Bill Text: TX SB776 | 2015-2016 | 84th Legislature | Comm Sub

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Relating to the operations of a municipally owned utility or municipal power agency; providing authority to issue bonds.

Spectrum: Partisan Bill (Republican 5-0)

Status: (Passed) 2015-06-19 - Effective on 9/1/15 [SB776 Detail]

Download: Texas-2015-SB776-Comm_Sub.html

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By: Fraser S.B. No. 776
(In the Senate - Filed February 25, 2015; March 2, 2015,
read first time and referred to Committee on Natural Resources and
Economic Development; March 31, 2015, reported adversely, with
favorable Committee Substitute by the following vote: Yeas 10,
Nays 0; March 31, 2015, sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 776 By: Fraser

A BILL TO BE ENTITLED
AN ACT
relating to the operations of a municipally owned utility or
municipal power agency; affecting a provision that is subject to
criminal penalties; providing authority to issue bonds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 37.051, Utilities Code, is amended by
adding Subsections (g) and (h) to read as follows:
(g) A municipally owned utility or a municipal power agency
created under Subchapter B, Chapter 163, may not directly or
indirectly construct, install, or extend a transmission facility
outside of the municipally owned utility's certificated service
area, 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 are the certificated service
areas 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
capacity.
(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.
SECTION 2. Subchapter A, Chapter 35, Utilities Code, is
amended by adding Section 35.009 to read as follows:
Sec. 35.009. AMOUNTS PAID IN LIEU OF AD VALOREM TAXES FOR
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:
SUBCHAPTER C-1. ALTERNATE GOVERNANCE FOR CERTAIN MUNICIPAL POWER
AGENCIES
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
163.087.
(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.
Sec. 163.073. APPLICABILITY; ALTERNATE GOVERNANCE.
(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.
Sec. 163.076. ADDITION OR REMOVAL OF PUBLIC ENTITIES.
(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
agency.
(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
entity;
(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.
Sec. 163.077. ELECTION FOR ADDITION OF PUBLIC ENTITY.
(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
purpose.
(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
appointees.
(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
entity.
(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
director.
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
system.
(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;
and
(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;
or
(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
investment.
(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
expenses;
(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.
Sec. 163.086. ISSUANCE, FORM, AND PROVISIONS OF 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
purchaser.
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
facilities;
(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
agency.
(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
agreement.
(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.
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