Current through Reg. 50, No. 13; March 28, 2025
(a) Applicability. This section applies to a
requested area that also meets the following criteria:
(1) the requested area has been incorporated
or annexed by a municipality;
(2) a
retail public utility provides service to the requested area under a
certificate of convenience and necessity (CCN); and
(3) the retail public utility that holds the
CCN under which the requested area is currently certificated is one of the
following:
(A) a water supply or sewer
service corporation, a special utility district under chapter 65 of the Texas
Water Code, or a fresh water supply district under chapter 53 of the Texas
Water Code; or
(B) not a water
supply or sewer service corporation, and its service area is located entirely
within the boundaries of a municipality that has a population of at least 1.7
million according to the most recent federal census.
(b) Definitions. In this section,
the following words and terms have the definitions provided by this subsection.
(1) Impaired property--Property remaining in
the ownership of the current CCN holder after single certification that would
sustain damages from the transfer of property to the municipality.
(2) Franchised utility--A retail public
utility that has been granted a franchise by a municipality to provide service
inside the municipal boundaries.
(3) Current CCN holder--The retail public
utility that holds a CCN to provide service to the municipality's requested
area.
(4) Transferred
property--Property that the municipality has requested be transferred to it or
to a franchised utility from the current CCN holder.
(5) Useless or valueless property--Property
that would be rendered useless or valueless to the current CCN holder by single
certification.
(c)
Notice of intent to provide service in incorporated or annexed area. A
municipality that intends to provide service itself or through a franchised
utility to all or part of an annexed or incorporated area shall notify the
current CCN holder in writing of the municipality's intent. The written notice
to the current CCN holder shall specify the following information:
(1) the municipality's requested
area;
(2) any transferred
property;
(3) the municipal
ordinance or other action that annexed or incorporated the municipality's
requested area;
(4) what kind of
service will be provided;
(5)
whether a municipally owned utility or franchised utility will provide the
service; and
(6) the municipally
owned utility's or the franchised utility's identity and contact
information.
(d) Written
agreement regarding service to area. The municipality and the current CCN
holder may agree in writing that all or part of the area incorporated or
annexed by the municipality may receive service from a municipally owned
utility, a franchised utility, or the current CCN holder, or any combination of
those entities.
(1) If a franchised utility is
to provide service to any part of the area, the franchised utility shall also
be a party to the agreement.
(2)
The executed agreement may provide for single or dual certification of all or
part of the area incorporated or annexed by the municipality, for the purchase
of facilities or property, and may contain any other terms agreed to by the
parties.
(3) The executed agreement
shall be filed with the commission. The commission shall incorporate the
agreement's terms into the respective CCNs of the municipality, current CCN
holder, and franchised utility, as appropriate.
(e) Application for single certification. If
an agreement is not executed within 180 calendar days after the municipality
provides written notice under subsection (c) of this section and the
municipality intends to provide service to the municipality's requested area,
the municipality shall submit an application to the commission to grant single
certification to a municipally owned utility or a franchised utility.
(1) If a franchised utility will provide
service to any part of the municipality's requested area, the franchised
utility shall join the application.
(2) The application shall include all of the
information listed in this paragraph.
(A) The
application shall identify the municipal ordinance or other action that annexed
or incorporated the municipality's requested area.
(B) The application shall identify the type
of service that will be provided to the municipality's requested
area.
(C) The application shall
identify the municipally owned utility or franchised utility that will provide
service to the municipality's requested area and, if each will serve part of
the area, the area that each will serve.
(D) The application shall identify contact
information for the current CCN holder.
(E) The application shall demonstrate
compliance with the TCEQ's minimum requirements for public drinking water
systems if the municipality owns a public drinking water system.
(F) The application shall demonstrate that at
least 180 calendar days have passed since the date that the municipality
provided written notice under subsection (c) of this section.
(G) The application shall identify with
specificity any property that the municipality requests be transferred from the
current CCN holder.
(H) The
application shall identify the boundaries of the municipality's incorporated
area or extraterritorial jurisdiction by providing digital-mapping data in a
shapefile (SHP) format georeferenced in either NAD 83 Texas State Plane
Coordinate System (US feet) or in NAD 83 Texas Statewide Mapping System
(meters). The digital mapping data shall include a single, continuous polygon
record.
(I) The application shall
identify the municipality's requested area by providing mapping information to
clearly identify the area the municipality is seeking in accordance with §
24.257 of this title relating to
Mapping Requirements for Certificate of Convenience and Necessity Application.
Commission staff may request additional mapping information after the
application is submitted.
(3) Within 30 calendar days of the filing of
the application, commission staff shall file a recommendation regarding whether
the application meets the requirements of this subsection.
(f) Notices for single-certification
application. The applicant shall send a copy of the application to the current
CCN holder by certified mail or hand-delivery on the same day that the
applicant submits the application to the commission.
(g) Response to single-certification
application. The current CCN holder shall file a response to the application
for single certification in conformance with this subsection.
(1) The response shall be filed within 40
calendar days of the filing of the application.
(2) The response shall state the following
information:
(A) whether the single
certification is agreed to; and
(B)
if there is no agreement for single certification, any conditions that, if met,
would cause the current CCN holder to agree to single certification.
(3) In its response, the current
CCN holder shall identify any useless or valueless property, or impaired
property, that would result from certification of the municipality's requested
area to the municipality.
(4) There
is a rebuttable presumption that there is no useless or valueless property or
impaired property if the current CCN holder fails to timely respond as required
under paragraph (1) of this subsection. Upon motion and proof of service
consistent with the requirements of subsection (f) of this section, the
presiding officer may issue an order determining that there is no useless or
valueless property or impaired property.
(h) Referral to SOAH.
(1) Within 50 calendar days of the filing of
the application, a presiding officer shall determine whether an application for
single certification meets the requirements of subsection (e) of this
section.
(2) If the presiding
officer determines that the application meets the requirements of subsection
(e) of this section, the application shall be referred to the State Office of
Administrative Hearings (SOAH) for a hearing. SOAH shall fix a time and place
for a hearing on the application and shall notify the current CCN holder,
municipality, and franchised utility, if any, of the hearing.
(3) Except as provided under paragraph (4) of
this subsection, if the presiding officer determines that the application does
not meet the requirements of subsection (e) of this section, the applicant
shall supplement its application to correct the identified deficiencies within
a timeframe, and under a process, established by the presiding
officer.
(4) The application shall
be denied if the municipality fails to demonstrate compliance with the TCEQ's
minimum requirements for public drinking water systems. This paragraph does not
apply to a municipality that does not own a public drinking water
system.
(i) Hearing at
SOAH.
(1) The hearing at SOAH shall be
limited to determining what property, if any, is useless or valueless property,
impaired property, or transferred property.
(2) The current CCN holder bears the burden
to prove what property is useless or valueless property or impaired
property.
(3) The transferred
property shall be limited to the specific property identified in the
application.
(4) The SOAH
administrative law judge shall issue a proposal for decision for the
commission's consideration.
(j) Interim order. The commission shall issue
an interim order identifying what property, if any, is useless or valueless
property, impaired property, or transferred property.
(k) Administrative Completeness. Section
24.8 of this title relating to
Administrative Completeness does not apply to the determination of
administrative completeness under this section. After the commission has issued
its interim order under subsection (j) of this section, a presiding officer
shall determine that the application for single certification is
administratively complete and shall establish a procedural schedule that will
allow total compensation for any property identified in the interim order to be
determined not later than 90 calendar days after the application is determined
to be administratively complete.
(l) Valuation of real property. The value of
real property that the commission identified in the interim order issued under
subsection (j) of this section shall be determined according to the standards
set forth in Texas Property Code, chapter 21, governing actions in eminent
domain.
(m) Valuation of personal
property. The value of personal property that the commission identified in the
interim order issued under subsection (j) of this section shall be determined
according to this subsection.
(1) This
subsection is intended to ensure that the compensation to a current CCN holder
is just and adequate as provided by these rules.
(2) The following factors shall be used to
value personal property that the commission identified in the interim order
issued under subsection (j) of this section:
(A) the impact on the current CCN holder's
existing indebtedness and the current CCN holder's ability to repay that
debt;
(B) the value of the current
CCN holder's service facilities located within the municipality's requested
area;
(C) the amount of any
expenditures for planning, design, or construction of service facilities
outside the incorporated or annexed area that are allocable to service to the
municipality's requested area;
(D)
the amount of the current CCN holder's contractual obligations allocable to the
municipality's requested area;
(E)
any demonstrated impairment of service or increase of cost to the current CCN
holder's customers that remain after the single certification;
(F) the impact on future revenues lost from
existing customers;
(G) necessary
and reasonable legal expenses and professional fees;
(H) factors relevant to maintaining the
current financial integrity of the current CCN holder; and
(I) other relevant factors as determined by
the commission.
(n) Valuation Process.
(1) For an area incorporated by a
municipality, the valuation of property that the commission identified in the
interim order issued under subsection (j) of this section shall be determined
by a qualified individual or firm serving as an independent appraiser. The
independent appraiser shall be limited to appraising the property that the
commission identified in the interim order issued under subsection (j) of this
section. The current CCN holder shall select the independent appraiser by the
21st calendar day after the date of the order determining that the application
is administratively complete. The municipality shall pay the independent
appraiser's costs. The independent appraiser shall file its appraisal with the
commission by the 70th calendar day after the date of the order determining
that the application is administratively complete. The valuation of property
under this paragraph is binding on the commission.
(2) For an area annexed by a municipality,
the valuation of property that the commission identified in the interim order
issued under subsection (j) of this section shall be determined by one or more
independent appraisers under the process set forth in this paragraph. All
independent appraisers shall be limited to appraising the property that the
commission identified in the interim order issued under subsection (j) of this
section. All independent appraisers shall be qualified individuals or firms.
(A) If the current CCN holder and the
municipality can agree on an independent appraiser within ten calendar days
after the application is found administratively complete, the agreed-upon
independent appraiser shall make a valuation of the property that the
commission identified in the interim order issued under subsection (j) of this
section.
(i) The agreed-upon independent
appraiser shall file its appraisal with the commission by the 70th calendar day
after the date of the order determining that the application is
administratively complete.
(ii) A
valuation of property under this subparagraph is binding on the
commission.
(B) If the
current CCN holder and the municipality cannot agree on an independent
appraiser within ten calendar days after the application is found
administratively complete, the municipality shall notify the serving CCN holder
in writing of the failure to agree.
(i) If the
parties still cannot agree within 11 calendar days of the written notification,
on the 11th day, the current CCN holder and the municipality shall each file
with the commission a letter appointing a qualified individual or firm to serve
as an independent appraiser.
(I) Within 10
business days of their appointment, the independent appraisers shall meet to
reach an agreed valuation of property that the commission identified in the
interim order issued under subsection (j) of this section.
(II) If the independent appraisers reach an
agreed valuation of property, the agreed valuation under this subclause is
binding on the commission.
(ii) If the appraisers cannot agree on a
valuation before the 16th business day after the date of their first meeting
under this subsection, then both parties shall file separate appraisals by that
date, and either the current CCN holder or the municipality shall petition the
commission to appoint a third appraiser to reconcile the two appraisals.
(I) The commission may delegate authority to
appoint the third appraiser.
(II)
The third appraiser shall file an appraisal that reconciles the two other
appraisals by the 80th calendar day after the application is found
administratively complete.
(III)
The third appraiser's valuation may not be less than the lower or more than the
higher of the two original appraisals filed under subparagraph (B)(ii) of this
paragraph.
(IV) A valuation of
property under this clause is binding on the commission.
(C) The current CCN holder and the
municipality shall each pay one-half of the costs of all of the appraisers
appointed under this paragraph. Payment shall be made directly to the
appraisers, and proofs of payment shall be separately filed by the current CCN
holder and the prospective retail public utility within 30 calendar days of the
date of the invoice.
(o) Action after receipt of appraisals.
(1) An order incorporating the valuation
determined under subsection (n) of this section shall be issued by the 90th
calendar day after the application is found administratively
complete.
(2) The commission shall
deny the application if the municipality fails to demonstrate compliance with
the TCEQ's minimum requirements for public drinking water systems. This
paragraph does not apply to a municipality that does not own a public drinking
water system.
(3) If the commission
does not deny the application, the commission shall do the following:
(A) determine what property, if any, is
useless or valueless property, impaired property, or transferred
property;
(B) determine the
monetary amount that is adequate and just to compensate the current CCN holder
for any such useless or valueless property, impaired property, and transferred
property; and
(C) grant single
certification to the municipality or franchised utility.
(4) The granting of single certification
shall be effective on the date that:
(A) the
municipality or franchised utility pays adequate and just compensation under a
court order;
(B) the municipality
or franchised utility pays an amount into the registry of the court or to the
current CCN holder under TWC §13.255(f); or
(C) the Travis County district court's
judgment becomes final, if the court's judgment provides that the current CCN
holder is not entitled to any compensation.
(5) The commission's order does not transfer
any property, except as provided under subsection (u) of this section. Any
other transfer of property under this section shall be obtained only by a court
judgment rendered under TWC §13.255(d) or (e).
(6) A presiding officer may issue an order
under this section. Any such order shall be the final act of the commission
subject to motions for rehearing under the commission's rules.
(p) Appeal to district court,
district court judgment, and transfer of property.
(1) Under TWC §13.255(e), any party that
is aggrieved by a final order of the commission under this section may file an
appeal with the district court of Travis County within 30 days after the order
becomes final.
(2) Under TWC
§13.255(d), if the commission's final order is not appealed within 30
days, the municipality may request the Travis County district court to enter a
judgment consistent with the commission's order.
(q) Withdrawal of application for single
certification. A municipality or a franchised utility may withdraw an
application for single certification without prejudice at any time before a
court judgment becomes final, provided that the municipality or the franchised
utility has not taken physical possession of property owned by the current CCN
holder or made payment for the right to take physical possession under TWC
§13.255(f).
(r) Additional
requirements regarding certain current CCN holders. The following subsection
applies to proceedings under this section in which the current CCN holder meets
the criteria of subsection (a)(3)(B) of this section.
(1) The commission or a court, as
appropriate, must determine that the service provided by the current CCN holder
is substandard or its rates are unreasonable in view of the current CCN
holder's reasonable expenses.
(2)
If the municipality abandons its application, the commission is authorized to
award to the current CCN holder its reasonable expenses incurred to participate
in the proceeding addressing the municipality's application, including
attorney's fees.
(3) Unless the
current CCN holder otherwise agrees, the municipality shall take all of the
current CCN holder's personal and real property that is used and useful to
provide service or is eligible to be deemed so in a future rate case.
(s) Notice of single
certification. Within 60 days of a transfer of property under a court judgment,
the municipality or franchised utility shall provide written notice to each
customer within the service area that is now singly certificated. The written
notice shall provide the following information: the identity of the
municipality or franchised utility, the reason for the transfer, the rates to
be charged by the municipality or franchised utility, and the effective date of
those rates.
(t) Provision of
service.
(1) A municipally owned utility or a
franchised utility may provide service to all or a portion of an incorporated
or annexed area on one of the following dates:
(A) the date that the commission incorporates
the terms of an executed agreement filed with the commission under subsection
(d)(3) of this section into the CCNs of the municipality, current CCN holder,
and franchised utility, if applicable; or
(B) the date that the municipality or
franchised utility:
(i) pays adequate and
just compensation under court order; or
(ii) pays an amount into the registry of the
court or to the current CCN holder under TWC §13.255(f).
(2) If the court
judgment provides that the current CCN holder is not entitled to any
compensation, the grant of single certification shall go into effect when the
court judgment becomes final.
(u) Additional conditions.
(1) If the current CCN holder did not agree
in writing to a revocation or amendment sought under this section, then an
affected retail public utility may request that the revocation or amendment be
conditioned on the following:
(A) ordering
the municipality or franchised utility, as applicable, to provide service to
the entire service area of the current CCN holder; and
(B) transferring the entire CCN of the
current CCN holder to the municipality or franchised utility, as
applicable.
(2) The
commission shall order the municipality or franchised utility, as applicable,
to provide service to the entire service area of the current CCN holder if the
commission finds that the current CCN holder will be unable to provide
continuous and adequate service at an affordable cost to the current CCN
holder's remaining customers.
(A) The
commission shall order the municipality or franchised utility, as applicable,
to provide continuous and adequate service to the remaining customers at a cost
comparable to the cost of that service to the municipality's or franchised
utility's other customers and shall establish the terms under which service
must be provided.
(B) The
commission may order the following terms:
(i)
transfer of debt and other contract obligations;
(ii) transfer of real and personal
property;
(iii) establishment of
interim service rates for affected customers during specified times;
and
(iv) other provisions necessary
for the just and reasonable allocation of assets and liabilities.
(3) The municipality or
franchised utility, as applicable, shall not charge the affected customers any
transfer fee or other fee to obtain service, except:
(A) the municipality's or franchised
utility's usual and customary rates for monthly service, or
(B) interim rates set by the commission, if
applicable.
(4) If the
commission orders the municipality or franchised utility, as applicable, to
provide service to the entire service area of the current CCN holder, the
proceeding shall not be referred to SOAH for a hearing to determine the useless
or valueless property, impaired property, or transferred property, and the
commission shall not order compensation to the current CCN holder.
