3.  Chapter 1232, Government Code is amended to add a
	new section to read as follows:
	Sec. 1232.1072.  ISSUANCE OF OBLIGATIONS FOR CUSTOMER RATE
	RELIEF BONDS APPROVED BY THE RAILROAD COMMISSION OF TEXAS. (a) The
	authority may, either directly or by means of a trust or trusts
	established by it, issue obligations or other evidences of
	indebtedness for financing customer rate relief bonds approved by
	the Railroad Commission of Texas pursuant to Chapter 104, Utilities
	Code.
	(b)  At the request of the Railroad Commission of Texas, the
	authority shall issue obligations or other evidences of
	indebtedness in the amount of the requested customer rate relief
	bonds, plus the issuance costs, and shall make a grant of the
	proceeds of the obligations or evidences of indebtedness to the
	Railroad Commission of Texas. The Railroad Commission of Texas'
	request under this subsection must include a statement of the
	payment terms for recovering customer rate relief costs.
	(c)  Obligations or evidences of indebtedness issued by the
	authority under this section must be created pursuant to financing
	orders issued by the Railroad Commission of Texas. Such financing
	orders shall authorize the authority to create isolated bankruptcy
	remote financing entities to hold customer rate relief property,
	and the establishment of such financing entities is hereby
	authorized.
	(d)  Obligations or evidences of indebtedness issued by the
	authority under this section shall also include administrative
	costs related to each approved customer rate relief financing, as
	part of the financing costs of each financing.
	(e)  Obligations or evidences of indebtedness issued by the
	authority under this section must be secured by CRR property, as
	defined in Section 104.361 (10), Utilities Code, and non-bypassable
	CRR charges, as defined in Section 104.361 (9), Utilities Code,
	imposed by the authority on customers receiving natural gas
	services provided by the requesting gas utility, which must be
	consistent with the customer rate relief recovery terms stated in
	the gas utility's request unless otherwise approved by the Railroad
	Commission of Texas. Obligations or evidences of indebtedness
	issued by the authority under this section are not a debt of this
	state, the Railroad Commission of Texas, or any gas utility.
	(f)  The Railroad Commission of Texas shall provide
	necessary assistance to the authority to ensure the collection and
	enforcement of the non-bypassable charges, either directly or by
	using the assistance and powers of the requesting gas utility as
	servicer.
	(1)  The authority and the Railroad Commission of Texas
	have all the powers necessary to perform the duties and
	responsibilities described by this section. This section shall be
	interpreted broadly in a manner consistent with the most
	cost-effective financing of customer rate relief related costs.
	Obligations or evidences of indebtedness issued by the authority
	under this section may be structured so that any interest on the
	obligations or evidences of indebtedness is excluded from gross
	income for federal income tax purposes. Any interest on the
	obligations or evidences of indebtedness is not subject to taxation
	by and shall not be included as part of the measurement of a tax by
	this state or a political subdivision of this state.
	(2)  The authority shall make periodic reports to the
	Railroad Commission of Texas and the public regarding each
	financing.
	SECTION 4.  Chapter 1232.018, Government Code is amended to
	read as follows:
	Sec. 1232.108.  LEGISLATIVE AUTHORIZATION REQUIRED. Except
	as permitted by Section 1232.109, 1232.1072, 2166.452, 1232.1072
	or 2166.453, before the board may issue and sell bonds, the
	legislature by the General Appropriations Act or other law must
	have authorized:
	(1)  the specific project for which the bonds are to be
	issued and sold; and
	(2)  the estimated cost of the project or the maximum
	amount of bonded indebtedness that may be incurred by the issuance
	and sale of bonds for the project.
	SECTION 5.  Chapter 104, Utilities Code, is amended by
	adding subchapter I to read as follows:
	SUBCHAPTER I. CUSTOMER RATE RELIEF BONDS
	Sec. 104.360.  PURPOSE. The purpose of this subchapter is to
	reduce the cost that customers would otherwise experience due to
	the extraordinary costs that gas utilities incurred and may incur
	to secure gas supply and provide service during natural and
	man-made disasters, system failures, and other catastrophic events
	and to restore gas utility systems after such events by providing
	securitization financing enabling gas utilities to recover these
	costs. This financing mechanism will provide rate relief to
	customers by extending the timeframe over which the extraordinary
	costs are recovered from customers and support the financial
	strength and stability of gas utility companies. The commission
	shall determine that securitization provides tangible and
	quantifiable benefits to customers, greater than would have been
	achieved absent the issuance of the CRR bonds, as defined herein.
	The commission shall determine that the structuring and pricing of
	the CRR bonds result in CRR bond charges consistent with the terms
	of the applicable financing order and market conditions at the time
	of the pricing of the CRR bonds. The proceeds of the CRR bonds shall
	be used solely for the purpose of reducing the amount of the
	regulatory asset determined by the commission to be reasonable and
	other purposes provided herein.
	SECTION 6.  Chapter 104, Utilities Code, is amended by
	adding Section 104.361 to read as follows:
	Sec. 104.361.  DEFINITIONS. In this subchapter:
	(1)  "Ancillary agreement" means any bond, insurance
	policy, letter of credit, reserve account, surety bond, interest
	rate or currency swap arrangement, interest rate lock agreement,
	forward payment conversion agreement, or other hedging
	arrangement, liquidity or credit support arrangement, or other
	financial arrangement entered into in connection with the issuance
	or payment of CRR bonds that enhances the marketability, security,
	or creditworthiness of CRR bonds.
	(2)  "Assignee" means any legally recognized entity to
	which an interest in CRR property is transferred, other than as
	security. The term includes a corporation, limited liability
	company, public authority, trust, general partnership or limited
	partnership, or other financing entity, including any assignee of
	that party.
	(3)  "Authority" means the Texas Public Finance
	Authority, as the sponsoring issuer of CRR bonds.
	(4)  "Bond administrative expenses" means expenses
	incurred to administer CRR bonds issued under this subchapter,
	including fees for paying agents, trustees, and attorneys, and for
	other professional services necessary to ensure compliance with
	applicable state or federal law.
	(5)  "Bond obligations" means the principal of a CRR
	bond and any premium and interest on a CRR bond issued under this
	subchapter, together with any amount owed under a related ancillary
	agreement or credit agreement
	(6)  "Commission" means the Railroad Commission of
	Texas.
	(7)  "Credit agreement" means a loan agreement, a
	revolving credit agreement, an agreement establishing a line of
	credit, or any similar financing arrangement.
	(8)  "CRR bonds" means bonds, notes, certificates, or
	other evidences of indebtedness or ownership that are issued by an
	assignee pursuant to an financing order, the proceeds of which are
	used directly or indirectly to recover, finance or refinance
	railroad commission-approved regulatory assets, including
	extraordinary costs, and related financing costs, and that are
	payable from and secured by CRR property and amounts on deposit in
	the obligation trust fund to the extent provided by the applicable
	financing order.
	(9)  "CRR charges" means the amounts authorized by the
	commission to repay, finance, or refinance regulatory assets,
	including extraordinary costs, financing costs, and other costs
	authorized by the financing order and that are non-bypassable
	charges:
	(a)  imposed on and part of customer bills of a gas utility
	who has received a regulatory asset determination under Section
	104.363;
	(b)  collected by a gas utility who has received a regulatory
	asset determination under Section 104.363, or its successors or
	assignees, or a collection agent, as servicer, in full, separate
	and apart from the gas utility's base rates; and (c) paid by all
	existing or future customers receiving service from a gas utility
	that has received a regulatory asset determination under Section
	104.363 or its successors or assignees, even if a customer elects to
	purchase gas from an alternative gas supplier.
	Such charges shall continue to be paid until all CRR bonds and
	financing costs are paid in full. CRR charges shall be designed as
	uniform volumetric charges applicable to all existing or future
	customers receiving service from a gas utility that has received a
	regulatory asset determination under Section 104.363.
	(10)  "CRR property" means the property described in
	Section 104.365.
	(11)  "Extraordinary costs" means:
	(A)  Reasonable and necessary costs placed in a
	regulatory asset as defined in subpart (16) and approved by the
	commission in a regulatory asset determination pursuant to section
	104.363. Extraordinary costs eligible for inclusion in a
	regulatory asset may include costs incurred to serve customers,
	including capital costs and other costs expensed, charged to
	self-insurance reserves, deferred, capitalized, or otherwise
	financed, that are incurred by a gas utility or on behalf of the gas
	utility for gas procurement, supply and system restoration and
	infrastructure, operations and administration in response to any
	tropical storm or hurricane, ice or snow storm, flood, or other
	weather-related event, other natural or man-made disaster, system
	failure, or other catastrophic event. (B) Extraordinary costs may
	include natural gas procurement costs above normalized market
	pricing, mobilization, staging, construction, reconstruction,
	replacement, or repair of system facilities. Extraordinary costs
	may include reasonable estimates of the costs of natural gas
	procurement above normalized market pricing and any activity or
	activities conducted or expected to be conducted by or on behalf of
	the gas utility in connection with the restoration of service or
	infrastructure associated with natural gas outages, and such
	estimates may be subject to reconciliation after the actual costs
	are known but before the commission makes a determination as to the
	utility's regulatory asset in accordance with Section 104.363.
	(C)  Extraordinary costs may include:
	(i)  a carrying charge interest rate at the
	gas utility's cost of long-term debt as last approved by the
	commission in a general rate proceeding if the final order (which
	may be an order on rehearing) approving the cost of long-term debt
	was filed less than three years before the application for
	regulatory asset recovery was filed;
	(ii)  if the final order approving the gas
	utility's cost of long-term debt is not stated in a final order
	meeting the requirements of subsection (c)(i) or the final order
	was filed three or more years before the application for regulatory
	asset recovery was filed an alternative cost of long-term debt
	shall be used that reflects the average cost of long-term debt
	established by the commission for all gas utilities based on final
	orders issued in the most recent three-year period preceding the
	filing of the application for regulatory asset recovery; or
	(iii)  the carrying charge interest rate set
	at the applicable cost of long-term debt set forth in subsection
	(c)(i-ii) shall be applied from the date on which the extraordinary
	costs were incurred until the date that CRR bonds are issued or
	until extraordinary costs are otherwise recovered by the gas
	utility pursuant to the provisions of this section.
	Extraordinary costs include any costs of acquiring, retiring, and
	refunding the gas utility's existing debt and equity securities or
	credit facilities in connection with the issuance of CRR bonds.
	(12)  "Financing costs" means any of the following:
	(A)  interest and acquisition, defeasance, or
	redemption premiums that are payable on CRR bonds.
	(B)  any payment required under an ancillary
	agreement and any amount required to fund or replenish reserve or
	other accounts established under the terms of any indenture,
	ancillary agreement, or other financing documents pertaining to CRR
	bonds.
	(C)  issuance costs, and any ongoing costs related
	to supporting, repaying, servicing, and refunding CRR bonds,
	including but not limited to servicing fees, accounting and
	auditing fees, trustee fees, legal fees and expenses, consulting
	fees, administrative fees, printing fees, financial advisor fees
	and expenses, SEC registration fees, issuer fees, placement and
	underwriting fees, capitalized interest, overcollateralization
	funding requirements, rating agency fees, stock exchange listing
	and compliance fees, filing fees, and any other bond administration
	expenses. The term includes the costs to the commission of
	acquiring professional services for the purpose of evaluating
	extraordinary costs under this subchapter.
	(13)  "Financing order" means an order of the
	commission adopted under Section 104.364 approving the issuance of
	CRR bonds and the creation of CRR property and associated CRR
	charges for the recovery of regulatory assets, including
	extraordinary costs, and related financing costs, and other costs
	authorized by such financing order.
	(14)  "Financing party" means a holder of CRR bonds,
	including trustees, collateral agents, any party under an ancillary
	agreement and other persons acting for the benefit of the holder.
	(15)  "Gas utility" shall mean:
	(A)  An operator of natural gas distribution
	pipelines that delivers and sells natural gas to the public and that
	is subject to the commission's jurisdiction under Section 102.001
	of this title; and
	(B)  a gas utility that transmits, transports,
	delivers, or sells natural gas or synthetic natural gas to
	operators of natural gas distribution pipelines and whose rates for
	such services are established by the commission in a cost of service
	rate proceeding filed pursuant to Chapter 104 of this title.
	(16)  "Non-bypassable" shall mean a charge that may not
	be offset by any credit.
	(17)  "Normalized market pricing" shall be determined
	using the average monthly pricing at the Henry Hub for the three (3)
	preceding months prior to the month during which extraordinary
	costs were incurred, plus contractual adders to the index price,
	and other non-indexed gas procurement costs.
	(18)  "Regulatory asset" includes the extraordinary
	costs recorded by the gas utility in its books and records in
	accordance with the Uniform System of Accounts Prescribed for
	Natural Gas Companies Subject to the Provisions of the Natural Gas
	Act (FERC USOA) and Generally Accepted Accounting Principles (GAAP)
	or classified as a receivable or financial asset under
	International Financial Reporting Standards (IFRS) pursuant to the
	commission's authorization in the Notice of Authorization for
	Regulatory Asset Accounting for Local Distribution Companies
	Affected by the February 2021 Winter Weather Event issued on issued on
	February 13, 2021, or any notice or order issued by the commission
	thereafter for other similarly authorized natural or man-made
	disasters or system failure events.
	SECTION 7.  Chapter 104, Utilities Code, is amended by
	adding Section 104.361 to read as follows:
	Sec. 104.361.  JURISDICTION AND POWERS OF THE COMMISSION AND
	OTHER REGULATORY AUTHORITIES. (a) The commission may authorize the
	issuance of CRR bonds if the commission finds pursuant to Section
	104.363 that the proposed structuring, expected pricing, and
	proposed financing costs of the CRR bonds are reasonably expected
	to provide benefits to customers comparing the net present value of
	the costs to customers resulting from the issuance of CRR bonds and
	the costs that would result from the application of conventional
	methods of financing or recovering gas utility extraordinary costs
	and other costs authorized by a financing order.
	(b)  The commission may assess to a gas utility costs
	associated with administering this subchapter and such assessments
	shall be recovered from rate-regulated customers as part of gas
	cost.
	(c)  The commission has exclusive, original jurisdiction to
	issue financing orders that authorize the creation of CRR property,
	CRR charges to service CRR bonds and financing costs. CRR charges,
	if authorized by the commission through a financing order in its
	sole discretion, will be imposed pursuant to CRR property, and not
	by a gas utility.
	(d)  Except as provided by (c), this subchapter does not in
	any way limit or impair a regulatory authority's plenary
	jurisdiction over the rates, charges and services rendered by gas
	utilities in this state under Chapter 102 of this subtitle.
	SECTION 8.  Chapter 104, Utilities Code, is amended by
	adding Section 104.362 to read as follows:
	Sec. 104.362.  REGULATORY ASSET DETERMINATION. (a) The
	commission shall, upon application of a gas utility to recover a
	regulatory asset, determine the regulatory asset amount to be
	recovered by the gas utility.
	(b)  A gas utility desiring to participate in the CRR bond
	process pursuant to a financing order shall file an application
	with the commission no later than 90 days following the conclusion
	of the event for which regulatory asset recovery is requested or no
	later than 60 days following the effective date of this
	subchapter's passage. The application date deadline shall be
	determined by the commission consistent with this subpart.
	(c)  If the commission does not make a final determination
	concerning the regulatory asset amount to be recovered by the gas
	utility not later than 90 days of an application filed under (a),
	the commission is considered to have approved the regulatory asset
	amount requested by the gas utility.
	(d)  The regulatory asset determination shall not otherwise
	be subject to reduction, impairment, or adjustment by further
	action of the commission, except as permitted by Section 104.368.
	(e)  The regulatory asset determination is not subject to
	rehearing by the commission. A regulatory asset determination may
	only be appealed to a Travis County district court by a party to the
	proceeding filed not later than 15 days after the order is signed by
	the commission. The judgment of the district court may be reviewed
	only by direct appeal to the Supreme Court of Texas filed not later
	than 15 days after entry of judgment. All appeals shall be heard and
	determined by the district court and the Supreme Court of Texas as
	expeditiously as possible with lawful precedence over other
	matters. Review on appeal shall be based solely on the record before
	the commission and briefs to the court and shall be limited to
	whether the financing order conforms to the constitution and laws
	of this state and the United States and is within the authority of
	the commission under this subchapter.
	(f)  The commission shall issue an order to establish a
	schedule, filing requirements, and procedure for determining the
	prudence of the costs included in a gas utility's regulatory asset.
	(g)  To the extent a gas utility subject to this subchapter
	receives insurance proceeds, governmental grants, or any other
	sources of funding that compensates or otherwise reimburses or
	indemnifies it for extraordinary costs following the issuance of
	CRR bonds a gas utility may record the amount in a regulatory
	liability account and such amounts will be reviewed in a future
	proceeding. If any audit conducted under a valid gas purchase
	agreement identifies a change to the total amount of greater than 5%
	of the gas supply costs incurred during the extraordinary event set
	forth in Section 104.361(10)(A) is identified, the gas utility may
	record the amount in a regulatory asset or regulatory liability
	account and such amounts will be reviewed for recovery in a future
	proceeding.
	SECTION 7.  Chapter 104, Utilities Code, is amended by
	adding Section 104.363 to read as follows:
	Sec. 104.363.  FINANCING ORDERS AND ISSUANCE OF CRR BONDS BY
	OR ON BEHALF OF THE AUTHORITY. (a) If the commission determines
	that CRR bond financing for extraordinary costs is the most
	cost-effective method of funding several regulatory asset
	reimbursements to be made to gas utilities, the commission may,
	following the final resolution of all applications filed under
	Section 104.363, request the authority to issue CRR bonds on its
	behalf. Before making a request of the authority under this
	section, the commission must issue a financing order that complies
	with the provisions of this Section 104.363.
	(b)  The financing order shall include a finding that the use
	of the securitization financing mechanism is in the public interest
	and that the financing order is consistent with the standards set
	forth in Section 104.360.
	(c)  The financing order shall detail the total amount of the
	regulatory asset determinations to be included in the CRR bond
	issuance.
	(d)  The financing order shall authorize the recovery of any
	tax obligation of the gas utilities arising or resulting from its
	receipt of CRR bond proceeds, or from the collection or remittance
	of CRR charges through the gas utilities' gas cost recovery
	mechanism or other means determined by the commission to be
	reasonable.
	(e)  The financing order shall authorize the authority's
	issuance of CRR bonds through one or more legally isolated
	bankruptcy remote financing entities established by the authority.
	(f)  The financing order shall include a statement of the
	aggregated regulatory asset determination to be included in the
	principal amount of the CRR bonds, not to exceed $10 billion for any
	separate bond issue, and the maximum scheduled final maturity of
	the CRR bonds may not exceed 30 years, however the legal final
	maturity may be longer, based upon rating agency and market
	considerations.
	(g)  The financing order shall provide for the imposition and
	mandatory periodic formulaic adjustment of CRR charges in
	accordance with Section 104.368 and the collection thereof by all
	gas utilities for whom a regulatory asset determination has been
	made pursuant to Section 104.363 to guarantee that the bonds will be
	paid in full.
	(h)  The financing order shall authorize the creation of CRR
	property in favor of the authority and the authority's transfer
	thereof.
	(i)  The financing order shall direct the authority to
	disperse the proceeds of CRR bonds to gas utilities for which a
	regulatory asset determination has been made under Section 104.363
	and the amounts to be distributed.
	(j)  The principal amount determined by the commission under
	subsection (c) may be increased to include an amount sufficient to:
	(1)  pay the financing costs for such issuance;
	(2)  reimburse the authority for any costs incurred for
	the issuance;
	(3)  provide a bond reserve fund; and
	(4)  capitalize interest for the period determined
	necessary by the commission.
	(k)  The authority, consistent with this subchapter and the
	terms of the financing order, shall issue CRR bonds on request by
	the commission, in accordance with the requirements of Chapter
	1232, Government Code, as amended by this subchapter and other
	provisions of Title 9, Government Code, that apply to bond issuance
	by a state agency.
	(l)  The authority, consistent with this subchapter and the
	terms of the financing order, shall determine the method of sale,
	type of bond, bond form, maximum interest rates, and other terms of
	the CRR bonds that, in the authority's judgment, best achieve the
	economic goals of the financing order and effect the financings at
	the lowest practicable cost.
	(m)  The authority shall establish legally isolated
	bankruptcy remote financing entities and may enter into credit
	agreements or ancillary agreements in connection with the issuance
	of CRR bonds.
	(n)  The financing order shall provide that CRR charges shall
	be collected and allocated among customers of each utility for whom
	a regulatory determination has been made under Section 104.363
	through uniform, monthly volumetric charges to be paid by customers
	as a component of the gas utility's gas cost or in such other manner
	as determined by the commission to be reasonable.
	(o)  The financing order shall reflect the commitment made by
	each gas utility receiving proceeds therefrom that such proceeds
	shall be in lieu of recovery of these costs through the regular
	rate-making process or other mechanism to the extent such costs are
	reimbursed to the gas utility by CRR bond financing proceeds.
	(p)  The financing order shall become effective in
	accordance with its terms, and the financing order, together with
	the CRR property and the CRR charges authorized by the financing
	order, shall thereafter be irrevocable and not subject to
	reduction, impairment, or adjustment by further action of the
	commission, except as provided under subpart (r) and permitted by
	Section 104.368.
	(q)  The commission shall issue a financing order under this
	Section not later than 90 days following the conclusion of all
	proceedings filed under Section 104.363.
	(r)  A financing order is not subject to rehearing by the
	commission. A financing order may only be appealed to a Travis
	County district court by a party to the proceeding filed within 15
	days after the financing order is signed by the commission. The
	judgment of the district court may be reviewed only by direct appeal
	to the Supreme Court of Texas filed within 15 days after entry of
	judgment. All appeals shall be heard and determined by the district
	court and the Supreme Court of Texas as expeditiously as possible
	with lawful precedence over other matters. Review on appeal shall
	be based solely on the record before the commission and briefs to
	the court and shall be limited to whether the financing order
	conforms to the constitution and laws of this state and the United
	States and is within the authority of the commission under this
	subchapter.
	(s)  The authority shall issue CRR bonds within 45 days of
	the receipt of a financing order issued pursuant to this section.
	The authority shall deliver CRR bond proceeds net of upfront
	financing costs to each gas utility sufficient to reimburse the gas
	utility the regulatory asset amount determined to be reasonable
	under Section 104.363 within 15 days of issuance of the CRR bonds.
	For the weather event that took place in February 2021, the
	authority shall deliver CRR bond proceeds net of upfront financing
	costs to each gas utility no later than December 31, 2021.
	SECTION 8.  Chapter 104, Utilities Code, is amended by
	adding Section 104.364 to read as follows:
	Sec. 104.364.  PROPERTY RIGHTS. (a) The CRR bonds will be
	solely the obligation of the assignee or issuing financing entity
	and will not be a debt of a gas utility or a debt or a pledge of the
	faith and credit of the state or any political or governmental unit
	thereof.
	(b)  The CRR bonds shall be nonrecourse to the credit or any
	assets of the state and the authority.
	(c)  The rights and interests of the authority or successor
	under a financing order, including the right to impose and receive
	CRR charges authorized in the financing order, shall be only
	contract rights until they are first transferred to an assignee or
	pledged in connection with the issuance of the CRR bonds, at which
	time they will become "CRR property."
	(d)  CRR property shall constitute a present property right
	for purposes of contracts concerning the sale or pledge of
	property, even though the imposition and collection of CRR charges
	depends on further acts of the gas utility or others that have not
	yet occurred. The financing order shall remain in effect, and the
	CRR property shall continue to exist for the same period as the
	pledge of the state described in Section 104.372.
	(e)  All revenues and collections resulting from CRR charges
	shall constitute proceeds only of a property right arising from the
	financing order.
	(f)  An amount owed by the authority or an issuer under a
	credit agreement shall be payable from and secured by the CRR
	property, including CRR charges and amounts to the extent provided
	in the proceedings authorizing the credit agreement.
	SECTION 9.  Chapter 104, Utilities Code, is amended by
	adding Section 104.365 to read as follows:
	Sec. 104.365.  NO SET-OFF. The interest of an assignee or
	pledgee in CRR property, including the revenues and collections
	arising from CRR charges are not subject to setoff, counterclaim,
	surcharge, or defense by the gas utility or any other person or in
	connection with the bankruptcy of the gas utility, the authority,
	or any other entity. A financing order shall remain in effect and
	unabated notwithstanding the bankruptcy of the gas utility, the
	authority or their successors, or assignees.
	SECTION 10.  Chapter 104, Utilities Code, is amended by
	adding Section 104.366 to read as follows:
	Sec. 104.366.  NO BYPASS. A financing order shall include
	terms ensuring that the imposition and collection of the CRR charge
	authorized in the order shall be non-bypassable.
	SECTION 11.  Chapter 104, Utilities Code, is amended by
	adding Section 104.367 to read as follows:
	Sec. 104.367.  TRUE-UP. The financing order shall include a
	formulaic true-up charge adjustment mechanism that requires that
	the CRR charges be reviewed and adjusted at least annually, at time
	periods and frequencies provided in the financing order, to correct
	any overcollections or under collections of the preceding 12 months
	and to ensure the expected recovery of amounts sufficient to
	provide for the timely payment of upcoming scheduled CRR bond
	payments and financing costs. Such true-up charge adjustments
	shall become effective within 30 days of the receipt of the true-up
	charge adjustment letter from the gas utility or replacement
	servicer to the commission that notifies the commission of the
	pending adjustment. Any administrative review of such charge
	adjustments shall be limited to notifying the servicer of
	mathematical or clerical errors in the calculation, and the
	servicer may correct its error and refile its letter, with the
	adjustment becoming effective as soon as possible within 30 days
	after the refiled letter.
	SECTION 12.  Chapter 104, Utilities Code, is amended by
	adding Section 104.368 to read as follows:
	Sec. 104.368.  SECURITY INTERESTS; ASSIGNMENT; COMMINGLING;
	DEFAULT. (a) CRR property does not constitute an account or general
	intangible under Section 9.106, Business & Commerce Code. The
	creation, granting, perfection, and enforcement of liens and
	security interests in CRR property are governed by this section and
	not by the Business & Commerce Code.
	(b)  A valid and enforceable lien and security interest in
	CRR property may be created only by a financing order and the
	execution and delivery of a security agreement with a financing
	party in connection with the issuance of CRR bonds. The lien and
	security interest shall attach automatically from the time that
	value is received for the CRR bonds and, on perfection through the
	filing of notice with the secretary of state in accordance with the
	rules prescribed under subsection (d), shall be a continuously
	perfected lien and security interest in the CRR property and all
	proceeds of the property, whether accrued or not, shall have
	priority in the order of filing and take precedence over any
	subsequent judicial or other lien creditor. If notice is filed
	within 10 days after value is received for the CRR bonds, the
	security interest shall be perfected retroactive to the date value
	was received, otherwise, the security interest shall be perfected
	as of the date of filing.
	(c)  Transfer of an interest in CRR property to an assignee
	shall be perfected against all third parties, including subsequent
	judicial or other lien creditors, when the financing order becomes
	effective, transfer documents have been delivered to the assignee,
	and a notice of that transfer has been filed in accordance with the
	rules prescribed under subsection (d); provided, however, that if
	notice of the transfer has not been filed in accordance with this
	subsection within 10 days after the delivery of transfer
	documentation, the transfer of the interest is not perfected
	against third parties until the notice is filed.
	(d)  The secretary of state shall implement this section by
	establishing and maintaining a separate system of records for the
	filing of notices under this section and prescribing the rules for
	those filings based on Chapter 9, Business & Commerce Code, adapted
	to this subchapter and using the terms defined in this subchapter.
	(e)  The priority of a lien and security interest perfected
	under this section is not impaired by any later modification of the
	financing order under Section 104.368 or by the commingling of
	funds arising from CRR charges with other funds, and any other
	security interest that may apply to those funds shall be terminated
	when they are transferred to a segregated account for the assignee
	or a financing party. If CRR property has been transferred to an
	assignee, any proceeds of that property shall be held in trust for
	the assignee.
	(f)  If a default or termination occurs under the CRR bonds,
	the financing parties or their representatives, a district court of
	Travis County, on application by or on behalf of the financing
	parties, shall order the sequestration and payment to them of
	revenues arising from the CRR charges.
	SECTION 13.  Chapter 104, Utilities Code, is amended by
	adding Section 104.369 to read as follows:
	Sec. 104.369.  BOND PROCEEDS. (a) The proceeds of CRR bonds
	issued by or on behalf of the authority under this subchapter may be
	deposited with a trustee selected by the authority or held by the
	comptroller in a dedicated trust fund outside the state treasury in
	the custody of the comptroller.
	(b)  Bond proceeds, including investment income, shall be
	held in trust for the exclusive benefit of the commission's policy
	of reimbursing such gas utility costs. The authority shall use the
	proceeds to:
	(1)  reimburse each gas utility the regulatory asset
	amount determined to be reasonable for that gas utility in the
	financing order;
	(2)  pay the financing costs of issuing the bonds; and
	(3)  provide bond reserves, as applicable.
	(c)  Any excess money remaining after the purposes for which
	the bonds were issued is satisfied may be used to provide credits to
	gas utility customers.
	(d)  If there are no outstanding bonds or bond interest to be
	paid, the remaining proceeds shall be used to provide credits to gas
	utility customers.
	SECTION 14.  Chapter 104, Utilities Code, is amended by
	adding Section 104.370 to read as follows:
	Sec. 104.370.  REPAYMENT OF CRR BONDS. (a) If any CRR bonds
	and related financing costs remain outstanding, a uniform, monthly,
	volumetric CRR charges shall be paid by all existing and future
	customers that receive service from a gas utility for whom a
	regulatory asset determination under Section 104.363. A gas
	utility and its successors, assigns and or replacements, shall
	continue to bill and collect, as servicer, CRR charges from the gas
	utility's existing and future customers until all CRR bonds and
	financing costs are paid in full.
	(b)  With regard to outstanding CRR bonds issued by the
	authority under this subchapter, the authority shall report to the
	commission the amount of the bond obligations outstanding and the
	estimated amount of bond administrative expenses each year.
	(c)  All revenue collected from the CRR charges shall be
	promptly remitted by the applicable servicers to the authority to
	pay bond obligations, ongoing financing costs, and bond
	administrative expenses to ensure timely payment of bond
	obligations and financing costs.
	(d)  Revenues received from the CRR charges may be applied
	only as provided by this subchapter.
	(e)  Bond obligations are payable only from sources provided
	for payment in this subchapter.
	SECTION 15.  Chapter 104, Utilities Code, is amended by
	adding Section 104.371 to read as follows:
	Sec. 104.371.  PLEDGE OF STATE. (a) CRR bonds issued under
	this subchapter, and any related ancillary agreement, or credit
	agreement, are not a debt of the state or any state agency or
	political subdivision of the state and are not a pledge of the faith
	and credit of any of them. A CRR bond, ancillary agreement, or
	credit agreement is payable solely from CRR charges as provided by
	this subchapter.
	(b)  The state, including the commission and the authority
	pledge, however, for the benefit and protection of the financing
	parties and the gas utility, that it will not take or permit any
	action that would impair the value of CRR property, or, except as
	permitted by Section 104.368, reduce, alter, or impair the CRR
	charges to be imposed, collected, and remitted to financing
	parties, until the principal, interest and premium, and contracts
	to be performed in connection with the related CRR bonds and
	financing costs have been paid and performed in full. The authority
	or any other entity issuing CRR bonds is authorized to include this
	pledge in any documentation relating to those bonds.
	SECTION 16.  Chapter 104, Utilities Code, is amended by
	adding Section 104.372 to read as follows:
	Sec. 104.372.  TAX EXEMPTION. (a) A CRR bond issued under
	this subchapter, any transaction relating to CRR bonds, and profits
	made from the sale of CRR bonds are exempt from taxation by this
	state or by a municipality or other political subdivision of this
	state.
	(b)  A gas utility's receipt or collection of CRR charge
	amounts is exempt from state and local income, sales, franchise,
	gross receipts, and other taxes or similar assessment.
	(c)  Any tax obligation of the gas utility arising from its
	receipt of CRR bond proceeds, or from the collection or remittance
	of CRR charges is an expense that shall be recovered by the gas
	utility.
	SECTION 17.  Chapter 104, Utilities Code, is amended by
	adding Section 104.373 to read as follows:
	Sec. 104.373.  NOT PUBLIC UTILITY. An assignee or financing
	party shall not be considered to be a public utility or person
	providing natural gas service solely by virtue of the transactions
	described in this subchapter.
	SECTION 18.  Chapter 104, Utilities Code, is amended by
	adding Section 104.374 to read as follows:
	Sec. 104.374.  NO PERSONAL LIABILITY. The Commissioners of
	the commission, commission employees, the board of directors of the
	authority, and the employees of the authority shall not be
	personally liable as a result of exercising the duties and
	responsibilities established under this subchapter.
	SECTION 19.  Chapter 104, Utilities Code, is amended by
	adding Section 104.375 to read as follows:
	Sec. 104.375.  SEVERABILITY. Effective on the date the CRR
	bonds are issued under this subchapter, if any provision in this
	title or portion of this title is held to be invalid or is
	invalidated, superseded, replaced, repealed, or expires for any
	reason, that occurrence does not affect the validity or
	continuation of this subchapter or any other provision of this
	title that is relevant to the issuance, administration, payment,
	retirement, or refunding of CRR bonds or to any actions of the gas
	utility, its successors, an assignee, a collection agent, or a
	financing party, which shall remain in full force and effect.
	SECTION 20.  This Act takes effect immediately if it
	receives a vote of two-thirds of all the members elected to each
	house, as provided by Section 39, Article III, Texas Constitution.
	If this Act does not receive the vote necessary for immediate
	effect, this Act takes effect September 1, 2021.