2023 Texas Statutes › Water Code › Title 2 - Water Administration › Subtitle B - Water Rights › Chapter 13 - Water Rates and Services › Subchapter H. Sale of Property and Mergers › Section 13.301. Report of Sale, Merger, Etc

Sec. 13.301.  REPORT OF SALE, MERGER, ETC.;  INVESTIGATION;  DISALLOWANCE OF TRANSACTION.  (a)  A utility or a water supply or sewer service corporation, on or before the 120th day before the effective date of a sale, acquisition, lease, or rental of a water or sewer system owned by an entity that is required by law to possess a certificate of public convenience and necessity or the effective date of a sale or acquisition of or merger or consolidation with such an entity, shall:
(1)  file a written application with the utility commission; and
(2)  unless public notice is waived by the utility commission for good cause shown, give public notice of the action.
(b)  The utility commission may require that the person purchasing or acquiring the water or sewer system demonstrate adequate financial, managerial, and technical capability for providing continuous and adequate service to the requested area and any areas currently certificated to the person.
(c)  If the person purchasing or acquiring the water or sewer system cannot demonstrate adequate financial capability, the utility commission may require that the person provide a bond or other financial assurance in a form and amount specified by the utility commission to ensure continuous and adequate utility service is provided.
(d)  The utility commission shall, with or without a public hearing, investigate the sale, acquisition, lease, or rental to determine whether the transaction will serve the public interest.
(e)  Before the expiration of the 120-day notification period, the utility commission shall notify all known parties to the transaction and the Office of Public Utility Counsel whether the utility commission will hold a  public hearing to determine if the transaction will serve the public interest.  The utility commission may hold a hearing if:
(1)  the application filed with the utility commission or the public notice was improper;
(2)  the person purchasing or acquiring the water or sewer system has not demonstrated adequate financial, managerial, and technical capability for providing continuous and adequate service to the service area being acquired and to any areas currently certificated to the person;
(3)  the person or an affiliated interest of the person purchasing or acquiring the water or sewer system has a history of:
(A)  noncompliance with the requirements of the utility commission, the commission, or the Department of State Health Services; or
(B)  continuing mismanagement or misuse of revenues as a utility service provider;
(4)  the person purchasing or acquiring the water or sewer system cannot demonstrate the financial ability to provide the necessary capital investment to ensure the provision of continuous and adequate service to the customers of the water or sewer system; or
(5)  there are concerns that the transaction may not serve the public interest, after the application of the considerations provided by Section 13.246(c) for determining whether to grant a certificate of convenience and necessity.
(f)  Unless the utility commission holds a public hearing, the sale, acquisition, lease, or rental may be completed as proposed:
(1)  at the end of the 120-day period; or
(2)  at any time after the utility commission notifies the utility or water supply or sewer service corporation that a hearing will not be held.
(g)  If the utility commission decides to hold a hearing or if the utility or water supply or sewer service corporation fails to make the application as required or to provide public notice, the sale, acquisition, lease, or rental may not be completed unless the utility commission determines that the proposed transaction serves the public interest.
(h)  A sale, acquisition, lease, or rental of any water or sewer system owned by an entity required by law to possess a certificate of public convenience and necessity, or a sale or acquisition of or merger or consolidation with such an entity, that is not completed in accordance with the provisions of this section is void.  The utility commission shall approve a transaction to which this section applies without an owner's signature required by other law if the owner has abandoned operation of the facilities that are the subject of the transaction and cannot be located or does not respond to an application filed under Subsection (l).
(i)  This section does not apply to:
(1)  the purchase of replacement property;  or
(2)  a transaction under Section 13.255 of this code.
(j)  If a public utility facility or system is sold and the 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 public utility may not sell or transfer any of its assets, its certificate of convenience and necessity, or its controlling interest in an incorporated utility, unless the utility provides to the purchaser or transferee before the date of the sale or transfer a written disclosure relating to the contributions.  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.
(k)  A utility or a water supply or sewer service corporation that proposes to sell, assign, lease, or rent its facilities shall notify the other party to the transaction of the requirements of this section before signing an agreement to sell, assign, lease, or rent its facilities.
(l)  Notwithstanding any other provision of this section, the utility commission by rule shall adopt an expedited process that allows a person appointed by the utility commission or commission under Section 13.4132 as a temporary manager of a utility, utility in receivership, or utility in supervision, who is also an operator of a Class A or Class B utility to apply for utility commission approval of the person's acquisition of the stock, ownership interest, or assets of the temporarily managed and operated utility, utility in receivership, or utility in supervision, its facilities, and, if applicable, its certificated service area.  The expedited process must:
(1)  waive public notice requirements regardless of whether the person elects to charge initial rates in accordance with Section 13.3011 or use a voluntary valuation determined under Section 13.305;
(2)  require approval of the acquisition transaction if the transaction is considered to be in the public interest; and
(3)  provide that:
(A)  the person's appointment is considered sufficient to demonstrate adequate financial, managerial, and technical capability for providing continuous and adequate service to the service area to be acquired and any areas currently certificated to the person; and
(B)  all used and useful invested capital and just and reasonable operations and maintenance costs incurred by the person during the person's appointment as temporary manager and operator of the utility, utility in receivership, or utility in supervision to be acquired are considered to be a regulatory asset for the person and are recoverable in the person's next comprehensive rate proceeding or system improvement charge application.
(m)  If a temporary rate under Section 13.046 is adopted during the period described by Subsection (l)(3)(B), all used and useful invested capital and just and reasonable operations and maintenance costs incurred by the person in excess of costs covered by the temporary rate are considered to be a regulatory asset for the person and are recoverable in the person's next comprehensive rate proceeding or system improvement charge application.
(n)  The utility commission and commission shall provide a reasonable period for a person acquiring a utility under Subsection (l) to bring the acquired utility into compliance with utility commission and commission rules before imposing a penalty for any violation committed by the acquired utility for which no enforcement action has been completed at the time of acquisition.
Added by Acts 1985, 69th Leg., ch. 795, Sec. 3.005, eff. Sept. 1, 1985.  Amended by Acts 1987, 70th Leg., ch. 539, Sec. 21, eff. Sept. 1, 1987;  Acts 1989, 71st Leg., ch. 567, Sec. 33, eff. Sept. 1, 1989;  Acts 1991, 72nd Leg., ch. 678, Sec. 9, eff. Sept. 1, 1991;  Acts 1995, 74th Leg., ch. 400, Sec. 7, eff. Sept. 1, 1995;  Acts 1997, 75th Leg., ch. 1010, Sec. 6.11, eff. Sept. 1, 1997.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 2.59, eff. September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 171 (S.B. 567), Sec. 59, eff. September 1, 2013.
Acts 2015, 84th Leg., R.S., Ch. 853 (S.B. 1148), Sec. 7, eff. September 1, 2015.
Acts 2023, 88th Leg., R.S., Ch. 28 (S.B. 1965), Sec. 1, eff. September 1, 2023.