Current through Reg. 50, No. 13; March 28, 2025
(a) Application. A
water supply or sewer service corporation or a water and sewer utility owned by
an entity required to possess a certificate of convenience and necessity (CCN)
must comply with this section. A municipality, district, or political
subdivision may, but is not required to, comply with this section.
(b) Notice and filing requirements for
approval of transaction. No later than 120 days before the effective date of
any sale, transfer, merger, consolidation, acquisition, lease, or rental, an
applicant must file an application with the commission and give public notice
of the transaction in accordance with this section. Notice is considered given
under this subsection on the later of:
(1) the
last date the applicant mailed the required notice as stated in the applicant's
affidavit of notice; or
(2) the
last date of the publication of the notice in the newspaper as stated in the
affidavit of publication, if required.
(c) Transaction involving a municipal utility
system. A transaction involving the sale of a municipal utility system to an
entity to which this section applies must comply with this subsection. For
purposes of this subsection, a municipal utility system means one or more
retail water or sewer utility systems that comprise all or part of the
facilities used by a municipally owned utility to provide retail water or sewer
utility service. If the municipal utility system being acquired does not
include all of the facilities used by the municipally owned utility to provide
retail water or sewer utility service, the applicant must provide sufficient
detail in its application to identify the specific retail water or utility
systems and facilities being acquired.
(1) A
water supply or sewer service corporation or a water and sewer utility required
to possess a CCN may purchase a municipal utility system if:
(A) the sale has been authorized by a
majority vote of the qualified voters of the municipality in an election held
by the governing body of the municipality in the manner provided for bond
elections in the municipality including, if applicable, Tex. Gov't Code Title
9, Subtitle C, Chapter 1251; or
(B)
the Texas Commission on Environmental Quality (TCEQ) has issued a notice of
violation to the municipality for one or more of the retail water or sewer
systems that comprise the municipal utility system, and the governing body of
the municipality finds by official action that the municipality is either
financially or technically unable to restore the retail water or sewer system
or systems to compliance with the rules or statutes cited in the notice of
violation. For purposes of this section, any official written notification from
the TCEQ, such as a notice of violation letter, a notice of enforcement letter,
or a field citation, that a retail water or sewer system is out of compliance
with a rule or statute within the TCEQ's jurisdiction will be considered a
notice of violation.
(2)
For a sale authorized under paragraph (1)(A) of this subsection, the applicant
must include with its application documentation that the sale was authorized by
a majority vote in compliance with the requirements of this section.
(3) For a sale authorized under paragraph
(1)(B) of this subsection, the applicant must provide notice to the TCEQ of the
transaction in writing. For a sale authorized under paragraph (1)(B) of this
subsection, the applicant must also include the following information to the
commission as a part of its application:
(A)
a copy of the notice of violation issued by the TCEQ involving the municipal
utility system;
(B) a copy of the
written notice provided to the TCEQ as required by this paragraph;
and
(C) documentation of the
official action taken by the governing body of the municipality finding the
municipality is financially or technically unable to restore the municipal
utility system to compliance with the rules or statutes cited in the notice of
violation.
(d) Intervention period. The intervention
period for an application filed under this section must not be less than 30
days. The presiding officer may order a shorter intervention period for good
cause shown.
(e) Notice.
(1) Unless notice is waived by the
commission, proper notice must be given to affected customers and to other
affected parties as required by the commission on the form prescribed by the
commission. The notice must include the following:
(A) the name and business address of the
utility currently holding the CCN (transferor) and the retail public utility or
person that will acquire the facilities or CCN (transferee);
(B) a description of the requested
area;
(C) the following statement:
"Persons who wish to intervene in the proceeding or comment upon the action
sought should contact the Public Utility Commission, P.O. Box 13326, Austin,
Texas 78711-3326, or call the Public Utility Commission at (512) 936-7120 or
(888) 782-8477. Hearing- and speech-impaired individuals with text telephones
(TTY) may contact the commission through Relay Texas at 1-800-735-2989. The
deadline for intervention in the proceeding is (date 30 days from the mailing
or publication of notice, whichever occurs later, unless otherwise provided by
the presiding officer). If you wish to intervene, the commission must receive
your letter requesting intervention or motion to intervene by that date.";
and
(D) if the transferor is a
nonfunctioning utility with a temporary rate in effect and the transferee is
requesting that the temporary rate remain in effect under TWC §13.046(d),
the following information:
(i) the temporary
rates currently in effect for the nonfunctioning utility; and
(ii) the duration of time for which the
transferee is requesting that the temporary rates remain in effect.
(E) if the transferor is a
municipality, the notice must also provide the following information as an
attachment, as applicable:
(i) If subsection
(c)(1)(A) of this section applies, a statement describing the details of the
authorizing election, including the date and outcome of the election and the
text of the applicable ballot provision.
(ii) If subsection (c)(1)(B) of this section
applies, a statement:
(I) indicating that the
TCEQ has issued a notice of violation for one or more systems within the
municipal utility system and that the governing board of the municipality has
found that it is either financially or technically unable to restore the system
to compliance with the applicable rules or statutes;
(II) providing a basic description of the
violations cited in the notice of violation, including the systems involved,
the nature of the violations, and the rules or statutes cited in the notice of
violation; and
(III) describing the
details of the official action of the governing board including the date and
forum in which the official action was taken and how to locate a transcript or
recording of the official action, if available.
(2) The transferee must mail the
notice to cities and neighboring retail public utilities providing the same
utility service whose corporate limits or certificated service area boundaries
are within two miles from the outer boundary of the requested area, and any
city with an extraterritorial jurisdiction that overlaps the requested
area.
(3) The commission may
require the transferee to publish notice once each week for two consecutive
weeks in a newspaper of general circulation in each county in which the retail
public utility being transferred is located. The commission may allow published
notice in lieu of individual notice as required by paragraph (2) of this
subsection.
(4) The commission may
waive published notice if the requested area does not include unserved area, or
for good cause shown.
(f) If the transferee cannot demonstrate
adequate financial capability, the commission may require that the transferee
provide financial assurance to ensure continuous and adequate retail water or
sewer utility service is provided to both the requested area and any area
already being served under the transferee's existing CCN. The commission will
set the amount of financial assurance. The form of the financial assurance must
meet the requirements of §
24.11 of this title (relating to
Financial Assurance). The obligation to obtain financial assurance under this
title does not relieve an applicant from any requirements to obtain financial
assurance to satisfy another state agency's rules.
(g) The commission will, with or without a
public hearing, investigate the sale, transfer, merger, consolidation,
acquisition, lease, or rental to determine whether the transaction will serve
the public interest. If the commission decides to hold a hearing, or if the
transferee fails either to file the application as required or to provide
public notice, the transaction proposed in the application may not be completed
unless the commission determines that the proposed transaction serves the
public interest.
(h) Before the
expiration of the 120-day period described in subsection (a) of this section,
the commission will determine whether to require a public hearing to determine
if the transaction will serve the public interest. The commission will notify
the transferee, the transferor, all intervenors, and the Office of Public
Utility Counsel whether a hearing will be held. The commission may require a
hearing if:
(1) the application filed with the
commission or the public notice was improper;
(2) the transferee has not demonstrated
adequate financial, managerial, and technical capability for providing
continuous and adequate service to the requested area and any area already
being served under the transferee's existing CCN;
(3) the transferee has a history of:
(A) noncompliance with the requirements of
the TCEQ, 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 transferee cannot demonstrate the
financial ability to provide the necessary capital investment to ensure the
provision of continuous and adequate service to the requested area;
or
(5) there are concerns that the
transaction does not serve the public interest based on consideration of the
following factors:
(A) the adequacy of
service currently provided to the requested area;
(B) the need for additional service in the
requested area;
(C) the effect of
approving the transaction on the transferee, the transferor, and any retail
public utility of the same kind already serving the area within two miles of
the boundary of the requested area;
(D) the ability of the transferee to provide
adequate service;
(E) the
feasibility of obtaining service from an adjacent retail public
utility;
(F) the financial
stability of the transferee, including, if applicable, the adequacy of the
debt-equity ratio of the transferee if the transaction is approved;
(G) environmental integrity;
(H) the probable improvement of service or
lowering of cost to consumers in the requested area resulting from approving
the transaction; and
(I) whether
the transferor or the transferee has failed to comply with any commission or
TCEQ order. The commission may refuse to approve a sale, transfer, merger,
consolidation, acquisition, lease, or rental if conditions of a judicial
decree, compliance agreement, or other enforcement order have not been
substantially met.
(i) If the commission does not require a
public hearing, the sale, transfer, merger, consolidation, acquisition, lease,
or rental may be completed as proposed:
(1) at
the end of the 120-day period described in subsection (a) of this section;
or
(2) at any time after the
transferee receives notice from the commission that a hearing will not be
required.
(j) Within 30
days of the commission order that approves the sale, transfer, merger,
consolidation, acquisition, lease, or rental to proceed as proposed, the
transferee must provide a written update on the status of the transaction, and
every 30 days thereafter, until the transaction is complete. The transferee
must inform the commission of any material changes in its financial,
managerial, and technical capability to provide continuous and adequate service
to the requested area and the transferee's service area.
(k) If there are outstanding customer
deposits, within 30 days of the actual effective date of the transaction, the
transferor and the transferee must file with the commission, the following
information supported by a notarized affidavit:
(1) the names and addresses of all customers
who have a deposit on record with the transferor;
(2) the date such deposit was made;
(3) the amount of the deposit; and
(4) the unpaid interest on the deposit. All
such deposits must be refunded to the customer or transferred to the
transferee, along with all accrued interest.
(l) Within 30 days after the actual effective
date of the transaction, the transferee and the transferor must file a signed
contract, bill of sale, or other appropriate documents as evidence that the
transaction has closed as proposed. The signed contract, bill of sale, or other
documents, must be signed by both the transferor and the transferee. If there
were outstanding customer deposits, the transferor and the transferee must also
file documentation that customer deposits have been transferred or refunded to
the customers with interest as required by this section.
(m) The commission's approval of a sale,
transfer, merger, consolidation, acquisition, lease, or rental of any water or
sewer system or retail public utility expires 180 days following the date of
the commission order allowing the transaction to proceed. If the sale has not
been completed within that 180-day time period, the approval is void, unless
the commission in writing extends the time period.
(n) If the commission does not require a
hearing, and the transaction is completed as proposed, the commission may issue
an order approving the transaction.
(o) A sale, transfer, merger, consolidation,
acquisition, lease, or rental of any water or sewer system or retail public
utility required by law to possess a CCN, or transfer of customers or service
area, owned by an entity required by law to possess a CCN that is not completed
in accordance with the provisions of TWC §13.301 is void.
(p) The requirements of TWC §13.301 do
not applyto:
(1) the purchase of replacement
property;
(2) a transaction under
TWC §13.255; or
(3)
foreclosure on the physical assets of a utility.
(q) If a utility's facility or system is sold
and the utility's facility or system was partially or wholly constructed with
customer contributions in aid of construction derived from specific surcharges
approved by the regulatory authority over and above revenues required for
normal operating expenses and return, the utility may not sell or transfer any
of its assets, its CCN, or a controlling interest in an incorporated utility,
unless the utility provides a written disclosure relating to the contributions
to both the transferee and the commission before the date of the sale or
transfer. The disclosure must contain, at a minimum, the total dollar amount of
the contributions and a statement that the contributed property or capital may
not be included in invested capital or allowed depreciation expense by the
regulatory authority in rate-making proceedings. This subsection does not apply
to a utility facility or system sold as part of a transaction where the
transferor and transferee elected to use the fair market valuation process set
forth in §
24.238 of this title (relating to
Fair Market Valuation).
(r) For any
transaction subject to this section, the retail public utility that proposes to
sell, transfer, merge, acquire, lease, rent, or consolidate its facilities,
customers, service area, or controlling interest must provide the other party
to the transaction a copy of this section before signing an agreement to sell,
transfer, merge, acquire, lease, rent, or consolidate its facilities,
customers, service area, or controlling interest.
