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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